South­east Asia bangs the drum for sin­gle mar­ket

Lead­ers sign AEC dec­la­ra­tion, but see chal­lenges

Kuwait Times - - FRONT PAGE -

Thir­teen years af­ter moot­ing the idea, South­east Asian lead­ers yes­ter­day for­mally cre­ated a uni­fied eco­nomic com­mu­nity in a re­gion more pop­u­lous and di­verse than both the Euro­pean Union and North Amer­ica, and one that hopes to com­pete with China and In­dia.

The 10 lead­ers in the As­so­ci­a­tion of South­east Asian Na­tions signed a dec­la­ra­tion dur­ing their sum­mit es­tab­lish­ing the ASEAN Eco­nomic Com­mu­nity, as part of a larger ASEAN Com­mu­nity that aims for po­lit­i­cal, se­cu­rity, cul­tural and so­cial in­te­gra­tion. The sum­mit’s host, Prime Min­is­ter Na­jib Razak of Malaysia, hailed the ASEAN Com­mu­nity as a “land­mark achieve­ment,” and urged mem­bers to ac­cel­er­ate in­te­gra­tion. “The re­gion is primed to ex­pand ex­po­nen­tially,” he said. The com­mu­nity, known by its acro­nym AEC, is al­ready a re­al­ity and many of its fun­da­men­tals have been ap­plied in the re­gion, in­clud­ing the re­moval of tar­iff bar­ri­ers and visa re­stric­tions. It has also led to greater po­lit­i­cal and cul­tural co­op­er­a­tion.

AEC will bol­ster in­come and em­ploy­ment, and pro­vide the re­gion with stronger eco­nomic mus­cle in fac­ing the other gi­ants, said Michael G. Plum­mer, a pro­fes­sor of in­ter­na­tional eco­nomics at the Europe Cen­ter of Johns Hop­kins Univer­sity, based in Bologna, Italy.

“ASEAN in­te­gra­tion will help bal­ance the eco­nomic power of China and In­dia,” Plum­mer said. “In­di­vid­u­ally, ASEAN coun­tries are, per­haps, too small to be im­por­tant play­ers in the eco­nomic and se­cu­rity game, but as an in­te­grated group of more than half a bil­lion peo­ple, they would be in the ma­jor league.”

But there is a long way to go be­fore the AEC be­comes fully func­tional af­ter be­com­ing a le­gal en­tity on Dec 31. The re­gion’s di­ver­sity can some­times be a hin­drance. ASEAN has 630 mil­lion peo­ple, speak­ing dif­fer­ent lan­guages, fol­low­ing var­i­ous faiths and gov­erned by var­i­ous sys­tems, in­clud­ing ram­bunc­tious democ­ra­cies, a mil­i­tary dic­ta­tor­ship, quasi-civil­ian, au­thor­i­tar­ian, monar­chy and com­mu­nism.

“The AEC is ar­guably the most am­bi­tious eco­nomic in­te­gra­tion pro­gram in the de­vel­op­ing world,” Plum­mer said. “But im­ple­men­ta­tion of the AEC is in­creas­ingly up­hill. Much re­mains to be done and the re­gion faces many chal­lenges in fin­ish­ing. The AEC is a process.”

In­vest­ment flow

It falls short in more po­lit­i­cally sen­si­tive ar­eas such as open­ing up agri­cul­ture, steel, auto pro­duc­tion and other pro­tected sec­tors. ASEAN cit­i­zens will be al­lowed to work in other coun­tries in the re­gion, but will be lim­ited to jobs in eight sec­tors, in­clud­ing engi­neer­ing, ac­coun­tancy and tourism. This ac­counts for only 1.5 per­cent of the to­tal jobs in the re­gion, and host coun­tries still can put up con­sti­tu­tional and reg­u­la­tory hur­dles re­strict­ing the in­flow of tal­ent. In­tra-re­gional trade has re­mained at around 24 per­cent of ASEAN’s to­tal global trade for the last decade, far lower than 60 per­cent in the Euro­pean Union.

