Cari: The road to Asean integration

This article first appeared in Forum, The Edge Malaysia Weekly, on October 28, 2019 - November 03, 2019.
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Policy advocacy is hard work, in that it takes an excruciatingly lengthy engagement process to find common ground with the rightful policy stakeholders to make a point. It requires both top-down and bottom-up approaches to move the needle, if at all. Contrary to popular belief, political will is not the only barrier hindering the process.

Since 2013, to better reflect private sector concerns and identify Asean sectoral integration gaps, CARI has published numerous papers, reports and commentaries; organised numerous Asean-themed policy roundtable discussions; issued regular public policy calls; and led multiple trade delegations to member countries to engage with policymakers, even all the way to the level of heads of government.

Until the establishment of the Enterprise and Stakeholder Engagement Division (ESED) at the Asean Secretariat in 2016, many of these policy advocacy efforts, although not unique to CARI, were akin to shots in the dark or guerilla-style in nature. More often than not, the private sector’s recommendations ended up in the black hole of the unknown. Unlike our counterparts in the European Union, the US and Japan, Asean businesses and entities face resource-scarcity in terms of time, funding and technical capability as well as suffering significant disadvantages in being referred through the policy channels in Asean.

In recent years, I have been privileged to participate in and present at official Asean meetings in my capacity as the deputy executive director of the Asean Business Advisory Council, facilitated by ESED. This year alone, I have attended the working lunch with Asean finance ministers and central bank governors in Chiang Rai; working dinner at the 51st Asean Economic Ministers meeting in Bangkok, Thailand; and dialogue with Asean leaders/heads of government, to name a few.

In these meetings, consolidated policy recommendations from various business associations, including those from Asean’s dialogue partners, were tabled in the hope of benefiting the region as a whole, especially the micro, small and medium enterprises (MSMEs). While these interface meetings were valuable, they are at best ceremonial. Follow-ups are often slow to none, and less than effective. The quality of engagement has huge room to improve, to say the least.

From making voluntary policy calls on the sidelines to finally having a front-row seat at the consultation tables, there are at least seven simple observations I wish to have been better informed about before.

 

(1) Come as a collective

Asean subscribes to the principle of impartiality and strives to avoid being considered biased towards any member state or private entity. To ensure success, policy recommendations representing collective interests are prioritised and should be channelled through business organisations, chambers and councils.

In 2017, in order to better reduce understanding gaps between the public and private sectors, Asean released the Rules of Procedures for Private Sector Engagement under the Asean Economic Community (AEC). Only those entities “associated with Asean and listed in Annex 2 of the Asean Charter entities; or as suggested by Asean sectoral bodies” are acceptable. Approaching Asean as a single private sector entity is likely to be a futile effort.

 

(2) Propose actionable policies

While the private sector criticises the public sector for being slow to respond, Asean officials lament that the private sector’s recommendations lack structured details and tend to be broad and vague. The officials regard any recommendations “to promote/to encourage” high-level ideals without action points as impractical. Proposals such as “promoting paperless customs procedures, modernisation of payment and settlement systems, accelerate migration to electronic payment” are considered less specific.

Applying the S.M.A.R.T. framework to the policy recommendations — specific, measurable, achievable, relevant and time bound — may be a good starting point. Making the proposals with targeted policy stakeholder groups in mind as the audience, as well as researching what Asean is already working on makes the engagement more effective.

 

(3) Prepare concept notes

While structuring a proposal to be actionable may be easy, the private sector would also need to articulate the idea and how the proposal can be executed in the form of concept notes.

A meaningful concept note requires the public sector’s input. Yet how to arrive at that is challenging due to the absence of institutionalised and frequent engagements with the relevant Asean bodies, even though it is prescribed in the AEC 2025 Blueprint. The invitation to the consultation meetings is at the discretion of the chair, and worse, the meetings are few and far in between, ranging from once a year to probably a few times a year, thus causing the back-and-forth feedback loop to be a very, very long haul.

To shorten this lengthy process, engaging with the Asean Secretariat (ASEC) on how best to present the case with a concept note that details practical implementation milestones would go down well with Asean officials.

