Challenges of unity as Asean turns 50
We often forget the important role that Asean unity has played in ensuring regional stability and peace, which has enabled Southeast Asian countries to pursue economic development and cooperation through various free trade agreements (FTAs).
There is the Asean Economic Community (AEC); FTAs with six East Asian countries (China, Japan, South Korea, Australia, New Zealand and India); and the current negotiations on the East Asia Regional Comprehensive Economic Partnership (RCEP) to consolidate all those agreements.
As a result, most intra-Asean trade tariffs – and a significant portion of trade with the six East Asian countries – are at zero per cent. We can also travel visa-free to each other’s countries. Asean is the eighth-largest regional organisation in the world with 600 million people, growing at an average of around 5 per cent.
Intra-Asean trade accounts for 25 per cent of regional trade and investment, and intra-East Asia trade accounts for two-thirds, while intra-Asean tourism accounts for 46 per cent and intra-East Asia tourism for two-thirds of tourist travel.
While Asean economic integration has been criticised for being too slow and lacking ambition, it is at least an ongoing process in contrast to stagnancy of regional agreements elsewhere or even at the World Trade Organisation (WTO). Furthermore, international commitments under the AEC have shaped and continue to influence national reform programmes, and in the growing anti-globalisation and anti-elite world, there have at least been no major reversals.
However, we cannot take this unity for granted if Asean fails to resolve the challenges it faces as it approaches year 50 in 2017. What are the changes and innovations needed going forward? These were the questions being pondered by Eisenhower Fellows in Bali last weekend at the “Asean Unity Through Changes and Innovation” summit.
The Big Four
The first challenge is the slow recovery in the global economy – especially important for Asean is the impact of the slowdown and structural changes in China. Second is increased anti-globalisation, anti-immigration and anti-elite sentiments, peaking with Brexit, and the political stance adopted across the globe including in the US and evident in Asean.
In turn these tendencies have affected the appetite for bold reforms and international cooperation on various issues that need collective action such as climate change, trade policy and international investment. Third, disruptive technologies that on the one hand increase efficiency and inclusiveness can lead to loss of jobs and impact traditional industries.
Fourth is Asean’s increased urbanisation and demographic shifts. There are ageing populations in Northeast Asia and Thailand on the one hand, and on the other hand a demographic bonus in the rest of Asean and India of young productive people who will need jobs.
What changes are needed? To remain relevant, Asean must be able to speed up and widen the scope of regional economic integration, including addressing technological disruptions and the freer flow of people that will be beneficial to all members. At the same time it must be able to address the anti-openness movement with concerns rooted in the perceived lack of spread of the benefits of economic integration between and within countries.
Various surveys in Asean show that less than 50 per cent of businesses have heard of the AEC. The utilisation rate of FTAs is only around 40 per cent and only a small percentage of small and medium enterprises (SMEs) participate in international trade.
Young people in Asean probably also have little idea about the Asean Community, even though they enjoy the outcomes: We can find JCO doughnuts in Singapore and Extra Joss in the Philippines.
In fact, they could be seen as similar to their European counterparts. A recent survey in Europe by the Foundation for European Progressive Studies found that millennials saw their future in globalisation and the continued importance of the EU, but did not trust the elites or politicians to deliver the right kind of globalisation for them – of quality growth (health and environment being important) and inclusiveness.
Thus, change is needed not just in Asean actions, but also in the way Asean operates and communicates. Political leaders need to be in tune with the needs of the people, including of youth, and to be able to truly discuss these challenges openly at Asean summits. At the same time, to be truly people-oriented and inclusive in line with the Asean Vision, the process must be made open, inclusive and participatory from the beginning – not at the end of the process of shaping our regional community.
Innovations can aid openness with more transparent evaluations of impacts. One example is the AEC Scorecard, which could be made more transparent and be lent an independent evaluation.
Also key to economic integration is getting more of region’s population hooked up to the Internet. For innovation and creativity to thrive, there has to be supporting physical connectivity, soft infrastructure of talent, a conducive innovation climate and access to networks, finance and industry.
In turn this will allow SMEs and start-ups to be integrated. The outsourcing of many services and tasks to a wide range of clusters all over Asean could be a new method. An innovative approach is also needed to manage disruptive technologies so that there is net job creation and the creation of new industries and opportunities.
These changes and innovations are just a glimpse of what needs to be done. It is the beginning of a serious conversation that must happen from political leaders down. Let’s not lament the loss of Asean unity when it is too late or when it is gone. Let’s get going on the changes and innovations that we must make to ensure regional unity – otherwise we will be living in an unthinkable world without Asean.
Mari Pangestu served as Indonesia’s trade minister from 2004 to 2011, and as tourism and creative economy minister from 2011 until October 2014.