Freedom of Movement: George Yeo’s Interview

By Management Insider for MANAGEMENT INSIDER | Special Edition, May 2017

The Building Blocks of an ASEAN Infrastructure

George Yeo, the chairman of Asia’s leading logistics provider, Kerry Logistics, is a member of the Foundation Board of the World Economic Forum, the Berggruen Institute on Governance, the Asia-Pacific Advisory Board of Harvard Business School and the International Advisory Board of IESE Business School. In a distinguished career, he has served the Singaporean government for 23 years, as the minister for information and the arts, health, trade and industry and foreign affairs.

Yeo shared with Management Insider his expertise on the progress being made to connect Asean and the challenges that remain.

What is the current state of ASEAN’s infrastructure?

For ASEAN countries to continue growing and urbanising in the coming years, hundreds of billions of dollars in infrastructural investment will be required. Infrastructure to improve connectivity (road, rail, river, sea, air, electronic, electrical) is a major component within each ASEAN country, among ASEAN countries and between ASEAN countries and its neighbours, especially China and India.

There is every possibility now that all ASEAN countries can achieve First World status in one to two generations.

What is the strategy of ASEAN to develop infrastructure? What is planned and what is to be expected?

ASEAN has been pushing for better connectivity within ASEAN and between ASEAN and its partners for some years now. We have made good progress, but much more still needs to be done. ASEAN has succeeded in maintaining peace in the region, which is a necessary precondition. The peaceful transition and gradual opening-up of Myanmar is the final piece of our regional jigsaw. China’s ‘One Belt, One Road’ initiative is very positive for ASEAN. There is every possibility now that all ASEAN countries can achieve First World status in one to two generations.

How should developing nations fund their infrastructure?

We need international support, regional cooperation, public investments, private investments, and public- private partnerships. A sense of the future is important so that our short-term efforts help us secure our collective future. Coordination within ASEAN and between ASEAN and its neighbours is essential. We must coordinate master plans and agree on key border crossings so that railroads, roads, optical fibres, transmission lines, bridges and tunnels are all in the right places.

How will changes to infrastructure impact businesses and future investment opportunities?

Infrastructure is like the blood circulatory system of the body. Without a network of good blood vessels, the blood cannot flow freely. Logistics is like the blood flow of the economy. The better the infrastructure, the cheaper the logistics, and the lower the costs. There is, therefore, a direct connection between the quality of infrastructure and the willingness of entrepreneurs to invest in the economy. Of course, other factors also come into play, such as regulations, taxes, and the quality of the workforce.

What are the strengths and weaknesses that ASEAN has in terms of developing infrastruc- ture?

ASEAN is a diverse region in terms of ethnicity, religion, and external influence. This is partly the result of geography. ASEAN consists of peninsulas and islands between the two great plain civilisations of China and India. With the rise and fall of empires in China and India, their influence on Southeast Asia has waxed and waned. With coastal China becoming expensive, manufacturing investments are shifting to ASEAN countries in a big way, fuelling a new wave of growth. The rise of India is also a big plus for ASEAN.

What are the threats to ASEAN infrastructure?

The principal threat is political: domestic politics, regional politics and geopolitics. ASEAN countries can be held back by an inability to create sufficient domestic consensus to take decisions favouring development. It is crucial that ASEAN remains neutral and does not get sucked into big power conflicts in the region.

What are the benefits, in terms of transport and trade facilitation, for the Greater Mekong Subregion of regional cooperation and integration, such as the Cross-Border Transport Facilitation Agreement?

Historically, high mountains and deep valleys separated China from Southeast Asia. They are now being rapidly overcome by roads, rail, bridges and tunnels. This will enable the economic integration of southern China with mainland Southeast Asia, and will have enormous benefits for people on both sides. These benefits require political and economic cooperation like the Greater Mekong Subregion initiatives. It is important for the opening up to be gradual and controlled to reduce the impact on the environment and ethnic populations straddling the borders.

Cambodia, from being a tragically contested land during the Cold War, is now benefiting hugely from its connections to the rest of Southeast Asia. With peace and regional cooperation, Cambodia will be a major conduit between Thailand and Vietnam and between Laos and the Gulf of Thailand.

Are regional cooperation and integration in ASEAN a solution to counter the diversity of ASEAN’s countries?

ASEAN’s institutions and practices are grounded in the reality of a diverse Southeast Asia. ASEAN operates on the basis of consensus. If there is no unanimity, countries can opt out and join later if they wish. This can slow down progress, but it also makes long-term progress more sustainable.

ASEAN’s diversity is both a weakness and a strength. It is a weakness because the diversity makes it harder to forge consensus. Markets are fragmented, making it more difficult to achieve economies of scale. However, as long as ASEAN stays neutral and friendly to all the major powers, we provide a common platform for them to meet. This is the reason such a large part of the diplomatic architecture of the Asia-Pacific is based on ASEAN centrality. To use a Buddhist/Taoist analogy, ASEAN’s strength is not in the possession of hard power, but in the absence of it.

With Jessica Tana