ASEAN Roundtable Series: Lessons learned from Brexit – risks and opportunities for ASEAN

Published on 15 May 2017

Dato’ Steven CM Wong

Deputy Chief Executive, Institute of Strategic and International Studies

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Dato’ Steven Wong (Steve) is Deputy Chief Executive of the Institute of Strategic and International Studies (ISIS) Malaysia. He has worked in the public policy arena for 25 years, twenty of which has been with ISIS Malaysia, and has also spent eight years in the private sector where he held positions in management consultancy, economic research, corporate finance and capital markets.

Steve has extensive experience in global, regional and national political economic affairs. He was Malaysia’s principal representative to the OECD’s Dynamic Asian Economies Dialogue (1989-92) and has been on the secretariats of two ASEAN eminent persons groups (1987 and 1992). He has also served the Malaysian National Committee for the Pacific Economic Cooperation Council (PECC) and is active in the Network of East Asian Think Tanks (NEAT), among others. Steve is ISIS Malaysia’s representative in the Asian Dialogue on Forced Migration (ADFM), a network of Australian, Indonesian, Thai and Malaysian think tanks that examines regional asylum seeker and refugee issues. The ADFM has made submissions to the Bali Process on People Smuggling, Trafficking in Persons and Related Crimes, the latest being a requested review of the 2015 Andaman Sea Crisis.

Steve is a columnist for the New Straits Times where he mainly writes on national unity and social cohesion. He received his undergraduate and postgraduate education in Melbourne, Australia and is married with two adult children.

Mr. Nick White

Partner, Trowers & Hamlins Kuala Lumpur

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Nick White is a partner based in Trowers & Hamlins office in Kuala Lumpur. Nick joined Trowers & Hamlins in 1980 and became a partner in 1987. His career has included time spent in Trowers & Hamlins’ litigation department in London, and spells in three Gulf jurisdictions – Oman, Bahrain and Dubai. Following numerous years of working with Malaysian clients on their activities outside Malaysia, Nick moved to Kuala Lumpur in July 2012 to head up the newly-formed representative Regional Office in an expansion to the firm’s international network. In April 2015, the firm became the first Qualified Foreign Law Firm to be licensed to operate in Malaysia.

Nick’s practice has involved him in a wide range of client activities. In addition to his substantial involvement in litigation and arbitration, he has acquired knowledge of the various laws and legal systems of other jurisdictions, across areas including real estate and construction, mergers and acquisitions, business set ups and structures, agency arrangements, and free zone advice.

Nick has been an experienced disputes resolution lawyer. He has been involved in many high profile cases, both as counsel and arbitrator – including under ICC, LCIA, DIFC-LCIA, and DIAC sets of Rules.

Tan Sri Dr. Munir Majid

Chairman, CIMB ASEAN Research Institute President, ASEAN Business Club

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Tan Sri Dr. Munir is the Chairman of CIMB ASEAN Research Institute (CARI) and the president of ASEAN Business Club (ABC). He is also the Chairman of Bank Muamalat Malaysia Bhd, and has been on its board since 2008. He obtained his B.Sc (Econ) from the London School of Economics and Political Science in 1971, and his PhD in International Relations in 1978. He taught at the Department of International Relations in LSE from1972-1975, and was an analyst for Daiwa Europe NV in London from 1975-1978.

On his return to Malaysia at the end of 1978, Tan Sri Dr. Munir joined The New Straits Times Press (NSTP) as a lead writer and progressed to become its Group Editor. He left The NST in 1986 to become the CEO of a small merchant bank, Pertanian Baring Sanwa (PBS), which then became Commerce International Merchant Bankers, the genesis of today’s CIMB Group. He left CIMB in 1993 at the invitation of the Government of Malaysia to set up the Securities Commission and became its first Executive Chairman until 1999. He continued with his illustrious career, serving in various capacities, including as Chairman of both Celcom and Malaysia Airlines System at different times. He was the founder and President of the Kuala Lumpur Business Club (2003-2008), and was the chairman of its Advisory Council. Dr. Munir, an Honorary Fellow, is Visiting Senior Fellow at LSE IDEAS (Centre for international affairs, diplomacy and strategy).

After 43 years of being a member of the European Union, in a referendum and a result that shocked most, Britain decided to leave the EU. In the latest development in the lead up to this roundtable current United Kingdom Prime Minister Theresa May called for elections in early June of this year. She resorted to this measure to ensure that she has the mandate of the British people to lead the country through Brexit, a process which she set in motion on 29th March 2017 by invoking Article 50. This roundtable discussed the factors that made Brexit a reality and the various lessons that ASEAN can learn from the unexpected outcome.

1. Does ASEAN share a common vision?

If ASEAN were to learn one thing from Brexit it would have to be the importance of a truly shared common vision and direction, according to H.E. Victoria Treadell, British High Commissioner to Malaysia. She said that many British people struggled with one of the four freedoms guaranteed by the European Union (EU). The EU believes in the free movement of goods, capital, services, and people – it is this final freedom that many British people disagree with which eventually led to Brexit. H.E. Victoria Treadell argued that when the European Common Market began it was more of an endeavour in economic cooperation however it evolved to include integration of political and socioeconomic issues. Additionally, not everyone was in agreement with the direction of travel being set by Brussels.

