Power of 10
As Thailand takes its turn to chair of the Association of Southeast Asian Nations (ASEAN) for 2019 nine years on from its previous incumbency − and more than five decades after its original founding in Bangkok − Deputy Secretary General Aladdin Rillo talks to flow about how ASEAN is making the fourth industrial revolution part of its roadmap to economic integration
Tell us why you returned to ASEAN in 2018 after your time at the Asian Development Bank Institute?
In my earlier ASEAN role, I had responsibility for cooperation and finance, as well as a number of regional initiatives, including the Chiang-Mai-Initiative Multilateralisation (CMIM) in 2010; and the Asian Bond Market Initiative (ABMI) in 2005, activities I was proud of being part of during that time. I moved to ADBI to Tokyo for five years where I was in charge of capacity building, but I missed doing something related to ASEAN, particularly in the area of regional economic integration.
Dr Aladdin D Rillo
Deputy Secretary-General for the ASEAN Economic Community
In the context of AEC 2025, what are the “mega-trends” that are increasingly relevant to ASEAN and how has ASEAN responded?
First and foremost is the digital revolution or the fourth industrial revolution (4IR), which affects everyone in ASEAN, businesses and government. Everyone in ASEAN is committed to embrace the 4IR. During summit events, ASEAN leaders gave the highest political recognition of the need to maximise the opportunities from 4IR. We came up with our own assessment study to assess where the different ASEAN countries are in terms of readiness to embrace 4IR. We found a wide diversity of readiness, and there is a need to have a more holistic regional strategy to ensure the 4IR will really contribute to what we are doing in ASEAN, particularly in terms of economic integration.
In November 2018 we were able to sign the ASEAN agreement on e-commerce. It sets the voice the region will pursue in terms of how ecommerce can be further facilitated and actions in the regions to support the ASEAN Economic Community (AEC). Last year the region was able to adopt the ASEAN digital integration framework that identified the priority areas for digital integration. In 2019, Thailand is the host country for ASEAN, and there are five deliverables for ASEAN under the Thai chairmanship that are all related to the 4IR.
We are developing a concrete roadmap for ASEAN innovation that supports our ability to deliver the 4IR. Furthermore, we need to ensure we have the right skills in the region to cope with the challenges of the digital revolution. In addition, we are trying to focus on the SMEs including micro enterprises and how this sector can take advantage of increasing digitalisation in the region.
The second mega trend is one of sustainability and the need to ensure development in the region remains inclusive. This is an integral part of our strategy. We want to make sure that as the AEC continues to gain momentum, everyone can take advantage of the opportunities this integration will bring. The ASEAN secretariat is trying to work with the different UN agencies to ensure complementarity between the UN 2030 agenda for sustainable development and the ASEAN Vision 2025 for community development. This ensures we cover key issues such as poverty eradication, connectivity, and sustainable management of natural resources, sustainable production and consumption.
One example of the common aspiration in ASEAN to promote sustainable development is the Smart Cities Network created last year. This identifies technological and non-technological solutions to create sustainable and smart cities in the region and we have identified 26 pilot cities participating in the framework. We look at different aspects of urbanisation that need to be addressed to make sure ASEAN can work better and support the greater goal of market integration.
ASEAN trading partners such as the US, China, EU, Japan, Korea, New Zealand, Australia and others have increasingly increased their engagements with ASEAN, and AEC 2025 aims to reinforce and strengthen ASEAN characteristics like a “Global ASEAN”.
On this note, 2018 has seen a number of major free trade agreements (FTAs) like RCEP, CP-TPP and EU-Singapore FTA progressing. Key trade corridors such as China-US that are relevant to ASEAN are also changing.
In what ways can ASEAN change as a result? Are there any aspects and risks of these potential changes that the business/corporate sector should take particular note?
ASEAN is trying to create its own market integration while at the same time strengthen our economic integration with other countries. This is evident in the way we form FTAs with other countries including China, Japan and South Korea. We are trying to the put the conclusions of the Regional Comprehensive Economic Partnership (RCEP) into action and RCEP speaks highly about our commitment and strength of our economic relationship with ASEAN’s Asia trading partners. These efforts also recognise the changing trade and production landscape in the region and beyond, and seeks to ensure ASEAN remains relevant and competitive in the global value chain. ASEAN remains committed to ensure we have multilateral open trading system face of all the trade tensions that have built up over the past 18 months.
Specifically we are looking at forming an FTA with Canada having examined the complementarities between Canada and ASEAN countries in 2018. We are also developing an approach to assess and prioritize partners for engagement and new areas for cooperation.
Asean economic integration progress and next steps
What are key ASEAN trade and economic integration activities and milestones to watch for in 2019/2020?
There are three key areas:
- Creating an effective environment for the markets to flourish. In other words, trade facilitation with all the facilitative measures in place. Two years ago, our economic leaders agreed a target that by 2020 our trade transaction costs in the region will decrease by 10%. We now have five countries engaged in live operation of the ASEAN Single Window and we hope the rest of the countries will come on board this year.
The objective is to expedite cargo clearance and promote ASEAN economic integration by enabling the electronic exchange of trade-related documents among ASEAN member states. Another area in terms of facilitating trade environment in the region is in terms of the ASEAN wide self-certification scheme which will allow exporters in the region to issue the origin declaration and to reduce transaction costs and time. We are hoping that in 2019, this ASEAN-wide self-certification scheme will be implemented. As you would recall, last year the ASEAN economic ministers signed a protocol to amend ASEAN trade and goods agreement part of which is to implement the ASEAN wide self-certification scheme. We hope this year the agreement will be finally ratified to kick-start the implementation.
