Hadi Kuntjara
Deputy Director for Operations, The Habibie Center Managing Editor
Ray Hervandi
Thinking ASEAN Team A. Ibrahim Almuttaqi Askabea Fadhilla Fina Astriana Muhamad Arif Wirya Adiwena
About Thinking ASEAN Articles
Laos’ ASEAN Chairmanship 2016:
A Step Forward or a Standstill?
Keeping ASEAN Centrality Afloat Amid Traditional and Non-
Traditional Security Challenges ASEAN Economic Community:
Practice vs. Theory
Infographic : Lao PDR ASEAN Chairmanship ASEAN 2015 ROUND-UP Indonesia
Malaysia Myanmar Singapore Thailand
Contents
2 1 2
4
7
11 10
11
11
12
12
12
A note from the editor
Dear readers:
Welcome to the December 2015 issue of the monthly Thinking ASEAN!
This month’s issue, like December itself, provides an opportune moment to look back and forward. ASEAN and its member states have gone through an eventful 2015, and they have much to look forward to with many exciting developments in 2016.
The opening article by Wirya Adiwena, Head of International Relations at the Habibie Center, looks at the promises and challenges brought on by Laos’ chairmanship of ASEAN in 2016. This will be the second time Vientiane has chaired the Association since it joined in 1997.
Maria Anna Rowena Layador, currently at the Foreign Service Institute in the Philippines, then looks at how ASEAN Centrality fares amid traditional and non-traditional security concerns. In particular, Layador looks at the dynamic between the ASEAN Political Security Community and the ASEAN Centrality concept within and without the association.
The third article, by Tri Widodo, economics lecturer at Gadjah Mada University in Yogyakarta, Indonesia, provides an analysis of the historical perspective and the background of the establishment of ASEAN institutional structural changes. He suggests they indicate a real change in the institutional focus of political issues to economic issues along with the development of regionalism in the world.
To round out this month’s issue, we present a short infographic of Laos and its chairmanship of ASEAN and a summary of the goings-on in selected countries from around Southeast Asia.
Please do not hesitate to drop me a line at thinkingasean@habibiecenter.or.id if you have comments, suggestions or prospective submissions.
Happy reading!
Best regards from Jakarta,
Ray Hervandi Managing Editor
Thinking ASEAN is a monthly publication that aims to provide insightful, cogent and engaging perspectives on issues central to contemporary Southeast Asia and the ASEAN member states. It is a product of The Habibie Center, with the generous support of the Republic of Korea’s Mission to ASEAN.
The content of Thinking ASEAN does not reflect the official opinion of The Habibie Center or institutions related to the publication. The Habibie Center was founded by Indonesian President Bacharuddin Jusuf Habibie in 1999 as an independent, non-governmental and non-profit organization to promote the democratization and modernization of the country.
Responsibility for the information and views expressed in Thinking ASEAN lies entirely with the author(s). For comments, suggestions and prospective contributions, the Managing Editor of Thinking ASEAN can be reached at thinkingasean@habibiecenter.or.id.
Laos’ ASEAN Chairmanship 2016:
A Step Forward or a Standstill?
Vientiane at Night.
Photo Credit: Aleksey Gnilenkov, Moscow, Russia.
Wirya Adiwena is Head of International Relations, The Habibie Center.
For the second time in ASEAN’s history, Laos will assume chairmanship of this regional organization in 2016.
The country first assumed this position in 2004, seven years after it gained ASEAN membership. The second chairmanship is only a bit more than a decade after the first, but significant changes have taken place both globally and regionally. Laos’ chairmanship of ASEAN is now taking place on a vastly different landscape than it did in 2004.
Southeast Asia has experienced overall good economic growth even as it faces global economic slowdown.1 This helps bring increasing confidence to many countries in the region. However, at the same time the region’s giant neighbor China has also become increasingly more assertive and dominant, most notably in the South China Sea.
Meanwhile, progressive discourses of human rights and democracy have spread more widely across the region although with varying success. It is against this backdrop that Laos will take over the ASEAN chair.
What the ASEAN Chairmanship Means
According to the ASEAN Charter, the chairmanship rotates annually based on the alphabetical order of the English names of member states. However, practice has deviated from this rule in recent summits. A member state assuming the chairmanship is to chair the ASEAN Summit and related summits, the ASEAN Coordinating Council, three ASEAN Community Councils, a number of ASEAN Sectoral Ministerial Bodies and senior officials, as well as the Committee of Permanent Representatives.2
The ASEAN chairmanship is an important role in the regional organization. In previous summits, the chairing countries have been critical in determining the direction that ASEAN took throughout the year. The ASEAN chair can set the scene to a certain extent, although they do not have full power to steer the summits and other related meetings. Former ASEAN Secretary-General Rudolfo Severino has stressed that, “There is little that the chairperson can do if other participants raise something outside the formal agenda.”3
Nevertheless, there is one infamous example of the influence that ASEAN chairs can have: the Cambodia chairmanship of 2012. For the first time in ASEAN history, member countries failed to produce a joint statement supposedly over a disagreement on the South China Sea issue. It is widely claimed that the rift happened because Cambodia was under pressure from China to stop ASEAN from taking a meaningful position on the South China Sea disputes.4
The 2016 chairmanship will also mark the start of the ASEAN Community and the ASEAN Community Vision 2025. While many components of the ASEAN Community—particularly the ASEAN Economic Community—have been implemented in the past, there are a number of issues that require closer attention, such as the labor movement and efforts to narrow development gap between countries in the region. These are issues that of Laos chairmanship can help bring closer attention to.