The British High Commissioner said the ASEAN vision and mission needed to be clear on two levels; firstly, what ASEAN is about i.e. is it just about economic integration and secondly, if each and every one of the 10 countries is truly on board with the common vision and in agreement with the trajectory of the bloc.

Another consideration for ASEAN is the way that it makes decisions – currently it is through consensus, ASEAN integration is based on non-binding commitments of the member states. While many have criticised this method of decision making, citing that this slows down the decision process and hinders much tangible progress, H.E. Victoria Treadell pointed out that despite the fact that decisions move at a glacial pace in ASEAN due to consensus based decision-making, it may be better than the process that takes place in the EU. In the EU policies are voted in based on majority with all EU member states having to implement the outcome regardless of whether they agree with said policy or not. Nick White added that that in the EU countries integrate at different levels and speeds depending on the political and economic situation in the respective countries.

However, Chairman of CIMB ASEAN Research Institute Tan Sri Munir Majid, cautioned that Brexit should not validate a slow process of integration for ASEAN. More so it signifies the importance of having all the countries share and agree upon the vision of the regional bloc.

2. Are trade linkages and interdependence enough to hold a regional bloc together?

Dato’ Steven analysed Brexit using the Nash equilibrium. He summarised the Nash equilibrium as the state where the only way to get ahead would be to act not only in one’s own interest but also in the interest of the group. Essentially, he said that the system in the EU was in disequilibrium which led to Brexit. Which begs the question what collective action will benefit individual nations and simultaneously a regional bloc as a whole? Is the glue of trade linkages and interdependence sticky enough to keep the ASEAN from experiencing a situation similar to Brexit?

Dato’ Steven is of the opinion that the larger ASEAN member states, economically speaking, “lack a desire to move ahead”, while the smaller countries are keen to move forward because they stand to gain the most from economic integration and liberalisation. He gave the example of Indonesia which has liberalised 30 percent of its ports. Being such a large country, 30 percent of Indonesia’s ports is approximately equivalent to the total number of ports all over ASEAN, so it sees no reason to liberalise further. Similarly, Indonesia is also weary of liberalising its e-commerce sector under the Regional Comprehensive Economic Partnership because it believes its micro-small-and-medium enterprises (MSMEs) will lose out.

H.E. Victoria Treadell was confident that despite the United Kingdom (UK) having withdrawn from the EU, trade linkages between the two will definitely continue. She went on to explain that Europe needs a good deal with Britain or Europe “will be cutting off its nose despite its face”. She believes that Europe will not introduce tariffs to penalise Britain because it has left. In fact, industries in the UK and the EU are “indelibly linked and no one in Britain or EU would want to destroy that stability”. Nick White also added that there is plenty of trade to be done and that the UK was not becoming “Little England” but rather enabling itself to trade on its own terms with the rest of the world.

Dato’ Steven said that systems are complex and there are a myriad of reasons for each occurrence which can also be applied to Brexit. While some of the main reasons for Brexit was populist politics and xenophobia but he was adamant that we should not get caught up in seeing Brexit as a disaster. He pointed to the case of New Zealand in the 1970s when it lost access to the UK market as the latter joined the Common Market. This left New Zealand’s dairy market without unfettered access to its largest market. While many saw this as the end of the industry, it actually caused the country to reduce its agricultural subsidies, reduce union power and become more efficient which eventually led it to become a competitive world-class supplier of dairy products. Britain pulling away from the EU may yet have many positive unintended consequences.

3. Populist politics and the freedom of movement

H.E. Victoria Treadell mentioned that Brexit was a result of disagreement on one of the four fundamental freedoms the EU stand for, the movement of people.

Nick White touched upon immigration as factor that pushed Brexit through as well. He cited the fact that UK experiences a net migration of around 300,000 people per year burdening systems of healthcare and welfare in the country. The emigration from other European countries to UK has also led to wage depression instead of a rise in incomes for British people. However he noted that other factors also played a part including Britain’s financial contribution to the EU and its loss of sovereignty over its own laws.

While Dato’ Steven agreed to a certain degree he also believes that governance has become increasingly complex, and that the politics of polarisation, among others, is what led to Brexit. He was of the opinion that Brexit was a strange happenstance where conservatives were able to tap into the anti-establishment populace in the peripheries to gain a slight edge in the votes. He emphasised that this polarisation is observed in many ASEAN countries too and that ASEAN has to ensure that it is addressed before it reaches a tipping point similar to Brexit.

Tan Sri Munir Majid echoed this view and emphasised that if MSMEs are unable to experience the benefits from the ASEAN Economic Community, they will similarly push back against integration and liberalisation.

ASEAN should ensure that all countries truly share the vision and mission of the bloc while persevering sovereignty. Economic integration not be hijacked by other political issues. Members states should not feel that removing themselves from the bloc would be more beneficial for their trade prospects – so liberalisation should continue to occur across all countries at a pace comfortable to each respective country’s development, and ASEAN leaders should work to stamp out populist politics which could tear the bloc apart from the seams. ASEAN has the opportunity to learn these key lessons from Brexit and the experience of the European Union in order to prevent a repeat of Brexit in ASEAN.

Written by Tamanna Patel, Resident Research Fellow at CARI.

• Roundtable ponders lessons to be drawn from Brexit in SE Asia (21 April 2017)