THE ASEAN COMMUNITY – EMERGING REGION IN THE GLOBAL COMMUNITY OF NATIONS

                                                           By Ambassador(r) Gheorghe SAVUICA*,

 (Summary of the presentation in Romanian language on May 4, 2011, at the seminar organized by the Commission of Prospective Studies of the Romanian Academy on the theme called “The Future of the World Economy”)

 

1.    South East Asia’s place in the global community of nations

 

-       South East Asia has a special and important role, being a region with more than 580 mil inhabitants, and a combined GDP in 2010 of about 1.5 trillion US $. It is reach in natural and energetic resources and has a huge market and an attraction for direct foreign investments, including from the European Union.  In fact these days, The EU is ASEAN’s biggest investor.

-       South East Asia belongs to a great civilization and it is now the region where there are going on important democratic changes and challenges. Their high and steady growth rate propelled the group at the top of the world’s growth list.

 

 

-       In the economic studies as well as in the international political perception it seems that a consensus has been reached in the sense that the economic power is gradually, but surely, shifting towards East and South East Asia.

 

-       A historical retrospective look shows that the emerging economies called “The Asian Tigers”, which came out earlier than in most other regions   represent the first observation in defining the developments in this part of the world.

-       The progress was based on the massive presence of the foreign capital. The financial crisis of 1997 showed that the Asian miracle however still did not have a national or regional solid economic ground to face the crisis and recessions.

-       On the contrary, during the new crisis of the last two years, the economies of ASEAN member countries still had the benefit and support of the foreign capital, but this time they did not feel so much the impact of the crisis as they had  a much more robust internal structure as a result of the national policies pursued by the governments created under the circumstances of consolidating the democratic processes in the region as well as of the great and successful efforts of regional integration.

-       After the 1997/1998 crisis, the South East Asian countries agreed upon a regional mechanism, based on the “ASEAN + 3” partnership, regarding coordinating and supervising macroeconomic policy and identifying of a cumulative scheme to create financial reserves within the context of “Chang Mai Initiative” and later, in 2010, “The Chiang Mai Initiative Multilateralization”, which meant shifting from bilateral arrangements to a multilateral regional financial arrangement.

 

2.   ASEAN Economic Community (AEC) –emerging institutionalized economic power at regional level.

 

-       South East Asia has a particular role and place within “The Future of the World Economy” as a result of the developments and evolutions towards regional integration, that started based on successive

Prospective visions since ASEAN’s foundation in 1967 and which during the next four years, more exactly by 2015, will reach a significant level- creation of ASEAN Community, which is rising on three pillars: ASEAN political-Security Community – PSC, ASEAN Economic Community – AEC and ASEAN Socio-Cultural Community – ASCC.

 

-       By fully implementing the ASEAN Community, but mostly by creating the ASEAN Economic Community, replacing the miracle of “Asian Tigers “and in parallel with other emerging economies, as single entities, such as China, India and Brazil  a new phenomenon will appear in this region, in a certain way similar but not identical to the one existing in Europe, i.e. an emerging institutionalized economic power at regional level.

 

-       This positive development signifies an important step forward for South East Asia to be able to promote with a greater added value its interests in the global community of nations. It is at the same time a new evolution for ASEAN from a regional economic association to a regional integrated aria. AEC will transform ASEAN into a single market making the whole region much more dynamic and competitive, fully integrated into the world economy.

 

-       Based on the real progress and assessments one can say that ASEAN Economic Community will be in 2015 an accomplished target. The President of Indonesia underlined that his country in its capacity this year as ASEAN chair has taken the implementation of AEC as one of his essential priorities of his mandate.

 

-       ASEAN and implicitly AEC is now operating in an ever more globalized climate, which requires a lot of efforts and real dedication.  Implementation of ASEAN Community is the most important factor for maintaining ASEAN’s role as driving force in the process of regional integration and creation of a new East and South East Asian cooperation architecture.

 

-       The closer the ASEAN Community is the quicker has to be the elaboration of a post 2015  ASEAN vision if the ASEAN Member States would like to constitute a real force in tackling the global issues and to ensure a successful path to the global community of nations.

