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On track to Asean integration?
Publication Date : 12-10-2013
There can be no doubt that Asean member states want the Asean Community, a platform for regional integration based on the three pillars of the economy, security and culture, to succeed.
Of the three pillars, the most important by far is the Asean Economic Community (AEC) whose main objectives include a single market and production base, a highly competitive economic region, a region of equitable economic development, and a regional economy fully integrated into the global economy.
Therefore, Myanmar and Malaysia, who will be chairing the Asean summits next year and in 2015 respectively, will be closely watched as they set the agenda towards regional integration.
At the 22nd Asean summit held in April and chaired by Brunei, integration was the major agenda item. The 23rd summit, also chaired by Brunei and held over Wednesday and Thursday, committed the members to the Asean Community goals as well as regional stability and prosperity.
However, the end-2015 deadline, while a milestone in regional integration, only marks the beginnings of integration, not the deadline for total integration, as government officials and Aseancrats point out.
While Asean government leaders sing paeans to regional integration, their underlings are more practical as the AEC is very much a work-in-progress.
The AEC have a scorecard measuring members’ progress but US Chamber of Commerce senior director for South East Asia John Goyer says a better way of measuring compliance is needed.
“The scorecard does not access how well or effectively obligations are being implemented, it just assesses whether rules/regulations are in place,” he says in an email reply to StarBizWeek.
Goyer says while the impact of the AEC have been generally positive, there is substantial unrealised potential, adding that Asean has had a substantial focus on trade and investment, which has served the organisation, its members and its people, very well.
“Economic integration, both within Asean and between Asean and its major trading partners, has played an important role in the region’s growth and development,” he points out.
But business leaders have cause to question whether economic integration is deepening. In fact, a joint survey by the American Chamber of Commerce in Singapore and the US Chamber recently showed that 52 per cent of 475 senior US business executives doubt the AEC’s goals will be realised in 2015.
Some 60 per cent of them believe that member states will not be able to fully achieve the goals set out for deeper economic integration until 2020 or later.
The survey also showed that these executives remain optimistic of overall business prospects in the region and expect the levels of trade and investment in Asean by US firms to rise over the next five years.
The push for economic integration
Nevertheless, despite the pessimists’ views, Asean ministerial officials remain committed to ensuring that member states’ governments comply with the AEC goals.
Malaysia’s International Trade and Industry Ministry secretary-general Dr Rebecca Fatima Sta Maria says the challenging part comes from improving behind-the-border measures. These are measures akin to non-tariff barriers and include technical barriers, labelling requirements and other regulatory measures.
She notes that while member states are working on increasing intra-Asean trade, the region is still more competing than complementary.
“Trade facilitation must be a priority. We have begun the process of collating the non-tariff barriers (NTBs) as brought to our attention by the business community,”
Rebecca says, adding that Asean needs to strengthen its dispute settlement mechanism.
She also stresses that 2015 is not a deadline. “It is a major milestone towards economic integration. The process of economic integration will continue,” Rebecca says.
Rebecca says there is an agreement among all parties that there is a need to streamline meetings while the oversight process as provided by the senior economic officials, Asean economic ministers and the Asean Economic Community Council should be stepped up.
Meanwhile, former deputy secretary-general for Asean economic cooperation Dr Suthad Setboonsarng acknowledges that members’ commitment to implement and enforce AEC rules is still an unresolved issue.
“This is why the focus is now on administrative measures and product/service standards. Changing administrative procedures requires changing existing regulations, rules and laws which may be embedded in other laws and regulations. It is a demanding exercise and takes time,” he points out.
Suthad says the 2015 deadline “is a good milestone” but some areas of the AEC will have progressed more than others.
“For example, the textile industry, automotive, and wood-based products such as furniture are almost single markets. However, service sector liberalisation will need us to properly address winners and losers.
These are sensitive issues that need to be further investigated,” he adds.
Suthad likens the AEC rules, regulations and laws governing business conduct in the region as the Asean software infrastructure but the process of implementing them will take years and not all will be completed by the end-2015 deadline.
“This doesn’t mean we will stop working on them,” he says. Inevitably, the private sector must step up to assume part of the burden that the AEC changes will demand and which the public sector may not be able to cope.
Suthad says one example in which the private sector can take an active role is in product standards testing and verification where governments can accredit private companies/institutions to provide the certification while maintaining the supervision role.
Inevitably, economic integration will be important for Asean’s community-building process as a natural next-step to the political security and the peace dividend cultivated over the years.
“Asean can only determine its own future if the region is integrated.
“We all in Asean know that autarky is not sustainable in the medium or long run. These practices cater to pressure in domestic politics and only serve short term interest. Governments and, more critically, their voters will know that this is not in the best interest of the country and region,” Suthad says.