How Will Laos Measure?
Laos is currently preparing itself for the two ASEAN Summits that will be held back to back in November. They are building new hotels to accommodate foreign diplomats as well as training functionaries and staff who will be deployed in the summits and other ASEAN-related meetings. Taking into account their experience in hosting previous Summit and the ASEAN Regional Forum, as well as the Asia-Europe Meeting in 2012, Laos already has a solid foundation to handle logistical matters concerning the event.5
More substantively, Edmund Sim has projected that Laos will take a more “proactive stance on AEC matters,” citing Laos’ intention to further promote the Initiative for ASEAN Integration (IAI) to narrow the development gaps in the region.
He also mentioned that Laos has been a strong supporter of regional economic integration.6 This will mean that Laos will put special focus on the economic pillar during their chairmanship.
We can also expect Laos to hold a more neutral stance on the South China Sea issue. Unlike Cambodia, Laos is not in China’s direct sphere of influence and is in fact closer to Vietnam owing to economic dependence over the years. However, this does not mean that Laos will push ASEAN to hold a tougher stance against China on the issue. This will require a confidence and strong leadership in Southeast Asia, the likes of which have yet to be seen again in the region.
One issue that will possibly escape Laotian attention is human rights. Although the promotion and protection of human rights have been enshrined in the ASEAN Community Vision 2025, it has not been fully realized in Laos—and other parts of the region. Many across Southeast Asia still recall the disappearance of prominent activist Sombath Somphone back in 2012, apparently one among many forced disappearances that dragged on without clear conclusion.7 Regionally, there is allegation that Laos pressured its civil society activists to refrain from promoting human rights. Allegedly, civil society representatives from Laos can only discuss gender rights and not other sensitive issues like land rights and enforced disappearance.8
Moreover, it is quite possible that Laos will not host the ASEAN People’s Forum, the annual gathering of civil society organizations from around the region, citing “potential criticism by participants against governments in the region and inadequate resources.”9 Indeed, even if Laos decided to host this meeting, civil society organizations have expressed concerns that the forum will not be free from government’s interference.10
Notwithstanding these issues, Laos can still be considered quite successful as chair of ASEAN if it does well on a number of fronts, especially in light of the patchy human rights records in the region and the overall stronger focus towards AEC among ASEAN member countries. It can be understandably tempting to focus only on the ASEAN Economic Community. The economic pillar is arguably the most successful of all three pillars and there remains important economic homework that demands close attention and therefore focus from the current ASEAN chair.
However, it is worth noting that Laos’ chairmanship will run under the theme “turning vision into reality for a dynamic ASEAN community.” And for many, this does not simply mean realizing a prosperous region but also one that is safe and peaceful for all of its peoples. Indeed, Laos has picked the perfect theme: it is high time to truly realize ASEAN vision into reality.
Notes
1 McKinsey and Company. 2014. “Understanding ASEAN: Seven things you need to know”. Retrieved from http://www.mckinsey.com/
insights/public_sector/understanding_asean_seven_things_you_
need_to_know, December 2, 2015.
2 ASEAN Secretariat. “ASEAN Chair”. Retrieved from http://www.
asean.org/asean/asean-chair, December 7, 2015.
3 Rudolfo Severino. 2012. “Cambodia hosts the first ASEAN Summit for 2012”. Retrieved from http://www.eastasiaforum.org/2012/04/27/
cambodia-hosts-the-first-asean-summit-for-2012/ December 6, 2015 4 Aljazeera. 2012. “ASEAN talks fail over South China Sea dis- pute”. Retrieved from http://www.aljazeera.com/news/asia-pacif- ic/2012/07/201271381350228798.html, December 5, 2015.
5 Inquirer. 2015. “Laos prepares for ASEAN chairmanship in 2016”. Re- trieved from http://globalnation.inquirer.net/128949/laos-prepares- for-asean-chairmanship-in-2016. December 2, 2015.
6 Edmund Sim. 2015. “Can Laos lead ASEAN in 2016”. Retrieved from http://thediplomat.com/2015/06/can-laos-lead-asean-in-2016-2/, De- cember 2, 2015
7 National Geographic. 2014. “Mystery in Laos: Reformer Still Miss- ing Two Years After Videotaped Police Stop”. Retrieved from http://
news.nationalgeographic.com/news/2014/12/141216-laos-sombath- somphone-abduction-police-environment/, December 6, 2015.
8 Radio Free Asia. 2015. “Lao Civil Society Pressured to Drop Rights Issues from ASEAN Forum”. Retrieved from http://www.rfa.org/eng- lish/news/laos/forum-04222015150409.html. December 7, 2015 9 Radio Free Asia. 2015. “Laos Refuses to Host Meeting of ASEAN
Civil Society Groups”. Retrieved from http://www.rfa.org/english/
news/laos/refuses-10122015173336.html, December 4, 2015.
10 See, “Civil society organizations ask ASEAN Peoples’ Forum not to hold its 2016 event in Laos”. Retrieved from http://www.rightsan- dresources.org/en/news/civil-society-organizations-petition-asean- peoples-forum-against-holding-its-2016-event-in-laos/, December 5, 2015.
Keeping ASEAN Centrality Afloat Amid Traditional and Non-Traditional Security Challenges
The USS Germantown is underway in the South China Sea.
Photo Credit: Creative Wikimedia Commons.
Maria Anna Rowena Luz G. Layador is on secondment to the Foreign Service Institute of the Philippines. Before secondment, Layador was Assistant Professor at the Department of Political Science, College of Social Sciences and Philosophy, University of the Philippines, Diliman.
