ASEAN’s Journey to Community Building in East Asia

by Hadi Soesastro

 

 

CSIS (Indonesia)

Introduction 

ASEAN provides a “reality check” for regionalism in East Asia and the wider Asia Pacific region. It can suggest the kind of regional cooperation that can be promoted and the extent to which regional integration can be deepened.

Two points need to be made at the outset. The first is that the ASEAN region consists of a diverse set of countries, some of which have gained independence and sovereignty only within the previous generation. There are major gaps in their economic capabilities, and some have begun to open up economic and political systems only in the last decade. And yet, they have come together and committed themselves to the creation of an ASEAN Community. The second is that ASEAN has been engaged in efforts to promote cooperation and community building with other nations in the wider regional context of East Asia and the Asia Pacific region, both bilaterally through regular exchanges with Dialogue Partners and regionally in the ASEAN Plus Three (APT), the ASEAN Regional Forum (ARF), the Asia Pacific Economic Cooperation process (APEC), and even inter-regionally with Europe through the Asia Europe Meeting (ASEM) and Latin America through the Forum for East Asia Latin America Cooperation (FEALAC). These interactions have an impact on ASEAN cooperation, and have also resulted in dynamic developments in the wider region.

 

 

 ASEAN Style of Regionalism

 In Asia, ASEAN is the first attempt at regional community building. ASEAN is an on-going experiment in community building. It began in 1967 as a regional cooperation arrangement to promote welfare and peace in Southeast Asia. In that sense, it was based on some vision of regional order and regional community. Building this regional community began with some modesty. The regional arrangement sought to promote cooperation in the economic and social fields. This was understandable. The region had just opened up a new page in its history. Having gained independence and having experienced continued internal turmoil for about two decades, and more importantly, having ended political animosities, the five original members of ASEAN embarked on the path of community building by taking steps to learn more about each other and to learn to live together in harmony and peace.

It took these countries almost a decade to bring their leaders together for the first

Summit meeting. That happened in 1976 in Bali. From then on, several concrete cooperation programs were introduced. They included the ASEAN Industrial Projects (AIP), the ASEAN Preferential Trading Arrangement (PTA), ASEAN Industrial Joint Venture (AIJV), and ASEAN Industrial Cooperation (AICO), to name some of the more important programs. ASEAN members began to learn how to cooperate and work together to achieve some common objectives. They were prepared to pool their resources, but they were unprepared to share their markets. Therefore, there were continuing tensions between “resource pooling” and “market sharing” in implementing and up-grading the cooperation programs. As a result, not much progress was achieved in the field of economic cooperation.

ASEAN’s founding fathers did not envision the economic integration of the region. In their view, that was a remote possibility, perhaps even an “impossibility”. However, gradually regional economies became more integrated. It was the remarkable economic growth of regional countries and gradual economic reform and opening up that greatly increased their economic interactions. This was not a direct result of ASEAN economic cooperation programs. Rather, the region saw the working of “market-driven” integration.

 

 

 

This market-driven integration was not independent of developments in the political field and the intensification of ASEAN external relations. As the region turned into an ocean of stability and peace, thanks to the establishment of the regional forum, national governments were able to concentrate on national economic development. In the two decades until the middle of the 1990s, the region was growing at an average rate of 7 percent or more. This made the region even more attractive for trade relations with and investment from other parts of the world. The wave of Japanese foreign direct investment following the Plaza Accord in 1985 further deepened the development of regional production networks.

ASEAN has had established dialogues with its main trading partners since the late 1970s. These dialogues helped shape trade, aid and investment policies of ASEAN’s main dialogue partners in enhancing cooperation with ASEAN. In turn they also contributed to ASEAN’s increased diplomatic clout in the international arena.

Increased political cooperation amongst ASEAN members was a manifestation of the growing need to coordinate their views and policies in regard to international and regional strategic and political developments. The fall of Saigon changed the region’s political map, but the wave of “boat people” from Vietnam and the subsequent invasion of Cambodia by Vietnamese forces created potential sources of instability for Southeast Asia. ASEAN’s determination to help resolve the conflict in Indochina provided strong glue for ASEAN’s cohesion. ASEAN’s efforts were supported by the international community. Its international standing was at its height and signified ASEAN’s success.

