Hydropower, Economic Growth and Inequality in Cambodia

Cambodia imports all of its petroleum products, which are the main source of energy for power generation in the industrial, transport, residential and commercial sectors. With such a high dependence on oil, the price of electricity in Cambodia is the highest in the Southeast Asian region. As such, the massive demand for electrical power and infrastructure demand is unaffordable for the Cambodian Government. In light of these circumstances, the Royal Government has decided to encourage and create necessary conditions to attract private sector investment in the power industry. Through this condition, all potential hydropower projects are being developed with the support of investment from foreign companies, particularly Chinese companies.

Amongst the range of energy sources utilised to faciliate economic growth, hydroelectricity is a cheap and sustainable energy source. In the long term, the improvement of power supply and reduction of power price could be significant because of its benefits for economic growth and employment through absorbing the Foreign Direct Investment. Moreover, unemployment in Cambodia can potentially be reduced by increasing of foreign direct investment in Cambodia. Lower electricity prices can encourage the growth of small and medium enterprise in Cambodia, which contribute substantially to economic growth and poverty reduction in Cambodia.

That said, however, there are about 90,000 people of ethnic minority backgrounds living in the middle Se San Basin in Cambodia and Vietnam down-stream from the Yali Falls Dam, who engage in subsistence farming as their main occupation (Halcrow, 1998). The Se San River supports a rich variety of plant and animal life, which provide local people with water for drinking, washing and irrigation as well as other  resources particularly for Cambodian side, where livelihoods almost totally rely on access to natural resources from aquatic and terrestrial ecosystems. The previous livelihood systems might not be able to be sustained for these effected people. Moreover, these impacts have been serious for indigenous people living along the Se San River. In the case of Yali Falls, flood waves as a result of the initial operational tests of this project have resulted in a loss of lives, property, livestock and crops. The villagers have also stopped fishing due to the reduced fish population in the river. Before the dam was constructed, they could get between 2 to 20 kg of fish per day from this river for domestic consumption and sale (about 2 USD per kg).  The dam has made them lose their income from fish and increase their spending to buy meat for domestic consumption. As such, the impact of hydropower dam should be minimized in order to reduce the inequality between the downstream and upstream community. The government and developers of hydropower projects should provide more support to the affected communities in recovering their livelihood from the resettlement.

Research conducted under the ASEAN-Canada Junior Fellowship will analyze the costs and benefits of hydropower in terms of economic, social and environmental circumstances in Cambodia, Vietnam and Laos. The research focuses on analyzing the improvement of hydropower dams on affected communities and contributes to the economic development in region with less inequality.

This blog post has been written by Kesa Ly. Kesa is a Research and Development Advisor at Life With Dignity and Research Fellow at M-POWER, and a Junior Fellow for 2012 under the ASEAN-Canada Research Partnership. For more information on the ASEAN-Canada Research Partnership, please click here.

SME Development and Management in Myanmar

Small and Medium sized Enterprises (SMEs) play an essential role in the economic development of Southeast Asian countries. Generally, the SME sector accounts for more than 90% of all firms as well as the biggest employment source contributing for over three quarters of the workforce especially for the women and the young. As such, the SME sector will remain the back bone of most of the economies in the region for some time. Supportive measures and encouragement for SME development is therefore urgently needed at both the sub-regional and national level. As such, an SME development strategy can be regarded as one of the pillars of a developing country’s national development strategy.

In Myanmar, SMEs contribute to about 90% of total enterprises and about 70% of the total work force is employed in SMEs. Although SMEs dominate every sector of the economy, supportive policy measures are still lacking in Myanmar. The status of SMEs in Myanmar among South East Asian countries is relatively low due to its low productivity, shortage of capital, outdated technology and poor market access. Moreover, there are no laws in Myanmar that pertain to SMEs.

Although SMEs can be found in every sector of the country, their legal status and statistics are available only in the manufacturing sector accounting for more than 40,000 firms and 92% of total domestic firm in Myanmar.

Among the SMEs in Myanmar, food-processing industries account more than 60% of total firms, which largely operate based on “learning by doing” in production as well as marketing. Food-processing companies include rice mills, oil mills, powdering machines, sugar mills, bean & pulses processors, ice factories and confectionaries, which make up about 90% of food-processing industries. In addition to this, rice mills make up half the number of food processing firms in Myanmar. As Myanmar adopted market oriented system in 1988 and encouraged privatization, the private manufacturing firm increased three fold during 1988/89 to 2011/12.

SMEs of Myanmar can be basically classified as the following: (1) Traditional SMEs; (2) Import substituted SMEs (Active SMEs); (3) Agricultural and resource based export oriented SMEs (Modern SMEs). That said, most of Myanmar’s SMEs are traditional SMEs, which constitute more than 80% of the total number. Import substituted SMEs are mostly concerned with food and beverage, household utilities, plastic goods, basic electronic goods etc. They are located in the main cities and account for probably less than 10% of the total. A few export oriented industries like  modern rice mills, bean & pulses processing, fish and prawn processing, wood-based factories and garment factories have emerged recently in Yangon  and Mandalay under market oriented system.

As such, SMEs development in Myanmar is mainly concerned with the transformation of traditional SMEs into active SMEs and then eventually into modern SMEs. SMEs in Myanmar still face various problems such as lack of financing, low level of technologies, and unequal playing field with Foreign Direct Investment firms[1].

Myanmar desperately needs to solve all these problems in order to gain SMEs development. And in-depth study on how Myanmar can overcome these barriers and effective policy recommendations for ways to maximize the growth of SMEs is urgently needed.

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[1] Survey result conducted by ASEAN Canada Junior Research Fellow from Myanmar.

 

This blog post has been written by Nang Saw Nandar Hlaing. Nandar is a researcher with the Union of Myanmar Federation of Chambers of Commerce & Industry (UMFCCI), and a Junior Fellow for 2012 under the ASEAN-Canada Research Partnership. For more information on the ASEAN-Canada Research Partnership, please click here.

