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In Conversation with Timothy Ong: On the ASEAN Economic Community

Author(s): Asia Global Institute

Date: Dec 31, 2015

Theme(s): Trade & Investment

Insights: In Conversation With

Asia Inc Forum Chairman Timothy Ong maps out likely scenarios as ASEAN launches the AEC.

Q: ASEAN has set December 31, 2015 as the deadline for the creation of the ASEAN Economic Community. What can we expect?

Those who expect an economic community to descend from the heavens at the end of 2015 will be disappointed. We aren’t going to see an ASEAN Economic Community (AEC) at the end of 2015, but we are going to see some progress. You could say this is typical of the ASEAN journey, where you see significant progress in terms of tariff barriers, yet there is significant obstacles still in terms of non-tariff barriers. It is very easy to see this type of development as an indictment of ASEAN. When people are skeptical about ASEAN, they will point to all the unfinished business. But all this is just a reminder that it is extremely difficult to integrate a region as disparate and diverse as ASEAN is. The richest ASEAN country is a first world economy—Singapore, which is 60 times wealthier in per capita income terms than the poorest ASEAN economy, which is Myanmar.

As an example, if you look at the World Bank’s Ease of Doing Business, which compares the rules and regulations in about 189 economies around the world, you’ll see all ten ASEAN economies on the list. Number 1 in that ranking is Singapore, which is an ASEAN economy. Number 18 is Malaysia, followed by Thailand, and then the rest. That gives you a window into how far still ASEAN has to go to become an integrated community. This also shows how challenging it is to bring together economies as different from each other as the ASEAN economies are.

Q: What kind of steps can we expect to see, and do you have a sense of what we can expect in five, ten or fifteen years?

If you speak to ASEAN officials or ASEAN ministers, you will generally find a more optimistic assessment, because there is that solidarity in the ASEAN policy establishments. But you’ll find a much higher degree of skepticism amongst business communities because as they travel through ASEAN, they seek to do business in different ASEAN countries. They discover challenges that are reflected in the World Bank survey, and they see how different rules apply to business in different ASEAN countries. My own sense is, my own view is, we must see these points of view as different perspectives. The ASEAN record in terms of economic integration is not to get to timelines. But it doesn’t mean there is no progress. It may be useful to remember that the ASEAN journey may have achieved enormous successes when it comes to maintaining peace and security between its members, but it is now moving into uncharted waters somewhat with economic integration and there are very different assessments of how much progress has been made.

Q: What factors play an important part in the creation of the AEC and are there lessons that can be learnt from Europe’s integration experience?

Confidence building is important, because the creation of an ASEAN economic community requires some surrendering of sovereignty. ASEAN is at the stage where each member economy guards its own sovereignty, its own autonomy, its own authority closely. This is natural in a region as diverse as ASEAN is. The important thing is not to be excessively discouraged.

The ASEAN journey is remarkable. It has achieved enormous successes when it comes to maintaining peace and security between its members, and it’s now moving unchartered waters. We often compare ASEAN to the European example, forgetting that there is a much higher degree of commonness among the European members in almost every respect, culturally, politically, and economically. And even their integration continues to be challenging.

Q: Do you feel that ASEAN’s leaders are looking at the European Community with more than a little bit of fear, given everything that’s been happening in that part of the world?

I don’t think so, because ASEAN is not talking about the kind of integration you see in Europe. We are long way away from that. The European (Financial) Crisis is a crisis (that arose from) a certain kind of integration. In ASEAN’s case, (that type of integration) is not what we can talk about now. We are long way away from that. However, there are lessons to be learnt from the European example. So I think if anything, when ASEAN leaders look at Europe, they are asking themselves, what other things we can learn from this. But I don’t think they are saying to themselves: “oh my goodness, let’s slow down,” because the ASEAN situation and the European situation are not comparable at this stage.

Q: So what CAN we expect at the end of 2015 with respect to the launch of the ASEAN Economic Community?

No bells and whistles from my view, but you can expect officials will probably come out with some initiatives that can symbolically represent an important step forward. But business people who are waiting for the sky to change will need to understand that given the contexts, these things take time.

I have no doubt that over time ASEAN will start, will move, but it won’t be driven by the vision of the ASEAN Economic Community. The reason is that the world is changing in such way that in order to stay competitive, there are strong pressures for us to act and work as a community. But these pressures need with countervailing pressures, arising from how diverse we are, how disparate we are as a region. And all the politics that comes from that disparity, you know the questions that you raised.

Q: China has unveiled its Belt and Road Initiative, and the region stands to benefit from this investment. Is ASEAN prepared to set aside its concerns of own sovereignty to see the Belt and Road Initiative as a positive development?

I think ASEAN views are evolving, because we live in a world where many different things are happening at the same time. So you have these very forward-looking initiatives coming from China, which have the effect of creating more space for common ground, and I think that’s the best way to look at how to promote peace and prosperity within our region. We need to look for things that we can have in common. Dr Victor Fung (AGI Advisory Board Chairman) once said that the discussion needs to be seen as a positive sum game rather than a negative sum game; let’s look at the things we can work together on. So the Asian Infrastructure Investment Bank (AIIB) and the Belt and Road Initiative would represent big moves in that direction.

But there are also other things, other sources of conflict and disagreement. There are different territorial claims that are going on within the region. In an ideal world, we would deal with one issue at a time. But in the world that we live in, they all take place at the same time. And because they take place at the same time, our positions, our views are not sometimes straightforward. They are not black and white.

I am confident that the AIIB that China has proposed will be welcomed sooner or later throughout the region. I think it’s an idea whose time is come, that the Chinese have shown commitment to an idea which, when implemented, will benefit everyone within the region. At the same time, we need to recognize with eyes wide open that there are differences. And they are bound to be differences because of the historical context. And we need to deal with these differences as best as we can. But while dealing with them, we recognize that despite those differences, there are so much that we have in common. And there are so much that we can work together on.