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.