How ASEAN countries can benefit from a dynamic Asia

How ASEAN countries can benefit from a dynamic Asia

Goh Chok Tong, Jakarta

We must admit that ASEAN has lost some shine. Perceptions of
Southeast Asia are affected by the series of bad news -- in
particular, the overhanging sword of terrorism. Bilateral
disputes, highlighted in the media, also appear to threaten
ASEAN's cohesiveness. No wonder analysts perceive ASEAN to be in
drift, an organization mired in mid-life crisis.

Moreover, a gap is developing between Southeast and Northeast
Asia. For the decade before the 1997 financial crisis, the growth
of ASEAN matched that of China and surpassed India's. But since
then, China has streaked ahead and India has caught up with
ASEAN. China and India, not ASEAN, are now dominating the radar
screen of international investors. They are the flying steeds of
Asia.

How should ASEAN respond? I believe ASEAN should respond in
three ways:

(1)First, by hitching ourselves to the two flying steeds.

(2)Second, by constructing a chariot together to do so.

(3)Third, by pressing on with reforms at the national level to
produce strong riders.

We are living in an era of rapid global change. In the next 20
years, we are likely to see a new global economic architecture.
Globalization has intensified competition and is reshaping the
world. Asia will be the most dynamic growth region in the world,
led primarily by China and India. As a sign of things to come, it
was reported that the two countries may start negotiations on a
Free Trade Agreement (FTA) soon.

ASEAN must position itself to ride on the dynamism of China
and India. By hitching ASEAN to these two powerful steeds, we can
fly together to greater prosperity.

India, China and ASEAN are natural partners for trade and
commerce. We are linked through geography, culture and history.
Our economies are also at different stages of development, and
hence complement one another. ASEAN's total trade with China and
India has grown significantly over the last 10 years and in 2003
amounted to US$55 billion and $12 billion respectively. I expect
this trend to continue.

ASEAN should speed up its negotiations to establish FTAs with
China, India, Japan, South Korea, Australia and New Zealand. We
mist ensure that FTAs signed are WTO-plus and of high quality.
Once China and India sign an FTA, they may need ASEAN less. ASEAN
must therefore work hard to ensure that FTAs with China and India
are completed and fully implemented by 2010 and 2001
respectively. When these FTAs are completed, it requires little
imagination and effort to move on to the next stage -- the
construction of an Asian economic community.

Individually, ASEAN countries do not have the same economic
pull of either India or China. Even Indonesia with its 240
million people, cannot at this stage of its development, be
considered an economic giant. To enhance ASEAN's attraction as a
market and an investment destination, ASEAN must band together to
maximize our strengths and attractiveness or what I call
constructing a common chariot.

Individual ASEAN economies are too small or weak to achieve
economies of scale. But through market allocation of resources
and specialization within ASEAN, efficiency and synergy can be
achieved. Take television production. It is an example of how
production chains have formed across the ASEAN region to the
benefit of all.

Semiconductor parts for televisions are manufactured in
Malaysia, the Philippines and Singapore, while cathode ray tubes
are produced in Malaysia, Thailand and Singapore. Other
television components are sourced from Indonesia and Thailand.The
assembly and testing of TV sets are then done in most ASEAN
countries. This has enabled ASEAN to be a major global exporter
of television sets.

Another example of ASEAN working together is Singapore's
agreement with Vietnam to connect our two economies. Vietnam and
Singapore are at two different stages of development and our
economies are complementary. We are enhancing links in sectors
like finance, aviation, tourism and telecommunications. The idea
is for Vietnam to take advantage of Singapore's strengths.
Singapore is a base for 7,000 MNCs. It is well-connected to other
parts of the world in terms of trade, communications and
transportation. Moreover, Singapore has capital, technology, and
business expertise.

By connecting our economies, Vietnam takes a short cut in
plugging itself into the global economy, attracting investments
and enhancing economic growth. It will develop faster than by
going it alone. Singapore too will benefit. Our trade and
investments will benefit from Vietnam's growth.

One major outcome of the Asian Financial Crisis was to force
governments in the region to clean up their acts, tackle
weaknesses in their financial and corporate sectors and implement
much-needed structural reforms. The balance sheets of the
financial and corporate sectors have generally shown solid
improvement.

ASEAN countries should press on with structural reforms to
strengthen their economies and continue with development plans to
achieve sustainable growth.

ASEAN is at the heart of Singapore's foreign policy. It is in
Singapore's interests to have a strong ASEAN. To have a strong
ASEAN, we need Indonesia to play an active leadership role. Over
the past few years, Indonesia has been preoccupied internally.
Unless the largest member in ASEAN is able to play an active part
in coalescing the other members towards achieving common goals,
it will be difficult for ASEAN to regain its vibrancy and
dynamism.

As the largest country in ASEAN, Indonesia is the key to
reinvigorating ASEAN.

But Indonesia faces some challenges. Investors remain
concerned about unclear and inconsistent regulations and labor
laws. Security is also a major concern. President Susilo Bambang
Yudhoyono wants to develop pro-business policies and reduce
corruption. His government has shown that it is prepared to
implement difficult but necessary measures such as reducing fuel
subsidies. Such policies and measures will build investor
confidence.

The writer is Senior Minister of Singapore. The article was
abridged from a speech he delivered at the launch of the CEO
Circle in Jakarta on Tuesday.