Second Asia Europe Business Forum (AEBF II)
Bangkok, 13-14 November 1997
The Second Asia Europe Business Forum (AEBF II) was held in Bangkok on 13-14 November 1997 bringing together over two hundred leading members of the business sector and government representatives of Asia and Europe, with the objective of:
- reaffirming the common desire of the nations of Asia and Europe to establish "'a growth-driven global partnership" as called for by the Leaders who attended the First Asia Europe Meeting (ASEM I) in Bangkok, on 1-2 March 1996 and reiterated at the Economic Ministers' Meeting on 27-28 September 1997;
- enhancing the growing links between the business communities of Asia and Europe who are the main driving force in the further strengthening, expansion and broadening of the economic partnership between the two regions;
- strengthening the close co-operation between the governments and business sector of the two regions in identifying opportunities for trade, investment and in creating an environment conducive to the further enhancement of economic synergy between Asia and Europe;
- building upon the successful results of the First Asia Europe Business Forum (AEBF I) held in Paris, France, on 14-15 October 1996 under the distinguished chairmanship of Mr. Francois Xavier Ortoli, and the Asia Europe Business Conference (AEBC) held in Jakarta, Indonesia under the distinguished chairmanship of Mr. Aburizal Bakrie in July 1997, which provided a major impetus for closer interaction and networking among the business communities of Asia and Europe.
- looking forward to the Third Asia Europe Business Forum (AEBF III) to be held in London in April 1998 in conjunction with the Second Asia Europe Meeting (ASEM II).
The AEBF II, attended by high-level business representatives from all 26 ASEM Partners and chaired by Mr. Arsa Sarasin, resolved to submit the following recommendations to the ASEM Leaders for their positive consideration.
SMEs are a vital engine of growth for the economies of many Asian and European countries. In addition to providing important support and back-up to larger industries, SMEs, which are dynamic entities, provide opportunities to people to gain valuable working experiences and good start-ups for new entrepreneurs. There is an imperative need to develop and strengthen SMEs, especially those which are international-oriented with significant export, investment and subcontracting capabilities abroad. At the same time, efforts should be made to enhance policies that will promote the growth of SMEs. Alliances should be encouraged not only amongst SMEs, but also with larger enterprises.
- There is enormous potential for co-operation between SMEs of Asia and Europe. But one issue they face is the lack of time and resources to easily access information, assistance, and business partners. A simple and cost-effective vehicle to easily obtain data on business partners and opportunities is useful. The Forum expressed its support for ASEMConnect, a proposed electronic resource network that aims to increase business information flow through the Internet and provide SMEs with consultancy and business-matching services. This network would establish points of contact for SMEs in ASEM host countries and leverage on the wide range of existing business-related and company databases to link them up. Singapore proposed to organise a working committee by early next year comprising interested ASEM representatives to examine this concept further, while Italy will present a paper (by January 1998) describing their own sectoral organisation of the more export-oriented companies. The working committee will then make a preliminary status report at the AEBF III in London in April 1998 and at the SME Conference that will be held in Naples May 1998, and possibly demonstrate a prototype.
- To actively promote the development of SMEs, the establishment of SME Centres would be considered in those countries which currently lack a similar body. As far as possible, existing facilities and support services should be leveraged upon, strengthened, and linked up to ensure efficiency and cost-effectiveness. The SME Centre as proposed by Thailand should be funded by its host country and should directly address the relevant needs of SMEs relating to information, skills and human resource development, market, finance and technology.
- The Forum further explored measures to enhance access to financing for SMEs. This issue relates to a better understanding between SMEs and venture capital financiers and more opportunities to raise viable projects. This issue would be further addressed at the Naples Conference, where financial and venture capital institutions will be invited. The Forum welcomed France's offer to submit a working paper on available financing facilities for SMEs and their access mechanisms before this Conference.
- The Forum reiterated the AEBF I recommendation on the development of human resource among SMEs. This should increase the exposure of European managers of SMEs to Asia and vice-versa. It will also upgrade the skills of manual and low-skilled workers, especially those from the emerging economies of Asia. Existing facilities for this purpose should be fully utilised. The Philippines offered to examine the various issues regarding human resource training.
