By Carlos A. Vargas
BIMP-EAGA turns 20 this year after its first ever BIMP-EAGA (Brunei, Indonesia, Malaysia, Philippines – East ASEAN Growth Area) Inaugural Senior Officials’ meeting and Ministers’ Meeting (SOMMM) in 1994 in Davao City.
Much has changed since its early inception. Early gains included commitments by the four countries to modify national policies to accommodate and facilitate cooperative agreements and cross border arrangements.
To support tourism, new commercial air and sea linkages were established between major urban areas in the sub-region such as the envisioned Davao- Manado and the Puerto Princesa- Kota Kinabalu air route. Policies on travel, including procedures and documentary requirements, were streamlined and exit taxes for travel within EAGA were waived.
Several airports and seaports infrastructure facilities throughout EAGA sub region were upgraded to accommodate the expected increase in passenger and cargo traffic. Major telecom firms operating in the EAGA areas implemented substantial tariff reductions on long distance calls within the sub-region, enabling greater interaction among businesses.
The BIMP-EAGA initiative was envisioned to restore the established economic activity that was traced backed as early as the 17th Century, founded on this strong cultural and historical linkage between Mindanao, Palawan, and the neighboring islands in the sub-region.
Tourism initially benefited the most, with significant increases in both domestic and cross-border investments in hotels and other tourism-related facilities. A BIMP- EAGA wide promotional activities which includes Chambers of Commerce’s business matching, trade fairs, sisterhood agreements, cultural events, tour exchanges and sports activities were held by various public and private organizations.
These joint activities raised the level of awareness on the vast potential and various investment opportunities within the sub region. By the end of 1996, clearly an economic take-off was in the horizon.
EAGA cooperation activities and cross-border investments had quickly developed, aided by the perception of economic stability and optimistic forecasts for sustained growth for the participating countries and the ASEAN region in general.
THE ‘97 & ’98 CRISIS
The 1997 Asian Financial Crisis seriously disrupted this growth momentum. As the economic environment in Southeast Asia weakened, governments had to refocus their attention on national issues.
Three (Malaysia, Indonesia & Philippines) of the four member countries of the BIMP-EAGA was badly hit by the rapid reversal of private capital inflows. Interest rates were driving SME’s to suspend expansion or downsize their operation.
Foreign Exchange Rates depreciated rapidly resulting in a good number of Real Estate Developers going bankrupt due to loans pegged on the US dollar. Small and medium enterprises (SMEs) comprise the large majority of the private sector in BIMP-EAGA and these enterprises bore much of the burden of the financial crisis. To make things worse, in 1998 the twin weather phenomenon of El Niño and La Niña inflicted even worse damage than the financial crisis. The severe droughts, forest fires, and the resulting haze contributed to sharp declines in the growth of the largely agriculture-based economies within the EAGA focus areas.
By the end of 2000, the BIMP-EAGA countries had recovered significantly from the crisis. As conditions improved, the leaders of EAGA Countries committed to revitalize economic cooperation in the sub-region.
At the 7th ASEAN Summit held in Brunei Darussalam in November 2001, the regional leaders renewed their commitment and support for the revitalization of the cooperation initiatives in BIMP-EAGA as part of the larger ASEAN initiative to integrate the region’s economies.
The ASEAN Leaders identified BIMP-EAGA as a test case for ASEAN economic integration. If the BIMP EAGA is able to successfully implement its economic cooperation program, then such cooperation can also be achieved in the broader ASEAN context. The Asian Development Bank (ADB) was designated by the ASEAN as the Regional Development Advisor for BIMP-EAGA.
On 7 October 2003, the first BIMP-EAGA Leaders Meeting was held in Bali, Indonesia and several measures were put into action to help bolster the BIMP-EAGA. Institutional reforms were implemented to strengthen coordination and consolidation of all joint policy and socio-economic promotions activities. Linkages with strategic partners were established, to include the ASEAN Secretariat and the ADB.
The current agenda were included in the new strategy: Improving transport linkages, both within and outside the sub-region; Consolidating the sub-region’s comparative advantages in the agro-industry and tourism sectors; Promoting the development of external trade; and Instituting more active trade and investment regimes. These new activities provided a new direction for the sub-region; clearly BIMP was back on its development track.
ROADMAP TO DEVELOPMENT
In 2004 the BIMP-EAGA Senior Officials and Signing Ministers agreed to formulate the BIMP-EAGA Roadmap to Development. The same Roadmap was launched during the 2nd BIMP-EAGA Leaders Summit in 2005. The Roadmap establishes the broad economic and sector-specific targets and guides the identification and implementation of priority cooperation projects and activities including ‘flagship projects’ which have been identified to have the most positive impact on the sub-region’s economic and social development in the short- and medium-term.
Under the Roadmap, the following strategies were pursued. Promote intra- and extra-EAGA trade, investments, and tourism in selected priority sectors, namely: agro-industry and natural resources, tourism, transport, infrastructure and information and communication technology (ICT), with particular emphasis on small and medium-sized enterprises (SMEs) development in these sectors; Coordinate the management of natural resources for sustainable development of the sub-region; Coordinate the planning and implementation of infrastructure support to economic integration, with active participation of the private sector; and Strengthen the BIMP-EAGA institutional structures and mechanisms for effective implementation of the road map and action plan.
2008 World Economic Crisis
En route to a more revitalized effort to develop the sub region another challenge emerges now on the world scene. The collapse of two Bear Stearns Hedge funds in summer of 2007 exposed what came to be known as the subprime mortgage crisis, reintroducing the world to an era of bank failures, a credit crunch, private defaults and massive layoffs. In the new, globalized world of closely interdependent economies, the crisis affected almost every part of the world, including East Asia.
