ASEAN Collective Leadership Running on Empty

By Tan Sri Dr. Munir Majid | 2 September 2019

ASEAN Collective Leadership Running on Empty
Originally published in TheEdge Malaysia

At the Bangkok ASEAN summit in June, the ASEAN Business Advisory Council (ASEAN-BAC) asked the region’s leaders to show greater collective political leadership in the deteriorating international economic environment.

We alerted them to the need to be more active and effective at the G20 summit in Osaka then coming up at the end of June.

We said ASEAN had a crucial stake in defending world economic peace. We understand ASEAN may be powerless to intervene in the big issues of international security between the US and China, including in the South China Sea, where the regional grouping is hopelessly divided. But on the matter of an open, rules-based global trade and investment system, which ASEAN has greatly benefited from and depends so much on, it must get its combined voice heard and offer encouraging signs of economic sense.

ASEAN is well represented at the G20. Indonesia is a full member and, since 2009, the chair of ASEAN has been invited as an observer. Singapore is also there, representing the Global Governance Group of medium and small countries. However, has there ever been a joint ASEAN stand and position taken at the conclave on rice bowl issues that matter?

Does ASEAN prepare a detailed strategy on how to be effective and how to engage partners in world economic peace at these meetings? Does the grouping have a strategy it has worked out in these uncertain times of outright trade war and impending world economic recession beyond general asinine leaders’ statements at the end of every summit?

ASEAN is long on vision statements and blueprints usually going out into the next 20, 30 years. A couple of months ago, another one, the ASEAN Vision 2040 report, was released in Bangkok musing about, among the so many things it lays out in four volumes, the collapsing world trading system – as if it is not happening already all around us and eating us up.

ASEAN can more effectively move issues for an open, rules-based global free trade system and its centrality is not realised by commissioning academic reports. Neither is it just about hosting meetings and regional forums. ASEAN’s claim to centrality can only be sustainable to the extent that it is able to remain relevant and be a part of the solution to the myriad of challenges to the global commons. Where is the collective leadership to drive its centrality?

Of course, individual countries will address current economic and trade challenges to suit their interests. Vietnam seems to have benefited the most from investment relocation as a result of the US-China trade war. However, its trade surplus with the US last year was already US$40 billion, with every sign of a sharp increase this year. US President Donald Trump has already deemed the ASEAN member state a cheat. There will be action taken against the country unless it believes Trump protectionism is an aberration.

Malaysia too has gained some relocation benefits, but these too are short-term. Apart from potential countervailing American action – the country is among the ASEAN member states the US has identified as currency manipulators – Malaysia must be aware that the investments it is attracting are not the kind that moves it up the value chain.

Thailand, with its economy slowing as a result of the trade war squeezing export markets, has come out with a domestic stimulus package to sustain growth, but business and consumer confidence are not likely to rise if the external environment continues to be fraught with economic fear and uncertainty.

The point is, while individual member states have to take their separate actions and enjoy their short-term benefits, they must also think about the medium and long-term and the kind of economic world that allows them to best prosper. They must think of the common interest. This is the rules-based order that has propelled many of their economies forward and, indeed, which is what their own integration initiatives are founded on. Should they not show this desire and commitment by word and deed?

In early August, Indonesia’s President Jokowi stated ASEAN must be united against the economic circumstances caused by the trade war. Although a welcome statement from the Indonesian leader, who in his first term was ASEAN neutral, there should be content in this statement if it is not going to be just empty rhetoric.

With Indonesia at the front, Thailand, Malaysia, Singapore and the Philippines, as the founders of ASEAN, could seize this moment of high economic risk to give the regional grouping the collective political leadership which it is severely lacking. The other members will come along. If on nothing else, at least with respect to world economic conduct.

There has to be careful strategic planning from now into the November summits when ASEAN could show it has a strong and united stand on the global economic order, not just in the leaders’ statement but, more importantly, in the discussions and meetings with summit partners, particularly the US and China. The messaging, who says what, when and to whom, should be rehearsed. Afterwards, there should be a review and an assessment of what has happened, and constant communication among the leaders, even as they will no doubt return home to domestic preoccupations.

