ASEAN Economic Community Scorecard: Performance and Perception

7. Infrastructure Development in ASEAN

7 Infrastructure Development In asean Mahani Zainal Abidin and Firdaos Rosli I. Introduction Since the formation of ASEAN Free Trade Area (AFTA) in 1992, ASEAN has made significant strides in transforming the region into an area for free movement of capital, goods, services, and its people. In 2003, ASEAN moved a step closer towards a greater regional integration by adopting the Bali Concord II that comprises three pillars — ASEAN Economic Community (AEC), the ASEAN PoliticalSecurity Community (APSC), and the ASEAN Socio-Cultural Community (ASCC). ASEAN leaders later agreed to accelerate the establishment of the AEC from 2020 to 2015, with the belief that integration can close the development gap amongst its member states. The AEC vision is to ensure that the ASEAN region be a single market and a production hub by 2015. One of the measures for achieving this vision is the level of regional intra-trade. The intraASEAN trade is stagnant at around 25 per cent, with trade between Infrastructure Development in ASEAN 137 Malaysia and Singapore accounting for more than half of the total. Economists believe that to ensure self-reliance, ASEAN has to achieve at least 40 per cent of intra-regional trade. The availability of a good physical infrastructure system that connects ASEAN member states is an important and necessary factor that can increase intra-regional trade and contribute to regional integration. According to the Asian Development Bank Institute,1 there are four reasons why infrastructure can generate a higher cycle of higher demand, productivity and growth, consistent with ASEAN’s long-term development goals. These are: 1. Infrastructure plays a significant role in promoting and sustaining economic growth in the region; 2. Infrastructure development is necessary to accelerate economic integration within the region, particularly in the area of trade and investment; 3. Addressing inequalities in infrastructure development is critical to the wider objective of reducing development gaps among ASEAN countries and income inequality and poverty within each country; and 4. Infrastructure development is necessary to improve resource sharing and efficiency in the region to provide basic needs, such as water and electricity. Realizing the importance of infrastructure, ASEAN countries initiated cooperation in the areas of transport, ICT and energy facilities even before the AEC. However, more progress needs to be made. In addition, ASEAN countries have built national infrastructure but the level of achievement varies between countries, depending on the stage of development and the availability of resources. Acknowledging the importance of having a good national as well as cross-border infrastructure, ASEAN launched the Master Plan on ASEAN Connectivity (MPAC) in 2009. The Plan, which focuses on improving regional connectivity through national and cross-border infrastructure development, will hopefully bring ASEAN countries closer together towards the realization of the AEC. This chapter will examine the ASEAN infrastructure cooperation in transportation (roads, bridges, and railway) as well as in energy (electrical power network, gas, and petroleum pipelines), water (pipes and storage reservoirs systems) and communication (telephone cables, satellite, and undersea cables) facilities. The issues discussed will include the evaluation 138 Mahani Zainal Abidin and Firdaos Rosli of the current status and the framework of cooperation and assessment of progress towards the milestones as set out in the AEC Blueprint. There are gaps between the progress made and the targets set and hence there is a need for policy reforms to ensure that the goals are met. Section II of this chapter will examine the infrastructure policy framework in ASEAN, while Section III assesses the infrastructure achievements in the AEC Blueprint. Section IV will analyse the progress towards a well-connected region including the Master Plan on ASEAN Connectivity and Infrastructure Financing. Issues, challenges and policy recommendations will be discussed in Section V and Section VI concludes with some thoughts on future initiatives. II. Infrastructure policy framework in asean Seven out of the ten of ASEAN members are geographically connected by land and as such, cooperation in the transport sector represents the biggest subset of the region’s infrastructure development. Besides building national and regional infrastructure, a key challenge is to ensure the smooth movement of goods and services across borders, which have to undergo various processes that complicate the flow and increase the cost of trade. Evidently, ASEAN is continuously building a more effective mechanism to reduce the physical barriers for better movement of trade and people that can further strengthen connectivity, where member states operate according to the same standards. ASEAN...