ASEAN Economic Community much needed

Eric Teo, Council Secretary, Singapore Institute of International Affairs (SIIA), Singapore

The ASEAN Economic Community (AEC) concept, first mooted by Singapore Prime Minister Goh Chok Tong last year, seeks to knit the Association of Southeast Asian Nations into a more streamlined and integrated economic community, along the lines of the European Economic Community (EEC) in the 1970s.

Inspired by the EEC's evolvement from the mere coal and steel set-up in 1957 and Europe's first expansion in the early 1970s, the AEC is however not meant to become a full-fledged integrated economic space, which was the European Community in the 1980s and is the European Union today.

The AEC's road to future integration is therefore timid and is essentially only at its budding stage, if it is officially adopted at the upcoming ASEAN Summit in Bali in October.

As ASEAN turned 36 in August and as Indonesia takes over the chairmanship of the association, hopes are now pinned on both the AEC and Indonesia's "sister-idea" of an ASEAN Security Community, which be officially adopted at the summit. These two communities should lay the groundwork for ASEAN's development in the next decade and the half, beyond the historic Hanoi Plan of Action in 2000.

Key to the AEC is clearly the streamlining of existing agreements and mechanisms as well as the speeding up of the whole process of ASEAN economic "enmeshment" towards a common economic space, even if integration is still a "far-off" dream for the association. There are compelling external reasons now to move fast, as world economics shift and "globalize" further and as China emerges as an erstwhile competitor and emerging market.

In a recent presentation in Kuala Lumpur, ASEAN Secretary- General Ong Keng Yong reiterated five new elements in streamlining and overhauling ASEAN's existing economic architecture: Greater speed, more openness, a spirit of innovation, inclusiveness of more stakeholders, and more aggressiveness in marketing this new impetus to ASEAN integration.

The fundamental problems, which remain, are still three-fold.

Firstly, there is the perennial question of whether there is sufficient collective political will to push this ideal vision through, especially when one feels that ASEAN's Vision 2020 is till today being impeded by internal forces of lethargy and even outright resistance to move forward.

Secondly, internal developments since the 1997-1998 Asian crisis have inherently turned ASEAN countries inwards towards domestic politics and developments, especially when national political, economic and social uncertainties understandably take first priority; recent developments in Myanmar, Cambodia, Philippines and Indonesia illustrate this political dilemma.

Lastly, ASEAN needs to critically and urgently address the issue of its existing "two-tier ASEAN", whereby the economic, social and mental cleavage between the six "old" members and the four "new" ones seem to be increasing, rather than decreasing. The eventual stability of ASEAN and the whole region could increasingly depend on resolving this widening developmental gap quickly.

ASEAN has indeed been served three "wake-up calls" in the last decade, which should heighten the real dangers that the association faces from looming redundancy and international irrelevance, if it does not urgently reseize initiatives to re- mold itself and become a more important player on the global stage.

Firstly, with the collapse of the Iron Curtain in Europe in 1990 and the end of the Cold War, ASEAN's attractiveness as an important pole of production, trade and investments is no longer assured, especially with the reemergence of Eastern Europe. World capital flows are today more instantaneous and fluid, given the world's multiple centers of economics and finance.

Secondly, the Asian crisis dealt a severe blow to ASEAN, as Asian countries were seriously affected, not only economically and financially, but also socially and politically.

ASEAN's economic competitiveness and its attractiveness for foreign direct investments have diminished tremendously, just as its credibility as a center for the "Asian miracle" has evaporated; much is now needed to rebuild ASEAN's credibility.

Lastly, the SARS (Severe Acute Respiratory Syndrome) epidemic and the terrorist "virus" took an even greater toll on the Association since last year, as it underlined not only a greater inter-dependency within ASEAN but also underscored the importance of combined action to eradicate the two threats simultaneously and urgently.

In parallel, there are also three important Asian socio- economic trends, which are seriously affecting ASEAN.

Firstly, since the Asian crisis, Asian governments have well perceived the vulnerabilities of their previous excessive dependence on exports alone in a globalizing world; domestic consumption and demand have now been "upgraded" in the economic strategies of Asian and ASEAN governments, especially to face the externally "uncertain times" ahead.

Secondly, the spectacular rise of China as the world's premier production center and India as probably the world's outsourcing services hub poses a direct threat and challenge to ASEAN, especially in the latter's flagging competitiveness.

ASEAN would have to compete harder with these two Asian giants (as well as Central and Easter Europe and Latin America) for a larger slice of the world economic pie!

Thirdly, the SARS and terrorist "viruses" have clearly highlighted the need for a more conspicuous social dimension in ASEAN's strategic priorities.

Richer and more developed areas are no longer immune from diseases which emanate from poorer and less developed regions, just as continued poverty and social depravation could provide opportune fertile ground for terrorism to spawn and develop in this region.

The AEC is therefore crucial from all of the above geo- political and politico-economic perspectives and should thus include the three following policies and goals, whilst streamlining and overhauling the existing "economic architecture" of ASEAN:

o The AEC should be based on a "Common Market minus" concept rather than on a "Free Trade Area plus" approach, as we should be daring enough to go beyond just trade and services alone; investment and social developmental policies must be clearly included.

o The social developmental aspect will be key to the AEC's success, as the social dimension cannot be ignored or sidelined, especially given the current "two-tier ASEAN" endangering the long-term social and political stability of the association.

o The AEC should also endeavor to help in "converging" the economic policies and priorities of ASEAN countries in the longer term; monetary, fiscal and external trade policies should be increasingly brought into some form of convergence.

All ASEAN countries have now accepted the free market approach in economics as a fundamental and hence, the "old" members have now a common responsibility to help the "newer" ones, as they take on the painful task of transforming their "transition economies and societies".

The AEC is the "next logical step" for ASEAN as it turns 36 this year. Together with the ASEAN Security Community, the Bali Summit would need to set the stage for a more integrated ASEAN Community in the longer term. But this task will not only be on the shoulders of governments and the bureaucracy in ASEAN alone; this common will to build the ASEAN Community must indeed also come from the peoples of ASEAN too.

Dr Eric Teo Chu Cheow, a business consultant and strategist based in Singapore, is also a resource panel member of the Singapore Parliamentary Committee on Defense and Foreign Affairs.