- The Forum urged that measures be taken to facilitate international trade and investment between SMEs of ASEM partners. These include : encouraging co-operation in technology exchange; industry linkage between MNCs and SMEs, including subcontracting arrangement (e.g., in infrastructure, tourism); market access including streamlining of custom procedures; holding seminars and exhibitions to increase better understanding among SMEs. Relevant papers will be prepared by Portugal and Japan.
- The SME Working Group stressed that it would be important for the AEBF process to be implementation-oriented. The dynamism of the process can be assured if actual identified projects and initiatives are developed and completed in a mutually agreed timeframe. The Forum welcomed the Italian initiative to organise a Conference on SMEs on 28-30 May 1998, which will focus its attention on government policies (local, national, and international) and the instruments they adopt taking into account business interests, as these are seen to be indispensable factors in the growth and consolidation of SMEs.
Infrastructure needs in Asia will be growing in the foreseeable future whereas European private sectors have technological know-how and expertise in this area. Multilateral and regional financial institutions as well as capital markets are potential sources of funds. As such, cooperation in infrastructure has become one of the flagship activities of the AEBF process.
In this connection, business representatives stressed the following factors to be the pre-requisites for an increased participation of the private sector in infrastructure:
- Foremost, sound and stable macro-economic policy;
- Robust financial infrastructures supported by policies, aimed at developing domestic financial markets, for speeding up private involvement in infrastructures;
- An institutional, legal and regulatory framework which is transparent, consistent and stable.
In order to maintain a continuous dialogue on infrastructure issues within the AEBF, the Forum recommended that each ASEM country should convene infrastructure round tables which would comprise of the private sector, government and multilateral financial institutions.
With a view to strengthening existing mechanisms to facilitate preparation of economic and technical projects, execute well-structured contracts in a reasonable lead time, and improve risk-reducing mechanisms, ASEM should encourage necessary actions such as macro-economic and institutional measures to speed up the emergence of deeper domestic financial markets; stronger co-ordination of external funding sources, such as multilateral financial institutions and export credit agencies; closer co-operation with the private sector. ASEM business leaders also urged OECD member states to finalize the current discussions on risk premiums and risk assessment within ECA's, notably in the field of BOT.
The Forum noted that the issue of setting up an "Infrastructure Fund" is not central. Thus it stressed the need to increase the number of sound and bankable projects in infrastructure, particularly projects that are developed at provincial and municipal levels with private companies strongly involved.
Legal Task Force: A Legal Task Force bringing together Asian and European developers, public authorities and legal practitioners, in close cooperation with multilateral institutions, could be set up to develop specific frameworks at national levels in accordance with international standards. These could be based on practical experience of successful ventures. Topics to be surveyed by the Legal Task Force could include procurement methods, role of the public partner in the venture, adaptation and re-negotiation clause, dispute avoidance and appropriate regulatory framework.
Project Preparation: It is recognised that proper project preparation is a key factor determining the success of a project. The preparation helps specify some key issues of the future partnership such as pricing or the sharing of responsibility thereby avoiding incorrect assessment by public authorities. Multilateral agencies such as the World Bank and ADB, the European Commission, representatives from the public and private sectors and interested ASEM countries should be associated with the assessment of the present situation and of possible new commitments.
Finally, human resource development, technology transfer and co-operation, environment issues and strategic business alliance between European and Asian partners are crucial ingredients for effective and sustainable infrastructure development. ASEM can explore the ways and means to set up training arrangements and co-operative ventures between entrepreneurs and governments.
Conclusion: Business initiative on risk mitigation:
The Infrastructure Working Group recognised that the mitigation of risk is the key issue and consequently agreed to constitute itself as the Infrastructure Joint Standing Committee which would meet in early 1998. The Joint Standing Committee will subsequently present its proposals to minimise risk and therefore enhance private sector participation in infrastructure projects in ASEM countries.
Strengthening two-way trade flows in goods and services between Asia and Europe is a major objective of the Asia Europe Business Forum. The Forum will play a major role in this respect by:
- providing private sector input to government initiatives such as the Trade Facilitation Action Plan ( TFAP);
- identifying obstacles to trade activities and proposing solutions to government;
- identifying opportunities for closer private sector co-operation;
- supporting efforts to strengthen the multilateral trading system embodied in the WTO.