 

(4) Demonstrate a positive impact

To increase the success rate, the private sector would also need to demonstrate potential positive gains or impact that comes with the proposed recommendation, with empirical evidence or quantitative projections. This serves to provide justification to various policy stakeholders of Asean, especially domestic jurisdictions. For example, the private sector was required to demonstrate that fast-tracking customs clearance for the proposed Low-Value Shipment Programme by the Asean Business Advisory Council and Joint Business Councils would not be revenue-negative for customs, as opposed to doing away with the de minimis.

But the requirement to support the recommendation with an in-depth study is clearly beyond the depth of the MSMEs of Asean. This reality only means that foreign companies, often larger in size and better resourced, would stand a better chance of lobbying in favour of the interests of extra-Asean companies.

 

(5) Pursue a balanced strategy mix

Top-down or bottom-up?

While heads of government often offer supportive gestures towards private sector suggestions, they have to cascade policy recommendations downward for further consideration and possible implementation.

However, caught in the internal deliverables, the officials are the least incentivised to advance any private sector policy proposal unless they are in line with their KPIs, resulting in bureaucratic inertia. On the other hand, some officials believe their role is to carry out ministerial instructions and therefore wield little policy influence. These conflicting dynamics send very confusing signals to the private sector as to whether a bottom-up or top-down approach would be most effective.

 

Bilateral or multilateral?

Similarly, while the private sector looks to ASEC to be the central party to connect with Asean policy bodies — instead of reaching out to 10 Asean jurisdictions — ASEC is, after all, not empowered to propose or implement any legislation, unlike the European Commission.

Therefore, reaching out to ASEC is just one part of the effort; the private sector also needs to work through national policy channels so when the relevant bodies that form a particular Asean working group meet, some form of pre-knowledge has already been socialised.

Taking cues from the EU- and US-Asean Business Councils, who are extremely effective in all policy channels, the real work starts from various policy pipelines. A combination of top-down endorsement and bottom-up buy-in; as well as having bilateral and multilateral support would be a good strategy mix for effective public-private engagement.

 

(6) Gather sufficient industry demand

It would be too careless to blame policy hurdles alone as the culprit for the slow progress of integration. The private sector sometimes frustrates policy facilitation efforts. After all the hard work being carried out, businesses cite business decisions against utilising certain policy support. That is the very reason policymakers are insisting on significant market demand as a prerequisite to pursuing regulatory or policy facilitation to avoid low utilisation of any new mechanism before launching into negotiations with Asean members.

This is a valid consideration, as even seemingly aligned policy direction between the private and public sector does not guarantee successful implementation. Cases in point, the now-defunct Asean Trading Link, the new local currency settlement arrangement among Thailand, Malaysia, Indonesia, the Philippines, and the Qualified Asean Banks all suffer from some form of low business interest.

The private sector is encouraged to gather reasonable industry demand so it provides sufficient motivation for the public sector to pursue the necessary policy liberalisation.

 

(7) Build technical capacity

The MSMEs constitute 97% to 99% of Asean businesses in numbers but are ill equipped to engage with Asean policy bodies for advocacy. Apart from funding, the lack of technical capability is one handicap that sets these businesses back.

Many Asean businesses also see little value in engaging in policy consultation and are generally less keen to attend consultation meetings due to potential business opportunity cost. To the contrary, EU and US businesses not only usually turn up in full force when such consultation opportunities arise, but they come prepared with effective presentations.

National chambers and business councils in Asean will have to begin to see the value in policy advocacy and be willing to invest in improving technical capacity to better represent MSMEs.

 

Conclusion

The setting up of ESED has demonstrated its effectiveness in connecting the private sector with Asean policy bodies. The process of engagement is increasingly structured and the quality is improving, most noticeable on the trade facilitation track, albeit without concrete results being achieved as yet.

The engagement process, however, must have better clarity and transparency and, most importantly, the quality, depth and results of engagement should be the ultimate goals of these exercises than merely ticking the boxes.


Jukhee Hong is the executive director of CIMB Asean Research Institute (CARI) and the Asean Business Club and the deputy executive director of the Asean Business Advisory Council, the apex private sector organisation established by the Asean Heads of State and Government

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