For an inclusive Asean to happen, each member country must have some sort of policy alignment with the larger regional frameworks if they are to fully benefit from improved physical, institutional and people-to-people linkages, argues Sok Chenda Sophea.
The issue of inclusive connectivity needs to be recognised within Asean’s larger inclusive development spectrum. Asean has launched many initiatives such as the Asean Economic Community (AEC) blueprint 2025, the Asean Framework for Equitable Economic Development, the Master Plan on Asean Connectivity 2025, and the Initiative for Asean Integration (IAI), to mention just the main ones.
But in this fast-changing global environment marked by technological disruptions and sluggish growth, challenges still remain. It is inevitable that rapid industrialisation brings about socio-economic and environmental challenges, be it sprawling urbanisation, widening income inequality and environmental degradation. If they are not managed well, sustainable and inclusive growth will be affected.
Inclusive growth requires an effective response to address the twin challenges of fostering productivity growth and reducing inequalities. Leveraging on technological advances and innovation to ensure that higher productivity growth is a must.
Asean has connected with East Asia and learning from the “flying geese” development model, a good number of Asean countries have successfully industrialised their economies, diversified their exports, and moved up the value chain. Now that Asean is at the forefront of global manufacturing we can already witness the continuity of the “flying geese” development pattern reaching out to the frontier Mekong countries by way of engaging downstream manufacturing activities in regional value chains.
However, to plug into the regional production networks led by Japan and other newly industrialised economies (NIEs), Asean countries have to ensure a certain policy coherence with the latter, particularly for Asean’s latest members, including Vietnam, Cambodia, Laos, and Myanmar.
In the context of production fragmentation, the Mekong frontier countries have been gradually upgrading their productivity and integrating into the regional production networks to make Asean the next “Factory Asia”. Despite such remarkable progress, there are still development disparities between earlier industrialising Asean countries and the Mekong frontier countries.
An “inclusive” Asean can be achieved by enhancing production synergies across the region, for example for investment activities that are complementary in nature. The success of regional production synergies can’t take place in a policy silo. Each Asean country would have to have some sort of policy alignment with the larger regional frameworks, like the Master Plan on Asean Connectivity 2025 and Japan’s Expanded Partnership for Quality Infrastructure, if they are to fully benefit from improved physical, institutional and people-to-people linkages.
For our part, Cambodia has launched its Industrial Development Policy (IDP) 2015-2025, which guided our efforts to move up the regional value chains and to remain competitive. “Regional inclusiveness” is a priority of our industrial policy.
Let me elaborate a bit more.
First, on hard infrastructure, our IDP is fully aligned with Asean connectivity initiatives. Cambodia has developed its economic corridors linking domestic and regional economic poles; in addition to the rehabilitation and construction of major national roads. The Tsubasa Bridge financed by Japan across the Mekong River has significantly shortened the travel time between Ho Chi Minh City and Phnom Penh and by extension with Bangkok and Laem Chabang industrial zones.
Cambodia is also making steady progress in connecting its highways with Asean highway networks and has made various efforts to rehabilitate and construct the missing lines to connect with the Singapore-Kunming Railway.
Second, our IDP reflects Asean’s inclusive growth framework which recognises the need to foster human development, promote private sector industrial collaboration, SME development and effective capacity building. We have designed our policy to tackle a wide range of issues, ranging from skill development to productivity enhancement, from SME upgrading to the promotion of green growth.
Under the Initiative for Asean Integration (IAI), Cambodia has placed a special focus on narrowing the development gap by way of enhancing its capacity in the area trade facilitation, SMEs, and education.
Third, speaking of soft infrastructure, Cambodia aims to upgrade its logistics infrastructure and services to reach international standards and transform the country into a logistics hub connecting two Southeast Asian manufacturing powerhouses, Thailand and Vietnam, and ultimately the entire Mekong subregion.
With technical support from JICA and the World Bank, our Master Plan on Logistics would soon be launched. Once implemented, we hope to boost our cost competitiveness through enhanced logistics and more efficient connectivity.
Because Cambodia is now more integrated into the Mekong subregion, it has increasingly become an attractive destination for investments, especially from Japan and Asean countries. The role of Japan has been critical for the industrialization of Cambodia. Japanese financial and technical assistance do not only allow Cambodia to become integrated within its border, but they also allow Cambodia to open itself wider to the region through key infrastructure projects.
The “China Plus One” and the “Thailand Plus One” trends represent an opportunity for Cambodia to be considered as an alternative for Japanese companies wishing to expand their manufacturing base within the region. Presently, Cambodia hosts more than 130 Japanese companies, most of which are located inside our special economic zones. These investments are mostly forming a part of the regional production networks and value chains.
Sok Chenda Sophea is Minister attached to the office of the Prime Minister and Secretary-General of the Council for the Development of Cambodia (CDC). He recently delivered this speech to the OECD Southeast Asia Regional Programme (SEARP) Tokyo Ministerial Conference, which was held on March 8-9 in Tokyo.