Solving ASEAN’s Connectivity Conundrum will Require Public-Private Partnerships

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  • ASEAN requires $1.7 trillion investment each year to meet the infrastructure needs of the region
  • To address the connectivity challenge in South-East Asia will require significant participation of the private sector
  • Countries must also focus on the soft aspects of connectivity, including regulatory harmonization and the facilitation of cross-border trade
  • For more information on the meeting: wef.ch/asean17

Phnom Penh, Cambodia, 11 May 2017 – To narrow the infrastructure gap in South-East Asia will require deep cooperation between the public and private sectors, government, finance and business leaders agreed in a session on the region’s connectivity challenge at the 26th World Economic Forum on ASEAN. “The buy-in of the private sector is crucial,” Jin Liqun, President of the Asian Infrastructure Investment Bank (AIIB) in Beijing, said. Sun Chanthol, Senior Minister and Minister of Public Works and Transport of Cambodia, added: “We have to look to the private sector to build major infrastructure.”

The Asian Development Bank (ADB) estimates that ASEAN will require $26 trillion in investment by 2030 to meet the region’s infrastructure needs. The AIIB sees infrastructure as the key to promoting economic and social development and reducing poverty. Crucial to this is the need to bring together the 10 South-East Asian countries and deepen their economic integration. “We understand how important it is for all the countries of ASEAN to be connected,” Jin noted. In the energy sector, Tevin Vongvanich, Chief Executive Officer of PTT Public Company Limited in Thailand, explained: “Connectivity is very crucial for economic development.”

“The business case for connected infrastructure is very clear,” said Anna Marrs, Regional Chief Executive Officer, ASEAN, South Asia and Chief Executive Officer, Commercial and Private Banking, at Standard Chartered Bank in Singapore. She observed that there is a lot of money available for funding projects. The challenge is finding infrastructure projects that provide good cash flow, limited risk and big competitiveness gains for the country involved and its neighbours. “Infrastructure investment could be very productive but, if not well-connected, some infrastructure projects could be a white elephant,” Jin cautioned. “We look at the impact of a project not just for a country but whether there would be positive spillover impact on neighbouring countries.”

Cross-border infrastructure projects are increasing, Tevin remarked. “If government works together with the private sector to allow a more fluid process to facilitate cross-border transactions, that would do a lot to facilitate the investment decision.” Measures could include investment protection for foreign investors and tax regulations that offer continuity and certainty.

Paying attention to the software of connectivity is vital, argued Arkhom Termpittayapaisith, Minister of Transport of Thailand: “We have to think about cross-border rules and regulations to make your infrastructure more valuable. Building infrastructure can stimulate growth over a period of time, but how you make use of infrastructure is more important.” Infrastructure must facilitate the movement of goods and people across a country and across the region, he added.

“Institutional connectivity is extremely important”, Sun Chanthol explained. He pointed out that customs clearances can take time so ASEAN countries need to move towards a single-window system. “We appeal for all ASEAN countries to have better regulatory harmonization,” Jin told participants. “That would make [the impact] of infrastructure investment go a long way.”

More than 700 business, government and civil society leaders from 40 countries are participating in the 26th World Economic Forum on ASEAN in Phnom Penh, Cambodia, from 10 to 12 May 2017. The theme of the meeting is Youth, Technology and Growth: Securing ASEAN’s Digital and Demographic Dividends.