ASEAN Rising

It's no overstatement to describe the region encompassed by ASEAN as one of the world's most complex and diverse.

Its ten nations-Malaysia, Singapore, Thailand, the Philippines, Indonesia, Brunei, Vietnam, Cambodia, Laos, and Myanmar-are truly very different from one another.

In economic terms, they range from Singapore, which has the world's 19th highest per capita income at US$38,000, to Myanmar, whose impoverished residents eke out a living on an average of about US$400 a year.

There is also a wide range of political systems-from communist states to constitutional monarchies to democratic republics. They include some of the cleanest governments in the world and some of the most corrupt.

The differences extend to ethnic character. The people of Vietnam boldly fought wars against the mighty United States and China. Recently, Vietnam has purchased six submarines to help back its claims of sovereignty in the South China Sea. There is a strong flavor of competition to its relationship with China. Meanwhile, the flexible people of Thailand have long taken the approach: "If you can't beat them, shake their hands." Thailand thus avoided its neighbors' fates of being colonized by Western powers and then occupied by Japan during World War II. And ever since Vietnam became a communist state in 1975, Thailand has kowtowed to the supremacy of mainland China.

With a combined population of 570 million and an area of 4.5 million square kilometers, with vast differences in terms of economic development, culture and religion, how are the nations of ASEAN supposed to accomplish integration?

Interestingly, ASEAN originated from a desire to create a bulwark against communist China.

In order to prevent the spread of communism and strengthen economic cooperation, Malaysia, Singapore, Thailand, the Philippines and Indonesia formed the Association of Southeast Asian Nations in 1967. Brunei joined in the 1980s. After the Cold War wound down in the early 1990s, the four nations that comprise ASEAN's "economic B team"-Vietnam, Laos, Myanmar, Cambodia-joined between 1995 and 1999.

Economics first

With the Vietnam War, the rise of the Khmer Rouge, and the Sino-Vietnamese War, ASEAN focused on security issues for its first 25 years. Even after the ASEAN Secretariat was established in 1976, ASEAN was powerless to force its member states to obey its regulations. Hence, despite promoting tariff reduction for 16 years, duties levied on goods traded between member states still averaged 23-25%. The organization was ridiculed as a toothless "talk shop," and had achieved little in the way of economic integration.

But the first of several turning points came in 1992.

Spurred by the establishment of the European Union and the signing of the North American Free Trade Agreement (NAFTA), the six member states agreed to establish the ASEAN Free Trade Area by 2008, by which time tariffs would be pulled down to under 5%. Chen Hurng-yu, director of the Graduate Institute of Southeast Asian Studies at Tamkang University, points out that with rapid global economic development occurring after the end of the Cold War, ASEAN decided to speed up integration, establishing a ministerial-level council charged with reviewing progress in reducing import duties, which would meet once a year. The association later moved its target date up five years to 2003.

The four late joiners, including Vietnam, were put on another schedule. They would not need to join the free trade area and meet its tariff targets until 2010.

Apart from pledging to eliminate import duties on each other's goods, ASEAN member states also signed the "Trade in Services" and "Comprehensive Investment Area" framework agreements in 1995 and 1998.

From a starting point of pursuing mutual economic benefit, ASEAN's ten member nations, although demonstrating huge differences in governmental systems, religion, culture and level of economic development, have been composing a great symphony of harmony and collective prosperity. (photos 1-5) The countryside in the Philippines, traffic on a Bangkok street, a mosque in Aceh in Indonesia, tourists at Angkor Wat in Cambodia, and Singapore.

Confidence in the storm

A second key point in the history of ASEAN's integration efforts occurred in 1997.

At that time the founding nations of ASEAN found themselves in a financial crisis. The Thai baht and Indonesian rupiah had respectively lost 40% and 83% of their value against the dollar. ASEAN member nations had originally hoped that an Asian Monetary Fund would be set up under the aegis of the Asia-Pacific Economic Cooperation forum to provide a lifeline to nations facing financial difficulties. But the United States insisted that the crisis be handled under the framework of the International Monetary Fund (IMF), which forced Indonesia and Thailand to accept onerous conditions and bear a tremendous burden. These events stirred ASEAN antipathy toward America and prompted a push toward self-reliance and regional integration.

While the citizens of ASEAN nations had believed that the association would drag its feet in implementing the Free Trade Area, in their 1998 summit ASEAN heads of state signed a "Statement on Bold Measures," announcing a target of bringing tariffs between them to under 5% by 2002.