Exploiting the potential of developing the CLV Development Triangle

The Development Triangle Area comprises of 13 provinces with a total area of 143.9 thousand square kilometers, population of approximately 7 million people (as of 2012) and population density of 48. Interestingly, most provinces share the same natural environment, culture and ethnic groups. Moreover, the Triangle is located in an area that is of economic, political and strategic importance to the three countries.

The CLV Development Triangle has abundant natural resources. It is located in Indochina’s central highlands. Fertile farmlands – up to 600,000 hectares – in this region have received investments for developing industrial tree planting areas, which is seen to be a profitable venture.  However, many fertile farmlands continue to be fallowed, have a lack of water for farming during the dry season and lack suitable cultivation methods.

There is a large area of natural forest with abundant and diverse systems of plants and animals. These forests contain many kinds of valuable wood – high in quality and primary nature reserve wood (total natural area of forest land is about 8.87 million hectares). The area conserves the unique species of flora and animal systems of the various countries and the wider region. Currently, however, indiscriminate exploitation of forest resources – activities such as illegal logging and poaching – have not been closely controlled and managed. Therefore, the benefits of natural forest resource development and genetic code preservation need to be urgently acknowledged and protected.

The CLV Development Triangle is also rich in water resources, including surface water and underground water, as this areas is the source of the major rivers in the three countries. In particular, a characteristic of the headwater river is high watershed slope and large amount of water, which has attracted interests to develop hydropower. Moreover, the groundwater reserve in this area is relatively large and plays an important role in daily serving and production activity needs of inhabitants. However, provinces in Cambodia and Laos have, to date, not utilized hydropower effectively. Electricity networks for local communities are still limited, and many areas still do not even have electricity for lighting. Moreover, there are many shortcomings and limitations in the irrigation systems and groundwater exploitation which support residents’ agricultural and animal husbandry activities.

In addition, there are vast reserves of mineral resources in the area that are untapped – including bauxite, gems, gold, aluminum, zinc, etc – which have attracted the attention of investors. However, the exploitation largely by foreign investors is rampant, spontaneous and has caused serious consequences for the ecology of the region.

Ecotourism and cultural tourism of ethnic minorities is also extremely remarkable here. Unique original culture have been conserved and developed by ethnic groups. Besides, there are many primitive natural conversation areas where have unique biodiversity. However, these potentials have not been seen sufficient investment and development.

Finally, the development triangle has many potential benefits as a base for developing efficient commodity futures market, which would promote socio-economic development and improve residents’ quality of life. However, such potential has so far been utilized spontaneously for planned development purposes. The question is how to not only develop the economic benefits of natural resources, but also maintain the sustainable development of this region in the future.

This blog post has been written by Hoang Thi My Nhi. My Nhi is a PhD candidate at the Vietnam National University, a researcher in the Institute of Southeast Asia Studies, Vietnam Academy of Social Sciences (VASS), and a  Junior Fellow for 2012 under the ASEAN–Canada Research Partnership.

For more information on the ASEAN–Canada Research Partnership, please click here.

Local Politics and the Limits of Micro-Regionalism in Border Areas

The cross-border cooperation between West Kalimantan in Indonesia and Sarawak in Malaysia shows rich evidence on how the dynamic interaction between the local and central governments has a great effect in determining the future of regional integration in the region. As a region that is far from the center of economic development in their respective countries, the successful cross-border cooperation between West Kalimantan and Sarawak can be seen as a success for ASEAN countries in overcoming development gaps within and across countries. Furthermore, successful cross-border cooperation might be seen as the emergence of the so-called micro-regionalism, which is defined as a cross-border integration within combination of two or more territorial elements that are contagious or linked by the seas ‘below the national level’ and ‘across national borders.

Theoretically speaking, the existence of cross-border cooperation mechanism between sub-national actors can foster deeper cross-border cooperation through the creation of more coordinated policies among political elites across countries in the border areas.  Furthermore, the existence of sub-regional institutional mechanisms as a top-down initiative from central governments should have fostered deeper cross-border cooperation in the border areas. The decentralization process experienced at the sub-national level may also foster micro-regionalism in the border regions by increasing the role of local governments in managing cross-border cooperation with their counterparts. Besides, the emergence of cross-border production networks due to the enhanced private sector involvement, and the increased economic cross-border activities is also the primary mover of the emergence of micro-regional cooperation in the border areas.

Sarawak Infrastructure in the border areas (road after Tebedu)

Despite the existence of cross-border cooperation mechanisms like Sosek Malindo, institutions for sub-regional integration like BIMP EAGA, the decentralization process, the greater business actor involvement, and the increased trade border activities which are arguably the prerequisite for the emerging of micro-regionalism, the emergence of the so-called micro-regionalism remains limited in this border region. This research finds that local politics, political antagonism between the local and central elites, as well as defective decentralization have hindered the emergence of micro-regionalism.

West Kalimantan Infrastructure in the border areas (road leading to Entikong)

In West Kalimantan, due to sovereignty issues is still appealing within the local politics and the perception of inferiority toward Sarawak economic growth, the local political elites tend to see Sarawak’s massive development as a threat rather than an opportunity thus create a barrier for the local elites to deepen cross-border cooperation. Furthermore, this feeling is intensified with the perception that the central government does not have the political will to develop the border areas in West Kalimantan thus creating political antagonism between local and national governments. In fact, this perception appears due to the decentralization process that does not give the local government a greater authority to conduct cross border cooperation. This makes decision-making mechanisms too bureaucratic compare with Malaysian counterpart to coordinate the development policy to foster cross-border cooperation.

This blog post has been written by Mochammad Faisal Karim. Karim is an Expert Staff to a Member of Parliament in Committee on Finance, National Development, Banking, and Non-Banking Institutions in Indonesia and a Junior Fellow for 2012 under the ASEAN-Canada Research Partnership. For more information on the ASEAN-Canada Research Partnership, please click here.