ASEAN Centrality will be critical in the post-2015 Vision of ASEAN. With the establishment of the ASEAN Economic Community by 2015, there is greater expectation for concerted action on the political-security issues, such as the haze, extremism, migration and even extra-regional issues. Inextricably linked to the promotion of the ASEAN Political Security Community (APSC), ASEAN Centrality can be the lens to use to ensure ASEAN solidarity and cohesion, affirming its role in the evolving regional security architecture. This also means enjoying credibility to move its initiatives and bring difficult issues onto the agenda, particularly those that affect regional peace and stability. To do this, ASEAN has to maintain its neutrality.
Related to ASEAN Centrality, Article 1, Paragraph 15 of the ASEAN Charter states the need for ASEAN to maintain a proactive role as the primary driving force in its relations and cooperation with external partners in a regional architecture that is open, transparent and inclusive. Centrality is an important component of the APSC, particularly in the promotion of peace and stability in the wider region.
As the region enters into a single-market arrangement under the economic community pillar, it is also entering into a phase where contestation among major powers is looming over their heads. The major-power rivalry has changed the geopolitical landscape, with the maritime terrain at the center of this dynamic. But there are still recurring political- security problems that include pandemics, terrorism and extremism, natural disasters, transboundary haze, the refugee issue and persistent bilateral issues that could dent ASEAN’s regional cohesion.
Both traditional and non-traditional security issues test ASEAN as a regional grouping. Affirming its centrality as the main driving force could fend off or dislodge this trajectory of enmity towards amity and greater cooperation within ASEAN as well as in the wider Asia Pacific. These issues can potentially affect regional peace and stability.
APSC and ASEAN Centrality Within and Without: Beyond Rhetoric
APSC ensures that ASEAN will not be an introverted ASEAN;
its direction is for “ASEAN (to) live in peace with one another but also with the world.” This pillar envisages a rules-based community; a cohesive, peaceful and resilient region; and an outward-looking grouping.1 Therefore, APSC also implicitly recognizes the importance of multilateral processes to manage its relations with those outside ASEAN.
ASEAN has been the central driver and at the core of various multilateral initiatives. However, it finds itself in a security frontier where it faces the possibility of being sidelined if it leaves great-power rivalry on its own and an environment of uncertainty if it fails to shape the geostrategic landscape. This failure, in turn, could dissipate ASEAN’s importance in the regional security architecture. The region has become part of the stage where US-Chinese competition unfolds. ASEAN must reflect whether it should let the great powers shape and eventually dictate the regional security agenda.
All this calls for a more proactive ASEAN. In a sense, it has recognized this challenge in the Chairman’s Statement of the 27th ASEAN Summit in November 2015.2 It has to move its rhetoric to the regional processes and make true its promise to promote the principles that ASEAN adheres to, such as to like those of the Treaty of Amity and Cooperation (TAC), the Declaration on the Code of Conduct in the South China Sea and the Treaty of Southeast Asia Nuclear Weapons Free Zone (SEANWFZ).
What continues to divide ASEAN is how to approach China on the South China Sea disputes. The ASEAN Defense Ministers’
Meeting of November 2015 failed to reach a consensus on China’s reclamation and militarization, and so no declaration was signed.3 ASEAN claimant states have adopted differing ways in managing their disputes with China, showing the disparate actions of ASEAN claimant member states. The Philippines chose to use international instrumentalities albeit seen as confrontational; Vietnam adopted a combination of both internationalizing the issue by bombarding China with protests while also engaging China bilaterally. The rest went the quiet bilateral means. But ASEAN has repeatedly called on all parties to exercise self-restraint, respect the Code of Conduct and uphold the freedom of navigation. ASEAN member countries involved have expressed concern that Chinese reclamation simply erodes trust and confidence in the region. Thus far, this issue has been a thorn that could pierce the core of ASEAN if not managed properly.
But ASEAN is also seen as a facilitator of free trade areas in East Asia.4 ASEAN neutrality, therefore, means that it cannot be partial to any regional power and that it must continue to be the enabler of economic convergence in East Asia. Centrality becomes even more important in this view if ASEAN wants
to continue being a neutral regional driver both economically and politically in the face of competing political and economic initiatives from the outside world. However, it must also address internal security issues. 5
ASEAN has by far been able to progress on a number of non-traditional security issues, such as on pandemics, disaster preparedness, counter terrorism and extremism and transnational crimes. It is in counter-terrorism6 and disaster preparedness that ASEAN has made much stride with an agreement in tow including simulation and exercises.7 It is also in these issues where Southeast Asia can play a bigger central role in the wider regional processes.
Extremism is an important security issue because regional gains will amount to nothing if extremism becomes an unshakeable reality in Southeast Asia. Moreover, enhancing ASEAN credibility means addressing issues such as transboundary haze problem, the Rohingya refugee crisis, and other bilateral territorial issues that have become a recurring irritant between and among affected ASEAN member states.
ASEAN Centrality Continues On
Community-building is a process. At this time, ASEAN is yet to establish coordinated regional security policies reflected by differing policy decisions on certain issues external to the region. ASEAN has been criticized for not coming out with a single voice with critics concluding that ASEAN Centrality is an illusion. It has been criticized for the many things it does not have. But a closer inspection shows that ASEAN has been making progress in the three pillars.8 This seeming lack of a unified voice is thought to invite outside-power competition;
ASEAN is at a point where it needs to ensure regional cohesion while managing simmering rivalry among great powers.
