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Chairman’s Circle 26 May 2015

ASEAN Economic Community:

Challenges and Opportunities for SME’s after the ASEAN Integration

May 26, 2015

Overview

          Human Development Forum Foundation (HDFF), in collaboration with The Asia Foundation, conducted the 2015-3 Chairman’s Circle on 26 May 2015 at the Aloft Hotel Bangkok under the theme of Challenges and Opportunities for SME’s after the ASEAN Integration. The opening remarks were delivered by the Chairman of HDFF, General (ret.) Bunchon Chawansin, and were followed by presentations from three distinguished panel speakers with extensive experience and expertise in academia and professional practice. The first speaker was Ms. Véronique Salze-Lozac’h, Senior Director, Economic Development and Chief Economist at The Asia Foundation. Mr. Matthieu Cognac, Youth Employment Specialist at International Labour Organization, was the second, and Dr. Suthikorn Kingkaew, Lecturer at Thammasat University, was the third speaker. The event was a half-day event moderated by HDFF Programme Officer, Mr. Adam Martin. The forum was attended by representatives of the foreign diplomatic, local academic, and regional private enterprise communities.

 

Highlights

          In the first panel, Ms. Véronique Salze-Lozac’h discussed the potential effects of ASEAN integration on SME’s and hypothesized as to the roles of SME’s in this changing environment. The presentation showed decreasing trade between ASEAN and the US or EU, combined with increasing trade between ASEAN member countries in the past decade. Regional trade has become an important buffer against falling exports and vulnerability to global economic fluctuations. However, income inequalities and development disparities between each ASEAN country were identified as some of the major obstacles in creating fair competitive opportunities within the region. AEC was formed to provide integrated economic protection networks which also help SME’s to be able to expand their business in international trade by being subcontractors for domestic and foreign investors in the region. SME’s (or Micro, Small, and Medium Enterprises (MSME)’s) are a huge part of the economic system with high possibility to grow and support sustainable economic development. The current feeling among SME’s indicates significant concern as to the effect of AEC 2015 economic integration, as individual SME’s express doubts and fears as to what the change will bring for them. According to Ms. Salze-Lozac’h, in order to receive more attention and participation from them, governments need to take an active role in promoting understanding of AEC to and their application to domestic policies in order to help SME’s develop their capacity to compete in a regional market. She argued that governments should provide access to finance, resources, information about foreign regulations and standards, networks in both domestic and regional, and public-private partnership opportunities. Perhaps most importantly, Ms. Salze-Lozac’h recommended that voices from SME’s should to be taken into account when creating new policies.

          Mr. Matthieu Cognac started the second panel on the topic of youth unemployment in ASEAN. The unemployment rate, especially among the youth, can be a crucial factor which can generate conflict and crisis, as evidenced in the recent case of Arab Spring. More educated youths are entering into the labour market every year only to face difficulties in finding proper jobs for their degrees. Inequality in society and a gap between the rich and the poor had escalated the situation into demonstrations and civil unrest in several Arab states. In ASEAN, although there are approximately 7.6 million unemployed youth, the unemployment rate is lower than in the Middle East. Notably within ASEAN, employment for women has shown a positive shift with the unemployment rate for female workers showing a marked decline in recent years. ASEAN integration will create more opportunities for employment with its promise of the free flow of skilled labour and the transfer of knowledge and technology. Mr. Cognac suggested that even though there is a good start with a greater number of employees covered by legal pensions, ASEAN should concern itself more with social protection especially considering its susceptibility to natural disasters. As (M)SME’s account for a huge portion of the overall economy, local labourers will be crucial resources for transnational businesses. To fully benefit from the economic integration, challenges for labours such as income inequality and minimum wages, access to skill training- especially in agriculture, career guide, and an appropriate social protection, will need to be sufficiently addressed.

