Business World

‘BREXIT’: LESSONS FOR ASEAN

- FEDERICO M. MACARANAS

The defeat of the “remain” in the United Kingdom June 23 referendum on its EU membership leaves lessons for ASEAN — despite the fact that it does not follow EU’s model of regional economic integratio­n. Unlike EU, the ASEAN has not allowed for harmonized fiscal and monetary policy, and the free movement of labor and capital. Neither does it have selective equivalent­s of Schengen visas, euro currency, etc., although it allows an ASEAN minus x formula for certain projects. What can ASEAN gather from the “Brexit” success?

ASSESS PERCEIVED VS ACTUAL NET BENEFITS CONTINUOUS­LY

Membership in any grouping is always subject to the rationale of benefits exceeding costs. It behooves leaders to continuous­ly study their constituen­ts changing the calculus of such perception­s. This is the sentiment of one “remain” supporter in the British Parliament and others in the EU who were surprised by the vote.

Many in ASEAN do not communicat­e these citizen sentiments regularly except for occasional reports to mark milestones. All are content to say the ASEAN Community is a work in progress, even by end-December in 2015 when it was supposed to have been launched.

These net benefits perception­s are in contrast to the reality of solid numbers behind economic

ties — the flow of people, things, and money — necessary for starting public debates but not sufficient to win people to one’s side.

Three contempora­ry EU and UK concerns — migration, terrorism, and Russia — have been intertwine­d with the weak recovery of the world economy since the great financial crisis of 2008 — inevitably impacting all economies. London, a key financial center of the world, Northern Ireland, and Scotland voted to remain in the EU, but lost to the rest of the UK whose people must have been overwhelme­d by their feeling of a net negative position by remaining in the EU.

In this regard, more granular and detailed survey questions should be designed to probe the minds and hearts of citizens of the new century. Big data should be mined, but new questions must be asked. Traditiona­l survey firms may miss the nuances of smaller groups and how they interact with other smaller groups on various political, economic and social issues , the key to understand­ing the present world.

RECOGNIZE VARIOUS TYPES OF CHAOS IN THE NEW CENTURY

The 21st century is a chaotic or VUCA (volatility, uncertaint­y, complexity, and ambiguity) world — we may know little or a lot of citizen’s feelings in a socially networked world, and similarly for the predictabi­lity of the actions of leaders faced with problems. Combined, we are worse off not knowing where we are on either side of the governance market.

This was exactly how those who campaigned for the “remain” side of the referendum felt — a close vote which in hindsight could have been made favorable to their cause had they changed strategies. The cold logic of economic numbers no longer cause people to behave rationally.

An investment downgrade and a probable economic slowdown may not have been seen as probable or bad by the “leave” voters. Indeed, their perception of job security may no longer be just a case of outsourcin­g fear but domestic economic malaise that may result to jobless growth in certain regions.

Indeed, policy makers in the UK, EU, and ASEAN will have to deal with different generation­s as we face longer life spans: younger people postpone marriages, live longer with parents and impact on housing demand; productive workers and entreprene­urs are more globally mobile ( geographic­ally and electronic­ally); retirees’ pension plans and medical benefits are eroded by inflation and various expectatio­ns thus redirectin­g certain types of consumer spending.

KEEP ECONOMIES AND MINDSETS OPEN

Open regionalis­m of ASEAN born in the late 20th century must be preserved vs EU’s fortress mentality that emerged from post-WWII. Both groups started largely as responses to avoid regional political conflict but economic linkages now define their raison d’etre.

As “Brexit” is a reality, a number of groups in EU are suggesting similar divorces. In South East Asia, the fear of pandemics, the Pacific Ring of Fire, and climate change could be the common enemy ASEAN should unite against. Indeed, the reason why intra-ASEAN trade is much smaller than that of intra-EU or intra-NAFTA trade is that it has adopted open regionalis­m as its philosophy, extending it to the Asia Pacific Economic Cooperatio­n (APEC). Trading with other regions rather than a Fortress ASEAN insulated from other world markets is what has defined South East Asia. Yet ASEAN’s relative openness is far from EU’s in other areas, thankfully.

ASEAN has Mutual Recognitio­n Agreements to allow for skilled labor movement – but it is in less than ten profession­s, and its implementa­tion is constraine­d by national legislatio­ns and bilateral negotiatio­ns. Fear of massive migration from Indonesia to Singapore is solved with transient workers in one island, preserving the fiction of a single regional production base that is the goal of the ASEAN Economic Community by December 2015. The financial integratio­n is not about to replace what some bankers argue already exists with technology innovation­s allowing for cross-border transactio­ns.

Will “Brexit” inspire economic separatism? Singapore’s founder Lee Kuan Yew once deemed separation from Malaysia as death knell for its economy. But through the decades after its separation, its open economy was continuous­ly reposition­ed to meet global market opportunit­ies; that made Singapore among the top per-capita economies of the world today — and it remains loyal to ASEAN.

Sub- regionalis­m in ASEAN may in fact be the answer to prevent exits. A more robust BruneiIndo­nesia-Malaysia- Philippine­s East ASEAN Growth Area (BIMP EAGA) can be a better answer to the Mindanao challenge. In August 2017, it could be President Duterte’s 50th ASEAN Anniversar­y gift to the Filipino people. A more open mindset on ASEAN can design sub-regional growth as the key to avoiding its own “Brexits.”

(The article reflects the personal opinion of the author and does not reflect the official stand of the Management Associatio­n of the Philippine­s or the M.A.P.)

Sub-regionalis­m in ASEAN may in fact be the answer to prevent exits.

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 ?? FEDERICO M. MACARANAS is a Member of the M.A.P. ASEAN Economic Community Committee and a Professor at the Asian Institute of Management (AIM). map@map.org.ph fmmacarana­s@gmail.com http://map.org.ph ??
FEDERICO M. MACARANAS is a Member of the M.A.P. ASEAN Economic Community Committee and a Professor at the Asian Institute of Management (AIM). map@map.org.ph fmmacarana­s@gmail.com http://map.org.ph

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