ASEAN is also often criticized for the impression that member states actually put national security interests over regional ideals particularly on geopolitical security matters.9 This means that ASEAN has not truly imbibed “regional thinking” when it comes to strategic engagements with extra-regional actors.
Moreover, it has not been able to conclude a binding Code of Conduct despite lengthy negotiations with concerned parties.
But in spite of China’s repeated pronouncements that ASEAN has no business resolving the South China Sea dispute, the association has been dedicating a line or two—even paragraphs—in the various ASEAN Chairman’s Summit Statements encouraging all parties to conclude a Code of Conduct.10 The rhetoric among leaders of ASEAN appears toward affirming ASEAN Centrality, but this must be supported with more visible action. To keep its centrality in face of geopolitical flux, ASEAN must continue setting the regional agenda, regional resilience, commitment to consult and coordinate, especially those foreign policy decisions that would affect the region, defining what consensus means to all members.
Post-2015 Vision and Challenges Ahead: No More Repeat of the Breakdown of Consensus
Envisioning itself a global player in the Post-2015 ASEAN Community Vision,11 ASEAN resolved to adopt a peaceful dispute mechanism. It is also paying closer attention to tolerance and moderation and also emphasizing the need to enhance dialogue and cooperation with external partners.
ASEAN has to lessen its dependence on external powers. It might have to eventually confront China on the artificial islands because of its geopolitical implications for Southeast Asia.
ASEAN must not allow itself to become pawns to the strategic competition of great powers. To be central also means the ability to bring actors together, the ability to draw a difficult process out on the table and the ability to move key regional initiatives such as the Code of Conduct in the South China Sea to adoption. ASEAN must also be on guard not to repeat the 2012 debacle in Phnom Penh.
Notes
1. Elaboration of the ASEAN Political and Security Pillar can be found in its Blueprint. Available at: http://www.asean.org/communities/
asean-political-security-community.
2. “Chairman’s Statement of the 27th ASEAN Summit”, November 23, 2015. Available at: http://www.asean.org/news/asean-statement- communiques/item/chairman-s-statement-of-the-27th-asean- summit.
3. Beams, Nick. “ASEAN defence summit divided over South China Sea dispute.” World Socialist Website, November 5, 2015. Available at: https://www.wsws.org/en/articles/2015/11/05/asea-n05.html 4. Kassim, Razali Yang.”East Asian Regionalism: End of ASEAN
Centrality?” RSIS Commentaries, July 4, 2012. Available at: https://
www.rsis.edu.sg/rsis-publication/rsis/1778-east-asian-regionalism- end-of/#.VmBCrdJ94dA.
5. Joycee Teodoro (Foreign Service Institute) in her Environmental Scan of ASEAN and Southeast Asia (unpublished 2015) noted the number of initiatives both non asean and asean as well. An example of which is China’s proposal for a Treaty of Good Neighborly and Friendly Cooperation between China and ASEAN, which might go in contrast with ASEAN’s Treaty of Amity and Cooperation 6. ASEAN has a Convention on Counter-Terrorism signed in 2013.
7. “Enhancing ASEAN Regional Capacity for Disaster Response Operations.” Relief Web, March 16, 2015. Available at: http://
reliefweb.int/report/world/enhancing-asean-regional-capacity- disaster-response-operations.
8. See the Chairman’s Statement of the 27th ASEAN Summit, Kuala Lumpur, 21 November 2015. It pointed out the successful implementation of the Roadmap for an ASEAN Community 2009- 2015.
9. Ho, Benjamin, Singh, Bhubhindar, Teo, Sarah. “Malaysia’s ASEAN Chairmanship in 2015: Perspectives and Prospects,” Asia-Pacific
Bulletin, No. 298, January 13, 2015. Available at: http://www.
eastwestcenter.org/sites/default/files/private/apb298.pdf.
10. See current and previous Chairman’s statements made at ASEAN Summits.
11. “ASEAN 2025 Forging Ahead Together,” November 2015. Available at: http://www.asean.org/images/2015/November/asean-forging- ahead/ASEAN%202025%20Forging%20Ahead%20Together%20 5bfinal5d.pdf.
ASEAN Economic Community:
Practice vs. Theory
Tri Widodo, PhD is a lecturer at the Faculty of Economics and Business and a researcher at the Center for Economic and Public Policy Studies at Gadjah Mada University in Yogyakarta, Indonesia.
A farmer sifts his wheat crop at a farm.
Photo Credit: Reuters.com.
ASEAN: From Political to Economic Issues
Economic regionalism proliferated during the period of aggressive trade liberalization in the 1980s and 1990s.
Indeed, attempts for an organized regional cooperation between the Southeast Asian countries dated back to 1967 when ASEAN was established. It might be argued that the establishment of ASEAN was encouraged predominantly by international political motivations, especially the territorial disputes, rather than economic ones. In fact, it was not until the 1970s that ASEAN countries tried to promote greater intraregional trade and to coordinate industrialization policies (Elliott and Ikemoto, 2004). Park (1999) notes that such policy efforts were based on proposals made by the United Nations in its series of policy studies, which proposed regional import substitution.
Subsequently, on February 24, 1977, the ASEAN Preferential Trading Arrangements (ASEAN-PTA) was established to promote intraregional trade. The Protocol on Improvements on Extension of Tariff Preferences under the ASEAN- PTA was signed on December 15, 1987. However, Tan (1992), Toh and Low (1993), Ariff (1994) and Garnaut and Drysdale (1994), among others, find that the ASEAN-PTA initiative was disappointing because the coverage of the PTA was quite limited, the nature of intra-regional structure was competitive rather than complementary, and the urgency of promoting tariff reductions was diminishing.
