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Awakens?
The AEC is here, but can it deliver on its promise?
By Elodie Sellier
January 12, 2016
For outsiders, the AEC is the culmination of the massive integrationist leaps
made by ASEAN since the early 2000s, suggesting new momentum in the
integration process of this gigantic market of 600 million people. But size
matters not, and from a pragmatic perspective, the entry into force of the AEC
is reminiscent of Shakespeares Much Ado About Nothing: Given ASEANs
extremely weak institutional base, reliant on a skeleton secretariat of no more
than 400 staff sustained by an annual budget of barely $17 million, there is
much uncertainty as to whether ASEAN can deliver on its ambitious targets.
With the AEC, the 48-year-old ASEAN finds itself at a critical juncture, yet
sobriety should drive any analysis. The reasons for skepticism center on two
questions. First, can ASEAN effectively pursue coherent economic integration
on the sole basis of voluntary commitments especially given the extreme
diversity of the region? Second, if so, which objectives it should pursue next to
build on the AEC?
Unity in Diversity?
Significant hope has accompanied the AECs formation. Many analysts have
pointed out that integrating ASEAN economies would create the worlds
seventh-largest single market, and they are certainly right. However, taking
advantage of this market requires dealing with its complexities and
contradictions, and accommodating the vast differences and national
sensibilities. The challenge of diversity is formidable enough: Politically, the
somewhat cacophonous, unstable democracies of Indonesia and the
Philippines cohabit with the Communist dictatorship of Vietnam and the
military junta of Thailand; economically, high-developed states and top
ranking economies stand along with some of the poorest countries in the
world; culturally, the plurality of religions, languages, ethnicities, and ways of
living is difficult to describe. To cite only one example, Malaysia and
Indonesias Muslim populations co-exist with peoples who are mostly
Buddhist (as in Myanmar), alongside the predominantly Roman Catholic
Philippines. Against this kaleidoscopic backdrop, it is surely reasonable to
question the ability of the AEC to deliver on its promise of a seamless
economic bloc.
What is more, the extremely pervasive and, some would say, blind adherence
to the overarching principles of consensus and non-interference, combined
with the lack of a robust and sound institutional architecture, have left intact
the problem of ensuring compliance and effective implementation of targets
by national governments and agencies. In spite of the various commitments
entered into under the AEC, ASEAN is still missing the necessary institutional
glue, which could take the form of an overarching regional mechanism that
ensures the smooth coordination of the vast array of government actors from
the different national sectors, ministries and agencies. The numbers speak for
themselves: Although 95 per cent of tariff lines are at zero, non-tariff barriers
on goods and services render cross-border trade particularly painful.
Consumer laws, intellectual property rights, land codes, and investment rules
have yet to be harmonized at the regional level, while the lack of common,
integrated banking structures, alongside the absence of an agreement on
common and acceptable currencies, are likely to hinder market access for
regional small and medium-sized enterprises. Also still unresolved is the
question of the free movement of labor, including in the so-called high-
skilled sector, with many ASEAN countries imposing heavy requirements on
firms wanting to employ foreigners. Meanwhile, in the shadow of the regional
debate on skilled labor migration, millions of marginalized migrants deemed
unskilled, from domestic workers to fishermen, illegally flit between countries.
But the simple, brutal truth of the matter is that the wait and see posture
idiosyncratic to the so-called ASEAN way of conducting business has failed to
live up to its original promise to promote perpetual peace, everlasting amity
and cooperation among their peoples which would contribute to their
strength, solidarity and closer relationship. The spectacular failure of the 10
ASEAN defense ministers to issue a joint declaration on the SCS at the
biannual ASEAN Defense Ministers Plus meeting held last November is
somehow reminiscent of the fiasco of the ASEAN Regional Forums summit of
2012 under the (China-friendly) Cambodian chairmanship. Incidents such as
these make a case for a firm, resolute approach to the much divisive and
contentious issue of China. Today, much of the hope rests with South Korean
President Park Geun-hyes attempts at a Northeast Asian trustpolitik, a
strategy that aims at lumping together the three regional powers of China,
Japan and South Korea in a pragmatic and functional cooperation framework,
the so-called Northeast Asian Peace and Cooperation Initiative (NAPCI), to
deal with matters of common concern, spanning nuclear safety, cyber security,
climate change and disaster response, to name but a few. The non-
participation of ASEAN in this new, innovative trilateral dialogue, perhaps
best attests of the obsolescence of the organizations hands-off approach and
informal modus operandi as a response to Chinas assertive divide et
impera strategy.
Given these constraints, it will certainly be no easy task for the impoverished,
tiny state of Laos to assume the ASEAN chairmanship in 2016. There is great
uncertainty as to whether Laos will be able to provide ASEAN with the much-
needed leadership and diplomatic acumen to find a common denominator
among the widely diverging national views, and further the momentum of
integration generated by the AEC. Strategically located at the heart of
continental ASEAN and wedged between the fast-emerging states of Thailand
and Vietnam, Laos has attracted considerable attention from China in recent
years. In 2014, China became Laoss leading investor with funds totaling more
than $5 billion, while the Sino-Laos agreement on the building of a $6 billion
high-speed railway project as part of the PRCs One Belt, One Road project
offers a telling glimpse into how Laos has become a frontier for Chinese
investment. An unwanted corollary of this increasingly dyadic relationship
would imply a situation in which Laos faces a major political dilemma,
emerging out of the discord between declared loyalty to ASEAN and actual
economic dependence on Chinese investment. In this scenario, whereby the
rotating chair, supposedly bound by an imperative of independence and
neutrality, favors one party over another and/or accedes to external demands,
would deal a serious blow to ASEAN credibility. Malaysias leadership and
principled attitude during the 2015 chairmanship turned out to be a
particularly well-suited approach in these years of crucial change and
uncertainty, yet Kuala Lumpur has set the bar particularly high for the small,
landlocked Republic of Laos.
Ultimately, it is clear that the workings and developments of the AEC should
not be seen independently from, but rather as complementary to, the crafting
of the political and security and socio-cultural communities. As member states
slowly absorb the externalities generated by the AEC, ASEAN leaders may
want to consider preparing the groundwork to build more stable, secure
societies, deepen ties with geographical neighbors and, eventually, develop a
shared sense of regional community and purpose. Otherwise, any attempt at
more integration is likely to ring hollow, and all the hard work that brought
about the AEC will have served only to paper over the cracks of ASEAN
community-building, thereby consciously hiding the divisive tendencies and
disagreements underneath the surface, and inevitably falling short of the goal
of an ASEAN identity.
http://thediplomat.com/2016/01/the-asean-economic-community-the-force-
awakens/