ASEM at Twenty: The Challenge of Connectivity

15 Sep 2015

How can the Asia-Europe Meeting (ASEM) retain its relevance in an increasingly interdependent and interconnected world? Sada Islam thinks the forum should use the institutional, digital and people-to-people links that have emerged over the past two decades to push for even greater connectivity between both continents.

This article was external pageoriginally published by external pageFriends of Europe on 3 September 2015.

Asian and European leaders will celebrate the twentieth anniversary of ASEM (Asia-Europe Meeting) at their summit in Ulaanbaatar, Mongolia, next July. ASEM has come a long way since its launch in Bangkok in March 1996. Even as leaders take stock of past achievements, however, the ASEM summit in 2016 must upgrade the Asia-Europe partnership by setting it on a renewed and reinvigorated track for its third decade.

ASEM today is more energised and vibrant than at any time in recent years, with governments seeking new ideas to ensure ASEM’s relevance in an increasingly inter-dependent and inter-connected world. The economies, societies and people of Asia and Europe are ever-more closely linked. Compared to 1996 or even ten years ago, there is now a stronger EU-Asian conversation on trade, business, security and culture. More than in the past, two-way trade and investment flows are vital to the security, well-being, growth and development of both Asia and Europe.

Although launched in the last century, with its focus on connecting countries, regions, businesses and people, ASEM is a relevant 21st Century construct. Asia-Europe connectivity is now a fact of life. And enhancing these networks through stronger institutional, infrastructure, digital and people-to-people linkages is rightfully emerging as a central element of efforts to revive and renew ASEM.

Milan summit sets out vast agenda

The significance of Asia-Europe connectivity – including digital connectivity – was underscored by the ASEM summit in Milan in October 2014, with leaders underlining the contribution increased ties could make to economic prosperity and sustainable development and to promoting free and seamless movement of people, trade, investment, energy, information, knowledge and ideas and greater institutional linkages.

The summit set out a clear – albeit vast – agenda for further reflection and action by urging the establishment of an “integrated, sustainable, secure, efficient and convenient air, maritime and land transportation system, including intermodal solutions, in and between Asia and Europe”. Leaders noted the usefulness of an exchange of best practices and experiences on areas of common interest, relating for example to the governance of the EU Single Market and the implementation of the Master Plan on ASEAN Connectivity. Significantly, they underlined that enhanced connectivity requires the engagement of all stakeholders, including the industry and the think tank and academic community.

From words to action

The challenge ahead of the summit in Ulaanbaatar is to turn the leaders’ words into policies and actions. The Milan summit and recent conferences in Riga and Chongqing, China, have tended to centre on an obvious priority: transport and infrastructure connectivity in order to build what the meeting of ASEM transport ministers in Riga in April referred to as “Eurasian multimodal transport corridors” and supply chains to provide additional connectivity. The meeting in Chongqing in July ambitiously referred to the improvement and building of new “Eurasian Land Bridges, Trans-Eurasian transport corridors” the upgrading of sea routes, high-speed rail links and work on an “information highway”. The importance of public-private partnerships was emphasised at both meetings. The conference in Chongqing further underlined the need to upgrade Asia-Europe cooperation in the industry, value and innovation chains.

Certainly, the focus on trucks, trains, ships and airplanes is justified. Business and trade are the backbone of Asia-Europe relations and the establishment of new and faster connections will boost trade, facilitate investments and create new business opportunities for European and Asian enterprises. This in turn will generate more employment, growth and development in Europe and Asia and open up exciting new markets across the routes.

In addition, joining forces on such projects will unleash more resources. Europe’s experience in implementing the investment plan drawn up by European Commission President Jean-Claude Juncker is that it requires the mobilisation of billions of euros of private and public funds as well as capital from the European Investment Bank (EIB) – money that has so far been in short supply. As such, it is interesting that – as noted at the meeting in Chongqing – at least some ASEM projects could benefit from China’s multi-billion dollar “One Belt, One Road” initiative. The economic gains could be immense as the projects come on stream and business opportunities open up for construction, transport, digital and logistical companies.

Let’s talk about good practice…

An ASEM working group on connectivity could be the right forum to discuss connectivity projects by setting focused objectives, sharing practices and encouraging cooperation through an exchange of ideas. But once the initial work is done, eligible projects will have to meet strict governance, environmental and technical standards – and result in sustainable development. Significantly, given the focus on expanding flows of goods, services, investment, information and people along new economic corridors, ASEM will be drawn into a reflection on institutional connectivity. This, in turn, is likely to result in a convergence of legal, technical and administration norms and regulations among widening groups of economies. ASEM can also of course provide an inventory of the different projects being discussed in other fora and by other organisations.