The first concrete effort toward regionalism was the ASEAN Free Trade Area (AFTA) launched in 1992 by ASEAN itself. The establishment of AFTA was encouraged by the changes in the global competitive environment during the 1980s and 1990s. European countries and the United States have been the main ASEAN’s trading partners.
Therefore, to some extent, the establishment of the North America Free Trade Agreement (NAFTA) and the European Union raised problems against ASEAN countries’ exports access to North America and Europe.
The AFTA was aimed at encouraging further cooperation for the region’s economic growth by accelerating the liberalization of intra-ASEAN trade and investment. By then, ASEAN had succeeded in maintaining international and political stability in the region. The AFTA will be realized by applying the Common Effective Preferential Tariff (CEPT) Scheme. In fact, it was started by the signing of the Agreement on the Common Effective Preferential Tariff Scheme for the ASEAN Free Trade Area on January 28, 1992 in Singapore. Under the agreement, CEPT means the Common Effective Preferential Tariff, and it is an agreed effective tariff, preferential to the ASEAN countries, to be applied to goods originating from ASEAN member states (at least 40% of its contents originates from members of the ASEAN), and those that have been identified for inclusion in the CEPT Scheme.1 The agreement applies to all manufactured products, including capital goods, processed agriculture products, and those products not included in the definition of agricultural products as set out in the Agreement. Agricultural products are excluded from the CEPT Scheme.
ASEAN Economic Community: Big Question?
Theoretically, there are five successive stages of economic integration i.e. Free Trade Area (FTA), Customs Union (CU), Common Market (CM), Economic Union (EU), and Complete Economic Integration (CEI) (Balassa, 1961; McCarthy, 2006) (See Figure 1). In FTAs, tariffs (and other quantitative restrictions) among the participating countries are abolished. However, each country still maintains its own tariffs against the non members. In CUs, besides introduction of the free movements of commodities within the union, the common external tariffs in trade with the non member countries are set up.
In CMs, not only trade restrictions but also restrictions on factor movements are abolished. In EUs, the countries combine the suppression of restrictions on commodity and factor movements with some degree of harmonization of national economic policies, in order to remove discrimination due to disparities in these policies. In CEIs, unification of monetary, fiscal, social and countercyclical policies will be observed. It also requires the setting-up of a supra-national authority whose decisions are binding for the member states.
The direction currently followed by the ASEAN Economic Community in 2015 seems to be different from the theory of economic integration. The only one de jure economic integration in the East Asia is the ASEAN Free Trade Area (AFTA). ASEAN will establish the ASEAN Economic Community (AEC) in 2015.
It would be argued the AEC has the similar characteristics with those of Common Market (CM) in the third successive stage of the theoretical economic integration. Currently, ASEAN has ASEAN-Free Trade Area (AFTA) in the first stage of economic integration, and it wants to be AEC in 2015. Therefore, a Customs Union (CU), the second succeeding stage of economic integration, has not been considered by the governments of ASEAN countries. Harmonization of the common external tariffs in trade with nonmember countries has not been discussed intensively yet.
Could the AEC work without the common external tariffs in trade with nonmember countries? Could the free movement of production factors (capital and labor) work smoothly without common external tariffs? Theoretically, could Common Markets be created without common external tariffs? In other words, is the common external tariff a sufficient condition for a Common Market? It was argued that in the AEC, the issue of the rule of origin (ROO) will still exist because each member county still maintains its own tariffs against non-member countries. The flow of production factors (capital and labor), trade diversion and trade creation could not be optimized in AEC due to the absence of common external tariffs. However, ASEAN countries have their own way in integrating their economy, the “ASEAN way”. So, the governments of ASEAN have been obviously eager to realize the AEC on schedule in 2015.
Concluding Remarks
The establishment of the AFTA and the AEC at least shows the ideal spirit of economic integration for all the ASEAN members.
It also creates another economic power in the East Asian region and then, as a single entity, becomes as big as the other main players in the East Asia i.e. Japan, China and South Korea.
Table 1 shows the economic growth of ASEAN countries and regions. Therefore, as the first de jure economic integration in the East Asia, ASEAN plays important role in furthering
Figure 1. Different stages of economic integration have different requirements. Stages of Economic Integration: FTA, CU, CM, EU.
Table 1. Economic Growth (%) Source: CEIC (2015) economic integration such as the ASEAN-China Free Trade
Agreement (ACFTA), the ASEAN-Korea Free Trade Agreement (AKFTA) and the ASEAN-Japan Comprehensive Economic Partnership (AJCEP). The latest comer does not only cover trade liberalization (tariff removal) but also services, investments, rules of origin, dispute settlement, sanitary and phyto-sanitary regulations, technical barriers to trade, economic cooperation and, on Japan’s request, intellectual property rights.
However, we have to pay special attention to the bilateral characteristics of these FTAs – i.e. between ASEAN as a single entity or the individual member countries themselves and other non-member countries in the East Asia, such as Japan, Korea and China. All these FTAs must be well managed regarding the problems of certificate of origin, etc. Otherwise, the noodle-bowl syndrome2 might appear. The networking of these bilateral trade agreements does not automatically mean regional economic integration. Baldwin (2006) argues that East Asian regionalism is fragile for the following three reasons: (1) each nation’s industrial competitiveness depends on the smooth functioning of ‘Factory Asia’ – especially intra-regional trade, (2) the unilateral tariff- cutting that created ‘Factory Asia’ is not subject to WTO discipline (bindings), (3) there is no ‘top level management’ to substitute for WTO discipline. In addition, Fouquin et al. (2006) notes that the AFTA, the ACFTA, the AKFTA and the AJCEP will give significant contributions to horizontal intra-industry trade as long as they succeed in reducing tariffs. In fact, the large diversities of incomes and industrial stages have enhanced the de facto economic integration. Therefore, de jure East Asian economic integration will take some time to realize until the large diversities converge between countries.