ASEAN Bond Market Initiative: A Quick Report on the Credit Guarantee Investment Fund

The ASEAN Bond Initiative (ABMI), like the Chiang Mai Initiative Multilateralisation, was formed in the context of the aftermath of the Asian crisis.  The mechanism was established in 2003 to promote long-term investment and financial stability by helping member countries tap into regional saving pools, while avoiding currency and maturity mismatches, as seen during the 1997 crisis.  These objectives were to be fulfilled through a multipronged strategy which addresses various issues, such as supply and demand of local bonds, cross-border transaction and settlement, and credit rating system.

The 2008 global crisis accelerated the ABMI dynamic.  Being aware of the fragility and interconnection of the global economy, leaders from ASEAN+3 countries acknowledged the pressing importance of building sustainable economic growth in the region.  As a result, a New AMBI Roadmap was adopted in 2008 to give the mechanism clearer objectives, including promoting the issuance of local currency-denominated bonds and improving the necessary infrastructure for the bond markets.   In 2012, these goals were streamlined and concretized by the New Roadmap+ to achieve more tangible outcomes and address with relevant issues in the global finance.  At the 10^th anniversary in 2013, the ABMI is at its vibrant stage and has contributed to the steady development of the regional bond market.

Among the various programs under the ABMI, the Credit Guarantee Investment Fund (CGIF) stands out as one that received close attention from member governments.  Established in 2010 as part of the New Roadmap, the CGIF is to provide guarantees on corporate bonds issued in regional markets.  The pool of US$700 million-paid-up-capital available to the fund, contributed by ASEAN+3 and the ADB, speaks well for the strong commitment given to this program.  Most recently in April 2013, the CGIF provided its first guarantee to the issuance of Thai-baht bonds at the value of Bt2.8 billion by Noble Group, a Singaporean–based commodities trading corporation.  This guarantee would allow Noble Group to diversify its borrowing and tap into the growing Thai bond market, while creating investment opportunities for local investors in Thailand.

Looking more closely at this development, the CGIF, and the ABMI in general, do not devoid of challenges.  First, regional bond market still have to compete with bank lending and local bond market as sources of corporate borrowing.  The case of Thai Union Frozen, whose deal with the CGIF in 2012 did not materialize reportedly due to the higher costs in issuing bonds in the Singaporean market compared to borrowing at home, illustrates this point.  This phenomenon reflects a fundamental problem in promoting regional bond market in a largely bank-based financial environment and existing advantages of big local companies in accessing domestic funds.  Second, the fund’s financial and organizational capacity can pose certain limitation to its performance.  Although the size of US$700 million is not insignificant, with the average deal size of US$75-100 million[1], the CGIF could only guarantee a limited number of companies and could hardly afford a default.  This concern is seen connected to its careful selection criteria that would require competent staff and a time-consuming approval process.  But this is a work in progress.  So far the CGIF is working toward building its organizational capacity and expanding its investment portfolio.  How it overcomes these challenges and contributes to regional financial integration should be followed closely by future research.

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[1] The Thai Union Frozen deal was about US$ 75 million and the Noble Group deal was approximately US$ 92 million (calculating from the rate of Bht32 to US$1).

This blog post has been written by Supanai Sookmark. Supanai is an instructor at Carleton University in Ottawa and a Junior Fellow for 2012 under the ASEAN-Canada Research Partnership. For more information on the ASEAN-Canada Research Partnership, please click here.

Governing South China Sea Affairs: Will Cooperation and Joint Development Affect Peace?

Since disputes that occurred in the 1980s,  affairs in the South China Sea have reflected and validated the notion of anarchy from a realist perspective. Governance over dispute settlements and other matters in the region has been absent, while each claimant tends to enforce a unilateral policy to secure its national interests. The ASEAN-facilitated effort to find a solution among the claimants in the disputed region has so far been modest in achievement.

ASEAN’s relative success in bringing the claimants into negotiation forum is an important aspect for building peace, but there are certain factors to be resolved if the claimants are determined to find peaceful settlement. First, the challenge to form a regulation (i.e. the Code of Conduct) that is acceptable to all of the claimants. In order to cope with this, compromises need to be made and incentives for compliance and cooperation need to be provided. Second, the absence mutual confidence that has been constraining diplomacy between the claimants. The options to bridge the mutual distrusts among the claimants are limited by insecurity complex generated by the balance of power in the region.  A respected leadership may be required as the bridge in the absence of mutual confidence.

In the effort to conclude an agreement, provide incentives for compliance, and build confidence, sufficient resources are fundamental. China and ASEAN has to work together and exert all possible resources, both internal and external. The on-going regional economic integration in East Asia (internal resources) can be expected to extend to South China Sea development for as long as the claimants are willing to accept and cooperate. In addition, the international community is more likely to be willing to support peaceful settlement to everyone’s benefit instead of allowing the conflict to cause strike to the regional economy. This support should be treated as opportunity for creating ways of solution to the dispute. If ASEAN and China can work together to do this, the world can expect to see economic integration also flourish in the South China Sea.

This blog post has been written by Meidi Kosandi. Meidi is a PhD candidate in International Relations at Ritsumeikan University, Japan and a Junior Fellow for 2012 under the ASEAN-Canada Research Partnership. For more information on the ASEAN-Canada Research Partnership, please click here.

ASEAN’s New Towns: Housing the Middle-Class Urbanity through Rural Dispossession

Half of ASEAN’s 600 million people now live in urban areas, a figure expected to continue to increase in the coming decades. To accommodate this rising urban population, public planning agencies throughout the region encourage a rapid—but controlled—expansion of urban activities, built forms, and populations into the urban hinterland. While this strategy is not new in the region, it is changing with the widespread adoption of planning policies favouring the construction new so-called new towns; i.e.; large-scale, planned, suburban redevelopments geared towards middle and upper-middle-class urban households.