In 2007 the ten countries signed the ASEAN Charter. By turning ASEAN into an international organization with formal legal status, that too represented a major milestone. Furthermore, the charter outlined goals for the ASEAN community in three areas: economics, security, and society and culture.

The more than 100 agreements reached between ASEAN nations since the 1990s have borne ample fruit: The amount of intraregional trade rose from US$10 billion in 1967 (accounting for 18% of these nations' total foreign trade) to more than US$700 billion in 2007 (accounting for 25% of their foreign trade). Meanwhile, the amount of foreign capital these nations have attracted has risen by more than a factor of 20 since 1997, to US$700 billion in 2007.

What's more, the 10 member nations recognize each other's university degrees, CPAs and doctors. Businesses in ASEAN nations can easily hire the nationals of other member states. And when citizens of ASEAN states find themselves in difficulties overseas, they can seek assistance or protection at the embassy of any ASEAN nation.

Yet there are many limitations to the process of ASEAN integration. In the analysis of Tu Chaw-hsia, the deputy director of the Taiwan WTO Center of the Chung Hwa Institution for Economic Research, because ASEAN has proceeded with economic integration under the principle of non-interference, its nations, apart from pushing trade, have not touched on issues like currency or interest rates. Consequently, deeply rooted integration like the European Union's is still impossible.

Secondly, for a manufacturer to enjoy the preferential tariff rates accorded member states, it must apply for a certificate of origin. And because ASEAN hasn't developed a unified set of rules attesting to product origin, manufacturers must meet different standards in different nations. The process is cumbersome and time-consuming, and its administrative costs are excessively high. Consequently, manufacturers in ASEAN nations have applied for preferential tariffs on less than 10% of their products.

ASEAN spirit

In light of the great differences among ASEAN nations, many regard it as remarkable that they could even coexist in peace for more than 40 years and take steps toward fostering stable regional development. These achievements are often attributed to "the ASEAN way."

Sun Guoxiang, a professor in the Department of International Studies at Nanhua University, says that "the ASEAN way" emphasizes equality in negotiations and the principle of non-intervention in the internal affairs of other member states. No distinctions are made between countries based on their size or strength, and no nation has been given a leadership role. They are simply ten nations, all of which must accede to terms before any agreement can be reached. They follow a process of consensus.

But these policies represent a double-edged sword, with positives and negatives, and many inside and outside of ASEAN have criticized certain aspects.

Take human rights, the issue over which ASEAN's non-intervention policy has attracted the most international attention. How, critics charge, can ASEAN say that it values human rights and yet overlook how the Myanmar army bloodily attacked peaceful demonstrators, including Buddhist monks, in 2007? More than 30 people were killed and thousands imprisoned. Under the principle of non-intervention, all that ASEAN can do, even when facing international pressure, is to make toothless statements of disapproval. Although the ASEAN Charter went into effect in 2008, it still upholds the principle of the "ASEAN way," so there has been no improvement on this front.

From a starting point of pursuing mutual economic benefit, ASEAN's ten member nations, although demonstrating huge differences in governmental systems, religion, culture and level of economic development, have been composing a great symphony of harmony and collective prosperity. (photos 1-5) The countryside in the Philippines, traffic on a Bangkok street, a mosque in Aceh in Indonesia, tourists at Angkor Wat in Cambodia, and Singapore.

A big circle of friends

At the same time that ASEAN has been actively working toward internal integration, it has also gradually been making overtures to other Asian nations, and has seen its status grow as a result.

Among all potential Asian-Pacific suitors-such as China, Korea, Japan, New Zealand and Australia-the first country with which ASEAN chose to establish economic and trade ties was mainland China. There was irony in the choice, since ASEAN was formed largely to protect its member states against mainland China.

"The term 'ASEAN plus China,' suggests that ASEAN is the host and China the guest," says Chen Hurng-yu. "But mainland China actually initiated the 'ASEAN plus China' summits as part of its economic development strategies. With the end of the Cold War and the collapse of the Soviet Union in the early 1990s, mainland China shifted its foreign policy focus from preparing for war on its northern border to looking southward to make friends. Consequently, it has had frequent interactions with ASEAN nations. Nevertheless, at first it refused several requests to try to peacefully resolve South China Sea territorial disputes with the six ASEAN members. Finally, under pressure from ASEAN, mainland China reluctantly signed the "Declaration on the Conduct of Parties in the South China Sea" in 2002. Chen describes the move as akin to "trading a concession on the South China sea problem for establishing a free trade zone!"

