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.