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.