Indochina needs good ties with ASEAN

Indochina needs good ties with ASEAN

The countries of Indochina need to strengthen linkages with
the dynamic ASEAN states and also with the rest of the Asia-
Pacific if they are to achieve comprehensive development. This is
especially in view of trends in global trade and investment
liberalization as shown in the recent APEC Summit in Indonesia
and in other international economic meetings. There are existing
modalities and mechanisms within ASEAN from which the Indochinese
countries can benefit, namely:

- cooperative arrangements through the various mechanisms of
the ASEAN Secretariat; and

- other sub-regional development cooperation arrangements and
projects among the ASEAN states, with reference to ASEAN's Six-
Minus-X principle.

Although the ASEAN Free Trade Agreement (AFTA) currently
covers only trade issues, it could be expanded in the future as
"AFTA Plus" to cover investment, services and environmental
issues. As to the status of the Indochinese countries regarding
their membership of ASEAN, Vietnam will in all likelihood be a
member in July 1995; Cambodia is currently a special observer;
and Laos has already become an observer by signing the Treaty of
Amity and Economic Cooperation.

AFTA has identified 15 specific product groups for tariff
reduction, many of which are resource-based commodities important
for Indochina, such as vegetable oils, pulp, rubber products,
gems and jewelry. If the Indochinese countries are to join ASEAN,
they will have to familiarize themselves with ASEAN's various
schemes. Singapore has provided some technical assistance in this
respect, but more sub-regional coordination and research will be
necessary.

In strengthening linkages between ASEAN and Indochina, two
major principles in terms of sub-regional co-operation, resource
pooling and market sharing, can be employed to mutual advantage.
ASEAN can pool its diverse comparative advantages both in terms
of trade and investment with that of Indochina.

Hence, the combination of foreign direct investments from the
ASEAN states (Singapore, Malaysia, Thailand and Indonesia), the
entrepreneurial and organizational resources (or "soft
technology") from ASEAN's internationally competitive and
successful public and private enterprises, abundant resources of
scenic and mineral-rich land, and the low-cost labor of the
Indochinese economies would generate positive-sum synergy and
efficiency leading to an expansion of productive capacity for the
benefit of all parties. In addition, the ASEAN states and the
Indochinese countries can organize joint trade and investment
promotion activities, as has been done by individual ASEAN
members in major investor-countries, such as the U.S., Japan,
Korea and the countries of the European Union.

Assistance from international agencies such as United Nations
Industrial Development Organization and the Economic and Social
Commission for Asia and the Pacific will make these efforts even
more effective. Human resource training, and capabilities in
institutional building in trade and investment promotion, are
also important activities and require assistance from various
public sector organizations.

There is a similar need to stimulate entrepreneurship and an
emergent private sector in the Indochinese countries. This could
be done through formulation of strategic business alliances with
Asean Chambers of Commerce and Industry. Such catalytic
institutional support can be instrumental in moving market forces
in the gradually liberalizing Indochinese economies, disciplined
by international competition.

Additionally, focus should also be on small and medium-sized
enterprises, as they have intangible assets which are relevant
and useful for the Indochinese countries. Furthermore, such
facilities as double-taxation agreements and investment
protection and guarantee agreements should be effectively
implemented, which would be instrumental in developing the
private sector in the Indochinese countries and in promoting
business transactions and cooperation with the ASEAN states.

To achieve the above recommendations, assistance from donor
countries (Japan and the other OECD countries) will be crucial.
Recent meetings of the ASEAN-MITI Working Group for Economic
Cooperation with Indochina, held in Chiangmai, has identified
several areas for technical cooperation such as industrial and
investment activities, trade promotion and facilitation,
harmonization of customs, technology transfer, human resource
development, and legal reform. The question now is how to act on
these proposals and identify funding and modalities for
implementation.

Dr. Joseph L. H. Tan is a Senior Fellow and Coordinator of the
Asean Economic Research Unit, Institute of Southeast Asian
Studies.