With regard to governments, the Forum recommended strongly that:
- the Trade Facilitation Action Plan be finalised early in order to allow its adoption by Heads of State and Government at their meeting in London on 3-4 April 1998. The Forum agreed that the priority areas suggested in the Framework for TFAP endorsed by Economic Ministers at their meeting in September 1997 in Japan are generally commendable. It would recommend that work be enhanced in the areas of government procurement (non discrimination of ASEM partners and dissemination of information by electronic media), quarantine (inspection procedures) and intellectual property rights (respect and effective implementation of existing laws).
- governments should ensure transparency, simplification, availability and consistency of trade related information, in particular with regard to regulations, and to standards and other procedures related to trade in goods and services with the objective to achieve unified testing standards and acceptance of suppliers declarations on conformity. A data base on Trade Standards and Procedures of ASEM countries should be established.
- deregulation should be encouraged in order to increase trade opportunities and joint ventures in the field of trade in goods and services between Asian and European companies.
- rules and regulations governing trade and trade related activities for foreign firms should be made readily available, applied effectively, consistently and in a non-discriminatory manner. An advance notification system regarding possible violations of directives and regulations, such as in the area of AD/CVD, should be developed.
The Forum requested the Heads of State and Government to proceed with the early and full implementation of the commitments undertaken in the Uruguay Round of multilateral trade negotiations. Priority should be given in particular to : tariff quotas and licences; simplification of customs procedures; transparency of relevant laws and regulations related to trade and including their implementation; trading rights and distribution in local markets; intellectual property rights; standards testing and certification; and government procurement. In this context, the Forum also welcomed the progress on WTO negotiations and the decisions related to trade in particular in Europe and the Asia - Pacific region and urged further steps which should take into account the interests of both developing and developed countries.
The Forum called upon the private sector in ASEM countries:
- to establish an inventory of trade information available within Asia and Europe including at the ITC in Geneva an the ICC in Paris; and to consider the development of company and product information data bases, drawing from existing services such as the European Business Information Centers;
- to collaborate in setting up an information exchange arrangement whereby the latest information on current and pending trade related government rules, regulations and directives would be made available;
- to establish business alliances and joint ventures between Asian and European firms to take advantage inter alia of larger markets such as the European Single Market, the ASEAN Free Trade Area (AFTA) and subregional cooperation areas as well as the AICO scheme, and in third regions such as Eastern Europe.
The Forum also recommended:
- continuing promotion of joint trade missions and trade fairs, and the strengthening of bilateral Business Councils or Committees under the various business and industry organisations of ASEM partners;
- the establishment, as needed, of ASEM Business Study Centres, with the support of the private sector, to promote exchange of academics and experts in the areas of trade, and to train, in close cooperation with already existing international institutions such as the WTC and ITC / UNCTAD, professionals to become world class traders;
- promotion of the application of standards like ISO 9000 and ISO 14000, where relevant, inter alia by enhancing technology cross flows;
- that supportive financing arrangements, including trade financing and export-import insurance, as well cooperation in improving the logistics of trade, such as transportation and handling, should form part of national and international steps to promote worldwide exchange in this field.
The Forum decided to set up a task force with the objectives:
- to identify non-tariff barriers in key areas and to provide, wherever possible, concrete examples of such barriers. Food and agriculture, machinery and equipment, and telecommunication products have been mentioned as such key areas. The task force should come up with a report by 15 March 1998. In its work, it should draw upon already available information pertaining to areas mentioned above and present it in a clear manner so that it could have an impact for trade policy makers;
- to provide on a more continuous basis input to government efforts in the context of the Trade Facilitation Action Plan.
It recommended that each ASEM partner should nominate an active businessmen as their
AEBF representative on trade in order to properly organise and supervise the follow-up of the recommendations of the Trade Working Group.
Neither Europe's investment in Asia nor Asia's investment in Europe has kept pace with the growth of trade between the two regions. Indeed Europe's share in the inward stock of Foreign Direct Investment (FDI) in the region actually declined between the 1980s and the early 1990s, and amounts to only 3.1 per cent of the European Union's total stock of outward FDI. Developing Asia's FDI in Europe has only just begun. This situation is unsatisfactory and needs to be corrected. Investment is an important and inseparable part of the overall economic relationship between Asia and Europe. Both ASEM partners warmly welcome inward investment. They also see cooperation in developing the financial services sector in Asia as a vital element in attracting more European investment.
