ASEAN Integration: Framework for considering

benefits and costs

7 May 2014

Dr. Jeremy Lim

MBBS, MPH, MRCS (Edin), MMed (Surg), FAMS
Head of Health and Life Sciences, Asia Pacific

Oliver Wyman Group

CONFIDENTIALITY

Our clients industries are extremely competitive. The confidentiality of companies' plans and data is obviously critical. Oliver
Wyman Group will protect the confidentiality of all such client information.
Similarly, management consulting is a competitive business. We view our approaches and insights as proprietary and therefore
look to our clients to protect Oliver Wyman Group's interests in our presentations, methodologies and analytical techniques.
Under no circumstances should this material be shared with any third party without the written consent of Oliver Wyman Group.
Copyright Oliver Wyman Group

Oliver Wyman is a member of Marsh & McLennan Companies group, a

US$11 BN company with more than 54,000 staff in over 100 countries

Strategic
consulting

Strategy
consulting

Oliver Wyman Group

Risk and
Insurance

Risk and
Reinsurance

Brand Strategy
Consulting

Economic
Consulting

HR and
Investment
Consulting

Oliver Wyman has over 40 branches in the major cities of the world

Americas
Atlanta
Bermuda
Boston
Calgary
Chicago
Columbus
Dallas
Detroit
Houston
Lisle
Los Angeles
Melville
Mexico City

Milwaukee
Montral
New York
Ottawa
Philadelphia
Pittsburgh
Portland
Princeton
Reston
San Francisco
So Paulo
Toronto
Washington

Oliver Wyman Group

Europe, Middle
East, and Africa
Barcelona
Madrid
Dubai
Milan
Dusseldorf
Moscow
Frankfurt
Munich
Hamburg
Paris
Istanbul
Stockholm
Leatherhead Wilmslow
London
Zurich

Asia-Pacific
Beijing
Hong Kong
New Delhi
Seoul
Shanghai
Singapore
Sydney

Oliver Wyman office

MMC Group office (not exhaustive)
Significant Oliver Wyman case work

Greetings from Singapore!

Oliver Wyman Group

EVOLUTION OF AEC

ASEANKey
Vision 2020
Year a stable, prosperous, and highly competitive region
Milestones
with equitable economic development, and reduced poverty and
socio-economic disparities.
1997
ASEAN Vision 2020
2003
Declaration of the ASEAN Concord II (Bali)
2007 Jan
Accelerate establishment of AEC to 2015
2007 Nov
AEC Blueprint
2013
I think (ASEAN) have come to the realization that
we are not going to be as ready as we might have
thought in 2003 by the end of 2015" Gita Wirjawan,
Indonesian Minister of Trade

Oliver Wyman Group

ASEAN people unaware of

2015 economic integration
Member states of the Association of
Southeast Asian Nations (ASEAN) are
struggling to get ready for full economic
integration by 2015, and most of their 600
million people are unaware of the changes
that will take place. Reuters 6 June 2013

Oliver Wyman Group

External pressures (such as the

formation of the European Union
Single Market and the North
American Free Trade Area)
pressured ASEAN to form a free
trade area (FTA) in 1992 The
AEC Blueprint outlines actions and
measures and time lines for
completion by the 2015 deadline.
However, by end-2011 only an
implementation rate of 67.5% had
been achieved. While tariff
elimination had largely been on
schedule, there were difficulties
with removal of non-tariff barriers
(NTBs) and services and
investment liberalization.

Oliver Wyman Group

It is highly unlikely that ASEAN

would be able to meet all its
integration goals by the year
2015.
On the other hand, one needs to
see the ASEAN economic
integration as an ongoing process
for which the leaders have laid
down the initial foundationSanchita Basu Das, Institute of
Southeast Asian Studies

Oliver Wyman Group

ASEAN ECONOMIC COMMUNITY 2015: HEALTHCARE

Core
Element
Free flow of goods

Free flow of services

Free
flow
investment;
flow of capital

of
Free

Free flow of skilled

labor
(including
Mutual Recognition
Agreements)
Oliver Wyman Group

Principal Considerations

Zero tariff and removal of Non-tariff Barriers; Single licensing

with harmonization of standards; Differential pricing of
pharmaceuticals and medical devices across ASEAN nations
Legal status of Cross-border health services; information flow;
issues related to mutual recognition
Impact of private investment on public healthcare servicesmanpower egress, demonstration effect; consequences of
consolidation
and
mega-healthcare
services
groups;
acceptability of healthcare services providers under foreign
ownership
Impact of manpower flows; Harmonization of Standards

Key Stakeholders
Stakeholder

General Position

Policy Maker/
Politician

Deeply entrenched local interest groups to pay attention to;

Intellectually aware of arguments for and imperative of
AEC

Payer
ProviderInstitutional (Service
and Products)
ProviderProfessional Group

Lowest defensible price, highest perceived value

Provider- Individual
Patient

Heterogeneous but generally localized perspective

Public

Good value for money until economic impact felt- jobs,

earnings

Oliver Wyman Group

Maintain market protection and position; Some see

economic opportunities in expansion

Largely insular and localized perspectives; Sees itself as

protector of public interest and professional standards

Good value for money

10

Discussion Issue 1- Investments within and across ASEAN

ASEAN losing FDI share (both stock and flow)

o Never recovered since Asian financial crisis
o Competition from China and India

Oliver Wyman Group

11

Investments within and across ASEAN

Bite-sized regional integration demonstrating synergies and benefits

Iskandar Project
Greater Mekong Subregion
Increased physical connectivity
Planned high speed rail between Singapore and KL
Strong country factors in each ASEAN nation complemented by solid ASEAN agreements
could make the ASEAN region an FDI magnet again- Manu Bhaskaran, Centennial Asian
Advisors

