Part 1 of 2: Can ASEAN integration help the poor?

Part 1 of 2: Can ASEAN integration help the poor?

Romeo A. Reyes, Jakarta

One of the key issues that ASEAN has been dealing with
following expansion of its membership to ten is the development
divide within and across member countries. This divide is clearly
manifested by the huge disparity in per capita GDP (income) and
in other dimensions of human development, such as life
expectancy, literacy rate and poverty incidence.

Let us look at some indicators of this development anomaly.
Based on UNDP's 2004 Human Development Report, the per capita GDP
(measured at purchasing power parity) of Singapore in 2002 was
around 23 times more than Myanmar's. If compared at current
exchange rate, the disparity will be many times more. Adult
literacy rate ranged from 94 percent in Brunei Darussalam to 66
percent in the Lao PDR and life expectancy from 78 years in
Singapore to 54 years in the Lao PDR.

For member countries with available data and using US$1 per
day as the poverty threshold, the percentage of population living
in poverty ranged from less than 2 percent in Malaysia and
Thailand to 34 percent in Cambodia.

This gap must be narrowed as an end in itself if the peoples
of ASEAN accept the notion that development is a fundamental
human right and that it should be pursued in an equitable and
inclusive way. It must also be narrowed, if not removed, as a
necessary condition for realizing the end goal of economic
integration: One community of 10 nations functioning as a single
market and production base.

Otherwise, it would be next to impossible for the ten
countries to move forward towards integration in a unified
manner. Indeed, efforts to narrow the development gap would be
self-reinforcing. They would help remove the biggest constraint
to economic integration, which in turn would help narrow the
development gap.

On Nov. 29 and 30, 2004, ASEAN Leaders will gather in
Vientiane for their Annual Summit. This time they will consider
and most likely adopt regional integration measures that their
Senior Officials will have negotiated and their Ministers agreed
to endorse in order to realize an ASEAN Economic Community (AEC).

The Leaders had earlier expressed their collective political
will to deepen and broaden ASEAN economic integration when they
declared in Bali last year the formation of the AEC by 2020,
along with ASEAN Security Community and ASEAN Socio-Cultural
Community. More importantly, they decided to accelerate the
economic integration process in 11 priority sectors to enable the
AEC to function as a single market and production base in those
sectors by 2010.

The forthcoming summit in Vientiane offers a rare opportunity
for ASEAN Leaders to strongly and collectively convey to the
international community and, more importantly, to their
constituencies, their resolve to do whatever it takes to realize
the AEC.

It is seen as a rare opportunity as the Summit will be held at
a time when 4 out of the ASEAN 6 Leaders would by then be on or
just over the initial year of stewardship of their respective
countries (Singapore, Malaysia and Indonesia) or have just
secured a fresh mandate (Philippines). These leaders should
therefore be relatively more willing and ready to take concrete
and bolder measures in opening and liberalizing their markets.

Even with strong reaffirmation of commitment to realize the
AEC at the forthcoming Summit, will economic integration of 10
ASEAN Member Countries (AMCs) into one community functioning as a
single market and production base actually happen by 2020, and
even earlier by 2007 in some of the 11 priority sectors? And if
it does happen, will it benefit the poor and reduce inequities
within and across AMCs?

With regard to the first question, a great deal will depend
not so much on the ability as the political will of the Leaders
to actually implement necessary but often painful, unpopular and
politically sensitive measures to make AEC a reality. For
instance, removal of tariff and other protection to domestic
producers will put a lot of pressure for them to be more
efficient to stay competitive.

Otherwise, they will have to eventually leave the market,
whose implication in terms of workers losing their job makes
trade liberalization terribly unpopular. National treatment of
foreign investment from within and outside ASEAN is another
politically sensitive measure that would often require amendment
of a national law and, for at least one country, perhaps even the
constitution.

Quite obviously, political support from domestic investors in
a heavily protected sector can easily be lost if these proposed
measure are forcefully implemented.

The political will of ASEAN Leaders to implement economic
integration measures will depend mainly on how their constituents
-- investors and consumers, producers and traders, exporters and
importers, employers and workers, etc. -- perceive the likely
outcome of those measures: In particular, whether they will be
winners or losers.

Such perception will in turn depend on their awareness,
understanding and appreciation of the real benefits and costs of
economic integration and the incidence of those benefits and
costs across various sectors of society.

In this regard, an innovative and creative public information
and communication strategy will be required, which can be a
formidable challenge to ASEAN and its Member Countries.

The information and communication strategy should be anchored
on the premise that economic integration is a necessity rather
than a choice in view of the forces of globalization sweeping the
region and the world.

It should highlight the short- and longer-term benefits of
economic integration to the peoples of ASEAN mainly as consumers
and workers, rather than as investors, producers and employers,
and explain the measures that are in place or to be put in place
to mitigate the short-term adjustment costs.

With enhanced public support to the AEC, stronger political
will to implement the integration measures to be adopted in
Vientiane can be mustered, thereby improving the chances of its
realization.

The writer is a Senior Adviser, ASEAN-UNDP Partnership
Facility. The views expressed herein are personal and do not
necessarily reflect those of ASEAN, any of the Member Countries,
or UNDP.