ASEAN Community 2015 beginnings, opportunities and challenges

Ambassador Ong Keng Yong

Director, Institute of Policy Studies, Singapore

Association of Southeast Asian Nations

1. Brunei Darussalam
2. Cambodia 3. Indonesia 4. Lao PDR 5. Malaysia 6. Myanmar 7. Philippines 8. Singapore 9. Thailand 10. Viet Nam

Beginnings

ASEAN did not start as economic grouping Politics, particularly Cold War dynamics drove 5 Southeast Asian countries to set up ASEAN Easier to use economics to inculcate habit of consultation and cooperation

(Five founding members of ASEAN : Indonesia, Malaysia, Philippines, Singapore and Thailand)

Opportunities (1970s / 1980s)

China's development under Deng Xiaoping's strategy Multinational companies strategy of manufacturing in low-cost locations Japan's strategy of shifting its production of manufactured goods to Southeast Asia Oil-rich countries cash flow (from dramatic increase in oil prices) European economic integration and offshore manufacturing USA's globalisation drive

ASEANs Response

Focus on economic cooperation Develop economy of scale Liberalise trade and open market (ASEAN Free Trade Area or AFTA) Strengthen vision of one economic region Capitalise on Southeast Asia's strategic geography and inherent strengths

Different world . . . 21st Century

- End of Cold War - Globalisation - China's economic growth - Trade Liberalisation - Free flow of capital

All led ASEAN Leaders to move collectively

First, do the ASEAN Economic Community as it was easier to start and the business/market conditions already there
Later, ASEAN Leaders added the ASEAN Political-Security Community and the ASEAN Socio-Cultural Community

Towards an ASEAN Community

Bali Concord II (2003)

Bali Concord II
ASEAN Vision 2020 (1997)
A concert of Southeast Asian nations, outward looking, living in peace, stability and prosperity, bonded together in partnership in dynamic development and in a community of caring societies

ASEAN Vision 2020 ASEAN Community

An ASEAN Community shall be established comprising three pillars, namely political and security cooperation, economic cooperation, and socio-cultural cooperation that are closely intertwined and mutually reinforcing for the purpose of ensuring durable peace, stability and shared prosperity in the region

P O L I T I C A L

S E C U R I T Y

External

E C O N O M I C

Relations

S O C I O

C U L T U R A L

NARROWING THE DEVELOPMENT GAP

Strategic Moves

ASEAN Leaders recognise the challenges and constraints of building ASEAN Community by 2015 ASEAN need to be seen as serious ASEAN Leaders moved quickly on:

Having an ASEAN Charter Accelerating economic integration Enhancing ASEAN connectivity

ASEAN Charter: Meeting Global Changes

ASEANs way of operating: Informal and flexible Deadline not always clear Implementation subjective/nonconfrontational Low priority Inadequate resources With change: Formal (ASEAN Charter) Clear targets (2015; roadmaps with milestones) Rules-based and accountability (report card to ASEAN Leaders) Compliance-oriented (success stories)

Trade Liberalisation and Market Opening

Started with AFTA Supplemented by FTAs with key trading partners China's offer to set up Free Trade Area with ASEAN led to ASEAN-China FTA, then FTAs with Korea, Japan, Australia/New Zealand, India Such momentum created a high profile on the international scene for ASEAN and facilitated ASEAN's broader diplomatic initiatives

ASEAN Community
APSC AEC ASCC

Enhance rules and good governance

Enhance integration and competitiveness Narrowing the Development Gaps People-toPeople Connectivity
Tourism, Education, Culture

Enhance well-being of ASEAN citizens

Physical Connectivity
Hard Infrastructure
Transportation, Logistics Facilities, ICT, Energy (Power Grid and Pipelines), Special Economic Zones

Institutional Connectivity
Soft Infrastructure
Trade facilitation, ASEAN Single Window, Investment facilitation, Services Liberalisation, Regional Transport Agreements, Capacitybuilding programmes

Resource Mobilisation

ASEAN Connectivity

Opportunities in ASEAN
Global Trade

ASEAN total trade with the world in 2009: US$ 1.537 trillion Growth of 19% of total trade from 2008 to 2009 despite global economic slowdown

Foreign Direct Investment (FDI)

Total net inflow to ASEAN in 2009: US$ 39.6 billion

ASEANs Challenges

Implications of enlargement
Narrowing

development gap Slow progress on ASEAN agenda: decision making by consensus Bigger countries in ASEAN projecting beyond ASEAN

Myanmar
Affect

engagement with ASEAN Dialogue Partners

ASEANs Challenges

Competing claims/interests of countries in the South China Sea

Bilateral problems remain, eg border disputes Ambitions of ASEAN Dialogue Partners, eg China, USA

ASEANs Challenges

Chinas rise Indias role USAs distractions Japans stagnation EUs inward-looking orientation

Going forward

National ego (big country/small country) Bureaucratic culture (corruption/use technology) Domestic politics (leadership changes) Insufficient institutional set-up to champion ASEAN agenda (only small secretariat in Jakarta) Rule of Man; not enough Rule of Law (ASEAN Charter)

Lessons learned

Stay open and inclusive (ASEAN economic integration) Be transparent (regular meetings at all levels Leaders, Ministers, Senior Officials, Experts) Give sense of ownership/stakeholdership (ASEAN agenda) Adhere to principle of equality (equal shares of operational budget)

Lessons learned (2)

Focus on practical projects first (start with capacity building, then economic cooperation, later political/security issues) Pick low-hanging fruits and have early harvest (ASEAN-China FTA) Use existing mechanisms as much as possible; avoid new structures till all ready to accept

Success depends on

Implementing plans and projects in a timely manner Keeping the "ball rolling"; no harm with small steps and small yields Building on any "common factor" Getting the top leadership to weigh in and even drive projects, where necessary Sharing the "dividends"

Bear in mind

Political will is everything Design of plan or mechanism not at fault Seize the opportunity Capitalise on any favourable circumstances Engage positively those who matter

Thank You.