While they contribute to accommodate growing urban populations and while they benefit various real estate economic actors, these large residential redevelopments put intense pressure on pre-existing populations, who must adapt to rapid socio-spatial changes. At the urban periphery of Jakarta, Manila, Bangkok and, more recently Hanoi, Ho Chi Minh City and Phnom Penh, new town developments entail forced acquisitions of large tracts of land, the displacements of populations, a profound land and housing market restructuring, and the afflux of suburbanizing dwellers into erstwhile rural places.

The capacity of pre-existing populations to adapt to these profound social, economic and spatial transformations is limited. Land expropriations, in particular, have been shown to disrupt the everyday life, social networks and livelihoods of erstwhile agrarian households. While many households on the edge of large Southeast Asian cities have already diversified their livelihood into off-farm activities, a significant proportion continues to depend on agricultural land. Despite land compensations, the most vulnerable segment of this population (women, the elderly and the less educated) struggle to find adequate livelihood alternatives once they are dispossessed of the land on which they sustained their living.

The negative effects of land dispossessions are worsened by the exclusionary designs, amenities and management styles of ASEAN new towns. Physical barriers, such as poor road connections or guarded gates, limit movement between the new and old periurban places and this, in turn, restrains social and economic interaction between incoming suburban dwellers and pre-existing periurban households.

Moreover, newly built amenities and services in periurban residential developments (schools, medical clinics, community centres, etc.) are often privately managed and, given the concomitant high fees these charge, are generally out of reach for the poorer population. In some cases, this socio-spatial segregation is reinforced by surveillance mechanisms that prevent periurban villagers and migrants from practicing traditional urban economic activities (e.g., street vending) and from using public spaces in the new suburban neighbourhoods.

Throughout the ASEAN, the construction of new towns tends to marginalize populations living on the peripheries rather than providing them an entry point into the urban economy. Weak physical and functional linkages and limited opportunities for socio-economic interaction result in the gradual fragmentation of periurban landscapes, economies and populations. This lack of integration widens social gaps between wealthier suburbanizing dwellers and the thousands of villagers and domestic migrants “left behind” by the urban encroachment process.

 

This blog post has been written by Danielle Labbe. Danielle is Assistant Professor of Urban Planning at the University of Montreal and a Junior Fellow for 2012 under the ASEAN-Canada Research Partnership. For more information on the ASEAN-Canada Research Partnership, please click here.

Social and cultural development in the Development Triangle: Challenges faced by Vietnam, Laos and Cambodia

Socio-cultural development in the Development Triangle Area of mainland Southeast Asia – comprising of Vietnam, Laos and Cambodia – continues to face several challenges despite recent support from ASEAN and other international organizations. Countries in the Development Triangle’s vary in terms of their geography, topography, social norms, religions, and nationalist characteristics. Such a diverse range of factors have to some extent also affected the general development of the region. While such diversity is also evident in other Southeast Asian countries, the Development Triangle Area countries are still considered as “bottomland” and lags far behind other countries in Southeast Asia.

Given growing social problems (such as cross-border crimes and environmental degradation), countries in the Development Triangle have recently established a consistent plan for ensuring that their basic development is equitable development. Equitable development does not only seek to address economic issues, but also socio-cultural aspects, such as increase investments in health, education and social services. Doing so would enhance the capacity of individual workers, improve the ability to develop and implement policies, enhance fairness in society, and build social security networks to eliminate poverty amongst marginalised communities amidst the conventional economic development process.

The problem that remains is how to sustain high growth while reducing the societal inequalities, which have been a result of inequitable growth, and in turn, increasing inequitable access to income and social services.

Over the last decade, thanks to cooperation among the three countries, the support of ASEAN as well as external funding of international donor countries, such as Japan and Canada, the CLV Development Triangle Area has had significant achievements. For example, there has been increasing living standards, reduced poverty levels, upgraded social services, improved educational levels, and heightened social order and security.

However, if compared with development levels of other countries in the region, the Development Triangle Area needs more internal efforts and continued effective support from organizations and donor countries.

Policies with a long-term strategic vision should be recommended to guide regional development in order to accelerate the development of the region’s assets, and subsequently facilitate equitable development to narrow the developmental gaps amongst ASEAN countries.

 

This blog post has been written by Hoang Thi My Nhi. My Nhi is a PhD candidate at the Vietnam National University, a researcher in the Institute of Southeast Asia Studies, Vietnam Academy of Social Sciences (VASS), and a  Junior Fellow for 2012 under the ASEAN–Canada Research Partnership.

For more information on the ASEAN–Canada Research Partnership, please click here.

Hubs for Cross Border Education: Singapore and Malaysia Carve out their Niche

Cross border education refers to the movement of people and research across national borders for academic purposes. Within the Southeast Asian region, Singapore and Malaysia have actively promoted themselves as hubs for cross border education.

While these two countries aim to attract foreign students and academics, their strengths, strategies and motivations differ.

Singapore holds an enviable reputation for providing quality tertiary education. In the 2012 QS ranking of Asian Universities, the National University of Singapore came in 2^nd while Nanyang Technological University came in 17^th. Comparatively, the University of Malaya was ranked 35^th.

The Singapore government plays a very active role in promoting Singapore as an education hub. It enjoys a healthy budgetary surplus and can afford to invest in human resource, infrastructure, and advertising. Under the Global Schoolhouse programme, the Singapore Economic Development Board (EDB) forms partnerships with leading foreign institutions and recruits foreign talent. The Singapore government also monitors closely, entry criteria, degree requirements, and remuneration for academics.

Singapore seeks explicitly to develop academic programmes that serve the needs of its economy, and to retain foreign talent on home soil.

While Singapore may enjoy a better reputation for quality education, Malaysia edges out on affordability. As an indication, the National University of Singapore charges foreign students approximately 9,500 USD per annum for its BA programmes. The University of Malaya on the other hand, charges a significantly lower rate of approximately 2,000 USD.

