Dump ASEAN baggage and reevaluate Aussie ties

Dump ASEAN baggage and reevaluate Aussie ties

Lim Say Boon, Director, OCBC Investment Research, The Straits Times,
Asia News Network, Singapore

The recent angry exchanges between Association of Southeast
Asian Nation (ASEAN) and Australia sound like a broken record --
and reflect historical baggage that has already been overtaken by
fast-moving events.

While there has been rapid growth in trade and investment
flows between Australia and ASEAN in the past two decades,
broader relations do not seem to have improved much.

Malaysian Prime Minister Mahathir Mohamad's recent criticism
of Australia is the latest episode in a saga that dates back to
his "recalcitrant" dispute with former Australian prime minister
Paul Keating.

Thai Premier Thaksin Shinawatra's comment that Australia
should be excluded from an Asian summit because the meeting was
only for "yellow-skinned and black-haired" people was reminiscent
of Australia's exclusion from the Asia-Europe Summit of 1996.

The tensions run far deeper than the recent travel advisories
issued by the Australian government. On a superficial level, the
frictions speak of the aspirations of a "middle power"
(Australia) clashing with what Southeast Asian countries, with
newfound assertiveness, might regard as pretensions. But chiefly,
they speak of the lack of economic commitment between Australia
and ASEAN.

A contributor to these frictions may be colonial baggage. For
some Southeast Asian leaders, this is a way to put a "Western"
nation in its place.

Another contributor is the difference in political culture.
Yes, the media in Australia, particularly the tabloids and radio
talk-back shows, indulges in its fair share of ranting against
Asian leaders. But comments about the color of one's skin or
shape of one's eyes are considered beyond the pale.

The bottom line is that the economics of the relationship is
not important enough to either side at this stage to restrain the
more belligerent.

Yes, growth in merchandise trade between Australia and ASEAN
averaged approximately 20 percent a year over the past 10 years
-- almost double the growth average for trade between Australia
and north-east Asia.

But Australia still accounts for a relatively small part of
most individual ASEAN countries' total exports. And ASEAN
collectively accounts for only about 12 percent of Australia's
exports today. North-east Asia is still the main game for
Australia, accounting for more than 41 percent of its exports.

Australia's relationship with Japan, China and Korea has been
unmarked by the sort of tensions that almost define its ties with
ASEAN.

Part of that may be the result of the north-east Asian
countries' huge appetite for natural resources. Further, Japanese
and Korean exports tend not to compete head-on with Australia's
own manufactures. A degree of competitive overlap between ASEAN
and Australia -- in the 1980s, this was typified by trade
frictions over low-value exports of textiles, clothing and
footwear into Australia -- has added to irritations.

There has also been a historical tendency for ASEAN to view
the relationship as being more favorable to Australia than vice
versa.

This was probably a reflection of the historic trade surplus
in Australia's favor, though that has shifted recently -- more on
that later.

Meanwhile, there is also the observation that Australia has
benefited more from investment flows from ASEAN than the other
way around. All these may have contributed to the "Australia
needs us more than we need them" attitude in ASEAN.

But it is worth noting that nearly half of the ASEAN
investments in Australia are actually from one country --
Singapore. Singapore accounts for about a third of all
Australia's exports to ASEAN -- though, arguably, part of that
finds its way to the rest of ASEAN.

Perhaps, not coincidentally, Australia's relations with
Singapore have been warmer than its relations with some other
ASEAN countries. Once again, the common factor here is resource
and economic complementariness.

However, looking forward, ASEAN might want to re-evaluate its
attitudes towards Australia. A lot of what drives some ASEAN
leaders' views of Australia is outdated -- or in danger of being
overtaken by developments elsewhere.

A walk through Melbourne or Sydney speaks of the irrelevance
of a debate on whether Australia is Asian or "Western". These
cities are becoming hybrids of both East and West.

And Australia has deregulated considerably over the past two
decades, making its market more accessible. Indeed, the
merchandise trade balance has, since the mid-1990s, moved in
ASEAN's favor.

Both ASEAN and Australia today live under the shadow of
China's massive industrial machinery. With it will come awesome
geo-political clout.

Rather than indulging in exclusion on the basis of race, it
would make a lot more sense for ASEAN to welcome Australia, to
create more diversity of trade and geo-political options.