2015

The Comprehensive Asia Development Plan 2.0(CADP 2.0)

–– Infrastructure for Connectivity and Innovation ––

ASEAN Business and Investment Summit (ABIS) 2015

20 November 2015 Kuala Lumpur, Malaysia

Hidetoshi NishimuraPresident

The Comprehensive Asia Development Plan (CADP)

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Submitted to the 5th East Asia Summit in 2010. Presented a grand spatial design of economic infrastructure and

industrial placement in ASEAN and East Asia and claimed to pursue both deepening economic integration and narrowing development gaps.

Provided a conceptual framework (Physical Connectivity, Institutional Connectivity, People-to-People Connectivity, and Resource Mobilisation) for the Master Plan on ASEAN Connectivity/ MPAC (2010) and ERIA drafted Chapter 2&3 of MPAC.

The Comprehensive Asia Development Plan (CADP)

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Joint Press Statement of the East Asia Summit on the Global Economic and Financial Crisis on 3rd June 2009 in Bangkok

11. In order to promote sub-regional development, they encouraged the Economic Research Institute for ASEAN and East Asia ( ERIA ), ADB and ASEAN Secretariat to work together to prepare as soon as possible a coherent master plan, which would contribute to coordinating, expediting, upgrading and expanding sub-regional initiatives and promoting private sector participation.

Chairman’s Statement of the 5th East Asia Summit on 30 October 2010 in Hanoi

13. We appreciated the completion of the Comprehensive Asia Development Plan (CADP) by ERIA in collaboration with the ADB and the ASEAN Secretariat.

The Comprehensive Asia Development Plan 2.0 (CADP 2.0)

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Reformulate the conceptual framework for “connectivity and innovation.”

Discuss “the quality of infrastructure” and “the quality of infrastructure projects”

Assess the progress of industrialization and soft & hard infrastructure development in 2011-2015.

Propose a renewed infrastructure development plan for 2016-2025/2030.

Presented to the 3rd EAS Economic Ministers Meeting in Aug 2015 and the 9th EAS Energy Ministers Meeting in Oct 2015.

To be submitted to 10th East Asia Summit on 22 Nov 2015.

The Comprehensive Asia Development Plan 2.0 (CADP 2.0)

Joint Media Statement of the 3rd EAS Economic Ministers Meeting on 24 August 2015 in Kuala Lumpur

9. The Ministers welcomed the updates on the activities and research undertaken by ERIA, including the Comprehensive Asia Development Plan (CADP) 2.0: Infrastructure for Connectivity and Innovation….. . The Ministers underscored the importance of quality infrastructure and expected CADP 2.0 to contribute to better quality infrastructure in the region.

Joint Ministerial Statement of the 9th EAS Energy Ministers Meeting on 8 Oct 2015 in Kuala Lumpur

2. The Ministers emphasised the need for EAS participating countries to step up efforts towards improving energy efficiency, promoting alternative/renewable energy and clean technologies, and developing high quality energy structure.

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0.854

0.856

0.858

0.860

0.862

ASEAN EAS 16

Economic Impacts of All -All Improvements (2030, Impact Density)

Economic Impacts on GINI (2030)

• Economic impacts of All-All improvements (infrastructure development, NTB reduction, and SEZ development) will be huge.

• Regional disparity will be reduced.

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Quantitative Assessment on Hard/Soft Infrastructure Development: The Geographical Simulation Analysis for CADP 2.0

Note: Not available for North Korea and Timor-Leste due to data availability. Not available for Jammu and Kashmir due to data availability.Source: IDE/ERIA-GSM simulation result.

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Economic Impacts in Ten Years Cumulation (2021-2030, %)