          Dr. Suthikorn Kingkaew, the final panel speaker, described how ASEAN integration has already begun in practice, yet gradual implementation of the complete integration plan will take time. He emphasized ASEAN integration as not only an economic one, but also political-security and socio-cultural pillar, which cannot be entirely distinguished from the economic one. ASEAN encompasses a huge amount of cultural diversity and to do business with other ASEAN countries or even across cultures within the country, obstacles, especially language must be overcome. The private sector can expand its business to a wider market on the regional level by providing other languages in their services or by opening local branches in other countries. Dr. Suthikorn noted that Thai SME’s may struggle as Thailand’s proficiency in English ranks last in ASEAN, and English is expected to become the de facto language of ASEAN. Additionally, logistical links between countries within ASEAN still lags behind what is needed for optimal conditions. Projects such as the “Asia Land Bridge”, the project of infrastructure constructions to connect each country with land transportation, are being implemented to address these issues with assistance from other regional partners such as ASEAN+6 (which consists of ASEAN and Australia, China, India, Japan, New Zealand, and South Korea) and the Greater Mekong Sub-region (Cambodia, China, Laos, Myanmar, Thailand, and Vietnam). Dr. Suthikorn also addressed major concerns among SME’s that they will not be able to compete with large corporations that already have a regional network, as well as greater resources. Dr. Suthikorn expresses his belief that SME’s will be able to survive, and in fact thrive, as large corporations will still rely on them as essential links in their supply chains. In concurring with Ms. Salze-Lozac’h, Dr. Suthikorn restated that differences in infrastructure, political instability, regulatory issues, corruption, cost of labour, etc., among various ASEAN nations will continue to be a major obstacle in the regions integration plan.

Policy Recommendations

          The forum explored ways and means to better prepare ASEAN countries in dealing with both economic opportunities and challenges in the wake of ASEAN integration process. The suggested recommendations included:

  • ASEAN countries should emphasize positive impacts from the integration on daily life activities of general public to increase attention and participation from individuals and (M)SME’s;
  • ASEAN members should continuingly implement their promises especially on AEC to their domestic policies to reassure the strong will and capability of regional cooperation, as the integration has practically already begun;
  • ASEAN governments should provide accesses to information and connections to (M)SME’s (e.g. international partnership, public-private partnership) as sources for (M)SME’s to develop their capability to compete in regional market.
  • ASEAN members states should enforce stronger regulations on transparency to avoid unofficial fees especially cross-border trade.

Human Development Training Course Catalog

The 2015 (July- December) Training Course catalog contains in depth information about the courses that will be offered this year. The aim is to empower local organizations with the tools necessary to succeed in there particular focus. As HDFF participants you will be able to improve your skills, professional credentials, and build networking opportunities.

View the catalog Here: HDTC_July_December_2015_Course_Catalog (1)

Newsletter March, 2015

Thailand Security Briefing

On March 7th an explosive attack was reported outside the Criminal Court on Ratchadaphisek Road. The blast did not cause any injuries or severe damage to the property. The grenade that was placed outside the parking lot was reported to have been the same type of explosive used during last year’s political rallies. Two suspects were apprehended shortly after attempting to flee on their motorcycle, and were arrested after a short exchange of gunfire. Police General Somyot said that the bomb was meant to create unrest amongst the public as a way to challenge the government and the National Council for Peace and Order.  The suspects were already under watch by government security forces, the military, police, and other officials. One of the suspects, Yutthana Yenpinyo, was wounded during the arrest and the other suspect, Mahahin Khunthong, was taken to police headquarters to be interrogated. As a result of the attack, certain government offices have increased their security measures. Both police officers and military officers have been conducting searches for any weapons or explosives.

In regional news, an agreement on security cooperation was reached between Malaysia and Thailand during Chief of Defence Forces Udomdej Sitabutr’s visit with Malaysian Chief General Raja Mohamed Affandi Raja Mohamed Noor. During this visit, they discussed the issue of illegal migration through the ongoing construction of the border fence. The fence is intended to help mediate violence in the border of the southern provinces by improving security measures in the area. Another topic also discussed during this meeting was border area reforestation and the development of villages on both sides of the border.