Notes
1. This term is used by Baldwin (2006) to illustrate a messy situation due dozens if not hundreds of trade deals under discussion, under negotiations or already signed.
2. The approach of the CEPT is mainly reciprocal and sectoral, which makes it more encompassing and manageable than the product- by-product approach of PTAs (Pangestu et al., 1992; Athukorala and Menon, 1997).
References
Ariff, M., 1994. “Open regionalism á la ASEAN”. Journal of Asian Economics, 5:99-117.
Athukorala, P. and Menon, J., 1997. ”AFTA and the investment-trade nexus in ASEAN”. World Economy, 20(2): 159-74.
Balassa, B., 1961. The Theory of Economic Integration. London: Allen
& Unwin.
Baldwin, R, 2006. Managing the Noodle Bowl: The Fragility of East Asian Regionalism. Center for Economic Policy Research (CEPR)
Elliot, R.J.R. and Ikemoto, K. “AFTA and the Asian Crisis: help or hindrance to ASEAN intra-regional trade?”, Asian Economic Journal, 2004, 18(1): 1-23.
Fouquin, M., D. Hiratsuka and F. Kimura. “Introduction: East Asia’s de facto economic integration”, in Hiratsuka, Daisuke, eds., East Asia’s de facto Economic Integration. New York: Palgrave Macmillan, 2006, pp. 1-15.
Garnout, R., and Drysdale, P., 1994. “Asia-Pacific Regionalism: the issues”. In Garnout, R., and Drysdale, P. (eds.). Asia-Pacific Regionalism:
Readings in International Economic Relations. Sidney: Harper Educational Publisher. pp. 1-7.
McCarthy, D.M.P., (2006), International Economic Integration in Historical Perspective, Routledge, New York.
Pangestu, M., Soesastro, H. and Ahmad, M. “A new look at Intra- ASEAN economic cooperation”, ASEAN Economic Bulletin, 1992, 8(3):333-352.
Park, D. “The prospect for further economic integration in ASEAN”, Journal of Economic Integration, 1999,14(3), September: 382-418.
Tan, G. “ASEAN Preferential Trading Arrangements: an overview”, in The ASEAN Reader. Singapore: Institute of Southeast Asian Studies (ISEAS), Singapore. 1992, pp. 237-241
Toh, M.H., and Low, L. “Is the ASEAN Free Trade Area a second best option?” Asian Economic Journal, 1993, 7(1): 275-298
ASEAN5 + China and India China
The year 2016 will open up a new chapter for ASEAN. With the ASEAN Community finally coming into force, the Lao People’s Democratic Republic (Lao PDR) will at the same time take over the chairmanship of ASEAN. This edition of Thinking ASEAN’s infographic is going to explore Lao PDR’s history as well as its current position in the region to provide a better understanding about the country’s readiness to lead ASEAN in the upcoming year.
Lao PDR throughout the years
Lao PDR in numbers
“… the Lao People’s Democratic Republic will continue to carry out its consistent foreign policy of peace, independence, friendship and development cooperation.”
- President Choummaly Sayasone, 40th Lao National Day speech
“We will continue to work closely with our ASEAN family members and external partners with the objective of further advancing the community building process for a dynamic ASEAN community,”
- Prime Minister
Thongsing Thammavong, during the closing ceremony of the 27th ASEAN Summit Should we feel
optimistic…
• Unlike Myanmar, Laos has previously hosted the ASEAN Summit, ASEAN Regional Forum, and the Asia-Europe Meeting (ASEM).
• The previous Lao chairmanship produced the Vientiane Action Program.
• Laos has shown strong
support for ASEAN Economic Community and the Initiative for ASEAN Integration
…or cautious?
• Laos most likely will not host the ASEAN People’s Forum, the annual meeting of civil society organizations from across ASEAN countries.
• The disappearance of Sombath Sompone, a prominent Lao activist, has also put the
country’s human rights record in question.
million,
ASEAN 2015 ROUND-UP
In this edition of Thinking ASEAN, our team highlights and analyzes trends that are happening across the region.
We focus our attention on a number of ASEAN countries with particularly striking developments, which we believe to have significant impact on the future of those countries as well as on the region.
Indonesia
It has been a rollercoaster year for Indonesia. It started full of hope as the archipelagic country elected a new leader in the late 2014. The new president, Joko Widodo, had campaigned on the promise of making a break from the perceived indecisiveness and party brokering of the previous administration. And indeed, Jokowi—as he is popularly known—seemed to deliver as he began his term by erasing fuel subsidy from the state budget.
Although it was not too popular, this move is widely believed as necessary to help salvage the state budget especially in the context of the new national healthcare and education subsidy policies.
However, the honeymoon period did not last long. The government faced its first major challenge when the Corruption Eradication Commission (KPK) went head-to-head with the Police. The commission named Budi Gunawan, a high-ranking officer and strong Chief of Police candidate, a corruption suspect.