Is this too much to expect of ASEAN in a situation in its own common interest?

In terms of its own actions to speak louder than words, ASEAN leaders should push for the conclusion of the RCEP (Regional Comprehensive Economic Partnership) by the end of this year. This is actually an ASEAN initiative from 2012, often wrongly attributed to the Chinese by Westerners, which must come to fruition in this year of trade war mayhem, to show in this fastest economically growing part of the world, there is life yet in a rules-based economic order.

If India continues to be the laggard, it should be left behind to join later. The fightback to protect world economic peace and order is time-critical. Trump must not be allowed to destroy it.

The ASEAN collective political leadership can then be taken one stage further, without risk of over-reach, by forming an effective Southeast Asian Caucus at APEC 2020, which can link up with so many like-minded economies in a world threatened by US bullying. Given Tun Dr. Mahathir Mohamad’s prestige and seniority as the APEC chair, it would be a propitious moment to take ASEAN – with full collective political leadership – to a level meaningful for an open rules-based international trade and investment. There are also so many issues that cut across national borders, like the environment, sustainability and shared prosperity, that need transnational solutions.

To show that ASEAN walks the talk, the regional grouping should also look unto itself and be honest about adherence to its integration based on open trade and investment. It should not just trumpet stellar future one-ASEAN economy numbers without attending to the conditions that would get it there.

ASEAN’s extrapolated combined GDP numbers for 2025, which could make it the fourth largest in the world, for instance, depend on the fulfilment of three main conditions. Zero tariffs, which ASEAN about satisfies; reduction in cost of intra-ASEAN trade by 20% which is still to be fully satisfied; and non-tariff barriers (NTBs) coming down by half – which is a huge battle as the numbers have ballooned.

NTBs now come in the guise of NTMs (non-tariff measures) justified as protective and not protectionist in nature. But they are proliferating and many are NTBs in disguise. Certainly, they are not transparent and announced beforehand.

ASEAN-BAC, together with its Joint Business Council members, works very hard to get at these NTBs and NTMs, now totalling over 9,000. It works with the officials in working groups at sectoral levels. It relates to ASEAN economic ministers, who it is meeting again in September, and just this year has been given access to the finance ministers and central bank governors. There is much goodwill but little movement.

As noted, ASEAN-BAC also meets the leaders. Again, all so convivial and warm. But no follow-through. No collective political leadership to make important things happen.

In the past two years, ASEAN has been concentrating, at least in words, on Industry 4.0, which will bring immense benefits to the region. Frequently now, the extra US$1 trillion it will bring to ASEAN GDP by 2025 (based on a 2015 study) is being cited. Again, however, the conditions for success both at the cross-ASEAN and individual member state levels must not be neglected.

There has to be greater liberalisation and harmonisation. Take e-commerce, which will be one of the drivers of growth. The efficiency of sales will not be fully realised if there are border roadblocks and latent demand will not be able to fulfil the increased spending that will propel greater growth.

Another assumption; higher worker productivity. But will the ASEAN workers be “Tech Ready” and “E-Fit”? What is being done, individually and collectively, to address the skills gap? There’s not even enough data on the skills supply pipeline into different economic sectors.

The issues for the good of ASEAN, whether to repel the bad, as in Trump’s trade war, or to fulfil the good such as growth from greater integration and digitisation, desperately need collective political leadership. ASEAN leaders must not continue to behave as if the world moves at the pace the grouping has been operating.

ASEAN must begin to get real and not have too many apologists who contribute to keeping it in its comfort zone.

Don’t get me wrong. I am very pro-ASEAN. That is why I am so frustrated. We must strive for ASEAN optimality, not mediocrity because that is all it can take. In the context, not of 2040 or of so many years cast so far ahead, but in the very next few years, this is not good enough.

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