- Against this background, the Forum favoured all practical measures to increase investment, to the mutual benefit of both the host country and the investor. Recent turbulence in Asia's financial markets only reinforces the need to find ways to encourage and increase investment.
- This can be achieved in the first place by practical measures to facilitate investment and to eliminate obstacles to it. These include greater liberalisation and transparency, better dissemination of information about investment opportunities, better protection for intellectual property, non-discriminatory licensing arrangements and improved regulatory regimes. Both Asian and European investors attached importance to being able to maintain majority shareholdings in, and management control of, the companies in which they invest.
- The Forum urged Governments to take all appropriate steps to improve the climate for foreign investment. It also noted the important role of privatisation and deregulation in attracting such investment.
- In particular the Forum urged ASEM countries to implement and make full use of the Asia Europe Investment Promotion Action Plan (IPAP) which was put forward by AEBF I and is due to be endorsed by Heads of State and Government at ASEM II. The Investment Experts Group (IEG) could act as a valuable forum for coordination of efforts in this sphere. Asian and European countries should establish investment regimes offering mutually beneficial conditions, while taking account of their diverse economic situations. These regimes could draw upon the work in hand in several international bodies on investment protection principles.
- The availability of both local currency and foreign exchange long term finance was identified as a crucial element in stimulating and supporting investment, particularly in infrastructure. This will require the development of debt markets in Asian countries and an enhanced role for multilateral financial institutions such as the ADB and IFC.
- Full weight should also be given to technical cooperation between Asia and Europe to help strengthen national financial and banking systems and thus improve the climate for investment. This would cover assistance in the task of creating more sophisticated financial markets, with particular attention to developing domestic capital markets, bond markets and stock exchanges, as well as credit and insurance agencies. Such assistance should extend to training and human resources development.
- Further deregulation and liberalisation of Asia' s financial markets have a vital role to play in restoring the confidence of foreign investors in Asia. In this context the Forum expressed strong support for an early and successful conclusion to the WTO negotiations on financial services.
- It is equally important that financial markets should be stable. It was therefore suggested that international financial institutions should maintain their observation of international capital flows, with the purpose of giving early warning of potential problems and avoiding as far as possible market disruption and extreme turbulence. There could also be a closer exchange of information between Asian and European Central Banks.
- The Forum also saw a pressing need to improve access to finance for investment, and particularly for investment in infrastructure. It saw scope to develop innovative financing schemes bringing together the private sector, governments and multilateral (including regional) financial institutions. The Forum attached particular importance to improving access for SMEs to venture capital funds. It also encouraged governments to consider other means to support investment such as guarantees and insurance.
Tourism, a fast-growing global industry, has fostered continued economic growth. It is recognised that tourism plays an important role in the world's economy as it encompasses elements of trade, investment, infrastructure, particularly with SMEs. It is mutually beneficial to recommend ways to further promote co-operation between Asia and Europe not only to increase tourist traffic flows between the two regions but also to encourage joint initiatives in the wide range of sub-sectors within the two regions. The Forum also noted that the governments should look into liberalisation of air traffic rights for scheduled and chartered flights.
- Visa Facilitation. Efforts should be undertaken to facilitate the movement and activities of visitors. Problems often arise when Asian travelers outbound to Europe apply for entry visas. Therefore, visa issuance in terms of documentation required and processing time should be reviewed for simplification and curtailment. Areas for improvement include
- multiple visas,
- extension of validity,
- easy renewal for visa reapplication and (4) electronics means of visa application such as the Australian ETAS system.
- Consumer Protection. The Forum noted that existing consumer protection directives and guidelines in the area of tourism affects the industry: Therefore, the Forum recommended that these directives, such as EU directives, and other guidelines in both regions should be made transparent and explained by EU and individual countries concerned with the aim of increasing tourism.
- Cooperation in Human Resource Development. Professionalism and quality services plays a growing important role in the future. Training and education should be addressed for companies to meet the challenges of globalisation. Assistance and cooperation in tourism training and education should be promoted, for example, International Tourism Management (ITM) of Austria expanding its programme in Asia.
