Creating a common market in ASEAN region

Alan Cassels, Senior Technical Advisor, PT Birotika Semesta/DHL Express, Jakarta

As political and business leaders from the Association of Southeast Asian Nations gather in Bali for the ninth ASEAN Summit, they will chart the region's economic destiny in the coming decades if they endorse the concept of an integrated ASEAN Economic Community (AEC).

With the implementation of the ASEAN Free Trade Area (AFTA) in January 2003, tariff on goods entering the ASEAN-6 -- Thailand, Malaysia, Singapore, Brunei, Philippines and Indonesia -- will be lowered to between 0 percent and 5 percent.

The six nations have also committed themselves to remove all remaining tariffs on intra-ASEAN trade by 2010. The regional grouping now is taking another giant leap to position itself to compete on a global scale with other economic powers. Removing tariffs is crucial. However, it is only the first stage in integrating the economies of the region.

What must also happen, however, is for economic integration to move from just an idea that is discussed at the political level to a level where businesses can realize tangible benefits from this ambitious vision.

The business community must play a leading role in the process of closer economic integration within the region. While officials can set directions, it is businesses and companies that operate and trade in the region who are the best placed to determine how integration should be achieved.

The idea to hold an ASEAN business and investment summit in conjunction with the leaders' summit is not only timely but critical for closer communication and understanding between political and business leaders. With their hands-on experience in dealing with cross border trade and investment flows, businesses must be part of the decision making process so that practical solutions can be arrived at.

The region as a unit also needs to push ahead to liberalize sectors such as logistics, telecommunications, financial, legal and other professional services. Only by allowing the free movement of goods, services and human resources within the region can ASEAN fully benefit from closer economic integration.

For example, one of the key concerns amongst ASEAN governments over the past few years has been the drop in foreign direct investments into the region as China has drawn proportionately more investments than ASEAN countries after 1997.

The reasons for this phenomenon are many but given the fact that ASEAN's economic institutions are more developed than China's, this trend can be reversed if the region's government leaders sit down with businesses to come up with more-business friendly investment policies.

It has been proven over and over again that greater trade and investments flows lead to greater prosperity for the people as a whole. And ultimately it is businesses that trade and invest cross border, not governments.

We are now operating in a global marketplace where goods, capital and human talent can move across geographical boundaries at unprecedented speed. Competition for investments and human resources is now keener than ever and ASEAN has to compete not only with China and India but the likes of the U.S. and Europe.

But competition for investments and talent is not a zero sum game. ASEAN can still benefit from globalization even as China and India temporarily steal the limelight -- but only if the regional grouping stays cohesive and charts a common strategy. The push to create one economic sphere within the Southeast Asian region could not therefore have come sooner and could prove pivotal in determining the fate of the association's 10 member countries.

With the rise of China in north Asia and the rapid economic expansion of India to the West, ASEAN is now at a critical crossroad not just in determining its political and economic future but its very reason for existence.

Individually, member countries will be overwhelmed by the economic giants to the north and to the west if they choose to go it alone. Collectively, the region is well poised to compete and ride on the growth of the twin economic engines of China and India.

Thus the AEC is an idea whose time has come. With a population of some 500 million people and a combined gross domestic product about equal to China's, ASEAN is not an economic lightweight. If the grouping is able to integrate the economies of its 10 members more closely and lower trade barriers totally, the region will be able to fully harvest its vast potential.

Ultimately, for the AEC concept to succeed, it will require both government leadership and private sector expertise. Without such close cooperation, ASEAN stands to lose this historic opportunity to firmly establish itself as a global economic heavyweight.