ASEAN mem­bers also strug­gle to re­solve diplo­matic flare-ups among each other such as border dis­putes be­tween Cam­bo­dia and Viet­nam, or In­done­sia’s in­abil­ity to fight an­nual for­est fires that spew nox­ious haze for months over Malaysia, Sin­ga­pore and Thai­land. Plum­mer said progress has been slow in ser­vices lib­er­al­iza­tion. Cross-border flow of in­vest­ment is also re­stricted by large ex­clu­sion lists and caps on for­eign own­er­ship. Gov­ern­ment pro­cure­ment and curb­ing mo­nop­o­lies by state-owned en­ter­prises are highly sen­si­tive and un­touched, he said. Al­though the four poorer economies - Cam­bo­dia, Laos, Myan­mar and Viet­nam - have un­til 2018 to bring down tar­iffs, eco­nomic in­te­gra­tion could fur­ther re­in­force in­come equal­i­ties in the re­gion, he said. AEC “is not the fin­ished ar­ti­cle. Nei­ther is it of­fi­cially claimed to be. There is much work to be done,” said Mo­hamad Mu­nir Ab­dul Ma­jid, chair­man of a coun­cil that advises ASEAN on busi­ness mat­ters. “There is a dis­par­ity be­tween what is of­fi­cially recorded as hav­ing been achieved ... and what the pri­vate sec­tor re­ports as their ex­pe­ri­ence.”

There are also other hur­dles, such as cor­rup­tion, un­even in­fra­struc­ture and un­equal costs of trans­porta­tion and ship­ping. A wide eco­nomic gulf di­vides South­east Asia’s rich and mid­dle in­come economies - Malaysia, In­done­sia, Sin­ga­pore, Brunei, Thai­land and the Philip­pines - and its four less de­vel­oped mem­bers, Com­mu­nist Viet­nam and Laos, Myan­mar and Cam­bo­dia.

The AEC was en­vis­aged in 2002 - and a blueprint cre­ated in 2007 - to face com­pe­ti­tion from China and In­dia for mar­ket share and in­vest­ments. While China’s eco­nomic growth is ex­pected to slow to an av­er­age of 6 per­cent an­nu­ally over the next five years, In­dia’s ex­pan­sion is likely to pick up to 7.3 per­cent in the same pe­riod, ac­cord­ing to the Or­ga­ni­za­tion of Eco­nomic Co­op­er­a­tion and De­vel­op­ment.

The AEC is one of the three pil­lars of the ASEAN Com­mu­nity, which was cre­ated by the sign­ing of the dec­la­ra­tion Sun­day. The other two pil­lars are po­lit­i­cal-se­cu­rity and so­cio-cul­tural.

Af­ter the ASEAN sum­mit, the 10 lead­ers hud­dled with heads of state from four other Asian coun­tries as well as Pres­i­dent Barack Obama, Rus­sian Prime Min­is­ter Dim­itri Medvedev, Aus­tralian Prime Min­is­ter Mal­colm Turn­bull and New Zealand Prime Min­is­ter John Key for a twohour East Asia Sum­mit. —AP

KUALA LUMPUR: (From left) Philip­pine Pres­i­dent Benigno Aquino, Sin­ga­pore Prime Min­is­ter Lee Hsien Loong, Thai­land’s Prime Min­is­ter Prayut Chan-O-Cha, Viet­nam’s Prime Min­is­ter Nguyen Tan Dung, Malaysia’s Prime Min­is­ter Na­jib Razak, Laos Prime Min­is­ter Thongs­ing Tham­mavong, Brunei Sul­tan Has­sanal Bolkiah, Cam­bo­dia’s Prime Min­is­ter Hun Sen, In­done­sia’s Pres­i­dent Joko Wi­dodo and Myan­mar Pres­i­dent Thein Sein join hands to­gether as they pose for a group photo af­ter the sign­ing cer­e­mony as part of the 27th As­so­ci­a­tion of South­east Asian Na­tions (ASEAN) Sum­mit at the Kuala Lumpur con­ven­tion cen­ter yes­ter­day. —AFP

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