- Conferences and Exhibitions. The Forum recommended the simplification and facilitation of custom formalities and regulation for imports of printed materials, brochures, and samples used for conferences and exhibitions, and these products should be exempted from import duties. Refundable bank guarantee system should be established for re-export of equipment used for exhibitions. An example which can be a benchmark is the German custom arrangements for conference and exhibition materials and equipment.
- Access to Investment Opportunities. Investment opportunities especially for SMEs in the tourism industry should be made more accessible by making available information, by encouraging knowledge transfer, and by making available easy access to credit. Business partnership in various tourism sub-sectors, such as small and medium-scale accommodation establishment, should be encouraged. Tourism companies should put their product information on electronics media in accordance with a standard data format. National tourism agencies should be encouraged to link private electronics collections into a central database.
- Liberalisation in Services. In connection with liberalisation process, tourism activities should be managed under freer competition. Existing restrictions such as the issuance of tour guide licenses and work permits should be liberalised. These provisions should be equally applied in both regions.
The Forum welcomed the successful and fruitful conclusion of the meeting which underscored the closer economic partnership between Asia and Europe. The participants of the Forum expressed their conviction that both sides should do their utmost to seize the opportunities for economic synergy between the two regions. While the recent currency crisis affecting a number of Asian countries was of serious concern, the participants of the Forum expressed their confidence in the ability of the countries concerned to manage the currency problem and economic difficulties. They were convinced that the economic fundamentals and the prospects for continued dynamic economic growth were still very positive. The Meeting further noted the increasing interdependency in the global economy, and hence the need for closer international co-operation to ensure greater stability of the markets.
It is hoped that business representatives welcome the opportunity to present the conclusions of the Business Forum to Heads of Government at ASEM II.
Looking ahead to the role of the business sector in the ASEM process, the business leaders considered it highly important to take an implementation-oriented approach, and that the recommendations contained in the Chairman's Statement would be submitted to the ASEM II in London for favourable consideration.
In order to facilitate speedy exchange of information on AEBF matters, business in each ASEM country should nominate an AEBF contact point. The Steering Committee should continue to act as a major link and clearing house for AEBF in between meetings of the Forum. In order to provide for a consistent and focused business dialogue, new initiatives in the ASEM business dialogue should be informally consulted with the Steering Committee before they are formally proposed to ASEM partners.
As AEBF representatives meet once a year, further dynamism could be generated with the formation of working committees at the discretion of each Working Group, as done by the Task Force on Infrastructure. Chairmen of such working committee may participate in the Steering Committee.
The meeting called for greater involvement of Asian and European business and industry organisations in participating in the Forum and in the recommended ASEM business-related activities.
The United Kingdom will host the next Asia Europe Business Forum in April 1998, Korea in 1999 and Singapore in 2001.
ASEMConnect - AN ELECTRONIC RESOURCE NETWORK
To establish ASEMConnect, an electronic resource network that will provide SMEs with: a)database information on companies, products and services, business alliance interests; b)optional business consultancy services.
One of the issues highlighted at the Asia Europe Business Forum 1 and the Asia Europe Business Conference that SMEs face was the lack of time and resources to easily access
information, assistance and business partners. Many SMEs may not even be aware of where, or how, to go about the search.
At the same time, there is much potential for co-operation between European and Asian SMEs. European companies may have a good product and technology but lack the distribution networks or co-production partners in Asia. Asian companies may also have products and services that can be marketed or produced in Europe. Therefore, a vehicle which allows SMEs from both continents to look for and form partnerships would be useful. This vehicle should be cost-effective to use and maintain, and easily accessible to all interested parties. Existing sources of information should also be made use of to prevent duplication. Ideally, it should also be self-financing.
The Internet provides the perfect avenue for such a vehicle. It should be recognised, however, that there is a proliferation of thousands of websites on the internet and that one more website with database of SMEs seeking business partnerships may not, by itself, attract many visits. To be effective, such a database therefore, should be housed in websites that are already enjoying very high visitor hit rates These in turn should preferably be linked in a network of similar websites.
Singapore, Korea and Japan have set up on the G7 Global Information Network (GIN) for SMEs (http://www.gin.ipa.go.jpa). This is a website with links to SME-related websites in all G7 countries. Most European countries have similar websites which allow the user to find preliminary information and contacts for business collaboration overseas These databases can be identified and leveraged upon to develop a network. Other Asian databases can similarly be built up, to join the network.