 It was felt, however, that the region needed to step up its economic cooperation to be able to effectively respond to economic globalization. There was much talk about the need to take “bold” decisions in the economic field. Eventually these led to the decision in 1992 to establish the ASEAN Free Trade Area (AFTA). Its boldness was the agreement to promote regional economic integration through resource pooling and market sharing. The ASEAN leaders produced a new kind of community building, namely one that stresses more on openness to each other, economically, socially as well as politically. ASEAN, it was argued, should have reached a state of maturity that allows them to be more open to each other. Due to growing interdependence, developments in one member country are likely to have a greater effect on the neighbors and the region as a whole. Thus came about the calls for “enhanced interaction” that allows for greater openness to comments and suggestions from fellow members on internal developments.

Another major move was the expansion of membership to finally complete the “One Southeast Asia” project. It was remarkable that in the middle of the 1990s ASEAN accepted the membership of Vietnam, its erstwhile enemy. A few years later, Laos and Myanmar were also brought in. Cambodia’s membership was delayed because of its internal developments. By the late 1990s, all Southeast Asian countries had become members of ASEAN, realizing the founding fathers’ dream. The broadening of ASEAN has become a challenge to ASEAN’s deepening. The new members have to take part in AFTA, but they are each given a longer time to implement the trade liberalization program. In reality, a two-tier ASEAN has emerged. This should not be a problem so long as they share a common goal.

 ASEAN Vision 2020 was formulated to provide such a common goal. Its implementation was guided by the Hanoi Plan of Action (HPA). At the mid-term review of the HPA, it was felt that ASEAN members must have stronger commitments to realize the ASEAN Vision 2020. This led to the proposal to deepen ASEAN economic integration towards an ASEAN Economic Community (AEC). By the time Indonesia hosted the Summit in Bali in 2003, ASEAN members agreed to create an ASEAN Community by 2020. As stated in the so-called Bali Concord II, the ASEAN Community consists of an ASEAN Economic Community, an ASEAN Security Community, and an ASEAN Social and Cultural Community. At the following Summit in Vientiane, leaders endorsed a Vientiane Action Program (VAP) to guide the process of community building in ASEAN for the next five years.

It has taken ASEAN nearly 40 years to come to the point where its members agree to form a Community (with a C) and not simply a community (with a c). They have about 15 more years to realize this vision. This remains a big challenge for ASEAN. It can be argued that this next phase in the integration process will be much more difficult.

The ASEAN model of community building, when contrasted to other experiences, is seen as having a distinct characteristic, namely its loose and open-ended process and its reliance on minimal institutional arrangements. These, plus the principle of consensus and the sanctity of national sovereignty, have characterized the so-called ASEAN way. However, the ASEAN way has undergone a modification. ASEAN’s mode of operation has evolved from one that was based on full consensus to one that allows for the emergence of the coalition of the willing. Several members also believe that the sanctity of national sovereignty can no longer be used as a protection against irresponsible actions. A new ASEAN way may be necessary to realize the ASEAN Community.

 

The experiment will continue. To some extent the ASEAN experience and experiment have inspired community building in the wider region.

 

ASEAN and Regionalism in Asia Today

Regionalism has become a “booming” industry in Asia. There are many initiatives to form regional cooperation processes. They can be found at the inter-governmental level as well as at the non-governmental level, and they involve different subsets of countries in the region.

These initiatives have different objectives and manifestations: they may be aimed at strengthening functional cooperation in a variety of areas, developing regional mechanisms and institutions, promoting regional economic integration, as well as establishing a regional community.

It is important to again review the main principles for organizing the region that have emerged from the many discussions involving a wide range of regional stakeholders. They were clearly spelled out in the early years (1980s and 1990s), but in later years they have become blurred.