Economy MIEC EWEC NSEC IMT IMT+ BIMP-EAGA

BIMP-EAGA+

BIMSTEC All Infra. NTB SEZ All-All

Australia 0.52 0.00 0.02 0.08 0.15 0.22 0.33 0.65 1.28 0.84 -0.04 2.10

Bangladesh 0.48 0.00 -0.01 -0.04 -0.05 -0.05 -0.07 11.45 11.51 8.48 0.02 20.56 Bhutan 5.84 0.00 -0.03 0.06 0.07 0.02 0.07 3.91 104.90 4.75 -0.01 109.81 Brunei Darussalam 1.95 0.01 -0.29 0.39 0.61 1.00 1.41 1.93 5.32 82.07 -0.12 88.33 Cambodia 144.45 0.00 -0.58 -0.02 -0.02 -0.03 -0.06 -0.26 24.86 8.44 125.39 160.30 China 0.15 0.00 0.00 0.00 -0.01 -0.01 -0.02 0.06 0.10 7.74 0.02 7.99 India 0.56 0.00 0.00 0.02 0.03 0.02 0.03 6.61 6.59 12.21 -0.01 19.28 Indonesia 0.07 0.00 0.00 2.20 35.01 27.30 57.88 0.07 91.87 25.86 0.03 118.50 Japan 0.52 0.00 0.02 0.10 0.12 0.18 0.22 0.57 1.39 1.29 -0.03 2.67 Korea 0.71 0.03 0.03 0.11 0.15 0.33 0.36 0.55 1.74 2.44 -0.03 4.17 Lao PDR -1.58 25.55 2.69 -0.03 -0.04 -0.03 -0.04 -0.09 61.85 12.85 79.06 156.58 Malaysia 1.64 0.04 0.02 0.54 0.75 0.25 0.69 1.47 3.46 54.36 -0.01 58.55 Myanmar 9.80 44.27 5.54 -0.05 -0.06 -0.07 -0.09 76.70 89.19 25.35 70.54 193.82 Nepal 0.13 0.00 0.00 0.00 0.00 0.00 0.00 1.25 6.10 8.33 0.00 14.69 New Zealand 0.56 -0.01 0.03 0.09 0.13 0.17 0.24 0.71 1.29 0.28 -0.06 1.52 Philippines 0.19 0.00 -0.01 -0.04 0.46 0.97 13.08 0.07 13.76 25.10 0.03 39.82 Singapore 3.74 0.15 0.04 1.25 1.50 0.67 1.36 4.86 7.86 6.06 -0.11 13.92 Sri Lanka 6.43 0.00 0.01 0.00 0.01 -0.01 0.03 6.15 8.20 29.30 0.02 40.82 Taiwan 0.75 0.04 0.06 0.12 0.16 0.34 0.40 0.64 1.80 1.79 -0.04 3.57 Thailand 4.64 0.02 0.51 0.11 0.22 0.05 0.18 0.44 7.86 41.68 0.02 51.58 Viet Nam 57.57 1.05 -0.20 -0.01 -0.02 -0.03 -0.03 0.20 17.14 47.47 56.86 124.81 United States 0.27 0.00 0.00 0.02 0.04 0.04 0.04 0.19 0.52 0.88 -0.01 1.39 Russia -0.05 0.00 0.00 0.00 0.00 0.00 0.01 -0.03 -0.03 0.56 0.00 0.54 European Union -0.15 0.00 0.01 0.07 0.09 0.09 0.15 0.01 0.86 0.88 -0.03 1.72 ASEAN10 6.11 1.34 0.23 1.06 13.37 10.37 23.16 2.92 42.08 31.19 6.33 80.87 EAS16 1.02 0.15 0.04 0.16 1.52 1.23 2.65 1.25 5.93 7.87 0.68 14.73 World 0.34 0.04 0.01 0.08 0.49 0.40 0.84 0.46 2.20 2.94 0.19 5.41

• Both physical infrastructure and reducing institutional and regulatory barriers have large impact on GDP in ASEAN.

(a) (b) (c)

A New Development Strategy for ASEAN and East Asia and the Quality of Infrastructure

Connectivity

Medium grades High grades Turnpike connectivity

Innovation

Process innov. Product innov.

Under-developed economy before industrialization

Hock up with global value chains (the 1st unbundling):resource-based/labor-intensive industries

Participate in production networks (the 2nd unbundling:Jump-start industrialization with machinery industries

Form industrial agglomeration:Accelerate technology transfer/spillover

Create innovation hub:Urban amenitiesAttract/nurture human resources

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Tier 3Tier 2

Tier 1aTier 1b

[Cambodia, Laos, Myanmar]

[Vietnam, Philippines, Indonesia]

[Thailand, Malaysia, Singapore]

• The nature of infrastructure needs differs according to the stages of industrial development.