 

 

 

3.  ASEAN FREE TRADE ARIAS (FTAs) - a catalyst for the ASEAN Community by 2015

 

-        2010 could be called the year for ASEAN Free Trade Arias (FTAs), a catalyst for the ASEAN Community by 2015

 

-        In addition to the existing successful ASEAN Free Trade Aria( or ASEAN FTA), ASEAN-Japan FTA and ASEAN-Republic of Korea FTA, the date marked the full implementation of the ASEAN-China Free Trade Area and the entering into force of the ASEAN-Australia-New Zealand FTA (AANZFTA).  The much-awaited ASEAN-India Trade in Goods (TIG) Agreement concluded on 12 August, 2009, after six years of negotiations, provides to enter into force on 1 January 2010, once India and at least one ASEAN Member State notify completion of their internal ratification process.

 

-       The ASEAN-China FTA is the world’s third largest free-trade aria. It was first made in 2001 at the ASEAN-China Summit, which formulated a Framework on Economic Cooperation and established an ASEAN-China Free Trade Area. Under this framework, establishing a free trade area within 10 years time was agreed.

 

-       China is a key trading partner of ASEAN – the third largest – and is responsible for 11.3% of total ASEAN trade in 2008 or US$ 192.6 billion. And the data clearly show the economic clout of the FTA: a combined GDP of US$ 6.6 trillion, 1.9 billion people and total trade of US$ 4.3 trillion. According to Chinese estimations, the trade between China and ASEAN will reach the level of 500 billion US$

 

-       It is obvious that FTA is meant for the mutual benefit of all parties involved in the process. The general reaction, particularly at official

 

level, is more than favourable, considering it as an opportunity for the South East Asian Economies, their exports mainly for agricultural products being opened to a huge market as is China today and in the future.

However, the respond from some business circles, most vividly in Indonesia, was not as enthusiastic as the official statements. They fear that the entry of cheaper Chinese products would undermine domestic manufacturing.In April, 2011, the Vice-President of the Indonesian Chamber of Commerce and Industry continue to spoke in favor of renegotiating the Agreement.

-       The ASEAN-Australia-New Zealand FTA (AANZFTA) is described as the single most comprehensive economic agreement among ASEAN’s Dialogue Partners.

 

-       The AANZFTA Agreement hopes to create a trans-Pacific free trade zone comprising a market of 600 million people with a combined GDP of US$ 2.7 trillion

 

-       The ASEAN-India Trade in Goods (TIG) Agreement was concluded on 12 August, 2009. It paves the way for the creation of one of the world’s largest free trade areas (FTA) - market of almost 1.8 billion people with a combined GDP of US$ 2.75 trillion.

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-       In order to promote trade and investment flows between the two regions, ASEAN and EU agreed on the Trans-Regional ASEAN-EU Trade Initiatives (TREATI), which is a policy dialogue mechanism/process in economic and trade related issues. TREATI will also include technical assistance and pave the foundation for the development of an ASEAN- EU FTA.

 

4. Indonesia – emerging economy

 

 

-       Indonesia has been taken as an example for an emerging economy in South East Asia, which is a participant to the creation of the ASEAN Community by 2015, having in mind that this is the single country from this region which became member of G-20 and which appears on all lists of markets or emerging groups elaborated by eminent economic analysts from different countries as well as from specialized international organizations.

-       There are also lists having Vietnam, Malaysia, Singapore, Thailand and the Philippines as examples of emerging economies.

-       Indonesia ranks third in the world in terms of gross domestic product (GDP) growth rate- 2000-2009 -5.1percent; 2010 – 5.8percent; 2011 – estimated 6.2persent.

-       Indonesia is positioned as having the fastest growing economy in Asia, after China, India and Vietnam.

-       Indonesia’s domestic demand is supported by a large population base of around 232 million people, making it the fourth most populated country in the world after China, India and the U.S.

