Keeping ASEAN Economic Community Relevant after the 19th ASEAN Summits

By Phar Kim Beng
In spite of the beehive of activity that took place in the region, the ASEAN Summit ended not so much on what Indonesia – the outgoing chair of ASEAN – had achieved in 2011, but whether ASEAN could retain its strategic relevance, now that the East Asian Summit (EAS) has included the United States and Russia.

Invariably, how can ASEAN and ASEAN Plus 3 remain the key facilitator granted that the EAS has become a main feature in the region?

For the last five years, this is what diplomats in ASEAN have silently pondered over, without coming out with a clear answer. At the inaugural EAS in Kuala Lumpur in 2005, a group of security analysts were gathered in a leading think tank in Kuala Lumpur just several months prior to the first EAS.

Analysts from Japan and Indonesia argued that ASEAN Plus 3 was not different from EAS since both summits talked about the same issues (as United States and Russia were not included then). Therefore, it was imperative to transform EAS and ASEAN Plus 3 into a single body.

In turn, policy specialists from Malaysia and China argued that it was more important to transform ASEAN Plus 3 into a workable body first, so that it could eventually strengthen the EAS.

This debate was never truly resolved, which is why ASEAN Plus 3 is still held back-to-back with EAS; with ASEAN ever leery of EAS supplanting all other ASEAN-led processes.

Thus, the solution to other great powers potentially increasing their influence over Southeast Asia was to insist that all future EAS must be held within the capitals of ASEAN. It was further affirmed that EAS can only be convened by the chair of ASEAN. The two conditions could of course be easily circumvented.

China, Japan and South Korea, for example, have begun to talk about a trilateral summit, with its own secretariat. This idea has gained traction too.

To ASEAN’s credit it is not watching everything passively. Since 2007, however, there has been greater acknowledgment that the region has changed drastically both on domestic and regional front. At the ASEAN Summit in Singapore, all agreed to bring forward the launch of the ASEAN Economic Community (AEC) from 2020 to 2015.

Since then, AEC has become the key edifice in regional integration. The AEC contains 17 “core elements” and 176 priority actions, to be implemented within a Strategic Schedule of four periods (2008–2009, 2010–2011, 2012–2013, and 2014–2015).

Given the diversity within ASEAN, and sensitivities regarding different issues/sectors, it was agreed that liberalisation of goods, capital, and (skilled) labour flows proceed at different speeds according to member countries’ readiness, national policy objectives, and levels of economic and financial development.

Thus, despite importance of the AEC, it remains to be seen to what extent concrete liberalisation will be implemented, or whether it will remain essentially a vision statement.

There are other factors that are pushing ASEAN to take its own AEC Blueprint seriously. One of them is China, with India catching up too. According to the research of Professor Peter Petri at Brandeis University in the US, the rise of China is potentially a challenge on the economy of Malaysia, Indonesia, Thailand and the Philippines. In turn, India is only an economic threat to Cambodia at this stage. Singapore and Brunei do not have economies that are vulnerable to the collective rise of China and India currently, so they don’t suffer from an acute concern with both countries. If anything, Singapore and Brunei will gain from the growth of China and India since they can import cheaper and skilled labour from them.

Indeed the challenges go beyond China and India. Between 2000 and 2006 alone, just prior to the global financial crisis, the exports of Cambodia, Laos, Myanmar and Vietnam (CLMV) were growing much faster than those of Indonesia, Malaysia and the Philippines.

Within ASEAN, the CLMV countries increased their export share by about 40 per cent. In 2000, Professor Petri wrote that “China and India exported 32 per cent less than ASEAN and in 2006 they exported 37 per cent more”. By all measures this is a dramatic turnaround.

Although recent research finds little evidence for the view that China and India’s rise have reduced ASEAN’s exports or growth rate, since different parts of Southeast Asia continue to hold various comparative advantages over China, it is inevitable that ASEAN exports face exceptional pressures as they adapt to this new competitive landscape.

Yet, over the new few years, the chairmanship of ASEAN will pass into the hands of Cambodia (2012), Brunei (2013), then Myanmar (2014), finally, Malaysia (2015). The period between 2012 and 2014 would be especially critical since all sides would have to intensify their regional integration in order to counter the growing economic challenge posed by China and India. There is a potential concern since Cambodia and Myanmar may be too absorbed by their domestic problems to concentrate on ASEAN Summits. Cambodia is still embroiled in a territorial conflict with Thailand, for example, while Myanmar’s political reforms are only starting.

Come what may, ASEAN needs to stay relevant by promoting itself as a genuine asset class and dynamic economic market. In many ways, the AEC has achieved that by attracting a high degree of attention from various parts of the world, including China, Japan, Korea, Russia, the US and the European Union. What ASEAN must do now is to enhance its interaction with the great powers already eyeing more influence in ASEAN and East Asia beyond calling them ASEAN Dialogue Partners. Great powers do not want dialogues for dialogues’ sake. They want to wrap their influence on the region with issues that matter to their domestic constituencies. ASEAN must rise to that occasion, regardless of whether the powers are from the West or East by making AEC a pillar of regional community and social responsibility.

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Notes:

1. There were more than 1400 journalists at the ASEAN Summit and related summits in Bali, Indonesia on November 17-19. Most of them were from the member states of ASEAN and East Asia. A search on the news coverage after event drew little results. Many journalists did not make out the major developments that transpired in the summits – other than the reforms made by Myanmar, and the impending visit of US Secretary of State Hilary Clinton to Yangoon on December 1-2. Financial Times reported it on its front cover. One journalist from Thailand, in turn, lamented that “ASEAN was boring, although capable of generating some EU-style economic activities.” On the opposite ledger, 140 journalists travelled with President Barack Obama to the event, especially to cover the East Asian Summit (EAS). President Obama’s attendance at the EAS was considered a major departure from the previous policy of the US since it signals the return of the US to Asia. The fact that more than 2500 US marines will be placed in Darwin, Australia further underscored the importance of Southeast Asia – indeed South China Sea – to the US, especially as a counterpoise to China.


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