 

The first principle is “open regionalism”. Regionalism in Asia should not be an inward looking and discriminatory type of arrangement. When ASEAN formed AFTA, this principle appeared to have been violated. However, ASEAN never meant to create an inward-oriented regional market (an “internal ASEAN” market). ASEAN’s trade is predominantly with non-ASEAN countries. Its main objective was to create a competitive regional economy that becomes attractive to global investors that will use it as a production and export platform for global markets. The principle of “open regionalism” in action in ASEAN is manifested in the reduction of MFN tariffs in parallel to or in some instances faster than the AFTA (CEPT) preferential tariffs. 

 

APECC’s liberalization agenda is also based on this principle. Liberalization, i.e. removal of trade barriers, is undertaken unilaterally by each APEC economy but in a concerted manner. This modality is known as “concerted unilateral liberalization”. There are views questioning the efficacy of this modality. However, APEC is a non-binding process. As such, this modality is the only feasible one. If this process has not delivered on the expectations, this could well be due to the weak “peer” process (pressure) that should drive trade liberalization.

There are two views on the future direction of APEC economic cooperation. Those that are unhappy with the results so far have demanded a radical change towards a formal Free Trade Area of the Asia Pacific (FTAAP). The status quo group argues that the FTAAP is contrary to the principle of “open regionalism”-- and the political feasibility of the FTAAP proposal is highly problematic because the region is so diverse. It could well be that because a region-wide FTA is almost impossible, countries have resorted to sub-regional and even bilateral arrangements. These have proliferated lately, especially in Asia and the Asia Pacific region.

The second principle is that regional community building is much more than trade liberalization. It is a comprehensive undertaking and at least must include the following aspects: liberalization, facilitation, and development cooperation. In APEC these aspects have been translated into the TILF (trade and investment liberalization and facilitation) agenda and the ECOTECH (economic and technical cooperation) agenda. In the past few years two other agenda items have been added, namely human security and governance.

 

The focus, however, remains largely on trade liberalization. APEC’s progress is measured in terms of progress in its trade liberalization agenda. This is so because the goals of APEC community building have been narrowly defined as “achieving free and open trade and investment in the region by 2010 for the developed economies and 2020 for the developing economies” (Bogor Goals).

 

In ASEAN, the focus of economic cooperation is in the realization of the ASEAN Free Trade Area (AFTA) at the latest by 2015 (for some CLMV countries and certain agricultural commodities), while the goals and process towards an ASEAN Economic Community by 2020 remain ill defined.

 

It is reality that FTAs have become to be seen as the main manifestation of regional economic cooperation. They are being broadened to include other aspects, such as investment, competition policy, and a number of behind-border issues. These more comprehensive agreements are called “new age” agreements, EPAs (economic partnership agreements) or CEC (comprehensive economic cooperation) agreements. 

 They involve hard-nosed negotiations amongst participating economies as they revolve around exchanges of concessions. The whole atmosphere of “confidence and community building” is being reduced to a game of bargaining. The other aspects of cooperation have been overshadowed by this exercise in bargaining. This is not the idea of Asian community building that is characterized by sharing, solidarity, and mutual support.

East Asia community building, proclaimed to be different from that of APEC because it does not involve such countries as the United States, is in danger of falling into the same trap as other regional initiatives. It lacks innovative ideas to go beyond forming an FTA in developing its institutional identity.

 

ASEAN is pretty much in the forefront in developing comprehensive FTAs with a number of countries:

 

China, Japan, Korea, India, and Australia and New Zealand It is also exploring similar arrangements with the EU (European Union) and EFTA (European Free Trade Area). There is also the Enterprise for the ASEAN Initiative which will consistof bilateral FTAs between the US and selected ASEAN countries.

In addition, many Asian countries are forming bilateral FTAs with other countries inside and outside the region, causing problems of “managing an Asian noodle bowl”.

 

In theory ASEAN could play a significant role in maintaining coherence and consistency in all these initiatives because it is placed in the center stage. This is the main challenge for ASEAN as well as for the region as a whole, but ASEAN still lacks a clear and firm strategy to perform this critical role.