ASEAN now involves 16 nations in the Asia-Pacific region (including Australia and New Zealand), and its impact is no longer limited to business directions inside and outside its member nations. It is also affecting political and economic development in all of East Asia. How is Taiwan to change from its current state of economic and political marginalization? Answers are needed immediately. The photo shows Truc Bach Lake in Hanoi.

Love-hate relationship

Mainland China's neighborly relations policy peaked during the Asian financial crisis of 1997. "China was adamant that it would not devalue the RMB, and it immediately began providing aid to the affected nations. These moves transformed the way that ASEAN looked at Beijing," Kuik Cheng-chwee, a lecturer at the National University of Malaysia, has written. Business opportunities offered by mainland China moved ASEAN's stance toward it from opposition to real cooperation.

With regard to the "ASEAN+3" (mainland China, Japan and Korea) arrangement, ASEAN had originally feared being overwhelmed by those larger powers, "but it agreed to the meetings because mainland China and Japan offered strong incentives," notes Hong Tsai-lung, an associate research fellow at the Taiwan Institute of Economic Research. Hong explains, ASEAN nations need Japan and Korea to supply them with capital. Japan, meanwhile, is the principle creditor nation in Asia, and it naturally wants to use its financial might to counter the influence of mainland China in Asia. And mainland China is focused on the backwardness of its own financial system and is eager to join in cooperative regional bodies, so as to speed its own progress.

ASEAN+3 largely focuses on ways to cooperate in the financial realm-for instance, on easing the impact of last year's economic tsunami. At a meeting of the ASEAN+3 finance ministers, they decided to provide funds to establish an "Asian Area Self-Managed Reserve Pooling Arrangement," which will formally be established and go into operation at the end of the year. Apart from resolving issues concerning short-term capital flows in the region, it will also function as a backup to global financial institutions.

 

China and Japan at odds

"An ASEAN+3 free-trade zone is something far, far off and not in the foreseeable future," says Chen, a longtime observer of political and economic trends in East Asia. He believes that this is not simply due to Sino-Japanese diplomatic rivalry. The two nations are at much different stages of economic development, and free trade between them is not in either country's best interest.

Everyone knows that Japan was originally the leader of the Asian economic pack. China is nervous about Japan being added to the mix and is consequently pushing for the inclusion of New Zealand, Australia and India. It hopes to dilute the power of the three by adding three more.

Squeezed between the great Asian powers, ASEAN is in fact acutely aware that its own economic power is limited. Its nations collectively account for only 2% of the world's GDP, whereas China and Japan and Korea account for 20%, so it realizes that it must widely make friends and adopt balanced strategies. As it moves among these large nations, it is trying to leverage its leadership role to push for Asian economic integration.

Although it faces many future challenges, ASEAN, which is on the rise, has already influenced economic development and trade across all of East Asia. It will thus necessarily have an impact on Taiwan's future. At a time when regional economic integration is now a mainstream trend, more people should consider how Taiwan can draw up its own battle plans to transform crises into opportunities!

Source: ASEAN Secretariat, Wikipedia/ chart by Coral Lee/ layout by Lee Su-ling
Note: ASEAN also includes East Timor as a candidate member and Papua New Guinea as an observer.

At noon workers sit and crouch at food stalls set up along fences around construction sites and eat ravenously. A glimpse at the center of Ho Chi Minh City shows it to be young, fast and unpretentious, reflecting ASEAN's new vitality.

From a starting point of pursuing mutual economic benefit, ASEAN's ten member nations, although demonstrating huge differences in governmental systems, religion, culture and level of economic development, have been composing a great symphony of harmony and collective prosperity. (photos 1-5) The countryside in the Philippines, traffic on a Bangkok street, a mosque in Aceh in Indonesia, tourists at Angkor Wat in Cambodia, and Singapore.

 

From a starting point of pursuing mutual economic benefit, ASEAN's ten member nations, although demonstrating huge differences in governmental systems, religion, culture and level of economic development, have been composing a great symphony of harmony and collective prosperity. (photos 1-5) The countryside in the Philippines, traffic on a Bangkok street, a mosque in Aceh in Indonesia, tourists at Angkor Wat in Cambodia, and Singapore.

Integration among the 10 nations of ASEAN is no longer confined to tariff reduction agreements. In 2015 liberalization among members states will extend to services and investment. The photo shows ATMs at a branch of the Thai Farmers Bank, one of the top three banks in Thailand.