In other news, in order to keep Thai armed forces on par with those of its ASEAN neighbors,  Defense Minister Prawit Wongsuwon has proposed buying submarines for the Royal Thai Navy. Funds to purchase these submarines have not been allocated, but a budget of 36 billion baht is expected to be granted. Thailand has not operated any submarines since 1951, and attempts to purchase from both Germany and South Korea in 2011 ultimately failed. Chonburi province is currently home to a submarine base and training center, even though Thailand currently owns no operational submarines. At the moment, there have been talks with China over the purchase of submarines that would be paid in a ten-year payment plan.

Myanmar soldiers closed off their ports in the Moei River area in response to the strict regulations of oil transport by Thai soldiers. Although the Thai-Myanmar friendship bridge remained open, ports on the bank were closed which stopped the cargo transports from Thailand. Thai police refused to let oil trucks be unloaded in Mae Sot to the pipelines that extend from Moei River to Myawaddy. The halt of oil transport through the pipelines resulted in an oil shortage that lasted approximately two weeks. Thai police insisted that oil must be shipped through the bridge and not through the extended pipelines. After reopening the ports on behalf of Myanmar soldiers, Thai authorities allowed oil to be transported via the pipelines to Myawaddy. Officials on the Thai side explained that the export licenses state that fuel must be delivered across the river through the roads, therefore banning the export through pipelines. The problem has been momentarily resolved by allowing oil exports to be resumed, but Thai officials have given Myanmar authorities 30 days to improve the way in which oil is transported between the two countries

Focus on Thai Politics

A final working draft is being written by the Constitution Drafting Committee set to be completed by 17 April. The National Reform Council (NRC) plans to review the newly written constitution in hopes that the finalized version will be ready in September. Abhisit Vejjajiva, a democrat party leader, opposes this drafted constitution claiming that it reduces the people’s democratic power even more and believes that it will lead to more conflicts in the future. At the moment, the new constitution has adapted a German-style voting system (MMP; Mixed-member proportional representation). This system is designed to favor smaller parties and weaken the major political parties. The number of the members of parliament will also be decreased, while allowing political groups to participate without any party affiliation. Much controversy has arisen due to mixed feelings about the proposed constitution. This charter brings questions of having an unelected prime minister, indirect elections of senators, and the strategic weakening of political parties. These controversies have led the public to ask for a referendum as the drafted charter is still being written. According to the Pheu Thai Party, the public should be given options on different charter versions rather than just have the option to accept or deny the charter.

In concurrence, Prime Minister Prayut Chan-Ocha has revoked martial law with permission from His Majesty the King. Martial law, which has been in effect for the past 10 months, is now being replaced by section 44, which is intended to speed up national development.  Section 44 gives Prime Minister Prayut the authority to “take any actions to promote reform and unite and tackle threats to order and the security of the nation, the monarchy and the national economy and his actions will be considered as legal, constitutional and final by being appointed the chief of the National Council for Peace and Order (NCPO)” (Bangkok Post).  This section is also meant to help the prime minister combat corruption and make government projects more visible to the public. Areas of development focus include; improving air transport, allocating land to the poor, and ensuring the government upholds the nation’s best interest.

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Former Prime Minister Yingluck Shinawatra has been cleared by the Election Commission (EC) for the alleged violation of election laws for visiting provinces in the northern and northeastern area prior to last year’s failed elections. Ten others also had charges against them dismissed on account of accusations from Srisuwan Chanya, the Thai Constitution Protection Association, and seven eligible voters. The charges claimed that power had been abused by violating the EC regulations on hosting activities that could have been misconstrued as electioneering. The EC declared that neither Yingluck nor the other 10 members participated in anything illegal. Other charges dropped included accusations over the exploitation of state media for making program appearances that promoted the rice-pledging scheme and allegations towards democratic executives for allegedly violating election laws by getting people to rally against the proposed amnesty bill.

