Commentary 2016/51, 24 August 2016
It was reported in Today online, 23 August 2016, that the Minister for Trade and Industry (Industry) S. Iswaran noted that ASEAN integration has become even more important in the digital era. In this regard, the rise of the digital consumer and the increasing digitalization of production in ASEAN calls for closer attention to the logistics sector as it is this sector that connects producers to consumers within a country and across borders. Enhancing the effectiveness of this sector requires four key considerations.
First, the logistics sector must align itself with the new demands of a digital economy by increasing its digitalization. For example, harnessing new technologies such as the Internet of Things can help to improve the efficiency and reliability of the logistics industry as it enables logistics providers and consumers to use real time data to analyse their supply chain movements. In turn, this enables faster response time and reaction to changes within the supply chain, thereby reducing untimely disruptions and ensuring the smooth delivery of goods and services.
Second, the logistics industry is hugely diverse, straddling a myriad of activities and different modes of transport, such as land, rail, air, ship and multimodal as well. It is also quite fragmented, with some crowded segments in the non-asset based sub-sectors, in most ASEAN member countries. This calls for consolidation and perhaps mergers and acquisitions, or alliances, without necessarily excluding new entrants.
The third key issue is the liberalization and facilitation efforts within this industry in ASEAN. Improving the performance of the logistics industry in each member country alone will not enhance the movement of goods between member countries in ASEAN, without a hastening of the integration efforts in the logistics sector itself. There are many ASEAN initiatives formulated for the integration of this prioritized sector such as the Roadmap for the integration of logistics services and the ASEAN Strategic Transport Plan. Speeding up the pace of implementation is crucial for accelerating ASEAN economic integration.
Finally, it is the deepening of integration within ASEAN that will create increased demand for goods and services within ASEAN, thereby reducing the imbalance in trade that increases logistics exports costs. Logistics export costs can be considerably reduced, if transport carrying cargo out of a country does not come back empty.
Dr Tham Siew Yean is Senior Fellow at ISEAS – Yusof Ishak Institute.
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