As the investigation continued, the police corps struck back by accusing Abraham Samad and Bambang Widjojanto, head and vice-head of the KPK respectively, as suspects in fraud cases.
The way the government handled this problem left a lot to be desired. While the issue has not been fully resolved, so far the government has emerged as weak and divided along the multiple vested interests inside its administration. Jokowi does not seem to be able to deliver the change that he promised. Nevertheless, it should be noted that he still has plenty of time left to realize his vision.
This year is also a difficult one for Indonesia’s diplomacy. The new Foreign Minister Retno Marsudi started her term by ensuring that Indonesia will remain an active player in the global and regional fora. However, this proves to be a difficult mission to carry out.
It is true that Indonesia does not fully seclude itself from the international stage, but it seems that it focuses more on bilateral economic relations while giving less attention to multilateral and regional fronts. The immediate effect of this policy reverberates strongly across the region. It has become a widely accepted fact that Indonesia plays major role in ASEAN—if not de facto leadership. As Indonesia struggles to define the direction of its current foreign policy, the region faces multiple challenges: on- going dispute in South China Sea, ethnic oppression in Myanmar and the subsequent refugee crisis, as well as setback for regional civil society activism in ASEAN under Laotian chairmanship.
One analyst, Donald Weatherbee of the University of Southern California, has called this situation “The Incredible Shrinking Indonesia.” An argument can be made in support of this shrinkage, as this policy can bring direct and more tangible benefits to Indonesia and its people. Nevertheless, one can ask whether this will still be beneficial in the long run or whether this will also be good for the region.
Malaysia
2015 is considered as a momentous year for Malaysia for the country’s development both in the domestic and regional level.
The 1Malaysia Development Berhad (1MDB) scandal was definitely the highlight of Malaysia’s political woes. The fund was set up in 2009 and initially projected to turn Kuala Lumpur into a financial hub. However, a number of newspapers have reported that the fund had gone to the personal account of Prime Minister Najib Razak and others associated with him instead.
The fiasco has dragged down the leader’s popularity and led into a street protest against his administration as well as other international investigations. However, former Prime Minister Mahathir Mohamad argued that the chances of unseating Najib Razak before election 2018 were slim.
Another pressing issue related to the domestic development of Malaysia is the newly proposed security bill. The regulation allows the creation of security zones in which police can impose curfews and make warrantless arrests. This policy resulted in strong criticism from the opposition party and human rights activists, since Malaysia was again showing a slight tendency toward more authoritarianism.
Another worrying trend is the growing numbers of population joining the Islamic State (ISIS) in Malaysia. Over 200 Malaysians are believed to have joined ISIS. This trend is especially troubling given that Malaysia has a relatively small population.
The support for religious extremism is in contrast with Malaysia’s image as a moderate Muslim state and role model for other Muslim-majority countries.
Nevertheless, despite its unfavorable domestic political situation, Malaysia has proven itself in the regional landscape by successfully holding the ASEAN Chairmanship in 2015.
Under Malaysia’s chairmanship, ASEAN has produced several important results. During the 27th ASEAN Summit, ASEAN member states have formally signed the 2015 Kuala Lumpur Declaration on the establishment of the ASEAN Community.
The Kuala Lumpur Summit also highlighted the ASEAN Vision 2025, which was designed to sustain the momentum of the integration in the region. It will also contribute to further fostering the efforts in building the ASEAN Community.
On the issue of South China Sea, ASEAN has also managed to reach a joint statement. In the statement, ASEAN member states have “reaffirmed the importance of maintaining peace, stability, security and freedom of navigation in and over-flight over the South China Sea” and urged the speedy conclusion of a Code of Conduct in the South China Sea. However, it is worth noting that the statment is reactionary and normative in nature rather than preventive and practical.
Myanmar ends the year on a high note. After around four decades under the military junta, the transition government has managed to usher the country through a largely free and democratic election.
Moreover, during this election, Aung San Suu Kyi and her National League for Democracy (NLD) party scored a major victory against the ruling Union Solidarity and Development Party. It is also important to note that the NLD has secured an overall majority in parliament even as under Myanmar’s parliamentary system the military automatically obtained 25 percent of the seats.
In the aftermath of the election, President Thein Sein has promised a smooth transition of power. The realization of this promise would mean that Myanmar is ahead of a number of other countries in Southeast Asia in terms of electoral governance. There are still countries in the region—such as Cambodia, Singapore, and Malaysia—that hold elections regularly without ever handing over power to the opposition.
This is a step forward for Myanmar and hopefully for the rest of the region as well. However, it is important to also note that the country still faces myriad of other problems. Ethnic conflicts and oppression is particularly troubling.
Although the government managed to strike a ceasefire deal with armed groups inside the country in October 2015, the persecution against the Rohingya minority that led them to drift away in the sea for months remains fresh in mind. Unfortunately, in the face of this tragedy, there is a deafening silence from within Myanmar, including from Aung San Suu Kyi herself. This might be a sign that durable solutions to ethnic conflicts and the Rohingya refugee crisis are still further away.
Nevertheless, the country is making progress. It might be slow or stuttered, but for the moment, there is reason for hope. Perhaps one day Myanmar will once again be the progressive country that gave birth to prominent individuals such as former UN Secretary General U Thant.
Singapore
In 2015, Singapore marks its 50th anniversary of independence. In little more than a generation, through a remarkable and unrivalled economic success, the small city-state has transformed “from third to first.” The country’s biggest challenge, as put by Prime Minister Lee Hsien Loong, is “to get the economy to the next level.”
