Secretary-General of ASEAN
at the
Workshop on Investment/Project Finance Opportunities in CLMV
Phnom Penh, 6-7 March 2007
Thank you for inviting me to address you this morning at this first Workshop of its kind organized jointly by the ASEAN Bankers Association, Association of Banks in Cambodia and the ASEAN Secretariat. This is a first project undertaken by the three of us. I hope there would be more similar workshops in the future, not only held in Cambodia but also elsewhere in the ASEAN region.
Since I am not a banker, I will focus on the bigger picture and tell you the ASEAN story from a different perspective. Hopefully, you will get a better idea of what ASEAN is doing and this will help you contribute your part to the community-building in ASEAN.
Two key challenges facing ASEAN today are globalization and technology. Globalization means we face competition of a kind which we have not known of previously. Our competitiveness will determine how well our economies in ASEAN will perform. The question is: “can we shut ourselves out of globalization”. My answer is “no”. The main reason is because Southeast Asia has been opened to the world and we are in a theatre of action. Our respective economies are export-oriented. A great deal of international trade and shipping goes through Southeast Asia.
Technology has advanced to a stage now where geography and space do not matter anymore. Borders are not important. We cannot take positions based on national boundaries. Our policy must be trans-national and take into account the multi-national activities of national companies as well as foreign corporations operating in ASEAN.
In response to these challenges, ASEAN Leaders came out with 5 basic strategies. These are:
- enlarge the market size;
- grab every opportunity;
- put ASEAN in the radar scope;
- close the developmental gaps among ASEAN Member Countries; and
- prosper thy neighbor.
Whatever ASEAN Leaders and Ministers are saying about the ASEAN Community, the 3 pillars of political and security cooperation, economic integration, and socio-cultural cooperation, they all go back to the 5 basic strategies. For example, the development of an ASEAN Single Market has to do with creating a good size to compete. Next, this Workshop has to do with our narrowing of the developmental gaps. The IAI, which means Initiative for ASEAN Integration, is the policy framework to ensure that our different economies in ASEAN are brought closer together and take advantage of the benefits of globalization.
Beyond the big picture, let me say a few words about the specific issues. In narrowing the developmental gaps, we must focus on 3 things, namely:
- capacity building
- infrastructure development
- financing provision
Capacity Building
In CLMV countries, financial intermediation has been expanding while financial sector has gradually been strengthened through structural reforms and enhanced regulatory and supervisory framework. In Cambodia, Laos and Myanmar, however, the banking system remains relatively undeveloped and concentrated. Capacity building will therefore remain key to further development of their banking sector.
Financing and Economic Integration
Financing is always recognized as an important contributor to economic growth. As ASEAN accelerates its economic integration efforts to meet the target of an ASEAN Economic Community by 2015, a lot more investment will be needed particularly in the development of regional infrastructure.
Together with the elimination of tariffs and non-tariff barriers, key regional infrastructure will need to be developed to allow CLMV countries to effectively take part in and benefit from the regional integration process, particularly the further development of regional production network. ASEAN banks, with their better understanding of the regional development and opportunities, could cooperate to provide joint financing to these infrastructure projects.
Infrastructure Financing Initiative by ASEAN Finance Ministers
Given the high savings of many ASEAN countries, the initiative aims to recycle the surplus savings into ASEAN infrastructure development by establishing a regional infrastructure financing mechanism to address under investments in ASEAN infrastructure projects. Towards this end, a regional collaborative effort in the form of an ASEAN Infrastructure Bond Fund (AIBF) is being proposed. The concept is to have ASEAN governments (or central banks) invest in a junior tranche while the private sector invest in a major tranche of the Fund which will be used to finance regional infrastructure projects.
The blended credit risks and guarantees of ASEAN governments would substantially reduce risk premiums and lower costs of funding infrastructure projects. Some benefits of this mechanism would be to accelerate infrastructure development and to promote the development of private sectors across ASEAN.
Financing for SMEs
Recognizing growing intra-ASEAN investment and the need to assist promising SMEs going regional, the Committee on Finance, Investment and Trade of the ASEAN Bankers Association also agreed to develop conventional financing schemes/products, including Islamic Financing Scheme, for SMEs. In the medium to long term, there is a need to develop the bond and equity markets in the CLMV countries to provide adequate choices of financial instruments consistent with their stages of economic development.
