A renewed interest in ASEAN

A renewed interest in ASEAN

Lee Kim Chew, The Straits Times, Asia News Network, Singapore

When Malaysian Prime Minister Mahathir Mohamad visits
Washington next month to meet United States President George W.
Bush, it will not just be about mending fences.

It also marks a re-ordering of America's strategic priorities,
a change that puts ASEAN back at the top of the agenda for U.S.
policy-makers. Washington's renewed interest in Southeast Asia
after Sept. 11 comes replete with a new attitude towards moderate
Muslim states such as Malaysia and Indonesia.

U.S. Assistant Secretary of State for East Asian and Pacific
Affairs James Kelly praised Malaysia as a regional "beacon of
stability" that "plays an important role in the global war on
terror". Even though he said the trials of former deputy premier
Anwar Ibrahim in 1999 were "flawed", his effusive gush on Dr
Mahathir's stand against terrorism sets the mood for the meeting
with Bush on May 14.

The Americans also met the Indonesians in Jakarta this week,
although the talks were not about resuming the military aid that
was suspended in 1999 after the rape of East Timor.

But U.S. Deputy Secretary of Defense Paul Wolfowitz is pushing
for the early resumption of an aborted training program for
senior Indonesian military officers.

The unmistakable signal from the Bush administration, which
works closely with the Philippines, Thailand and Singapore, is
that it also wants to improve military ties with Jakarta.

Washington is now keener to enlist the Indonesians in its war
against terror than focus on their human-rights lapses, as it did
previously.

The Americans have also put out feelers to Vietnam about using
their former naval base in Cam Ranh Bay after the Russians vacate
it in July. The import of all these moves is that ASEAN,
marginalised by the 1997 financial crisis, is gaining a new
significance in the U.S.' strategic horizon.

On the economic front, similar steps are afoot to augment U.S.
ties with ASEAN. Republican Senator Richard Lugar has introduced
a Bill to authorize negotiations for a free-trade pact with the
Philippines.

This is America's reward for President Gloria Arroyo's help in
the war on terror. The new pact will reinforce America's close
diplomatic and security relationship with Manila.

Singapore's trade agreement with the U.S., expected to be
ready this year, will allow the Indonesians to piggy-back on the
Republic's high-tech electronic exports to the U.S.

The Bush administration is resisting calls for a U.S.-ASEAN
trade pact because the 10 Southeast Asian countries are in
different stages of economic development, and thorny issues such
as intellectual-property rights and farm products remain
unresolved.

But America's trade agreement with Vietnam and its re-extended
textile pact with Cambodia will promote trade with the Indochina
countries.

In any case, Washington's pitch for "a strong, cohesive,
economically dynamic ASEAN region" will be put to the test as it
re-engages ASEAN.

U.S. Trade Representative Robert Zoellick's talks with ASEAN
ministers in Bangkok earlier this month were significant as they
marked the resumption of a formal economic dialogue that had
lapsed for more than a decade.

Slowly, but surely, ASEAN can claw its way back into the
center of things. The outlook is certainly brighter now as
compared to this time last year.

According to the International Monetary Fund, the prospects
for economic recovery in Malaysia and Thailand are better, amid
stronger signs of a recovery in the U.S.

The picture will change radically when ASEAN gets hitched to
China, the world's fastest-growing economy, to create a free-
trade area in 10 years' time.

The proposed pact -- the world's biggest with 1.7 billion
people, a gross domestic product of US$2 trillion (S$3.6
trillion) and two-way trade of US$1.23 trillion -- will simply be
too large for anyone to ignore.

Initial studies show that ASEAN's exports will rise by 48
percent and China's by 55 percent when tariffs are scrapped on
some 50 major products.

Dr Supachai Panitchpakdi, the in-coming director-general of
the World Trade Organization, noted that a decade ago, more than
half of Southeast Asia's trade with China were in primary
products. Since the mid-1990s, manufactured goods such as
computers, machinery and electrical equipment have made up 40
percent of the trade between ASEAN and China.

The new trade pattern benefits countries such as Singapore,
Malaysia and Thailand, as they complement the emerging Chinese
economy.

The less-developed ASEAN economies will need more time and a
lot of help to make the adjustments, and they must change. If
not, they will be overwhelmed by the Chinese, especially in the
labour-intensive industries.

Despite the disruptions of economic restructuring, Dr Supachai
said it was in ASEAN's long-term interest to step up economic
integration with China.

ASEAN is now China's fifth-largest trading partner -- after
Japan, the U.S., the European Union and Hongkong. But China-ASEAN
trade has grown at an annual rate of about 20 percent in recent
years, as compared to 15 percent between China and the other
countries.

At any rate, ASEAN is well-placed to do a deal with China, as
95 percent of regional trade among the ASEAN-Six is done at
tariffs of zero to five percent.

Clearly, there is ample room for ASEAN to expand trade and
investment with the world's most populous country. The China-
ASEAN pact, the next big thing for Southeast Asian countries, is
a bright speck on the economic horizon.

What's in it for China? Its leaders are obviously making a
strategic move to foster a cooperative relationship with ASEAN.

As historian Wang Gungwu of the East Asian Institute noted, a
prosperous and stable Southeast Asia offers the greatest security
for China.

"Therefore, it is in China's own interest to assist in helping
the region return to the trajectory it had before 1997," he said.

China's bid to build a stronger economic partnership with
Southeast Asia will force the world's major powers into the act
as ASEAN leaders look outwards to make the vital connections.

Singapore is trying to breathe new life into the Asia-Europe
summit, and there is talk of a "closer economic partnership" with
Australia and New Zealand.

Japan, worried that it could be elbowed out by the Chinese, is
also thinking big. It is toying with the idea of linking up with
China, South Korea, Hongkong, Taiwan and the 10 ASEAN states by
2010.

All these tentative moves could open up new opportunities to
give a flagging ASEAN the boost it sorely needs.