Infrastructure bottlenecks hinder investment
The Jakarta Post, Jakarta - 19/11/2011
ASEAN’s partners have agreed that infrastructure bottlenecks resulting in high logistical costs for businesses have become a serious problem for some Southeast Asian economies, where bad roads, rail tracks, ports and power stations remain prevalent, despite the potential of the resource-rich region.
Though this view was nothing new, businesspeople and government leaders of the US, Japan, India, Australia and South Korea reiterated their calls for regional stakeholders to address the issue to sustain the current momentum of economic growth, they said at the 2011 ASEAN Business and Investment Summit, a side event of the 19th ASEAN Summit in Nusa Dua, Bali.
US Secretary of State Hillary Rodham Clinton said that while lowering barriers was number one in terms of boosting trade and investment among countries, infrastructure development was also required to access the flow of goods and services.
“When it is cheaper and easier for Indonesian shipping companies to send their cargo almost 1,000 miles to Singapore rather than to one of their own islands, which has inadequate roads and facilities, then that is a breakdown of connectivity,” Clinton said in her speech at the business and investment summit.
ASEAN leaders have adopted the master plan on ASEAN connectivity to solve the issues of incomplete road networks, missing railway links, inadequate maritime and port infrastructure and many other problems as part of their effort to implement the ASEAN Community, which involves the three pillars of security, economy and socioculture.
“We really hope to see more development of hard infrastructure and facilitation of trade and investment being simplified,” said Setsuo Iuchi, president of the Japan External Trade Organization for Thailand and Southeast Asia.
Jae Bum Park, vice president of ASEAN-Indo marketing and sales division for South Korea’s Hankook Tire, said that the region’s low labor costs and high quality workers made it very attractive as a base for manufacturers, but that infrastructure bottlenecks were a turn-off due to high logistical costs.
Indonesia’s logistical costs are among the highest in ASEAN, between 25 and 30 percent of the nation’s gross domestic product, according to the Indonesian Logistics Association (ALI), compared with 16 percent in Thailand and 10 percent in Singapore.
Sofjan Wanandi, chairman of the Indonesian Employers Association (Apindo), said businesses would again bring the issue of infrastructure to the meeting of ASEAN leaders to better prepare for the integration of ASEAN economic activities, which is due in 2015.
“I’m afraid that if we don’t prepare ourselves well and address the key issues that we share, we won’t be ready for 2015. As businesspeople, we are ready to address this issue, but we cannot help if governments are not ready,” he said.
Infrastructure developments could not only boost investment and ease trade activities within nations, but could also create multiplier effects for economic growth and the provision of more jobs.