ASEAN economies

Given the currency and stock market turmoil which has gripped ASEAN's four largest members, it was expected that the 29th annual meeting of ASEAN ministers with economic portfolios in Kuala Lumpur last week would be much more than a routine gathering to evaluate the progress in the process of developing the ASEAN Free Trade Area (Afta).

Because the currency turbulence in Indonesia, Malaysia and the Philippines was partly seen as a contagion of the financial crisis in Thailand in early July, many analysts and businesspeople expected the ministers to broaden their agenda to include vigorous discourses on real policy coordination.

But the gathering ended over the weekend largely as a routine one. In fact, Indonesia backtracked on its commitment to Afta by withdrawing five chemical products, the importation of which is estimated at more than US$1 billion a year, from its earlier liberalization commitment. The meeting was served further bad news by senior officials who disclosed various problems behind the disappointingly slow pace of the ASEAN industrial cooperation scheme, a program designed to enhance regional economic integration.

The ASEAN Investment Area concept, formulated three years ago as another program to promote complementary economic systems in preparation for regional integration, remains a broad framework which has yet to be fine-tuned and translated into workable technical details.

The boldest measure taken by the ministers was the agreement to liberalize trade in services by 2020, 17 years after the full operation of free trade in commodities beginning in 2003. But even this supposedly dramatic measure could be rendered meaningless if members remain free to later backtrack on earlier commitments.

The ministers did touch upon the currency crisis, but with an optimistic note in their joint press statement that the financial crisis had made Afta even more important. They saw the sharp currency depreciation as a boon to further expand ASEAN exports both within and outside the region. So great was their optimism that they voiced hope that a full-fledged Afta would be launched earlier than the current target of 2003.

This is theoretically possible. Members not hard hit by the currency turmoil now find it cheaper to buy goods from the four countries suffering from the sharp depreciation. This in turn would further expand intra-ASEAN trade which last year exceeded US$155 billion.

But the optimism will only prove well-founded if ASEAN members, individually and collectively, work hard to regain international confidence in ASEAN. This is crucial as the currency turmoil has shown up a market perception -- however irrational it may be -- which looks at ASEAN as a bloc.

This is, we think, the new area to which the ministers should pay more serious attention. They should agree on what each member should do to strengthen itself economically and what all members should perform collectively to bolster the region's economic resilience. Put another way, the ministers' meeting should become a kind of regional surveillance to impose peer pressure on each member country to put its respective economic house in order.