ASEM connectivity, however, is not just about transport and infrastructure links – it’s also about establishing strong networks between institutions in areas such as education, science and technology as well as through trade, business, security, tourism and culture. ASEM is already working on these and other issues and is well-placed to help further expand synergies on such “soft” connectivity.

Europe, ASEAN and China

Europe, Southeast Asia and China have their separate connectivity initiatives – and are beginning to explore ways of cooperating.

The European Union’s many-faceted efforts at building a frontier-free Single Market include work on the digital single market, an energy union and a single market for financial services as well as the construction of Trans-European Networks. In addition, connectivity is an important element of the €315 billion investment blueprint drawn up by Commission President Juncker to encourage the financing of Europe-wide projects. As such, the EU’s connectivity ambitions (even though the EU does not explicitly use the term) are often described as the “gold standard” for others.

Certainly, leaders of the Association of Southeast Asian Nations (ASEAN) are working hard to build stronger intra-regional networks through the “ASEAN Master Plan for Connectivity”. Adopted in Hanoi in 2010, the Master Plan is seen as a vital step in the building of an ASEAN Community in 2015 by bringing peoples, goods, services and capital closer together. The project provides for enhanced physical infrastructure development (physical connectivity), effective institutions, mechanisms and processes (institutional connectivity) and empowered people (people-to-people connectivity).

The EU has identified support for ASEAN connectivity as a central element of its upgraded relationship with the region. So far, ASEAN has selected 15 priority projects, including the ASEAN Highway Network, the Singapore-Kunming Rail Link, the ASEAN Broadband Corridor and the National Single Windows. However, project funding remains a challenge. Although ASEAN countries have established an ASEAN Infrastructure Fund of US$485.2 million and promoted a public-private partnership mode of financing, developing bankable projects that have a regional impact has remained a challenge. (For more details see our commentary on external pageASEAN connectivity)

Most recently, it’s China’s ambitious “One Belt, One Road” (OBOR) initiative that has grabbed international attention. Backed by the 40 billion dollar Silk Road Fund and the $100 billion Asian Infrastructure Investment Bank (AIIB), the Chinese blueprint aims to link China and Europe through Central and Western Asia while also connecting China with South and Southeast Asian countries. Initial activities will be geared towards building basic infrastructure, a sector where China is well-equipped to provide engineering skills, construction experience, machinery and equipment as well as materials such as cement and steel in which it has excess capacity. The initiative provides an overarching framework for many ongoing efforts to improve connectivity and cooperation between China and other economies. (For more details see our commentary: external pageEU-China Connectivity: thinking big, starting small). Significantly, China and the EU have agreed to launch a “connectivity platform” in order to study possible synergies between the “Juncker Plan” and the OBOR blueprint.

Speaking at the ASEM seminar in Chongqing, Chinese Vice-Premier Zhang Gaoli said Beijing is mulling six economic corridors with countries along the OBOR route to better connect Asia and Europe with funding from the Asian Infrastructure Investment Bank and the Silk Road Fund. Corridors are set to run through China-Mongolia-Russia, New Eurasian Land Bridge, China-Central and West Asia, China-Indo-China Peninsula, China-Pakistan, and Bangladesh-China-India-Myanmar, said Zhang.

Asia needs infrastructure

Asia’s infrastructure needs are huge and growing. The Asian Development Bank (ADB) predicts that Asia will need to spend approximately $8 trillion on developing its infrastructure between 2010 and 2020. According to PwC, infrastructure spending in the Asia-Pacific region must be around 5.36 trillion annually by 2025 (representing nearly 60 percent of the world’s total). It says the region needs: new transport and utilities infrastructure to mobilise work forces, transport products and connect economic centres; social infrastructure including schools, healthcare facilities and aged care; “soft” infrastructure to ensure faster and cheaper access to broadband networks and to expand e-commerce; urbanisation infrastructure including housing, transport, water supply, waste management.

Examples of Asia’s hunger for infrastructure abound.

India alone needs to spend $1 trillion on infrastructure in the five years through 2017. Prime Minister Narendra Modi’s most ambitious initiative is the $100 billion Delhi-Mumbai Industrial Corridor Project, which calls for creating seven industrial cities, high-speed railways, six airports and three sea ports.

