2015 will be a critical year for the Association of Southeast Asian Nations ("ASEAN"), a political and economic community comprised of ten countries: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. The community must implement economic cooperation (one of its three pillars to achieve a cohesive ASEAN Community), and to do so, it is working to establish the ASEAN Economic Community ("AEC") by the end of 2015. The AEC envisions a single market and production base, with equitable economic development, fully integrated into the global economy.
At the same time, ASEAN nations hope to make significant progress towards completing two free trade agreements ("FTAs"): the Regional Comprehensive Economic Partnership ("RCEP") - which includes all ten ASEAN countries and the six countries with which ASEAN has existing FTAs; and the Trans-Pacific Partnership ("TPP") - which includes four of the ten ASEAN countries (Brunei, Malaysia, Singapore, and Vietnam) as well as Australia, Japan and New Zealand in Asia Pacific, and Canada, Chile, Peru, Mexico, and the United States in the Americas. In addition to the AEC, these FTAs also serve as an impetus for ASEAN countries to work now towards integration, as governments seek to get their local regulatory landscapes "FTA ready."
As ASEAN nations continue to finalize the AEC and negotiate these FTAs, Information and Communications Technology ("ICT") is at the forefront. For example, mobile and Internet banking are already helping to promote regional financial services integration efforts, particularly financial inclusion. In 2012, Malaysian bank CIMB launched ASEAN’s first banking service on Facebook, OctoPay, an extension of its Internet banking portal service. More broadly, to prepare for new regional and global commitments from the AEC and the FTAs, logistics and ICT multinational corporations ("MNCs") are already working with SMEs to help them get "supply chain ready", with training programs through alliances such as the US-ASEAN Business Alliance for Competitive SMEs.
Under the auspices of the ASEAN ICT Masterplan 2015 ("AIM 2015"), adopted by the Telecommunications and IT Ministers Meeting ("TELMIN"), ASEAN governments, in close coordination with the private sector and other governments particularly within Asia Pacific, have utilized ICT as a key tool towards economic integration.
Instituted in 2011, AIM2015 charts ASEAN’s strategy for ICT growth and development leading up to the establishment of the AEC in 2015. It focuses on innovation, human capital development, and infrastructure development as engines for growth for ASEAN countries, particularly as a global ICT hub. AIM works through a series of "projects" introduced by the ASEAN Telecommunications Senior Officials Meeting ("TELSOM") to support various initiatives, including in areas such as e-government, universal services, competition, licensing and regulation harmonization, among many others.
At the mid-term review in November 2013, TELMIN noted that key areas for further development include harmonization of the 700MHz frequency band for mobile broadband services; acceleration of the shift from analog to digital television broadcast to free up spectrum capacity for other services such as wireless broadband; and enhancement of the resilience and protection of submarine communications cable systems.
While promotion of regional ICT integration will provide opportunities for efficiencies, it also creates challenges, particularly at the local levels. These challenges lie in the diversity of the ten countries that make up ASEAN, including, but not limited to, diversity in: levels of economic development; experience in negotiating and implementing free trade agreements; sophistication of local laws and regulations, transparency; and cultures.
This diversity creates challenges due to the lack of capacity to meet commitments, varying technical standards, and lack of harmonization. Further, services sector transformation and integration, in particular, faces hurdles given that differing standards and capacity levels among regulatory authorities make it more costly and time-consuming for companies to operate in the different ASEAN markets.
For example, with expanded retail opportunities through, and integration of logistics into, e-commerce, come the challenges of national governments trying to "reach" to regulate cross-border services, with local server requirements, as well as challenging taxation issues such as how to implement transfer pricing for cross-border e-commerce transactions.
Business plays an important role in helping governments in ASEAN move away from diversity and towards regulatory cohesion and integration, while balancing their individual needs, in a manner that will benefit not only the individual countries and the Region, but also the companies doing business there. To do so, companies must act now to prepare for 2015 and beyond.
As companies consider increased engagement in ASEAN nations, they will need to consider how AEC ICT provisions facilitate such engagement and can use the current market fragmentation to their benefit by assisting in the creation of regional standards and requirements that will reap more opportunities than hurdles.
Therefore, the current market fragmentation among ASEAN nations should not signal companies to adopt a "wait and see" approach, watching on the sidelines to see what 2015 will bring. To the contrary, companies must get in front of regulators and emphasize the importance of taking actions now to become "AEC ready"; e.g., by removing barriers such as local server requirements for online services, tackling low hanging fruit at the outset such as licensing and other requirements that serve as barriers to entry. The more companies engage at the local, country-specific levels now, the greater the possibility that those countries will achieve standards harmonization and the elimination (or at least reduction) of non-tariff barriers and protectionist economic policies within ASEAN.
Companies will also need to work with the ASEAN governments to build awareness of ASEAN and the benefits or increased economic integration within ASEAN, including the private sector, civil society and the general public. Without public support, efforts to finalize and implement the AEC will falter. In certain cases, MNCs will also need to support efforts to build capacity among regulators tasked with applying new ASEAN commitments – the issues will not end when ASEAN leaders ink agreements. Therefore, companies must maintain open communications with regional government officials – and not simply those tasked with participating in the ASEAN negotiations.
There are myriad means and strategies for such engagement, such as: engaging governments both bilaterally and multilaterally, as well as on an individual company basis and through business associations such as the US-ASEAN Business Council, the US Chamber of Commerce and the American Chambers of Commerce in the Region. These business associations provide vehicles for industry to participate in meetings such as the TELSOM and give them an opportunity to shape policy and regulatory environments that foster competition and innovation, and, therefore, a business and investment friendly landscape. There are also opportunities to engage with the International Telecommunications Union ("ITU") ASEAN Regional Office with seminars such as the "Connect Asia-Pacific Summit" and specific projects targeted both at ASEAN as a whole and at individual countries.
These are just a few examples of the current channels for business engagement, which will only multiply in the coming months, and years.