 

As momentum for East Asian integration gathers steam, speeding up ASEAN regional integration becomes an urgent matter. ASEAN economic ministers on 15 May 2006 advanced the AEC completion date to 2015 (instead of 2020). It is argued that, to remain in the driver’s seat, ASEAN must become a single, highly competitive market.

 

 

A Blueprint for an ASEAN Economic Community

 

It has taken ASEAN a whole decade to translate its vision of an ASEAN economic community into a blueprint. The beginning was the ASEAN Vision 2020 that was adopted by the ASEAN leaders in December 1997 in Kuala Lumpur. The vision envisaged “a stable, prosperous and highly competitive ASEAN economic region in which there is a free flow of goods, services, investment and freer flow of capital, equitable economic development and reduced poverty and socio-economic disparities” by the year 2020. The Hanoi Action Plan was issued as a first step to implement the vision.

 

 A further boost came from the Summit in Bali in October 2003 when the leaders signed the Declaration of the ASEAN (Bali) Concord II. They declared that the ASEAN Economic Community (AEC) shall be the goal of regional economic integration as outlined in the ASEAN Vision 2020. In December 2005, the ASEAN Leaders discussed the acceleration of the AEC to 2015.

 

Subsequently, the High Level Task Force on ASEAN Economic Integration took up the matter and recommended to the ASEAN Economic Ministers (AEM) that the establishment of the AEC be advanced from 2020 to 2015. They also requested the ASEAN Secretariat to develop “a single and coherent blueprint for advancing the AEC by identifying the characteristics and elements of the AEC by 2015 consistent with the Bali Concord II with clear targets and timelines for implementation of various measures as well as pre-agreed flexibilities to accommodate the interests of the CLMV and other concerned Member Countries.” The AEM endorsed the recommendation and agreed to propose the acceleration of the AEC to the leaders at their Summitin January 2007 in Cebu, the Philippines.

 At the ASEAN Summit in November 2007 in Singapore, the leaders adopted the AEC Blueprint. They stated that each ASEAN Member Country shall abide by and implement the AEC by 2015. They also tasked the concerned Ministers, assisted by the ASEAN Secretariat, to implement the AEC Blueprint and to report regularly on the progress of its implementation through the Council of the ASEAN Economic Community.

The AEC Blueprint is definitely a serious document. It is the first of its kind for ASEAN. The Blueprint has been crafted to realize the AEC, defined by its four main characteristics, namely a sin­gle market and production base, a high­ly competitive economic region, a region of equitable economic development, and a region fully integrated into the glob­al economy. This clearly shows the comprehensive nature of the Blueprint.

To ensure its successful realization, there needs to be a common understanding of the essence of each of the above characteristics. The idea of a single market and production base is essentially about providing consumers in the region with an expanded market from which they can fulfill their consumption needs and producers in the region with an expanded space in which they can undertake their production activities without having to worry about existing national (administrative) boundaries within the region. Activities in this expanded market can exploit economies of scale and the differing comparative advantages of the constituent members in the region. Creating this expanded market requires that all barriers to trade in goods and services as well as investment be fully removed. ASEAN governments have agreed to achieve this by 2015, in about 7 years from now. ASEAN has come a long way since the agreement to form the ASEAN Free Trade Area (AFTA) in 1993, but removal of all barriers still faces many hurdles, not only physical and technical, but also economic and political as well as cultural.

ASEAN’s decisions to form AFTA and subsequently to create a single market and production base, by removing barriers to cross-border economic transactions, are fundamental measures to create a competitive economic region. The establishment of a free trade area was not meant to create an internal market in the region but to turn the region into an attractive production and export platform for global and regional (ASEAN) investors. In addition, several measures will need to be undertaken at the regional level to continuously increase the region’s attractiveness to global investments. These include the development of a regional framework on competition policy, regional cooperation on IPR (intellectual property rights), and regional cooperation in infrastructure development.      

