ASEAN Economic Community much needed

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.