The Timeliness of a new ASEAN

By John Pang
ASEAN ratified a Charter in 2008 and put in place a new legal and institutional framework for itself. This marked a change, in principle, from ASEAN being a loosely organised regional body run by consensus to becoming a rules-based inter-governmental organisation with supra-national institutions.

While it marked a discontinuity in the nature and the primary focus of ASEAN, it did not come out of the blue. The Charter capped a decade of increasing economic and financial cooperation in the region as a survival response to the Asian Financial Crisis.

The security imperatives surrounding ASEAN’s birth in 1967 had by 2008 been replaced by those arising from the most significant political and economic phenomenon of our time: the rise of China. In the decade preceding 2008, the Cold War landscape within which ASEAN had originally positioned itself as a non-aligned bulwark against Communism had been replaced by a brief and illusory moment of American “hyper-power”, and succeeded by a new world order characterised by the absence of a single pole or system of order, and consequently by the increasing importance of regional economic groupings.

If ASEAN in 1967 was about security and the prevention of war, by 2008 it was about regional economic integration. ASEAN had written into its charter the commitment to a blueprint adopted the year before to become an Economic Community, “a single market and production base” in a regional economy that was competitive, equitable and integrated into the world economy.

The year 2008, however, will not be remembered as the year that ASEAN committed to a timeline to form among its member states, by 2015, the ASEAN Economic Community, a market of half six hundred million people, a GDP of more than US$2 trillion, and collectively Asia’s third largest economy. That news was buried by the Global Financial Crisis. In retrospect, however, we might see the ratification of the charter, and the commitment to economic integration to which it gives legal form, as a response that has at least a chance of being adequate to the radical challenges of the day. The commitment to economic integration is what keeps ASEAN relevant. However, people must also believe that our project is credible.

The Global Financial Crisis may not be over yet. There seems no light at the end of the fiscal tunnel into which the US has dug itself, as the bills come due on three decades of economic expansion built on a mountain of debt. There has been massive leveraging through a shadow financial system that was, at its height, five times the size of the real economy. There will have to be a painful de-leveraging over decades. The crisis has brought to light systemic failure in the regulatory and political systems of the world’s most advanced economy. The failure is not merely financial, it is also political.

The Eurozone remains on the brink of a financial meltdown that could drag the world economy into another crisis. Once again political failure prevents the adoption of vitally necessary measures. The long-predicted migration of the centre of gravity of global economic activity to Asia has been accelerated by the the Global Financial Crisis. This has brought forward by decades the timetable of “the rise of Asia” and dropped a new set of challenges on the economies of Southeast Asia.

The global economic order to which all our economies are tuned, in which the East manufactured, exported and saved and the West imported, consumed and borrowed, is over. It is no longer “export or die”. For us the less elegant phrase is, “develop regional economic groupings or die”.

As the centre of gravity of the global economy shifts eastwards, and as this process is knocked along by the ongoing financial crisis in Europe and the United States, Southeast Asia, long at the margins of the global imagination is, is back in the middle of history. We are again at the heart of a set of changes with profound implications for the shape of the new world order. It will make a big difference to the rest of the world whether Southeast Asia remains a set of smallish economies or becomes a region-sized economic juggernaut. ASEAN is at the geographic and cultural crossroads of a resurgent Asia. ASEAN is at exactly the right time and place to recover its relevance by making it possible for goods, services and investment to operate unhindered across the region; most of all by enabling the diverse talent of the region to work together.

Against the background of tectonic shifts in the global system, the project of of forming an ASEAN Economic Community, far from being too ambitious, is a mere sketch of an adequate response that came not a moment too soon. Apart from everything else, the blueprint for an economic community shows us the gaps between what must be done and what we are capable of doing.

There is the gap of political will, between the ambitious goals to which the leaders of member countries have signed, and the uncoordinated, desultory reality of implementation on the ground at home. The problem of political will is a complex one. Neither the US nor Europe are doing very well on this front either right now. Political will is often a question of knowledge and identity. People need to understand how they benefit from ASEAN and begin seeing themselves as part of it. Beyond the official discussions and talk shops, we need a massive concerted effort to communicate ASEAN and foster its ownership among the citizens of ASEAN.

There is a gap between the scale of the project and the meagre resources we have pooled for the task. Take the ASEAN Secretariat, for example. It needs to be properly empowered and funded. Its executive powers need to be brought up to the level of its newly expanded responsibilities. This means some delegation of powers from the member states. It is also embarrassing that more of the Secretariat’s funding now comes from ASEAN’s dialogue partners than from member countries. We need an alternative funding model that does not cap member contributions at the maximum amount that the least generous contributor is willing to pay.

There is a gap between the scope of the project and the involvement of stakeholders. The formation of an economic community requires the broad and informed participation of the business sector, who are to be the prime agents of the economic activity being planned for. ASEAN’s businesses need to be engaged as self- organising, independent partners in the process and not merely as appointed observers. ASEAN must now begin to close these gaps if we are to have the basic capability to form an economic community, let alone achieve it.