ASEAN economies

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.