In Vietnam, the focus is on a proposal for a $15.8 billion second airport for its business capital, Ho Chi Minh City.

Thailand has a $92 billion building plan for 2015-22 that includes high-speed train routes that eventually will stretch from China in the north through Malaysia in the south to Singapore.

In the Philippines, President Benigno Aquino III in May approved $1.4 billion in spending for commuter rail in Manila and other projects. That brought the total for infrastructure investment to $31.8 billion since Aquino took office in 2010.

Indonesia is ratcheting up infrastructure spending to upgrade roads, ports, water facilities and power plants. Instead of leaning heavily on public funds to get them done, the government is inviting the private sector to foot a good chunk of the bill and take advantage of investment opportunities.

The Asian Development Bank says if the required facilities are built, the region’s people could get an extra $4.5 trillion in income in the decade through 2020 and another $8.5 trillion after that.

With demand for funding in the sector running so high in Asia (also in Africa and Latin America), infrastructure is now front and centre at most international and national financial institutions. While the Chinese-led AIIB centres exclusively on the development of Asia’s infrastructure, the World Bank (which has launched the Global Infrastructure Facility for infrastructure projects that can mobilise private investment), the Asian Development Bank and national institutions such as the Japan Bank for International Cooperation are now focusing on financing transport and other infrastructure projects. Japan has in fact announced a credit package of $110 billion’s worth of infrastructure financing in Asia.

Information highways

Despite the high penetration of smartphone usage in both Asia and Europe, the scope for stronger digital connectivity remains high, with both regions focused on developing e-commerce and on-line trading possibilities, especially for SMEs. The European Commission has identified the completion of the Digital Single Market (DSM) as one of its 10 political priorities and said completing the project could contribute €415 billion per year to Europe’s economy, create jobs and transform public services. Asian economies are becoming increasingly wired, but there is still some way to go as regards access to mobile and broadband connectivity. According to ASEAN’s Business Advisory Council Chairman Tan Sri Munir Majid, the potential for expanding digital connectivity is immense in the region. Currently, only 1% of the total retail business turnover in ASEAN is conducted via the Internet, compared to 9% in developed economies.

Education

Work on promoting ASEM-wide links in education have gained momentum since the first ASEM ministerial on education in 2008. There is an ASEM education secretariat – the only ASEM structure of its kind – currently established within the Indonesian Ministry of Education in Jakarta. Meeting in Riga in April, ASEM education ministers agreed to increase result-oriented cooperation activities in the following areas: quality assurance and recognition; engaging business and industry in education; balanced mobility; lifelong learning in technical and vocational education and training. They also focused on the strategic role of education in promoting sustainable and inclusive development and innovation and encouraging the mobility of students, teachers, researchers and ideas. At the meeting in Chongqing, participants supported the establishment of the ASEM Cooperation Centre on Science, Technology and Innovation.

The way ahead

As highlighted above, discussions on promoting various facets of connectivity within ASEM have already begun, with conferences held this year in Riga (transport and education), Chongqing (industrial connectivity) and Seoul (inter-modal transport). A conference on tourism (people-to-people connectivity) will be held in Tokyo in October. The Asia-Europe Foundation (ASEF) is actively engaged in promoting people-to-people networks in an array of sectors. Connectivity is also expected to be top of the agenda at the Ulaanbaatar ASEM summit in July next year.

The focus on connectivity is no surprise. ASEM is after all about creating new connections and consolidating existing ones between Asia and Europe. As ASEM seeks renewed relevance as a forum for informal dialogue in an ever-changing world, enhanced communication and exchanges between Asia and Europe become even more important. A focus on connectivity will help further boost Asia-Europe trade and investments but also link-up people, institutions and ideas. It also means an exchange of good practice on issues of governance, transparency, sustainability and trade facilitation.

ASEM at twenty can become more exciting, relevant and credible. A focus on connectivity will not automatically transform ASEM into a more dynamic and vibrant forum, but it will contribute to giving ASEM a sharper focus, encourage the forum’s credentials as an incubator of new ideas and through the creation of a “connectivity forum” also bring together policymakers, businesses, media and civil society organisations to discuss relevant ideas. Crucially, it will meet at least some of the demands by ASEM participants for more tangible cooperation and greater visibility.

Additional research by Jamie Parker / Research Assistant at Friends of Europe

This editorial has been released in preparation to the debate: external pageASEM AT 20 – The challenge of connectivity

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