The Malaysian government has spearheaded the supply of lower cost education. Its investment arm established Educity in Johore, a 350 acre campus that would eventually house 8 foreign linked universities. Cost savings are gained through the sharing of facilities, as well as teaching and administrative resources.

Notably, Malaysia has built up a unique reputation in the education of Islamic finance. Unlike conventional banking, Islamic banking complies with Muslim shariah law and abides by two key principles: the avoidance of usury, and the fair division of risks and returns. The Financial Times reports that Islamic finance is growing at remarkable speed. This has fuelled demand for knowledge and expertise in this area, which the Malaysian tertiary education system is able to meet.

Similar to Singapore, Malaysia aims to focus on academic fields that serve national socioeconomic goals: banking and finance, engineering, and health sciences. One nuanced difference is that while the Singapore government has announced that student numbers and GDP share are not its emphasis, the Malaysian government has made no such statement.

Singapore and Malaysia have each carved out a niche in the market for cross border education. The former’s selling points include: quality education, sound infrastructure, and job opportunities. Dissimilarly, the latter’s selling points include: affordability and specialised knowledge in Islamic finance.

As the two countries appeal to different demand needs, they do not appear to be in direct competition with each other. Besides as the market pie for cross border education continues to expand, each is likely to have its fill.

This blog post has been written by Diane Lek. Diane is a PhD candidate at the London School of Economics and Political Science, and is a  Junior Fellow for 2012 under the ASEAN-Canada Research Partnership.

For more information on the ASEAN-Canada Research Partnership, please click here.

Utility, Morality, and Stability: Perceptions of Inequality in Indonesia

Inequality, along with its myriad manifestations and various indicators, has garnered greater attention within recent international and regional policy debates. For example, UN agencies, academic institutions, and civil society organizations are engaged in a global discussion on if and how inequality may become an explicit target within the Post-2015 UN Development Agenda. Proponents argue that striving to reach individual developmental targets (e.g., access to drinking water) without addressing structural issues will inhibit the realization of the vision behind the Millennium Declaration.

At a regional level, ASEAN and the OECD collaborated to prepare the Southeast Asian Economic Outlook, 2013 which contains a thematic focus on narrowing development gaps. The Outlook takes a multi-dimensional approach to evaluating inequality vis-a-vis a six-point matrix called the Narrowing Development Gap Indicators (NDGIs). Within ASEAN, although poverty rates and the human resource development gap have declined, they remain significant. Both the infrastructure and the trade and investment gaps grew which brings to question whether the region is economically growing at its full potential.

Under the ASEAN-Canada Research Partnership, an assessment of perceptions on domestic and regional inequality, and also the process of ASEAN integration, has been conducted in Indonesia. Overall, twenty-two interviews were held with government officials, legislators, the ASEAN Secretariat, international organizations, and civil society.

Within Indonesia, the debate on income inequality is rich, lively, and varied. As the data is analyzed, patterns on strategic preferences and effective policy mechanisms will be presented. But the current area of interest is found in what is not being said.

First and foremost, the most noticeable absence from conversations is any expression of a moralistic imperative to address inequality. The distinct lack of a Rawlsian argument is striking: the need to address inequality based on principles of fairness in order to build a society in which differences in outcome are justifiable. A utilitarian argument is the dominant narrative; inequality must be addressed in order to avoid the least desirable outcome: instability.

Secondly, the topic of taxation has not been mentioned explicitly in discussions on effective policy mechanism to reduce inequality. There is extensive rhetoric on utilizing government spending to introduce a comprehensive social safety net for the poor, yet mentioned of taxation targeted at the wealthier middle class is lacking. If taxation was discussed, it fell under the guise of economic nationalism in relation to taxation of foreign companies. Interestingly, broad and effective taxation was the first recommendation in the OECD-ASEAN Outlook.

The absence of these two topics from interview discussions may simply be the result of the survey design. But as research moves to the Philippines these issues may become interesting points of comparison. The Philippines has reduced income inequality in recent years and has been aggressive in devising inclusive growth models.

This blog post has been written by Matthew Bock. Matthew is an Analyst and Technical Advisor based in Indonesia and a Junior Fellow for 2012 under the ASEAN-Canada Research Partnership. For more information on the ASEAN-Canada Research Partnership, please click here.

Reviewing and Evaluating Industrial Policies: Small-Medium enterprise (SMEs) development in CLMV Countries

Recently, the Republic of the Union of Myanmar had successfully changed its political system to become a democratic presidential system. In addition, Myanmar has been transforming its economic system into a market-oriented economic system. Prompt and active political and economic reforms have particularly been made since the formation of the new democratic government in March 2011.

These political and economic reforms are vital for Myanmar, which despite being an agricultural country with vast amounts of natural resources, has been regarded as a least developing country by international organizations. Myanmar cannot and should not rely solely on agriculture if it wishes to raise its level of development. It is therefore necessary for countries like Vietnam, the Philippines, and Myanmar to focus on industrial development while scaling up agricultural development efforts. As such, Myanmar’s new government has proposed five-year national development plan and it also prepared industrial development plan which is the main engine of growth to industrialization.

As part of my research, I conducted a survey (from January to February 2013) to evaluate industrial policies of small and medium enterprises development in CLMV countries on the extent to which they take into account policy changes. The survey revealed that investment capital is an essential need for the development of SME’s in Myanmar. Other important factors are technology and upgraded industries.