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Infrastructure for Connectivity and Innovation: The Conceptual Framework

Tier 3:Rural development for creating

business

Tier 2:Coming into production networks

Tier 1:Forming industrial

agglomeration/urban amenities

Infrastructure for connectivity

Medium-grade connectivity for various economic activities- Agriculture/food processing,

mining, labor-intensive industries, tourism, and others

High-grade connectivity to participate in production networks- Dual-modal (cargo, passenger)- Capital city, border area,

connectivity grid- Mitigate border effects- Institutional connectivity / soft

infrastructure for trade facilitation

Turnpike connectivity with other industrial agglomerations- Full-scale port with container

yard/airport for regular carriers and LCC

- Multi-modal (cargo, passenger)- Institutional connectivity for

reducing transaction costs

Infrastructure for innovation

Discovery and development of historical/cultural/natural heritage- Premium tourism- Cultural studies

Urban/suburban development for medium-scale industrial agglomeration- Urban/suburban development

plan for a critical mass of industrial agglomeration

- Economic infrastructure services (special economic zones, electricity, water, and others)

Metropolitan development for full-scale industrial agglomeration and urban amenities- Highway system, urban

transport (LRT, subway, airport access)

- Mass economic infrastructure services (industrial estates, electricity, energy, water, and others)

- Urban amenities to nurture/attract intellectual people

• The need for quality infrastructure increases as the level of participation in the production networks rises.

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Image of Road Grades

Three Tiers of Soft and Hard Infrastructure Development

Image of Railway Grades

• Images of differences in quality infrastructure

Reducing Non-Tariff Regulatory Barriers: Institutional and Regulatory Connectivity

“Good physical infrastructure does not guarantee a seamless connectivity if they are not supported by good institutional and people to people connectivity, particularly adequate regulatory coherence across the border” Swajaya, 2013.

Regulatory connectivity in ASEAN: adequate regulatory coherence within and among AMSs

Measures toward adequate regulatory coherence among AMSs:

• AEC Blueprint’s trade and transport facilitation; MRAs in S & C and professional services

Measures toward adequate regulatory coherence within AMSs:

• Good Regulatory Practice (GRP); effective Regulatory Management System (RMS)

Regulatory connectivity measures are mutually beneficial and key to ASEAN integration

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• Adequate regulatory coherence across the borders are needed.

Importance of GRP and Well Performing RMS

• ERIA study: regulatory burden of NTMs on firms is less in a country implementing GRP

• ERIA study: respondent firms’ complaints of irregular enforcement, informal payment, problems of interagency coordination, inconsistent interpretation of rules, etc. These are addressable by GRP and quality RMS.

GRP and well performing RMS address

concerns on implementation of

regulations and key AEC Blueprint measures

• Improved regulatory quality positively linked to higher FDI, growth, etc.

• Improved ease of doing business leads to greater SME formation

GRP and well performing RMS

improve investment, growth, employment,

and SME prospects

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• GRP and a well performing RMS help address the problems of complicated and burdensome documentation and procedures, leading to improved business environment.

GRP/ RMS Evolution and Success Stories in ASEAN

GRP/RMS Evolution

Success stories in ASEAN

• Most AMSs still far from embedding GRP and well performing RMS, except for Singapore followed by Malaysia and to a far less extent, Viet Nam.

• E.g., Project 30 (Viet Nam); NCC (Philippines); PEMUDAH, RURB, and NPDIR (Malaysia); Singapore

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• AMSs can take the leap forward from the successes of sectoral reforms toward a full and strong commitment to the effective and efficient use of the government’s regulatory power.

Energy Infrastructure Development: Unified Market through Power Grid Interconnection

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Philippines

Indonesia

Singapore

BruneiMalaysia

Thailand

Myanmar

Vietnam

Lao PDR

Cambodia

• Power grid interconnection, or “Energy Connectivity”, is one of the challenges of regulatory connectivity at the sectoral level for the AMSs.

• Grid interconnection seems to provide enough economic benefit (USD 11 to 21 Billion in 20 years net of investment and operation costs), besides energy security and carbon reductions, to rationalize large investment amount for interconnection.

• Several new interconnection projects are identified to be prioritized due to economic and financial feasibility

Challenges: • Set up regional regulators’ group / regional regulatory body to harmonize regulations and standards

relevant to grid interconnection.• Set up regional operators’ group or regional system operator to synchronize actions in balancing the

grid and the cross-border power exchange systems• Set up regional system planners’ group to coordinate and optimize the future investment plan of

power station and grid

Mil. USD US¢/kWh Mil. USD US¢/kWh

THA-LAO 1,400 0.25 19,881 3.51 14.2

VNM-LAO-THA 1,950 0.29 22,610 3.36 11.6

LAO-THA-MYS-SGP 1,860 0.26 25,490 3.60 13.7

Route

Interconnection lineconstruction cost

Net benefit(gross benefit - line cost) Benefit/Cost

ratio

Power Grid Interconnection and Regulatory Connectivity

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• The estimated benefit-cost ratios of power grid interconnection are very high.

Thank you very much for your kind attention

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