2011: More work, less talk

Armed with a master plan for regional connectivity that is expected for full economic integration by 2015, ASEAN members have declared 2011 a year for concrete implementation of action plans and less talk.

Under Indonesia’s chairmanship this year, ASEAN countries expect to see the full roll-out of the ASEAN Infrastructure Fund (AIF), which is instrumental in supporting projects under the connectivity agenda.

The 10-country grouping has also set a target for establishing the ASEAN Connectivity Coordinating Committee in the first quarter of this year, to be followed by the establishment of national coordinators in respective countries.

“The infrastructure fund is almost ready. We are still waiting for a final say from Myanmar,” Rahmat Pramono, director for ASEAN economic cooperation, said Friday.

ASEAN foreign ministers are set to go on a retreat meeting in Mataram, Lombok Island, from Saturday to Monday that will test Indonesia’s capacity to lead the group.

The AIF is expected to be operated by a special purpose vehicle (SPV) managed by the Asian Development Bank (ADB), with ASEAN countries pledging US$335 million into the fund. The financing support is significant to ASEAN’s growth as a 1 percent increase in infrastructure spending is estimated to increase private consumption by up to 2 percent of GDP.

Rahmat said Japan had deployed its resources in support of the creation of AIF or other alternative ways.

The master plan for regional connectivity proposes strategies to boost road, rail, shipping, air and other networks between ASEAN members. The master plan also includes connectivity to economies outside the regional grouping, particularly China with a railway connection between from Kunming to Singapore and railways in Sumatra and Java, as well as interconnection of energy distributions between neighboring countries. Rahman said power infrastructure would stretch from Malaka to Pekanbaru. “A study by the ADB estimates that the project requires $490 million. We expect this project to come on stream by 2015,” he said.

Another power connection is also in the pipeline. The network would connect Serawak and West Kalimantan, Rahmat said, adding that an estimated $150 million was needed to finance the project.

He also said Indonesia would need to ratify various agreements necessary for economic integration, including the ASEAN Comprehensive Investment Agreement and those concerning transportation.

Ahead of the completion of the regional connectivity, Indonesia plans to develop an economic corridor, which is defined as six economic development highways connecting centers of growth on five islands: Java, Sumatra, Kalimantan, Sulawesi and Papua.

As part of the six economic corridors, Japan has earmarked $52.9 billion to help Indonesia finance projects intended to sustain the flow of goods in the country and in the Southeast Asia region.

An international relations expert from the University of Indonesia, Syamsul Hadi, said ASEAN economies were benefiting from competition between Japan and China for hegemony.

“China bears the necessity of distributing its resources to projects outside the country in order to keep on growing. While Japan is struggling to maintain its footing through participation in the development of the economic corridors. I think this is positive as long as the government can use it as leverage in business negotiations,” Hadi said.