Singapore will continue to benefit from its role as the commanding trading hub in the region for the foreseeable future, especially when the global epicenter of economic development is now shifting to Asia. The country, however, has realized it could not forever rely on the geographical leverage. For the country to remain relevant in the next fifty or more years, it needs to transform itself into an innovation hub.
The 50th year of Singapore independence was also marked with mourning when Lee Kuan Yew, the founder and longest-serving leader of the country, passed away in March. The grief, however, was not always about tears as it also led to some cheers. People’s Action Party (PAP), the party that Mr Lee founded had governed Singapore since its independence, won a landslide victory in the 2015 general election in September. The result was unexpected as the polls prior to the election recorded a decrease of support for the PAP.
Although an entire regime change was not in sight, it was expected that the opposition would gain more foothold compared to previous elections. Commentators attributed the landslide victory of PAP to the “LKY dividend,” as the mass mourning had triggered a “renewed sense of gratitude” and led the people, especially a significant middle ground of undecided voters, to opt for PAP.
As the country’s economic performance remains satisfying, strict political controls, including on the freedom of speech, imposed by
posted a video praising the death of LKY, calling him “totalitarian,”
and likened him to Jesus Christ.
Singapore’s relations with neighboring countries remained patchy throughout the year. Singapore was praised by Indonesia for its meaningful assistance during the search and recovery operation of Indonesian AirAsia flight QZ8501, en route to Singapore from Surabaya, that crashed in Indonesian waters late last year. Singapore- Indonesia relations, however, were again in turbulence due to the haze crisis started in mid-2015. The Indonesian government also sounded its intention to take over control of airspace above the Riau Islands that has been controlled by Singapore since 1946, raising anxiety in Indonesia-Singapore bilateral relations. Control of the Flight Information Region (FIR) is regarded vital for Singapore’s role as an aviation hub as well as for the provision of employment.
Meanwhile, finding demographic balance between Singaporeans and immigrants remains a daunting task for Singapore. Although immigrants have admittedly played a significant role in running the country’s economy, the high influx of foreign workers have put societal cohesion at risk and created resentment among natives.
Thailand
The most coup-prone country in the region, Thailand, saw little progress in the democratization process throughout 2015 and was struck by one of the most violent terrorist attacks in the country’s history.
The military junta remains in control of the government since it launched a coup on May 2014. Coup leader-turned-Prime Minister General Prayuth Chan-Ocha lifted the martial law on April only to replace it with a new order that imposed harsher security measures across the country. Under the new order, military personnel are granted powers to issue summons and arrest those who commit crimes against the royal family or against national stability, and those who commit crimes involving war weaponry, or who violate the orders of the NCPO (National Council for Peace and Order) aka the junta. The prospect for the promised election to restore democratic governance is also grim as the military junta has yet to approve a new constitution to replace the military-imposed interim constitution.
Meanwhile in August, the country was caught in surprise after the worst bombing attack in the country’s history took place inside the Hindu Erawan Shrine in Bangkok, killing at least 20 people and injuring 125, most of them are tourists. The bombing was a huge blow for the country as Thailand’s economy heavily relies on tourism. A number of suspects have been arrested ever since.
Ongoing investigation and a number of arrest that have been carried out suggest the involvement of Chinese Uighurs international network in the attack. A month before the attack, Thailand forcibly repatriated over 100 Uighurs to China, where the ethnic minority group would likely face prosecution by the central government.
In addition to the August Bangkok bombing, the fear of terrorist attacks has increased significantly in Thailand over the last year due to the finding of Islamic State extremists’ traces in the country.
Indeed, a leaked memo from Thai Police containing “a secret Russian security briefing” shows that 10 IS militants have sneaked into the country and planned to attack popular tourists spots in Thailand.
The final blow to Thailand’s long-championed tourism sector came when the Federal Aviation Administration (FAA) degraded Thailand’s aviation safety rating to Category 2 because the country had failed to meet minimum international standards. The decision means that Thai airlines will face a ban to open new routes to the United States as well as raising prospects of similar restrictions on routes to Europe or East Asia.
The Habibie Center was founded by Bacharuddin Jusuf Habibie and family in 1999 as an independent, non-governmental, non-profit organisation. The vision of The Habibie Center is to create a structurally democratic society founded on the morality and integrity of cultural and religious values.
The missions of The Habibie Center are first, to establish a structurally and culturally democratic society that recognizes, respects, and promotes human rights by undertaking study and advocacy of issues related to democratization and human rights, and second, to increase the effectiveness of the management of human resources and the spread of technology.
ASEAN STUDIES PROGRAM The Habibie Center Jl. Kemang Selatan No.98, Jakarta Selatan 12560 (P.) 62 21 781 7211 (F.) 62 21 781 7212 www.habibiecenter.or.id www.thcasean.org
facebook.com/habibiecenter @habibiecenter
The ASEAN Studies Program was established on February 24, 2010, to become a center of excellence on ASEAN related issues, which can assist in the development of the ASEAN Community by 2015. The Habibie Center through its ASEAN Studies Program, alongside other institutions working towards the same goal, hopes to contribute to the realization of a more people-oriented ASEAN that puts a high value on democracy and human rights.
The objective of the ASEAN Studies Program is not merely only to conduct research and discussion within academic and government circles, but also to strengthen public awareness by forming a strong network of civil society in the region that will be able to help spread the ASEAN message. With the establishment of ASEAN Studies Program, The Habibie Center aims to play its part within our capabilities to the ASEAN regional development.
Lao actors wearing Khon Masks.
Photo Credit: Darren On The Road - originally posted to Flickr.
