October 18, 2010Leonie Wood The Sydney Morning HeraldAustralia needs to focus on the latest efforts to open up Asia's trade barriers. Leonie Wood examines the investment potential.
When ASEAN leaders meet in Hanoi this month, one of the top items for discussion will be a five-year plan to open Asia's borders and develop a highly connected trading community in the region.
It is a vast and ambitious proposal, a liberalisation plan that mirrors the single-Europe concept of open borders. And while it will no doubt encounter some hurdles and foot-dragging along the way, there is at least a stated universal commitment within ASEAN to pushing ahead with it.
It is the kind of seismic change in regional economic development that, if implemented, will force all sorts of changes in local laws, regulations and procedures. Australian companies, and professional services firms especially, will need to get to grips with the ramifications swiftly, or risk being muscled out of some rare opportunities.
Under the proposed plan, visa requirements for citizens of ASEAN member nations would be eased, a single tourist visa would be available for all ASEAN countries and tariffs on imported goods would be cut to between 0 and 5 per cent by 2015.
East and West, the two mighty economies of China and India, would be linked by a vastly upgraded highway system from China through Laos, Thailand and Myanmar to India. And a huge railway network would link Singapore in the south to Kunming in China, threading through Malaysia, Thailand, Laos, Cambodia and Vietnam.
By 2015, there would be a single aviation market across ASEAN nations. Shipping and customs procedures that tend to bog down in bureaucratic detail would be freed up, easing delays in freight transfers. And telecommunications, power and energy systems would be more closely integrated across borders.
Much coverage of ASEAN meetings tends to focus on what coloured shirts the leaders wore to dinner or who stood next to whom in group photos. But initiatives such as this proposed master plan demand the attention of Australian businesses.
Some details were raised last week during a Melbourne conference co-ordinated by a local barrister, William Lye, which focused on the need for Australia's legal community, and more particularly law firms and jurists, to engage with Asia.
Mr Lye believes that unless law firms and the legal community generally begin to investigate the enormous economic and trade changes within Asia, and try to open branch offices in China, Malaysia, India or Indonesia, they risk having their position even in their home market eroded by feisty competition.
One of the guest speakers in Melbourne was Michael Yeoh, a senior member of the ASEAN taskforce responsible for devising the five-year master plan for development. Dr Yeoh is also the co-ordinator of the World Chinese Economic Forum in Kuala Lumpur next month, where talk will focus on the huge impact that China's economic growth is having on smaller Asian countries.
He noted that while Australia's economy has flourished in the past decade under boom export conditions for iron ore, coal, oil and base metals into China, countries such as Malaysia are experiencing a big economic rebound after the global financial crisis - driven in large part by China's seemingly insatiable demand for manufactured goods.
But ASEAN economies are also experiencing an enormous pull from the West, as India continues its extraordinary economic development of the past two decades.
Dr Yeoh said ASEAN's plans for connected and upgraded road and rail networks would require substantial funding. Already the Asian Development Bank has committed $US150 million, a sum matched by Malaysia, and commitments by other ASEAN countries take the seed capital for an infrastructure fund to $US800 million.
But the build will require billions, and the fund to be managed by the Asian Development Bank is expected eventually to issue infrastructure bonds to private investors all over the world.
Dr Yeoh is optimistic about the plan to improve "connectivity" between ASEAN nations.
In particular, he is enthusiastic about the prospect of freer movement of people within ASEAN countries, including Laos and Cambodia.
While security issues are being handled by a different taskforce, Dr Yeoh believes an open-borders regime - or at least a visa-free system - would lead to greater understanding of cultures and better protections for migrant workers, many of whom are grossly exploited.
He also believes it would alleviate the flow of refugees out of Myanmar which in turn is putting huge pressures on Thailand and Malaysia.
The emergence of China as an economic powerhouse has led to big swings in investment flows throughout Asia. How to harness some of that investment, either from China's sovereign funds or the Chinese diaspora, is another question exciting the interest of ASEAN countries and delegates to the World Chinese Economic Forum.
"Many of the Chinese diaspora could be sitting on large sums of capital," Dr Yeoh said. "And we are wanting to get them to think about ASEAN as an investment destination."
In Australia, issues about Chinese investment spark deep divides.
Dr Yeoh, who studied here in the 1970s, says Australians garnered mixed reactions in Asia. Generally, they were considered "open, friendly people and easy to do business with", he said.
"On the other hand, … sometimes Australians come across to some Asians as being racist, as being arrogant, as aggressive. I think it might be a misperception … and generally the positives outweigh the negatives."
Yet he suggested there needed to be "a greater effort to understand and perhaps acknowledge the growing influence of China in the world".
"I think perhaps the Western world - the US and Europe - do have a tendency to fear the rise of China," he said. "They are suspicious of the rise of China and more recently the emergence of India … and there has to be a greater effort to develop a better understanding of how China and India will be driving the global economy of the future."
Australia has "great natural affinities" with these economies, he said. But Australians needed to make a better effort to engage and understand the cultures and what is driving China and India.