As ASEAN moves towards deeper economic integration a greater emphasis needs to be placed on developing an appropriate competition policy regime. The globalization of business also highlights the importance of competition issues. A competition framework assists in the healthy development of the private sector and in the sound handling of anti-competitive behavior. Healthy competition in the ASEAN region ensures the attainment of a competitive economic region.

Infrastructure development in the ASEAN region is a key catalyst for international competitiveness. It also plays a critical role in the economic development and growth of the members. Regional cooperation in infrastructure development can produce a more efficient system of transportation as well as telecommunications and energy networks. It can promote regional integration and contribute to narrowing the development gap within the region.

Economic integration must also be accompanied by specific efforts to reduce development gaps as manifested by large disparities in income, poverty incidence and other dimension of human development among member countries as well as within member countries. Trade and investment liberalization do not automatically reduce development gaps. In fact, in the short term they might aggravate the problem. A development agenda needs to be introduced to strengthen the less developed parts in the region to facilitate further trade and investment liberalization and domestic restructuring.

 Any regional integration requires the provision of regional public goods. These public goods can be in the form of technical assistance, grants-in-aid, concessionary loans (ODAs), preferential market access without reciprocity and other privileges. The provision of these regional public goods is often referred to as “enabling clause” with the objective of strengthening human and institutional capacity in the less developed members. The key in the provision of regional public goods however is to ensure that they benefit all ASEAN members and are seen to help “level up” the region as a whole. There needs to be a special development fund to finance the development of regional public goods.

And finally, ASEAN has been at the forefront in promoting and practicing the concept of “open regionalism”. It has made great progress in regional economic cooperation and integration while strengthening its links to the rest of the world and deepen its integration into the global economy.

 ASEAN has a great stake in the continued open, fair and more equitable international economic regimes. This interest must be ensured by a strong, pro-active and well-coordinated ASEAN multilateral economic diplomacy.

 ASEAN has taken various initiatives at promoting and taking an active part in wider regional cooperation arrangement and community building processes. These include the ASEAN Plus Three (APT), the East Asia Summit (EAS), the Asia Pacific Economic Cooperation (APEC) as well as ASEM (Asia Europe Meeting) and FEALAC (Forum of East Asia and Latin American Countries). These efforts are in line with ASEAN’s strategy of concentric circles of cooperation, which helps ensure optimal outcomes for ASEAN’s integration into the global economy. This is an integral part of the efforts to realize the AEC.

 

 Since ASEAN is engaged in a number of ASEAN+1 initiatives (with Australia-New Zealand CER, China, India, Japan, and the Republic

of Korea, and prospectively also with the European Union), it needs to coordinate all these efforts. Most of the negotiations have been completed. Beyond the negotiations, they should develop common strategies and approaches to implementing the agreements in the more difficult and complex areas of services, investment, intellectual property (IP) protection, competition policy, and government procurement. These could reinforce the efforts to realize the AEC.  

 

 

 

The Blueprint should be seen as a grand plan, consisting of roadmaps to delivering specific outcomes, namely the objectives of the AEC, by organiz­ing sets of deliveries (so-called `core ele­ments') to be carried out by purposeful­ly designed delivery vehicles (or `actions/measures'), all of which are to be deliv­ered within a certain timeframe (as in­dicated in the `strategic schedule'). The Blueprint has identified 17 core elements of the AEC and included 176 priority ac­tions to be undertaken within a strate­gic schedule of four implementation pe­riods (2008-2009, 2010-2011, 2012-2013; and 2014-2015). The 17 core elements are listed in the Annex.

The AEC Blueprint is a clear depar­ture from ASEAN's tradition as it has not been its practice to devise a blueprint to achieve its objectives. In the past, the process of regional cooperation and “re­gional community building” has been kept open-ended, driven by the dynam­ics of the process itself and often dictat­ed by the slowest mover. With the adop­tion of the Blueprint, ASEAN is now ready to move into an integration pro­cess that is driven by clearly defined end goals and timelines. Having said that, ASEAN is largely still a voluntary orga­nization with decisions being mostly of a non-binding nature. Although the AEC Blueprint has become a binding docu­ment for member countries, there is a se­rious lack of capacity in ASEAN to en­force its decisions either at the region­al or at the national level. An ASEAN Charter should be able to change this.