We need to ensure the private sector feels comfortable with the changes in the region, and last year we implemented the ASEAN Solutions for Investments, Services and Trade (ASSIST) which is a consultative mechanism to deal with complaints arising from trading in goods or services across borders. In addition we have strengthened the commitment to trade integration with the new model agreement, the ASEAN Trade in Services Agreement. This will strengthen our commitment to deepen trade integration in services.
- Investment. The ASEAN Comprehensive Investment Agreement (ACIA) was set up to make our investment proposition competitive to investors. Signed in 2012, we have to make sure it continues to be relevant to the market. We made a number of changes to it in 2018 and one important amendment is the prohibition of the performance requirements preconditions so that the investment proposition is more attractive.
- Connectivity. We hope that the whole ASEAN Framework Agreement on the Facilitation of inter-State Transport will be fully ratified. This will promote cross-border movement of goods and greater connectivity in ASEAN.
Asean Digital Integration Framework (DIF)
According to a report, digital integration in ASEAN could stimulate GDP uplift of US$1trn by 2025. It can also transform the basis of competition for manufacturing and make ASEAN into a global manufacturing hub.
Can you comment on ASEAN’s work, challenges and progress on DIF including on seamless trade, data protection that can support digital trade and innovation, and seamless digital payments? What should the business sector look out for?
The DIF will allow ASEAN to fully tap the potential of digital integration in the region. The framework identifies the priority areas for us to focus on, and these are:
The need to facilitate seamless trade (which we have already discussed)
Data governance and protection that will also allow artificial intelligence (AI) to be better harnessed
- Digital payments – so that we can create the right infrastructure to support e-data
- Talent development to support digital integration. People in ASEAN tend to be technologically savy but there are new skills to be developed so that all industries can benefit (rather than just technology).
- Fostering entrepreneurship so that SMEs can take advantage of the 4 IR
- Ensuring our economic growth remains sustainable
Do you see a multilateral agreement at ASEAN level for the free flow of financial data?
There is a lot of discussion about implementing the ASEAN Framework on Digital Data Governance but it would still be a regional multilateral activity. We have to make sure the digital data and management infrastructure is in place and there is an existing body within our Telecommunications and Information working group looking at that, so we are hoping there will be much more progress on implementation in 2019.
At the end of the day, the economic community is all about how the market responds. And that is why I welcome the opportunity to speak with private sector institutions like yours.
Sustainability in ASEAN
AEC 2025 has a goal of a people-centric ASEAN. How does AEC 2025 link with ASEAN’s attainment of the Sustainability Development Goals (SDGS) to address concerns of “growing inequality, employment insecurity, environmental degradation and increasing disaster risks”? What can this mean for economic integration?
We have always recognised the fact our market integration is supposed to support our goal for caring for people, so the initiatives in the AEC take account of the need to make sure we can support the SDGs. Take disaster management and emergency response which is coordinated among ASEAN member states through the AHA Centre as disasters impact global value chains. This links back to our vision under the AEC 2025 which also sets priorities for women in disaster management, given they are often disproportionately affected both during and after disasters. The point is that we want our efforts in market integration to actually deliver more meaningful outcomes for our people.
How could an aging ASEAN population and shrinking workforce by 2025/2030 impact AEC 2025?
The ASEAN population is still very young with the average age below 30. But there are aging population problems in some ASEAN countries. It is increasingly becoming a common issue. In assuming the chairmanship of ASEAN in 019, Thailand chose the theme “Advancing Partnership for Sustainability” and has stated that the ASEAN Centre for Active Aging and Innovation (ACAI) will play an important role in achieving the goal.
You said you welcomed the opportunity to talk to private sector institution, so what are you looking for in the financial services sector?
There are two important areas where private sector can contribute to our market integration efforts. These are:
- Infrastructure financing – our needs in ASEAN are huge so there is a significant need for the private sector to come in and help us with critical infrastructure. Export finance is one opportunity.
- Financial product development. We are looking to the private sector to help us develop innovative products and instruments to deepen our capital markets presence.
These two areas are crucial resources to help us finance the huge needs of ASEAN market integration
Dr Aladdin D Rillo was talking to Clarissa Dann (GTB Marketing) and Boon-Hiong Chan (Market Advocacy) at Deutsche Bank AG for flow
Dr Aladdin D Rillo is the Deputy Secretary-General for the ASEAN Economic Community. He supports the Secretary-General of ASEAN by providing leadership in the implementation of the AEC Blueprint 2025 and will lead the AEC Department of the ASEAN Secretariat. He also provides strategic advice to support ASEAN’s economic integration agenda.
Before assuming this role, Dr Rillo was a Senior Economist with the Asian Development Bank Institute in Tokyo where he designed and administered capacity building training and policy dialogue on development issues.
Prior to that Dr Rillo worked at the ASEAN Secretariat for more than ten years where he served in various positions; the latest as Director and Chief Economist of the ASEAN Integration Monitoring Office (2010 – 2013), during which he spearheaded the implementation of regional economic surveillance and integration monitoring in ASEAN as well as provided high level policy and recommendation to support ASEAN economic integration initiatives.
Dr Rillo holds PhD and MA degrees in economics from the University of Hawaii, and an AB in economics from the Ateneo de Manila University. He has also held various lecturing and senior economist positions in the region and beyond and has written and published extensively on the ASEAN economy and on the broader economic and finance issues