Today there are already several well established business-related and company databases in Europe and Asia. The proposed ASEMConnect aims to organise and establish links between these databases and provide SMEs with consultancy services for cross-regional trade and investment, as well as joint-venture projects. The idea is to develop a set of common data items and search facilities that are available in all databases, and link them to the end-user through the Internet.
To further enhance the usefulness of these on-line databases for potential business partners, we can add an optional consultancy service for investors who are not sufficiently familiar with the business environment and opportunities of the target country. These consultants can provide additional information not available through these databases as well as to provide other assistance required to bring a project idea to fulfilment.
Issues and Response
Likely issues that may arise include the following:
- Financing mechanism
- Update of data and maintenance of system
- Compatibility of existing databases
Costs can be contained by making full use of existing databases and facilities. Furthermore, the project would also be self-financing when fully developed. To facilitate regular updating of company databases, an automatic prompting system could be set up. Finally, a search mechanism could be developed that will ensure the compatibility and connectivity of the diverse databases.
The views of ASEM business leaders are sought on this proposal. If several countries are interested in this idea, Singapore would be willing to host a working committee to examine how to pursue this project further, leading to the setting up of a working prototype. Interested participants should nominate a representative from an organisation that is presently running such a database, or is planning to develop one.
The working committee could hold its first meeting in early 1998, and make a preliminary report at the SME Conference in Naples next May. A concrete proposal can then be submitted to the AEBF III.
Prepared by Singapore for AEBF II, Bangkok, 13-14 November 1997.
SME's contribution to the overall business sector in the economies of Asia and Europe is vital. However, lacking of experiences and resources make it difficult for SMEs to grow and expand into international market.
Large multinational companies have the resources (financial capital, personnel, expertise, and technology) to capitalise on the opportunities to international trade and investment without assistance. SMEs are different and have special needs and priorities.
In order to support and facilitate SME development, it is proposed that an SME Centre should be established in countries which currently lack a similar body, and are prepared to provide the necessary finance. The theme for discussion regarding to the development of SME in AEBF II could focus on policy implementation and establishing an SME Centre. The following five basic issues should be emphasised:
- Information (e.g., availability and easy access of useful information; linkage of information among members; information technology (IT) providing information accuracy and timeliness)
- Skills & Human Resource Development (e.g., development of local skills, regional skills, and international skills among labour forces)
- Market (e.g., market, access; mobility of business persons; business linkage between Asian and European SMEs, Intemet homepage facilitating SMEs business opportunities)
- Finance (e.g., export financing facilities; other related financial services; establishment of financing schemes for SMEs in Asian countries and support for national development banks in these countries): Co-operation between European and Asian nation development banks could ease and speed up the procedures and the establishment of such schemes.
- Technology (e.g., improving technology transfer agreement; technology standardisation)
SME Centre's Strategies
The SME centre should have the following missions:
- Formulate clear strategies : Adopt and promote policies that are conducive to the growth and development of SMEs.
- Identify industry linkages
- Develop new business strategies and new techniques to promote linkages between SMEs and large enterprises both locally and internationally.
- Help sub-contracting SMEs with large companies.
- Start-up SMEs partnership.
- Promote cost-efficient technology to improve SME productivity:
- Introduce support services & consulting services.
- Build up a comprehensive database of SMEs through the Intemet.
- Provide guidance in accessing and obtaining market information.
- Serve as a centralised library and information centre for SMEs.
- Provide match-making services.
- Set up a SMEs' network.
- Assist in preliminary and financial support for feasibility studies and familiarisation trips.
- Provide special financial arrangements.
- Provide venture capital funding facilities.
- Advise and assist with credit facilities, financial services, business and financial planning.
- European national development banks could help their Asian counterparts to design and implement schemes to provide long-term finance
- Promote utilisation of technology to improve efficiency and lower costs.
- Encourage development & training
- Promote opportunities for local SMEs to meet, learn, and exchange their experiences, views, and knowledge with international SMEs within the same sector.
- Introduce new entrepreneurship education programs.
To implement such proposed ideas, follow-up measures should be set up and the implementation should be in progress. Some monitoring system should be undertaken to ensure progress. Linkages with other existing centres and support services should also be maintained.
Prepared by Thailand for AEBF II, Bangkok, 13-14 November 1997