On 9^th January, the Central Committee and Work Committee for Development of Small and Medium Enterprises was formed at the state level. It comprises of 27 members, out of which 20 are ministers. The Committee is geared to enhance SME development as a central part of national economic development and the advancement of socio-economic well-being of Myanmar citizens. The committee represents about 99.4% of SMEs in Myanmar, which equates to 126,237 registered SMEs nation-wide. Committee members have agreed to the following duties and responsibilities: –

• Draft laws, regulations and procedures for SMEs development and submit them to the central committee for their enactment;
• Collect, analyze and report data and information for encouraging small and medium enterprises:
• Remove obstacles in works for small and medium enterprises development;
• Place emphasis on market development to ensure wide market chain;
• Nurture sufficient number of skilled workers and create job opportunities;
• Make contact and coordinate with local and foreign organizations to be able to receive financial and technical assistance;
• Ensure development of micro credit business through Small and Medium Enterprises Bank;
• Set up subcommittees and groups for respective sectors of small and medium enterprises as necessary.

By fulfilling these new responsibilities, it is hoped that Myanmar will be able to industrialize based on the growth of its SMEs. During the month of February 2013, there have been several meetings and discussions amongst government officials and the private sector, as part of a public-private consultation process concerned with development policies and laws pertaining to SMEs. These policies and laws emphasize the importance of result-oriented activities, which would thus facilitate means for upgrading industrial policies to incorporate and mainstream the role of SMEs in Myanmar.

This blog post has been written by Nang Saw Nandar Hlaing. Nandar is a researcher with the Union of Myanmar Federation of Chambers of Commerce & Industry (UMFCCI), and a Junior Fellow for 2012 under the ASEAN-Canada Research Partnership. For more information on the ASEAN-Canada Research Partnership, please click here.

Hydropower and Equitable Economic Growth in the Mekong River Region

In a bid to meet the increasing demand for electricity in Laos, Vietnam, Cambodia and Thailand to support economic growth, several hydropower dams have been constructed along the Mekong river, with many more in the pipeline. In Cambodia, there is the potential to harness  hydropower capacity of up to 8,000 MW from 43 potential sites for dams, which are in the planning stages of construction. In Laos, the potential of hydropower development is around 26,000 MW. These hydropower projects, however, have to potential to destroy wetland econsystems, seriously threaten the quality and security of water and affect other water-related resources, such as fish as sources of livelihood and the quality of arable land for agricultural products. There are about 60 million people live in Lower Mekong Basin Countries, who rely on these resources and services that will suffer. Moreover, when the services of this ecosystem are lost, it is often the poor who are most affected.Traditional livelihood systems will likely be adversely affected and thus a grave concern for indigenous people living along the Se San, Se Kong and Srey Pok rivers. In the case of Yali Falls, Cambodians have died as a result of floods caused by test operations of hydroelectric projects, and property has been lost. There has also been an increased spread of diseases that might be related to deteriorating water quality, coupled with the general deteriorating health of Cambodians. Since then, Cambodians feel a sense of insecurity as they do not know when the next flood will occur.

In order to measure the impact of dams, which can assist in reducing inequality in the country as well as the region, hydropower development policies should be given further consideration in terms of flood prevention or mitigation, the provision of irrigation for agricultural development, water supply  for domestic, municipal and industrial use as well as the improvement of conditions necessary for navigation, fishing, tourism or leisure activities. In terms of policies related to involuntary resettlement, displaced people should be engaged in the resettlement process in order to get productivity and resume responsibility for their lives. By participating in the resettlement schemes, the communities will have the chance to raise their concerns and preferences for finding alternative living areas that they find as being conducive supporting their livelihood needs. Furthermore, providing appropriate compensation packages to the resettled people should be implemented so as to ensure that they are able to recover their livelihood options in the short term.

It is with this context in mind, that my research under the ASEAN-Canada Research Partnership, will examine the improvements made in hydropower development policies in the Mekong Region to reduce the impact of hydropower dam on the affected communities. It is believed that such improvements will contribute to the economic development in the region without increasing inequality. Finally, the findings of this research will respond to the ASEAN-Canada plan of action by providing evidence-based policy improvements.

This blog post has been written by Kesa Ly. Kesa is a Research and Development Advisor at Life With Dignity and Research Fellow at M-POWER, and a Junior Fellow for 2012 under the ASEAN-Canada Research Partnership. For more information on the ASEAN-Canada Research Partnership, please click here.

The political-economy of ASEAN sub-regional cooperation in border areas

As an economically vibrant region, Southeast Asia has been experiencing economic integration for decades through building a robust yet soft regional cooperation known as ASEAN. Besides enlarging its economic integration through open regionalism such as ASEAN+3, ASEAN countries have also initiated sub-regionalisation integration efforts. Sub-regionalisation means “those processes of growing regional interconnectedness that occur between local governments either in provincial or regency level.”

For ASEAN, sub-regional cooperation is seen as an alternative and powerful mechanism to foster deeper economic integration through cross-border cooperation conducted by sub-national actors.

This research aims to systematically analyse sub-regionalization in Southeast Asia. Despite the growing importance of sub-regional cooperation in ASEAN, there are few studies which systematically analyse this process. Thus, this research attempts to explain why some sub-regional cooperation appears to be more successful than the other?

The first field research was conducted on January 2013 in Indonesia’s Kalimantan and Malaysia’s Sarawak. Thirty-two policy makers from both the national and local levels were interviewed.

There are several findings that shed the light on the process of sub-regional cooperation in the border areas of Kalimantan.

The first preliminary finding is that the possibility of a sub-regional mechanism has emerged as a new level of governance within ASEAN, which allows the process of economic integration to benefit people in the border area.

In the case of sub-regional cooperation in border areas in Kalimantan, sub-national governments have an existing mechanism for dialogue between local elites, namely, Malindo Socio-Economic Cooperation. Through this mechanism, local elites at the sub-national level can enjoy a political space in which negotiation and dialogue can take place.

However, there are several constraints as the mechanism has occasionally faltered. Malindo Socio-Economic Cooperation’s organizational structure and decision-making mechanisms are too bureaucratic thus making it inefficient. Moreover, there is no clear mechanism that integrates policy and implementation made by Malindo Socio-Economic cooperation, BIMP-EAGA (Brunei Indonesia Malaysia Philippines East Asia Growth Area), and ASEAN.