 

 

 

 

 

 

 

The Blueprint is not a de­tailed agreement that resulted from lengthy negotiations up front, as was the case with NAFTA (North American Free Trade Area), which was a narrow but rather deep integration project. In a sense, the ASEAN process towards re­alizing the AEC is more like that of the EU (European Union) rather than that of NAFTA. The stark and important differ­ence, however, is that the process of EU integration is driven by strong regional institutions, whereas in ASEAN such in­stitutions still need to be developed.

 

 

 

 

 

 

 

 

 

Some details of the plan have been left out, perhaps in recognition of the fact that an agreement on several aspects of “community building” cannot be reached until there is great­er confidence and comfort in the process and the existence of a larger and stronger con­stituency. The existing gaps amongst member countries appear to be another reason for this. In some areas, the Blue­print has gone rather far, but this was made possible by having a provision for “pre-agreed flexibilities.”

 

 

 

 

 

 

 

 

 

Some goals in the Blueprint remain vaguely defined, and “milestones” are still missing. Therefore, in the process of its implementation, signposts will need to be erected along the road to help indi­cate the progress made towards achiev­ing the goals. Here is where the develop­ment of “scorecards” can play a useful, perhaps even critical, role in the success­ful implementation of the Blueprint.

 

 

 

 

 

 

 

 

 

Having the Blueprint also means that the process of regional economic inte­gration will receive greater public scru­tiny. ASEAN has made progress in publicizing its many initiatives, but it has a rather poor record in informing the public about the implementation and out­comes of those initiatives. Many observers have complained about ASEAN's lack of transparency in that sense. This lack of transparency could well be due to the fact that the organization wants to spare member countries from the em­barrassment of failing to implement their commitments. Perhaps there is greater realization in ASEAN now that this lack of transparency could well be the cause for the poor record of its performance.

 

 

 

 

 

 

 

 

 

The Blueprint will also help coordinate the many efforts to achieving the objec­tives of the AEC and to drive forward the process of integration. It provides for a framework to organize a set of peer re­view mechanisms, based on systematic monitoring and tracking at the region­al and national levels that can help erect meaningful “signposts” to indicate prog­ress (or the lack thereof) towards estab­lishing an economic community. Sys­tematic efforts at monitoring and track­ing the implementation will contribute to the successful implementation of the Blueprint. In turn, this can help identi­fy areas in which analysis, policy devel­opment and technical inputs will need to be organized in the process.

 

 

In a public seminar in Jakarta in No­vember 2007, the Indonesian Trade Min­ister identified several key challenges for Indonesia in the implementation of the AEC Blueprint. These include customs modernization, standards and confor­mance, and infrastructure development. In addition, she stressed the importance of establishing institutions or mecha­nisms within Indonesia to monitor the implementation of commitments. Simi­lar challenges are likely to be faced by other member countries. ASEAN mem­ber countries must now focus their at­tention to implementing the Blueprint by organizing themselves accordingly. Each member country will have to begin this process by preparing a more detailed “na­tional action plan.” How this will be or­ganized will likely differ in the different member countries, but a clear and strong focal point must be established. 

At the regional level, the Blueprint has outlined the ASEAN bodies that will be involved in the coordination of the implementation of the Blueprint. These will include not only government agencies, but also sectoral bod­ies and business associations as well as civil society. The ASEAN Secretariat is entrusted with a major task in reviewing and monitoring the implementation of the Blueprint. It is already devoting about 60 per­ cent or more of its resources to this task. It definitely needs to be strengthened. However, without the cooperation and serious national efforts on the part of member countries, ASEAN will not be able to pass the challenge of implementing the Blueprint with flying colors.

 This is a challenge for ASEAN today.