Highlights – Chairman’s Circle Conference

On 24 March 2015, HDFF in collaboration with the Asia Foundation, hosted the second Chairman’s Circle of the year. The forum’s topic was, “The Challenges of the ASEAN Political-Security Community” and featured various panelists with very strong knowledge of this topic. Our Key note speaker was H.E. Lutfi Rauf, ambassador of the Republic of Indonesia to the Kingdom of Thailand who gave the opening remarks. His statement focused on the challenges that the region is facing as it prepares for the ASEAN Community 2015 integration. One challenge being that the diversity and differences that define the Southeast Asian region may be one factor contributing the difficulties of regional integration.

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For our first panel, the forum also welcomed Dr. John Blaxland, Senior Fellow at the Strategic and Defense Studies Centre at the Australian National University and Mr. Kavi Chongkittavorn, Assistant Editor at the Nation Media Group of Thailand. The second panel hosted Mr. Hernán Longo, Program Officer for Counter Terrorism at the United Nations Office on Drugs and Crime (UNODC) Regional Office for Southeast Asia and the Pacific, and Professor Yang Baoyun of the School of International Studies at Peking University as our participating panelists.

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Each speaker had the opportunity to elaborate on this month’s selected topic based on their experience and expertiese. Dr. John Blaxland presented on ASEAN through an Australian perspective, speaking on the security challenges which included political instability, border disputes, insurgencies, etc. Mr. Kavi Chongkittavorn continued with the idea of ASEAN’s centrality and how the ASEAN secretariat must be enforced in order to keep this centrality in order to act collectively. He also discussed the issue of IS in Southeast Asia by suggesting a counter-narrative strategy as a response to the ideologies spread by IS.

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The second panel was hosted by Mr. Longo and Professor Baoyun. Mr. Longo stated that ASEAN member states have to take national measures to prevent people from travelling to places as a means to join extremist groups. While Professor Baoyun focused on the internal challenges that ASEAN members faced, he believed that internal threats were more worrying than external ones. He ended with his explanation that political-security in ASEAN will continue to be determined by the interaction and that member states have with one another.

Spotlight on ASEAN

Lao People’s Democratic Republic (Lao PDR)

Capital: Vientiane

Population: 6.4 million

Official Languagel: Lao

ASEAN Status: Member, July 23, 1997

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The Lao People’s Democratic Republic will hold the annual rotating Chairmanship of ASEAN beginning in  2016. The rotation is based on alphabetical order of the English names of Member States  as outlined in Article 31 of the ASEAN Charter. A number of issues have been discussed in order to prepare Lao PDR for the ASEAN chairmanship. Preparation has started with the upcoming creation of the slogan and logo that will represent the goals and aspirations of ASEAN. Lao PDR plans to concentrate on coordination mechanisms, human resource development, and infrastructure improvement in order to facilitate better integration with the AEC at the end of 2015. Lao PDR has also committed to creating a community comprising of the three pillars of ASEAN; Political-Security Community, Economic Community and Socio-Cultural Community under the theme “Turning into Action for a dynamic ASEAN Community” (ThaiPBS).

Lao PDR has had a communist government regime since the fall of the Soviet Union very similar to that of Vietnam. This ended a six-century old monarchy and created a socialist governing system. The country is being led by the Lao People’s Revolutionary Party (LDRP) with President Choummaly Sayasone as the head of state for a total term of five years. In the past, Lao PDR was ruled by France until 1946 as part of French Indochina, but gained full independence in 1954 leaving hostilities between royalists and communist groups. Later in the years, the LDRP took full control of the government, becoming the only legal political party. Until this day, it remains a developing country which relies heavily on monetary aid from outside countries and foreign investment, although it is looking to further their development. As of 2011, Lao PDR has become a lower-middle income economy (World Bank) whose focus has been to effectively utilize natural resources in order to create better infrastructure, health services, and educational opportunities for its people. Its natural resources consist of agricultural land, forestry, minerals, hydropower, and mining sectors. With many reforms underway Lao PDR will likely continue to make gains in its efforts to eradicate poverty, social inequalities, and increase its economic performance.

Human Development Training Center – Updates

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