The second finding is on the dynamic relations between the local and the national government at the sub-regional level. In line with literature on sub-regionalism, the key finding from the field suggests that the process of sub-regional integration conducted by the local government usually has stagnated due to conflicting political interest and the lack of policy coordination between local and national governments.

The third finding is the tendency for more developed countries to be actively involved in sub-regional cooperation than less developed ones. But literature shows that sub-regional projects are more likely to be promoted by the weaker states to enhance their economic capacity. In our case, it seems that the local elites in Malaysia’s Sarawak, with an approximate GDP of around $11,000, are keen to boost sub-regional integration compared to local elites in Indonesia’s West Kalimantan. This finding is a theoretical puzzle that needs to be addressed.

 

This blog post has been written by Mochammad Faisal Karim. Karim is an Expert Staff to a Member of Parliament in Committee on Finance, National Development, Banking, and Non-Banking Institutions in Indonesia and a Junior Fellow for 2012 under the ASEAN-Canada Research Partnership. For more information on the ASEAN-Canada Research Partnership, please click here.

Mind the Gap: Perceptions on ASEAN Inequality

The ten member nations of ASEAN are seeking to build a community, as envisaged in the ASEAN Vision 2020:

…To transform ASEAN into a stable, prosperous, and highly competitive region with equitable economic development, and reduced poverty and socio-economic disparities.

Realizing this vision faces challenges from integrating highly disparate political systems and unequal economies: the GDP per capita of Singapore, a wealthy free-market city-state, is over 20 times that of Laos, a newer ASEAN member governed by a socialist party.

Within ASEAN, national policy makers and the Secretariat have been pro-active in addressing inequality by introducing the Initiative for ASEAN Integration (IAI), currently mid-way through Work Plan II (2009 – 2015). The IAI includes mechanisms to narrow the development gap between Cambodia, Laos, Myanmar, and Vietnam (CLMV) with the wealthier ASEAN-6.

Under the ASEAN-Canada Research Partnership, a mixed methodology of quantitative surveys and semi-structured interviews is being conducted with policy makers linked to ASEAN integration. The research objective is to understand perceptions on inequality within ASEAN and how these perceptions impact policy outcomes. The base assumption is that discourse on ASEAN inequality remains focused on equality of opportunity, not equality of outcome.

Background research indicates that since the Asian Financial Crisis (1997-98), two trends on inequality have been moving in opposite directions. Inequality between ASEAN members has been declining; CLMV are ‘catching up’ to the ASEAN-6. But relative income inequality within most ASEAN countries is rising as national elites capture more of the wealth. Overall, however, ASEAN members have lower domestic inequality levels in comparison to many countries in Africa or Latin America.

Inequality continues to rise in wealthier ASEAN nations such as Singapore and Malaysia, as well as low-income economies such as Cambodia and Laos. Conversely, countries of lower-middle income status, i.e., Thailand, the Philippines and Vietnam, have been able to reduce inequality slightly – within this group, Indonesia is the exception. Superficially, this runs counter to predictions based on the Kuznets curve: least developed agrarian and highly-developed service economies should have lower/declining inequality while industrial and manufacturing based economies should have higher/rising inequality.

Thus far, research interviews have revealed that managing inequality is paramount, which aligns with literature on perceptions of inequality in Asia. Without real or perceived shared benefits from regional integration, the probability of regional instability will rise. The message is clear: mind the gap.

There is a disconnect between regional policy forums and national legislators, which comes as no surprise. But this disconnect has impacts on policy outcomes. At a regional level, equality of opportunity relates to supporting CLMV so they may participate fully in the ASEAN process; the outcome is building ‘soft’ infrastructure through capacity building. At a national level, equality of opportunity relates to the ability of national economies to engage in regional markets; the outcome is to build ‘hard’ infrastructure.

Moving forward, this research will continue to explore perceptions of inequality and find institutional mechanisms suitable for transforming regional integration into inclusive, sustainable growth.

This blog post has been written by Matthew Bock. Matthew is an Analyst and Technical Advisor based in Indonesia and a Junior Fellow for 2012 under the ASEAN-Canada Research Partnership. For more information on the ASEAN-Canada Research Partnership, please click here.

East Asian Economic Integration and South China Sea Disputes

Economic integration in East Asia is deepening in the 21^st century. Trade among countries in the region has been growing in double digits yearly since the inception of the China-ASEAN FTA in 2010. Investment flows among countries in the region has also been growing significantly.

Theoretically, the ongoing economic integration in East Asia should have some positive impacts to the maintenance of peace in the region. Increasing interdependence is expected to reduce conflict potentials among states according to classical liberals. It generates incentives for peace and cooperation on the one hand, and increases costs and risks of conflict on the other hand.

However, this has not been the case in the South China Sea disputes. Despite deepening integration in the region, disputes settlement among the claimants remains an unresolved agenda. Dialogues between ASEAN and China on the Code of Conduct of the parties have so far been producing only limited progress. Tensions between China and ASEAN claimants remain high on this particular issue.

Several ideas had been discussed to solve the problem. Joint development and exploration as one alternative solution to spill the ongoing integration over onto the area, as functionalism argues, and put aside political and sovereignty claims has been discussed since the 1980s. This implies that ASEAN and China are ready for development and cooperation. The major obstacles to further progress in joint development are the absence of detailed agreement (Djalal, 2000; Townsend-Gault, 1998), lack of compliance to the 1991 Declaration (Djalal, 2000), and the parties independent act (Hyer, 1995) and negotiating behaviour. Informal negotiation through track-2 dialogues progressed, but only with little impact, if not none.

Economic integration so far has taken different track of development from the settlement of the South China Sea issues. Whether or not the integration will spillover onto the economic cooperation and development in the disputed South China Sea is yet to be seen. The chance for cooperation is there, but the actualization will depend on how both China and ASEAN manage the issue.

