Asean faces calls for reform

Asean faces calls for reform

Regional integration will require Asean leaders and Secretariat to display much more toughness to make sure members don’t backtrack on pledges.

There will be no romantic overtures ushering in the Asean Economic Community at the end of 2015, say experts who believe the region’s leaders will be far too busy dealing with thorny trade issues to celebrate.

While economic integration is making progress, trade officials still must tackle “sensitive lists” of goods and services prepared by member countries. As well, participation in larger trade pacts could undermine Asean “centrality” as the guiding principle of regional integration.

All 10 Asean members are committed to negotiating the Regional Comprehensive Economic Partnership (RCEP), which also includes China, India, Japan, South Korea, Australia and New Zealand. However, some members are also exploring the US-backed Trans-Pacific Partnership (TPP), which is a far broader agreement covering trade, services and investment.

Asean will need to show strong leadership to assert its role and also ensure that members do not start trying to backtrack on their commitments to regional reforms, said a senior official from Malaysia, which will hold the Asean chair in 2015.

The comments emerged last week at the second ERIA Editors Roundtable “Challenges Ahead: AEC 2015 and Beyond”, organised by the Economic Research Institute for Asean and East Asia (ERIA) and the Prime Minister’s Office of Brunei.

Those present at the meeting also supported Malaysia’s view that a stronger Asean Secretariat was needed to help steer the course.

However, Le Luong Minh, the Asean secretary-general, did not pledge any bold actions, saying he would do whatever was needed within the provisions of the Asean Charter.

The veteran Vietnamese diplomat conceded that member states could be moving faster to ensure their national strategies reflected regional goals. As well, he said, he liked to think of the TPP and RCEP as complementary rather than competing with each other.

Rebecca Fatima Sta. Maria, the secretary-general of the Malaysian Ministry of International Trade and Industry, made a strong case for the concept of Asean centrality. She said the aim was to create an inclusive, transparent and efficient economic entity with harmonised rules and regulations, effectively plugged into global supply and value chains.

Work on regional integration began in 1998 with the adoption of the Hanoi Plan of Action, culminating in the AEC Blueprint adopted in 2007. While 80% of the measures outlined in the Blueprint to reduce barriers to trade and investment have been implemented, much more remains to be done to achieve sound AEC governance, said Ms Rebecca.

To begin with, she said, Asean needs an oversight structure for monitoring and assessing the impact of the AEC Blueprint and a host of other initiatives. The latter include various trade pacts involving Asean plus one or more other countries, known as Asean+1 or Asean+3, and the RCEP.

“Streamlining is the key,” said the Malaysian official. “We need regulatory coherence, we need to get these measures up and running — a mutual recognition arrangement and dispute settlement mechanism— and we need fewer non-tariff barriers.”

In short, Asean needs to be leaner and cleaner, the Asean secretariat needs more human capital and resources, as well as better collaboration between public- and private-sector institutions, said Ms Rebecca. Engagement with think-tanks and civil society groups will be important as well.

“We should be more realistic and confront problems, not address them just in a ‘nice’ Asean way. We need the Asean Secretariat to have power to name and shame and other mechanisms to monitor all the required and pledged processes,” she said.

Lim Jock Hoi, the permanent secretary of the Ministry of Foreign Affairs and Trade of Brunei, said that while 80% of the AEC Blueprint was already in place, the effectiveness of the implementation could be a questioned, while the public still did not appear convinced of what Asean has achieved.

He cited a recent region-wide survey which showed that 76% of the population was unaware of the benefits of the AEC, if not critical, while among businesses surveyed, only 30% of SMEs understood or believed they would benefit from the AEC.

But without the AEC, he asserted, many member countries could not have pushed for the domestic economic and political reforms they have made so far and would make in the future.

Titik Anas, an economist with the Centre for Strategic and International Studies (CSIS), said some members sensed that with five individual FTA commitments with China, India, Korea, Japan, and Australia-New Zealand, the trade regime was already too complicated to administer and there had been no significant trade improvement.

It was therefore difficult for some members to see the merits that a bigger arrangement such as the RCEP, which would eliminate non-tariff barriers and sensitive lists in all 16 participating countries, would contribute to regional trade improvement, noted Ms Titik.

“Even the AEC requires a political commitment to complete at the very end of the deadline. The sensitive lists are all there — we’re facing domestic protectionism, a human resources deficit and limited capacity to negotiate as there are too many negotiations at the same time,” said the Jakarta-based economist.

She said Asean might not have fully fledged RCEP by 2015 as dreamed, especially in the services sector, unless there were strong commitments by individual members to make harmonised concessions easier to administer. As well, she said, members should consider merging the various Asean+1 pacts into the RCEP, and improve Asean’s research capacity.

“Seven of the 16 RCEP [members] who are in the TPP will get better access, so it’s quite a strategic competition. We need to watch to see if the RCEP can be concluded in time with the Community in 2015,” Ms Titik said.

ERIA executive director Hidetoshi Nishimura was optimistic, however, saying that the RCEP was expected to have a higher-quality development agenda, “if Asean can be a driver of the substance of regional economic integration”.

“If the AEC succeeds in 2015, the region becomes more attractive as an investment destination from three dimensions: durable macroeconomy, domestic consumption and the demographic dividend,” he added.

Despite some misgivings about the future, many economists reminded the forum about the positive long-term contributions Asean had created for the region.

ERIA chief economist Fukunari Kimura said the cost to import in Asean member countries had declined relative to Singapore, as had the time to export.

Suthad Setboonsarng, a former Thailand Trade Representative, said that customs authorities, usually the bad guys in the eyes of other agencies and the public, have improved tremendously.

Certainly more has to be done in eliminating non-tariff barriers, said Mr Suthad, a consultant for Brunei, the Asean chair this year.

Mr Kimura agreed, adding that the gap in restrictiveness between Singapore and others remained wide. “Efficient logistics are key for successful regional integration,” he said.

However, there were still many instances of a substantial regulatory gap between actual and best practices, said the Japanese economist.

While reminding the forum of how much progress reforms have made in the region, Mr Suthad also noted that Asean needed to enforce agreements and compliance to further the prosperity and credibility of the region.

“More is needed to tap and reach out to SMEs to benefit from all the arrangements,” he said.

Waseda University Prof Shujiro Urata agreed that a new approach to services trade negotiation was needed to promote liberalisation and cooperation to remove barriers to doing business.

Currently, the countries that have smaller sensitive lists in the Asean+1 FTAs are Singapore, followed by Brunei, the Philippines, Thailand and Cambodia, while Indonesia has a longer sensitive list than other countries, according to Mr Urata.

Australia and New Zealand fare better than China, which has a sensitive list of 5.9% of total tariff concessions, Japan (9.1%), Korea (9.5%) and India (21.2%), according to his table.

Mr Urata also noted that countries should make sure they have safety nets and social systems in place to support those that may not benefit as much from FTA arrangements, particularly the farm sector.

Lim Chze Cheen, head of the Asean Connectivity, Asean Secretariat, said Asean governments had only 30-40% financial capacity to finance infrastructure projects, so a public-private partnership approach was needed.

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