Regional Cooperation to Enhance ASEAN Connectivity

Economic Research Institute for ASEAN and East Asia (ERIA)

Fauziah Zen

Enhancing Connectivity through Multi-layered Regional Framework

Ministry of Foreign Affair, Thailand

Dusit Thani Bangkok, 19th of July 2013

Regional Cooperation
Financing Non financing ASEAN Subset cooperation ASEAN+ scope Recently emphasizing on PPP

Direction?
Despite intersectional events, still lacking efforts to following up and putting pieces of works into synergy. Different interests of countries resulted in different pace of countrys advancement. Different stages of development: different perceptions, priorities, and actions. Champion of Connectivity in ASEAN?

Challenges
Why does the infrastructure progress face bottleneck?
Financing

Sources of Financing (domestic and foreign):

Sovereign Private Aid

Challenges
Sovereign including loans, should comply with fiscal discipline. Private finance only follows business rule: profit-seeking with manageable risks. Aid: limited effect.

Financing Problem?
YES. But its not on the lack of supply per se. Instead there are quite abundant potential financial resources that can be utilized. More serious issues are:
regulatory framework, legal certainty, appropriate incentives. poor preparation, lacking competent human resources, low fund allocated for Project Development Facility (PDF), lacking communication to international community.

Lacking investor friendly environment

Lacking properly prepared projects

6

PPP Challenges: Causal Nexus

Shopping List

BAD Precedence

Project Prioritization Project Preparation

Poor Project Preparation

Project Implementation
Failures

Awarded

Tender
Market bias

Poor risk estimation

Selection

Selection bias or Fail

Source: Fauziah Zen, ERIA 2012

Challenges
PPP or Private Financing requirements:
Good project (must be well-prepared). Good preparation that requires capacity and money. Building the capacity needs time, consistency, persistency, money.

Problems:
Lacking allocated fund for project preparation. Lacking champion and leadership.

PPP Challenges: Causal Nexus

List of important Shopping List

GOOD Example BAD Precedence

Project

Project Prioritization Project Preparation

Poor Project PDF Preparation

Project Implementation
Successful Failures Execution

Awarded

Tender
Transparent Market bias&

Clear and Adequate Poor risk Fiscal Support estimation

Selection

sound promotion

Clear Criteria, transparent, Selection bias or Fail fair

Addressing the Challenges (1)

Project Prioritization: Be consistent with National Development Priority Manage fiscal issues (support vs. liabilities) Transparent process Market sounding Project Preparation: This is critical part, dont rush but work timely. Start with workable scale and size. Adequate funds, human resources, and time.

Addressing the Challenges (2)

Tender and Selection Process: Be transparent and time consistent. Contestable market. Awarding Project: Clear contract (output, dispute resolution, timeline, ownership, etc.) Sufficient fiscal and political support. Project Execution: Monitoring and Evaluation Addressing problems if any Promoting successful stories.

Enhancing Regional Cooperation

Non-optimal individual countrys effort. Improve cooperation from existing initiatives. Establish a Regional PPP Center:
Capacity Building Technical Assistance Intra and Inter Regional Cooperation Promotion

Regulatory Framework

Thank You for Your Attention

fauziah.zen@eria.org