ASEAN business summit

ASEAN business summit

The ASEAN Business and Investment Summit in Bali, starting on
Saturday, is timely as it will immediately be followed by the
summit of ASEAN heads of government and by a series of summit
meetings between ASEAN leaders with government leaders from
Japan, China, South Korea and India.

The business summit also has a strategic role in creating
momentum for the process of developing an ASEAN economic
community (AEC) as it will be attended by business leaders from
14 countries -- the 10 ASEAN members and the other four
countries. After all, in the final analysis, it is businesspeople
not governments that trade and make business deals.

The AEC -- first mooted by Singapore Prime Minister Goh Chok
Tong last year -- is one of three basic concepts expected to be
adopted by the ASEAN summit, in addition to the ideas of ASEAN
Social and Cultural Community and ASEAN Security Community,
initiated by Indonesia as host country.

The AEC seeks to lead the 10 ASEAN countries into a more
streamlined and integrated economic community through the ASEAN
Free Trade Area (AFTA) which was launched early this year.

AFTA itself strives to remove tariff and non-tariff barriers
-- to trade in goods and services and to investment -- thereby
making the ASEAN countries more competitive to direct foreign
investors. A common market of more than 500 million consumers is
expected to make ASEAN more viable for regional production
networks by capitalizing on local comparative advantages and
economies of scale.

However, there are still many issues to be resolved to smooth
AFTA as a mechanism in paving the way for the creation of AEC
(slated for 2020). Hence, the business summit could be an
effective forum for businesspeople as market players. Not only
for networking but also for exchanging views. To reach an
understanding on the most appropriate way to speed up the pace of
AFTA and to understand what measures the governments in ASEAN can
pursue in order to create an environment conducive to free trade
and investment.

The 1997 economic crisis -- which hit several ASEAN countries
-- has certainly affected the AFTA process. Members --
preoccupied with domestic political, economic and social
uncertainties -- tended to look inward. Indonesia, for example,
has shown a stronger tendency to raise import tariffs or even
erect new non-tariff barriers to protect its industries.

But it is time to revisit regional preferential trading and
investment arrangements with a heightened spirit. This is
especially urgent in the wake of the failure of the recent World
Trade Organization ministerial conference in Cancun, Mexico, to
make significant progress in the areas of greatest interest to
developing countries.

Indonesia itself has increasingly realized how important the
contribution of intra-regional trade and economic cooperation is
in the process of economic recovery. For example, most of the
foreign direct investments that entered Indonesia over the past
three years -- notably those via asset acquisition -- came from
ASEAN members, Singapore, Malaysia and Thailand. Once again this
underlined a greater interdependence within the region.

We are confident that -- judging from its agenda -- the
business summit will be highly effective and that feasible yet
innovative recommendations will be made to the ASEAN summit on
how to accelerate the AFTA process.

Hopefully, business leaders will be able to convince ASEAN
leaders of the vital importance of AEC, as the final goal of
AFTA.

This is a crucial moment. Indonesia, the largest market in
ASEAN with more than 215 million people (and the hardest hit by
the 1997 economic crisis) is given the oppurtunity to present
strong leadership by setting a good example in honoring its
commitments to AFTA.

Lack of leadership will only weaken ASEAN's bargaining
position to negotiate free trading arrangements (FTAs) with such
major trading countries as South Korea, China, Japan and India.
Worse still, impatient ASEAN members might break ranks and
individually conclude FTAs with other countries -- as Singapore
has done with Japan and the United States.

Both the summit meetings of ASEAN business leaders and heads
of government should produce a stronger commitment to the
acceleration of the AFTA process and the adoption of AEC -- at
least as a general concept to be worked out in subsequent
meetings. Anything less than this outcome may erode the relevancy
of ASEAN, as a regional economic cooperation concept.