1. 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 Nishimura President

2. The Comprehensive Asia Development Plan (CADP) 2  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.

3. The Comprehensive Asia Development Plan (CADP) 3 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 5 th East Asia Summit on 30 October 2010 in Hanoi 13. We appreciated the completion of the Compreh ensive Asia Development Plan (CADP) by ERIA in collaboration with the ADB and the ASEAN Secretariat.

4. The Comprehensive Asia Development Plan 2.0 (CADP 2.0) 4  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.

5. The Comprehensive Asia Development Plan 2.0 (CADP 2.0) Joint Media Statement of the 3 rd 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 9 th 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. 5

6. 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. 6 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.

7. 7 Economic Impacts in Ten Years Cumulation (2021-2030, %) Economy MIECEWECNSECIMTIMT+BIMP- EAGA BIMP- EAGA+ BIMSTECAll Infra.NTBSEZAll-All Australia 0.520.000.020.080.150.220.330.65 1.280.84-0.042.10 Bangladesh 0.480.00-0.01-0.04-0.05 -0.0711.45 11.518.480.0220.56 Bhutan 5.840.00-0.030.060.070.020.073.91 104.904.75-0.01109.81 Brunei Darussalam 1.950.01-0.290.390.611.001.411.93 5.3282.07-0.1288.33 Cambodia 144.450.00-0.58-0.02 -0.03-0.06-0.26 24.868.44125.39160.30 China 0.150.00 -0.01 -0.020.06 0.107.740.027.99 India 0.560.00 0.020.030.020.036.61 6.5912.21-0.0119.28 Indonesia 0.070.00 2.2035.0127.3057.880.07 91.8725.860.03118.50 Japan 0.520.000.020.100.120.180.220.57 1.391.29-0.032.67 Korea 0.710.03 0.110.150.330.360.55 1.742.44-0.034.17 Lao PDR -1.5825.552.69-0.03-0.04-0.03-0.04-0.09 61.8512.8579.06156.58 Malaysia 1.640.040.020.540.750.250.691.47 3.4654.36-0.0158.55 Myanmar 9.8044.275.54-0.05-0.06-0.07-0.0976.70 89.1925.3570.54193.82 Nepal 0.130.00 1.25 6.108.330.0014.69 New Zealand 0.56-0.010.030.090.130.170.240.71 1.290.28-0.061.52 Philippines 0.190.00-0.01-0.040.460.9713.080.07 13.7625.100.0339.82 Singapore 3.740.150.041.251.500.671.364.86 7.866.06-0.1113.92 Sri Lanka 6.430.000.010.000.01-0.010.036.15 8.2029.300.0240.82 Taiwan 0.750.040.060.120.160.340.400.64 1.801.79-0.043.57 Thailand 4.640.020.510.110.220.050.180.44 7.8641.680.0251.58 Viet Nam 57.571.05-0.20-0.01-0.02-0.03 0.20 17.1447.4756.86124.81 United States 0.270.00 0.020.04 0.19 0.520.88-0.011.39 Russia -0.050.00 0.01-0.03 0.560.000.54 European Union -0.150.000.010.070.09 0.150.01 0.860.88-0.031.72 ASEAN10 6.111.340.231.0613.3710.3723.162.92 42.0831.196.3380.87 EAS16 1.020.150.040.161.521.232.651.25 5.937.870.6814.73 World 0.340.040.010.080.490.400.840.46 2.202.940.195.41 Both physical infrastructure and reducing institutional and regulatory barriers have large impact on GDP in ASEAN. (a) (b) (c)

8. 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 1 st unbundling): resource-based/labor- intensive industries Participate in production networks (the 2 nd unbundling: Jump-start industrialization with machinery industries Form industrial agglomeration: Accelerate technology transfer/spillover Create innovation hub: Urban amenities Attract/nurture human resources 8 [Cambodia, Laos, Myanmar] [Vietnam, Philippines, Indonesia] [Thailand, Malaysia, Singapore] The nature of infrastructure needs differs according to the stages of industrial development.

9. 9 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.

10. 10 Image of Road Grades Three Tiers of Soft and Hard Infrastructure Development Image of Railway Grades Images of differences in quality infrastructure

11. 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 AMSsMeasures 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 11 Adequate regulatory coherence across the borders are needed.

12. 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 12 GRP and a well performing RMS help address the problems of complicated and burdensome documentation and procedures, leading to improved business environment.

13. 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 13 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.

14. Energy Infrastructure Development: Unified Market through Power Grid Interconnection 14 Power grid interconnection, or “Energy Connectivity”, is one of the challenges of regulatory connectivity at the sectoral level for the AMSs.

15. 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 Power Grid Interconnection and Regulatory Connectivity 15 The estimated benefit-cost ratios of power grid interconnection are very high.

16. Thank you very much for your kind attention 16