-       Indonesia’s political stability and the government’s liberalization of the economy coupled with sound fiscal and debt management have provided a conducive environment for the country to achieve robust economic growth. After President Susilo Bambang Yudhoyono took office in 2004, a comprehensive set of economic programs were implemented, such as creating more jobs, addressing corruption issues and increasing infrastructure investment spending. This economic performance has helped President Yudhoyono to secure a second term following a decisive victory in the 2009 general elections where he garnered more than 60 percent of the votes cast.

-        Foreign reserves rose  in March 2011 at a record high of 105.7 billion US$

-       The foreign trade has jumped the figure of 100 billion US$, with a significant export of row materials, representing in 2009 43 percent from GDP.

-       However, the infrastructure is not entirely ready and the corruption remains a problem.

 

-       The Economy of Indonesia is specific based on the following characteristics and stimuli for economic development:

·         healthy consumer spending with a rate averaging 4.1 percent per annum

·         the benchmark interest rate of Indonesia, unchanged at a historical low of 6.5 percent

 

·         inflation rate in the first half of 2010-4 percent

·         total FDI into Indonesia amounted to US$34.4 billion3 over the 2005-2009 period, particularly  in the mining sector, manufactory industry and transportation & communication sector Robust commodity exports: Exports have also been an important source of growth for Indonesia, accounting for 43 percent of GDP in 2009. Indonesia’s major commodity exports include oil & gas and coal which contribute 17 percent and 12 percent respectively to total exports in 2009. Meanwhile, exports of manufacturing products were driven by machinery and transportation equipment which comprise 14 percent of total exports in 2009.

·         Healthy fiscal position: a fiscal deficit of less than 3 percent of GDP over the 2000-2009 period.

·         Reduced necessity to take loans

·         Indonesia’s stock market is the third largest among ASEAN countries with a market capitalization of US$261 billion as at 30 June 2010. From 2006 to the 28 July of 2010, the Jakarta Composite Index registered a total return of 143 percent in Ringgit terms (163 percent in Rupiah terms) or a commendable annualized return of 21.4 percent.

         

- These days, the Indonesian authorities are analyzing with the business circles the Master-plan for accelerated and widened Indonesian economic development for 2011-2025. According to the estimations, Indonesia is going to be the10 largest economic countries by 2025 and the 6th largest economy in 2050 through high economic growth that is inclusive, just and sustainable.   To attain this, it requires a national economic growth of the real market of an average of 7-8% annually in a consistent manner.  Through the Master-plan, Indonesia intends to accelerate and enhance Economic growth and development through 8 sectors namely industry, manufacturing, agriculture, fisheries, tourism, telecommunications and energy and also developing national strategic regions.

 

5. The regional and international circumstances  for ASEAN and ASEAN Community

 

 

 

-       As a observer of ASEAN from the year it was born as well as of its permanent developments and from my position as specialist on South East Asia, speaking Bahasa, and having been the Head of Romanian Diplomatic Missions in Indonesia, Malaysia and the Philippines, I can affirm that during its 44 years of existence ASEAN has passed through three important steps: exclusive economic regional organization; primarily economic regional organization with added political, security and social –cultural dimensions; and regional organization in full process of political, security, economic and socio-cultural integration.

-       In its first stage, ASEAN was quoted in different ways. Romania has recognized from the very beginning its status of an exclusive economic regional organization and not a substitute to SEATO as some other countries considered ASEAN to be.

-       ASEAN was created as an Association, with a loose status, based on the predominant features in the aria – dialogue and consultation. The South-East Asia is a region of diversity from many points of view. No wonder, the unity in diversity is the driving force of their regional cooperation.

-       ASEAN was created when the nonalignment was in full spring and its principles are part of the founding document of ASEAN and of other important documents of the Association, particularly of the Treaty of Amity and Cooperation, shortly known as TAC

-       ASEAN has quite rapidly managed to capture the attention and interest of world and regional powers; later it formed an unique architecture of a institutionalized dialogue with all important actors in the context of world and regional politics – USA, EUROPEAN UNION, RUSSIA, CHINA, JAPAN, INDIA, REPUBLIC OF KOREA, CANADA, AUSTRALIA as well as with other countries from and outside of Asian region.