ASEAN: Establish where we are with an open mind

11 April, 2015
As appeared in TheStar.com.my

TWO Singaporeans recently disagreed with each other. Really, it sometimes happens, even if usually over something external.

One stated the notion there is, or will be, an Asean community is an illusion. In response, the other, perhaps a little defensively, argued it was a work-in-progress. As a Malaysian, I agree with both of them, although of course I hope this is not the only way we can get on with Singapore.

I have argued before, from a purist standpoint of what a community means and implies. Asean is far from being a community. There is a lot of work and time needed to achieve this but, even if a certain point has been reached where the claim to being a community can be made, which even so will be contested, there is no gainsaying there will still be challenges, pushback and backsliding.

Even in the most developed modern-day form of social organisation – the nation state – there are stresses and differences which deny true fulfilment of a community. You can pick almost anywhere in the world that bears this out, but we need look no further than our own country to see racial, religious, ideological and other differences which make a Malaysian community ill-formed. We are still striving to achieve that unity in diversity.

So, it is work-in-progress. What more with a more diverse Asean.

However, coming back to the argument of the purist, Asean does not even attempt to become a community in the sense of common identity and unity. Therefore, appellation of the term community cannot be allowed? It is, thus, all an illusion?

Here, a comparison with the EU might illuminate. Often Asean comes off worse when such comparisons are made, especially in relation to affinity to being a community. Indeed the EU was called the European Community before it became the European Union, a higher order being, a post-community political, economic and social order.

But look at the state the EU is in. Not just the euro crisis, but also challenges to free migration, dissatisfaction with unfair budgets, accusations of remoteness from local societies and, most of all, protests against imposition of Teutonic austerity measures in a situation of massive unemployment caused in the first instance by Latin poor fiscal discipline.

This is not to criticise or to say that Asean is superior. Far from it. The point is challenges – including very serious ones that could spell “game over” – there always will be. In this sense, every idea of community is an illusion, not just Asean’s. Far better, I think, to say that it is never easy to become a true community, that its achievement is elusive.

Yet it is an objective worth pursuing for the benefits of peace and the economic as well as social progress it brings.

In respect of Asean, that process is a rather functional block-building one and, particularly with the Asean Economic Community (AEC), somewhat quantifiably defined.

By official measure, Asean has achieved over 80%, if not more, of the action plans under the economic community blueprint. I shall focus only on the AEC and not make any comment on the Asean Socio-Cultural Community and the Asean Political Security Community – the other two of the three pillars of the Asean Community.

The over 80% number is an over-estimate which particularly disregards qualitative factors which often negate numerically measurable ones. The business experience shows what member states claim they have done is frustrated by non-tariff barriers (such as inconsistent and unreasonable labelling and packaging requirements), by the absence of enabling measures to realise in domestic jurisdictions what have been accepted at Asean level (such as by necessary amendment of laws and regulations), and by the introduction of what I call disabling measures (such as new laws or regulations which reverse previously accepted foreign shareholding in certain sectors out of pique or because of domestic pressure).

So while A may be counted as what has been agreed, the X, Y and Z of what should follow does not happen. Through the Lift-The Barriers (LTB) reports in the past two years, the Asean Business Club (ABC) has shown what have not been happening in 13 major sectors of the economy in terms of progress towards the AEC.

Of course there are success stories – where the X, Y and Z have happened. The automobile industry is a good example: How Thailand, for instance, has benefited from being a single production base with the supply of parts from other Asean countries which are able to cross borders without tariff charges and other impediments. Indeed businesses have benefited from the Afta (Asean Free Trade Agreement) through the Common Effective Preferential Tariff (CEPT) since 2010 to the extent that among the Asean-6 there are near-zero tariffs, while the Asean-4 (Cambodia, Laos, Myanmar and Vietnam) have been given until 2018 to reach that level – although they were required to sign the Afta to become members of Asean nevertheless.

But, let us be reminded, non-tariff barriers and other measures do exist, and objectives such as free movement of skilled labour and free movement of capital and investment are far from been achieved.

I don’t think the perfect 10 AEC is achievable by the end of 2015. However as much as possible can be achieved if the following steps are taken with sincere focused effort:

1. As the chair of Asean, Malaysia has announced there will be a stock-take of what has really been achieved so far. This is excellent, but the stock-take must be rigorous and involve the private sector. In my various capacities as chair of Asean Business Advisory Council, chairman of CIMB Asean Research Institute and president of the ABC, we are assisting in the process.

2. What can be achieved before the end of 2015 should be identified early with clear timelines on what needs to be done. In this connection the LTB reports I have referred to are a good place to start, but we have to factor in time, priorities and the decision-making process.

3. In respect of infrastructure development and harmonised regulation, the benefits of an integrated financial services sector and capital markets should be recognised as fundamental to driving Asean economies and needs.

I am not sure Asean leaders recognise this as they try to protect and develop nascent financial services and capital markets sectors. A lot of time would have been wasted before those minor markets are seen to have failed to attract capital and investment because of lack of size, liquidity and recognised regulatory standards. In the relevant sectoral LTB reports we have recommended that an expert financial services and capital market group be allowed to work through the Asean secretariat to reach Asean leaders to propose the way forward for financial services and capital market integration.

4. Asean leaders must be less reticent and more demanding of AEC objectives being fulfilled. The organisation’s and their credibility are at stake. Decisions must be made, not further studies by working groups and kicking the ball to long grass.

All Asean member states must remember they have already invited the world to come to the region to invest and trade through various free trade agreements and non-Asean companies are already here in full force. They had better wake up to this fact and not see the AEC as being a special threat to them. The SMEs that are now seen as threatened by the AEC are already threatened if they do not become more competitive, with or without government help. We cannot talk about the globalised world economy and forget about its implications – or only remember them against the AEC. This is anti-Asean!

The issues around achievement of the Asean community, any community, are complex. Strict definitional and epistemological discourse would render it not possible to call it a community. But then, where is there one in Socratic perfection?

Nevertheless, even in its own definitional terms – largely quantitative with respect to the AEC – the notion of an Asean community falls short. Therefore there must be a regroup of thought and leadership for the big 2015 announcement and, perhaps more importantly now, on the post-2015 Asean community.

Tan Sri Dr Munir Majid, chairman of Bank Muamalat and visiting senior fellow at LSE Ideas (Centre for International Affairs, Diplomacy and Strategy), is also chairman of CIMB Asean Research Institute.