The world was in an economic turmoil experiencing the greatest destruction of wealth. Paper losses measured in the Billions of dollars. No industry in the world has been left untouched. Bear Stearns and Lehman Brothers two of the biggest financial power houses have gone bankrupt and most mortgage giants had to be bailed out.
Attempts by the US government to save ailing industries led to an increased budget deficit and world wide concern. This situation has somehow made the Asian countries rethink their strategy and consolidate the economic potential of the Asian Market. Although some of the member countries are insulated from foreign debts and are holding enough foreign reserves to back-up their economies, most of them are dependent on tourism to fuel their economic growth.
A reduction in foreign tourist arrivals, foreign remittance and new foreign investments would mean a slow down in their economy. What began as a local problem of excess credit in the United States has likely affected every member of the global community.
All crises in the twentieth century have had world-wide consequences but the crisis of 2008 will go down in history as the first full-blown global crisis. The challenges of globalization and global markets require a broader collaboration among diverse players.
The BIMP-EAGA initiative was well before its time recognizing the need to collaborate for the common good. Harnessing our common heritage makes up the core of our cooperation. Bringing together the best in every member country to collaborate, cooperate or to compensate each other to face the Global Market Challenge.
STRONG PUBLIC-PRIVATE SECTOR PARTNERSHIP
As envisioned, BIMP-EAGA recognized that for growth in the sub-region to be sustainable, it must be market-driven and private sector-led. The private sector is thus considered as the primary engine for BIMP-EAGA’s growth. In view of this the BIMP-EAGA Business Council (BEBC), formerly known as the East ASEAN Business Council, was established as the umbrella organization of the sub region. In recognition of its status as an equal partner in the development of BIMP-EAGA,
The BEBC was then accorded a “fifth country” status in 1997. As the official organization representing the private sector in the EAGA cooperation, the BEBC enjoys the privilege of recommending to the participating governments the concerns and views of the private sector. A Board of Directors governs BEBC composed of three directors from the designated focal private sector organizations. A Chairman leads the Board and a Deputy Chairman serving as the Executive Director is elected to serve three-year terms. Chairmanship of the Board is rotated among the four countries. The objectives of BEBC are to: Promote economic development and other business activities in EAGA; Foster closer relationships and economic cooperation among business organizations in the EAGA; Deal with issues of common concern and disseminate pertinent information; Make representations on behalf of the BEBC’s members with the involved governments and to liaison between businesses, other economic entities and relevant governments authorities within EAGA; and Advocate for policies, plans, projects and regulatory changes. In 2003, BEBC was reorganized, and is now re-focusing its attention on the development of Small and Medium Enterprises (SMEs). The BEBC is strategically based in Bandar Seri Begawan, Brunei Darussalam.
BIMP-EAGA FACILITATION CENTER
In support of the BIMP-EAGA Business Council a public sector led initiative supported the establishment of the BIMP-EAGA Facilitation Center (IMP-FC). The BIMP-FC also functions as the secretariat for the Senior Officials and Ministers Meeting (SOMM). The four member government of the BIMP jointly funds the operation of the center.
The BIMP-FC complements the efforts of the BIMP-EAGA Business Council (BEBC) in coordinating trade and investment activities, and in facilitating the implementation and monitoring of priority development projects. The BIMP-FC was designed to accelerate cooperation development in BIMP-EAGA by establishing more structured institutional coordination and project facilitation mechanisms.
Based on the official documents released by the BIMP-EAGA, the terms of reference of the BIMP-FC includes: Undertaking, jointly with the private sector, investment promotion & business networking activities; Establishing and maintaining an information database; Coordinating the promotion of trade-related events; Establishing systems and undertaking monitoring of project implementation activities; and Assisting the private sector in resolving issues related to the implementation of projects.
THE RENEWED MATURITY
The “BIMP-EAGA Roadmap to Development” is a classic example of the resiliency of the EAGA initiative. This established the guidelines for Flagship projects. However, the program was not fully implemented due to numerous setbacks. Most of the efforts to expand businesses, investments, trade and tourism achieved only modest progress.
Not to be discouraged, a successor document was introduced in October 2010, during the 15th Ministerial Meeting called the: “BIMP-EAGA Implementation Blueprint (IB)” this was designed to strengthened cooperation among Governments and the private sector. The IB focuses on the following framework: Actively Promote EAGA trade, investments, and Equator Asia tourism. Improve the management of natural resources for sustainable development. Implement infrastructure support to economic integration, with the active participation of the private/business sector; and \ Strengthen the institutional structures and mechanisms to support the four strategic pillars of BIMP-EAGA: (1) Connectivity, (2) food production, (3) tourism development, and (4) environment protection.
This constant effort to remedy and correct previous declarations is a dynamic attempt by all sectors with the sincere intention from all the stakeholders particularly the private sector. The EAGA will continue to make headways especially in the following areas – in line with the four strategic pillars of BIMP-EAGA. The recent developments in the world economic arena will put to test again the maturity of the BIMP-EAGA initiative to handle the challenges of finding the right formula for inclusive growth.
A MODEL FOR ASEAN INTEGRATION
The 2nd BIMP-EAGA and Indonesia-Malaysia-Thailand-Growth Triangle (IMT-GT) Consumer Fair in Davao City in October 2014, signifies a renewed commitment from the four member countries to further the cause of the EAGA cooperation as a model for the 2015 ASEAN Integration. All is anchored in the smooth transition of this cross-border initiative by the four member countries acting as facilitators and enabler for the private sector to exercise free trade within the focus region of Fifty Million consumers.