Oliver Wyman Group

12

Investments within and across ASEAN

Stakeholder

Position

Policy Maker

Encourage private investment to offload government

financing; concerns over cannibalization of public sector
and uncontrolled private sector expansion

Payers

Lowest price, highest value; politically defensible

Providers- Services

New funding to expand/ improve services; economies of

scale and synergy regionally; fear of competition

Providers- Products

New funding to expand/ improve services; economies of

scale and synergy regionally; fear of competition and
pricing pressures

Professionals

Potentially higher remuneration; Competition for power and

influence

Patients

Lowest price, highest value

Public

Lowest price, highest value; some nationalistic sentiments

Oliver Wyman Group

13

Discussion Issue 2- Mutual Recognition Agreements and free flow of skilled

labor
Why?
Encourage Foreign Direct Investment (FDI)
Meet short-term skill shortages
Facilitate upgrading of local population
Meet international commitments under GATS/ FTA
But
Recognition of qualifications is not enough to ensure market access in ASEANChia SY, Singapore Institute of International Affairs 2012
Policies and regulatory frameworks affecting mobility

Oliver Wyman Group

14

Free flow of skilled labor

Stakeholder

Position

Policy Maker (Health) Overcome skills gap, reduce wage costs; concerns
over uncontrolled private sector expansion, quality
standards, protection of local enterprises
Payers

Lowest price, highest value; politically defensible

Providers- Services

New labor source to expand/ improve services;

economies of scale and synergy regionally; increased
competition for labor

Providers- Products

Perhaps easier operations

Professionals

Potentially higher remuneration (South to North); fear

of competition and pricing pressures (North to South)

Patients

Lowest price, highest value

Public

Lowest price, highest value; some nationalistic

sentiments

Oliver Wyman Group

15

"Please do not expect a big bang event in 2015 where everything

is going to happen overnight when the ASEAN Economic
Community comes into being. We've made progress in some
areas and unfortunately regressed in some areas.
But over time and following the ASEAN pace, gradually the
ASEAN Economic Community will come to be and by the end of
the decade, whatever the vision was, if it's not done by 2015 it will
be done by 2020."
Kishore Mahbubani, Dean of the Lee Kuan Yew School of Public
Policy

Oliver Wyman Group

16

The Greater Mekong Sub-Region designates

a development project formed by the Asian
Development Bank in 1992 that brought
together the six states of the Mekong River
basin, namely Cambodia, Laos, Myanmar,
Thailand, Vietnam, and Yunnan Province,
China.
Regional Cooperation Operations Business
Plan: 2012-2014: In December 2011, GMS
leaders endorsed a strategic framework for
2012-2022 that calls for a range of new
measures to strengthen regional cooperation.

What can be done to improve the odds of success for ASEAN integration?

Oliver Wyman Group

19

The Diversity of ASEAN

Oliver Wyman Group

20

Conflict Resolution within ASEAN

Oliver Wyman Group

21

ASEAN Business Club

We have come together to form ASEAN Business Club at a critical

moment in economic history. A new global order is coming into being
centered around Asia, in our own backyard. This new order is
dominated by large economic entities. Individually, we are dwarfed by
these economies and have little more than a marginal role on the global
stage. Together, however, we are a market of 600 million and have a
GDP of over US$2 trillion.
The governments have laid out ambitious plans for an ASEAN
Community as a a single market and production base. These plans
need the support and partnership of businesses.
Businesses need to provide this support and
ensure that we are there to tap the value of
economic integration. We need to grow crossborder trade and investment, create more
ASEAN enterprises and build regional
capability in our organizations.
Oliver Wyman Group

22

ASEAN University Network

Established in November 1995

Signing of Charter by the Ministers responsible for Higher Education from
ASEAN countries
Signing of the Agreement on the Establishment of the AUN by the
presidents/rectors/vice-chancellors of participating universities
Formation of AUN Board of Trustees and a Secretariat headed by an
Executive Director
Strengthen the existing network of co-operation among leading universities
in ASEAN
Promoting co-operation and solidarity among ASEAN scholars and
academicians, developing academic and professional human resource,
and promoting information dissemination among ASEAN academic
community.

Oliver Wyman Group

23

A friendship founded on business is a good deal

better than a business founded on friendship.
~John D. Rockefeller

Oliver Wyman Group

24

jeremy.lim@oliverwyman.com

QUALIFICATIONS,
ASSUMPTIONS AND LIMITING
CONDITIONS

This report is for the exclusive use of the Oliver Wyman Group client named herein. This report is not intended for general
circulation or publication, nor is it to be reproduced, quoted or distributed for any purpose without the prior written permission of
Oliver Wyman Group. There are no third party beneficiaries with respect to this report, and Oliver Wyman Group does not accept
any liability to any third party.
Information furnished by others, upon which all or portions of this report are based, is believed to be reliable but has not been
independently verified, unless otherwise expressly indicated. Public information and industry and statistical data are from sources
we deem to be reliable; however, we make no representation as to the accuracy or completeness of such information. The
findings contained in this report may contain predictions based on current data and historical trends. Any such predictions are
subject to inherent risks and uncertainties. Oliver Wyman Group accepts no responsibility for actual results or future events.
The opinions expressed in this report are valid only for the purpose stated herein and as of the date of this report. No obligation
is assumed to revise this report to reflect changes, events or conditions, which occur subsequent to the date hereof.
All decisions in connection with the implementation or use of advice or recommendations contained in this report are the sole
responsibility of the client. This report does not represent investment advice nor does it provide an opinion regarding the fairness
of any transaction to any and all parties.