Part 2 of 2: Can ASEAN integration help the poor?<\/p>\n
Romeo A. Reyes, Jakarta<\/p>\n
With regard to the second question as to whether economic
\nintegration would benefit the poor and reduce inequities within
\nand across ASEAN, much will depend on the ability of the less
\ndeveloped AMCs, especially the CLMV countries (Cambodia, Laos,
\nMyanmar and Viet Nam), to effectively manage their economic
\nintegration process.<\/p>\n
In this regard, formulation and implementation of a
\ncomprehensive economic integration strategy would be necessary to
\nguide them in managing the process. CLMV countries could
\ncooperate with each other and learn from the experience of the
\nmore successful countries among ASEAN 6 in formulating their
\nrespective integration strategies.<\/p>\n
Economic integration essentially involves removal of barriers
\nto trade and investment flows. As barriers are removed and
\nproducers adjust to changes in market conditions, there will
\ninvariably be short-term adjustment costs, particularly to
\nworkers who may lose their jobs if and when their employers in a
\nsunset industry decide to downsize to remain competitive or to
\nleave the market altogether.<\/p>\n
If there are appropriate social safety nets to mitigate these
\nadjustment costs as part of a comprehensive economic integration
\nstrategy, the public's apprehension could be assuaged. The
\nintegration strategy could also provide a mechanism that compels
\nthe employer to share their worker's burden of adjustment. For
\ninstance, provision of gratuity pay to terminated workers could
\nbe made mandatory.<\/p>\n
Even in the short-term, there could be benefits to workers if
\ntrade and investment liberalization achieves the purpose of
\nmaking ASEAN a more attractive production base. Firms that are
\nalready based in ASEAN would be encouraged to stay rather than
\nrelocate to China, thereby enabling workers to keep their jobs.
\nIn addition, greater investment inflow into sectors where ASEAN
\nhas a comparative advantage would create new job opportunities.<\/p>\n
In the longer-term, the real benefits from economic
\nintegration derive from enhanced competitiveness arising from
\neconomies of scale that a single market allows and lower
\nproduction costs as tariff, non-tariff and technical barriers to
\nthe flow of goods, services and factors of production are
\ndismantled. If these benefits were fully translated into higher
\nprofits, they would obviously accrue only to the
\ninvestors\/producers.<\/p>\n
But if the market were functioning in a fairly competitive
\nway, it would tend to encourage producers to share the benefits
\nof increased productivity to their workers -- who often comprise
\na good part of the poorer segment of society -- through higher
\nwages, and to consumers through lower prices. Apart from lower
\nprices, consumers would be better off as they are given a wider
\nrange of choice.<\/p>\n
If the market should fail to equitably distribute economic
\nintegration benefits among producers, workers and consumers, it
\nwould be incumbent upon the state to ensure that the market
\nfunction as it should and is not distorted by monopolists, rent
\nseekers, and cartels, which often have strong political
\nconnections.<\/p>\n
More broadly, it would be incumbent upon the state to ensure
\nthrough appropriate policies that the benefits of economic
\nintegration are maximized, the adjustment costs are minimized and
\nmitigated, and both benefits and costs are equitably shared among
\ndifferent sectors and income classes. The will and ability of
\ngovernments to design and implement pro-poor trade and investment
\nliberalization policies is particularly important in view of
\nincreasing evidence that such policies rather than community
\nlevel interventions here and there that meaningfully reduce
\npoverty.<\/p>\n
These are the key issues that an economic integration strategy
\nshould address so that the vision of ASEAN Leaders expressed in
\nBali Concord II of a \"stable, prosperous and highly competitive
\nregion in which there is equitable economic development and
\nreduced poverty and socio-economic disparities\" could be
\nrealized.<\/p>\n
Indeed, pro-poor trade and investment liberalization policies
\ncan be deliberately designed to enhance and accelerate the
\n\"trickle down\" of benefits from enhanced competitiveness to poor
\nworkers and consumers.<\/p>\n
If properly and effectively managed, economic integration can
\nbenefit the poor, thereby reducing inequities and the development
\ndivide within and across ASEAN Member Countries. With strong
\nadvocacy, public support and political commitment to implement
\nbold integration measures, there is a fair chance that it will.<\/p>\n
The writer is a Senior Adviser, ASEAN-UNDP Partnership
\nFacility. The views expressed herein are personal and do not
\nnecessarily reflect those of ASEAN, any of the Member Countries,
\nor UNDP.<\/p>",
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