This blog post has been written by Meidi Kosandi. Meidi is a PhD candidate in International Relations at Ritsumeikan University, Japan and a Junior Fellow for 2012 under the ASEAN-Canada Research Partnership. For more information on the ASEAN-Canada Research Partnership, please click here.

The Chiang Mai Initiative Multilateralisation and Regional Integration

When I was in Bangkok during the last two weeks of February 2013, there was much media and public attention on the ASEAN Economic Community.  As part of overarching regional objectives to be in effect in 2015, it is quite understandable why citizens of member countries would like to learn more about this regional project and how it would affect their lives.  Researching on the Chiang Mai Initiative Multilateralisation (CMIM), a mechanism to provide financial safety-net to ASEAN and its three counterparts, namely China, Japan, and South Korea (or the ASEAN+3), allows me to explore how this cooperation fits in and contributes to the process of regional integration.

To date my research has focused on understanding how the CMIM has evolved and what we could learn from this evolution about regional cooperation under the framework of ASEAN+3.  Evidence from written works on the CMIM and my interviews with Thai officials and scholars points to an incremental and cautious approach, which is largely a product of the preference for pragmatism and respect for national autonomy held among Southeast and East Asian policymakers.  The ten-year lapse between the birth of the CMI (Chiang Mai Initiative) in 2000 as a framework for bilateral swap arrangements among ASEAN+3 countries and when the CMIM became effective as a multi-lateralized mechanism in 2010 attests to the gradualism and caution underlying ASEAN+3 cooperation.  Central to this process of negotiation was the related issues of financial contribution and voting power, which took about two years to complete after an agreement for the CMIM was reached in 2007.  In 2010, another incremental step was made to establish the ASEAN+3 Macroeconomic Research Office (AMRO) to monitor regional economies and provide decision-making for the CMIM.  While the AMRO’s corporate status may limit its authority (compared to an international organization like the IMF), the private standing could put member countries at ease with regard to its potentially-intrusive surveillance role.  Pragmatic intention can also be seen in AMRO’s small size (11 staffs in 2011), making it relatively easy for member governments to agree on funding, while leaving opportunity to grow to future development.

As I continue to examine the financial and monetary cooperation in East Asia and their impact on regional integration, an observation can be made.  While the evolution of the CMIM has its own dynamics and rationale, the interest among ASEAN countries in forming an economic community could help inspire efforts to institutionalize the CMIM.  At the governmental level, this means more willingness to make the CMIM really work for member countries, as seen in a move in 2012 to increase its total size (from US$ 120 billion to US$240 billion) and the IMF de-linked portion (from 20% to 30% in 2012 and possibly to 40% in 2014).  However, lesser development has been made at the societal level as the CMIM continues to be known rather exclusively among policymakers and technocrats.  Implications of the CMIM’s technical nature on public perception of regional integration will need to be explored further.

This blog post has been written by Supanai Sookmark. Supanai is an instructor at Carleton University in Ottawa and a Junior Fellow for 2012 under the ASEAN-Canada Research Partnership. For more information on the ASEAN-Canada Research Partnership, please click here.

Cross-border Education Within ASEAN: A Double-edged Sword

Cross border education, which refers to the movement of people and research across national borders for academic purposes, has gained increasing prominence within ASEAN in recent years.

Collectively, ASEAN leaders have stressed the importance of cross border education within Southeast Asia. The Cha-am Hua Hin Declaration on the Roadmap for the ASEAN Community (2009-2015) for example, listed several joint initiatives to promote cross border education within ASEAN.  Member states agreed to facilitate staff and student exchanges, create research clusters, and institute ‘semesters abroad’ programmes among ASEAN educational institutions.

Importantly, the Declaration stated that these initiatives were conceived primarily to develop ASEAN human resource so as to create a knowledge based economy, as well as to build an ‘ASEAN identity based on friendship and cooperation’. Clearly, member states view cross border education within ASEAN as a means to promote balanced economic development and cultural integration in the region.

The contributions that education makes to development are well researched. Education raises human capital and accordingly, labour productivity. It allows individuals to acquire marketable capacities, hence reduce reliance on continual external aid. Connectedly, education alleviates poverty as it gives the poor access to employment opportunities. Tertiary education in particular, drives innovation and increases the number of scientists and engineers in a given population.

Cross border education initiatives in particular, have the potential to further facilitate pursuit of the above developmental goals. It provides less developed countries with opportunities to acquire relevant, applicable knowledge from more developed countries. It gives students from less developed countries access to higher quality tertiary education. It also offers researchers from less developed countries, options to participate in research projects that they would otherwise lack the resources to conduct independently.

ASEAN member states have introduced jointly, a series of cross border education initiatives. In 1995 for example, they formed the ASEAN University Network to advance regional co-operation among universities in the region. The AUN administers scholarship applications, credit transfers and quality assessments for ASEAN students and educational institutions.

Independently, some ASEAN member states have also sought to promote themselves as hubs for cross border education. Singapore implemented the Global Schoolhouse Initiative, Malaysia set up two tertiary education hubs, Educity Iskandar Malaysia, and Kuala Lumpur Education City, while Thailand implemented a research network covering the Greater Mekong Subregion.

Whether these joint and independent cross-border education initiatives contribute to balanced growth and integration within ASEAN however, remains questionable.

Crucially, cross border education tends to absorb the most capable individuals. Sending countries may experience severe brain drain should these individuals choose not to return home. Also, granted the relatively low number of scholarships offered, cross border education plays a negligible role in improving poorer populations’ access to education.

While cross border education participants who have chosen not to return home can remit a portion of their salaries, more needs to be done. Regional education policies need to be refined, to ensure that cross border participants take on some role in sharing knowledge with, or investing in their home country.

This blog post has been written by Diane Lek. Diane is a PhD candidate at the London School of Economics and Political Science, and is a  Junior Fellow for 2012 under the ASEAN-Canada Research Partnership.

For more information on the ASEAN-Canada Research Partnership, please click here.