[March 2018] ASEAN’s logistics infrastructure: ready for growth?

By James Evans, Director of Legal & External Affairs, Linfox International Group and AustCham Director


With the Association of Southeast Asian Nations (ASEAN) celebrating its 50th anniversary, James Evans looks at whether the region’s logistics infrastructure is ready for the anticipated population and economic growth, and how the logistics industry can help to connect countries, improve safety and make it easier to access to markets in the newly-formed ASEAN Economic Community.

Advancing by rail

Southeast Asia relies heavily on road transport. In Thailand, for example, more than 90 per cent of goods are transported on its congested roads with less than two per cent on an aging single-track rail network.

An advanced rail network is planned which will run from China’s north through Laos, Thailand, Malaysia and Singapore, with branches to the east through Cambodia and into Vietnam.

This will improve speed and reduce costs. The road transport industry will have to compete and integrate with rail as new logistics hubs develop.

Linfox is at the hub of this future network, in Bangkok, and has expertise in managing intermodal logistics. It is at a competitive advantage in the region and well placed to work with customers to create these hubs.

Making it safer to go by road

Driver safety and fatigue is a major challenge for the region.

The World Health Organisation (WHO) reports that 117,000 people died on the roads of ASEAN member countries in 2013.[1]

A 2016 analysis, shows that deaths from road incidents as a percentage of total fatalities are exceptionally high among ASEAN member countries.

Malaysia has the highest incidence, with six per cent of all fatalities being a result of a road incident. The global average in the same year was 2.1 per cent.

Location Road deaths as a percentage of all fatalities
Malaysia 6 per cent
Thailand 5.1 per cent
Brunei 4.4 per cent
Vietnam 3.7 per cent
Global average 2.1 per cent

http://www.who.int/gho/road_safety/en/

In the transport industry, drivers and their assistants frequently drive excessively long hours, sometimes in poorly maintained vehicles, endangering the public and themselves, and compromising the efficient delivery of goods.

Recognising that this is a serious social and economic issue, the ASEAN Secretariat rolled out its Regional Road Safety Strategy in 2015. Its impact has been limited, indicating that ASEAN members must do more to enforce safety laws and educate drivers and communities.

Linfox is working with local governments to improve road safety in a number of countries. In Vietnam, we have worked with the local government and communities to introduce road markings and signage and raise safety awareness in schools.

Removing legal and regulatory obstacles

ASEAN aims to facilitate the free flow of goods and services between markets. There is still a long way to go to meet this goal. The logistics industry can help change this with strategic investment in regional distribution centres and transport solutions but the region must harmonise its laws and practices before the industry will be willing to invest.

To free up the movement of goods, laws and taxes will need to be fair, transparent and similar to those in other countries in the AEC. Customs departments will also need to invest in modern technology and systems and the related laws and taxes must be similar, fair and transparent. This will encourage local and foreign investment alike.

The recent effort to harmonise laws and standards on labelling goods for certain products is a welcome step. Local language differences will almost always mean that labelling must be changed across countries, but there are at least agreed regulations on content.

Direct foreign investment and ease of access to markets remains a contentious issue. In many ASEAN countries a 100 per cent foreign-owned company cannot hold a transport license, which means foreign companies must establish a joint venture with local companies or people. This is a significant barrier to doing business. Despite AEC regulations providing for foreign ownership of up to 70 per cent in logistics businesses, many ASEAN nations have maintained a limit at 49 per cent.

Creating a connected economic community

A coordinated and efficient intra-ASEAN logistics network is essential to both growth and economic integration of countries in the region. This will require the further removal of non-tariff barriers, the easing of barriers to market entry, and a simplification of procedures for goods in transit.

The AEC needs time to mature – as an example, Myanmar and Cambodia have not fully implemented laws to satisfy the community’s conditions. At present, if a member country doesn’t comply with the AEC regulations, there is little ASEAN can do in the way of incentives, penalties or sanctions.

Membership to the World Trade Organisation (WTO) may be a way to influence ASEAN nations – full WTO compliant membership across the ASEAN region would be a very good point from which to grow further in the next 50 years. ASEAN’s leadership structure could also be improved. With leadership rotating from country to country it is difficult to build the momentum for change.

Stronger transport networks, better safety on the roads and harmonised laws and regulations will go a long way to helping ASEAN countries integrate and grow. With our strong relationships, expertise and cross-border capabilities Linfox is ready for the opportunities in the region.

[1] http://apps.who.int/gho/data/node.main.A997?lang=en

 

James

James oversees all legal, government and external relations matters in Asia for Linfox International Group, based at the Asia Regional Head Office in Thailand.
James joined Linfox in 2014 and has worked in Asia since 2004 across a wide variety of legal matters including general commercial advice, logistics, joint ventures and has particular expertise in intellectual property matters. James is a qualified Solicitor of England & Wales and holds an LLB (Hons) and a Post Graduate qualification in Legal Practice. James has previously held the position of director for the European ASEAN Business Council (EABC) in Bangkok and is company secretary for the Linfox International Group.
Linfox has been operating its logistics business in Thailand and Southeast Asia for over 20 years and serves customers in the FMCG, retail and industrial markets. Linfox has been a strong supporter of the chamber and is keen to work side by side to improve the chamber’s relations and service offerings to its members. Linfox will seek to involve its employees across as many of the chamber’s groups as possible, including targeted events, social meetings, advocacy and legal affairs.

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