The New Year is usually a time to reflect on the transient nature of life and contemplate the future, but for the 600 million-plus people of the 10 member states of the Association of Southeast Asian Nations (Asean), 2015 brings about a new era, which promises to transform the landscape of the region into an integrated market of many possibilities and an enormous set of challenges.
These enormous potentials and challenges are things that Asean will have to be careful about because the dream of a much touted community — "a single market and production base, highly competitive, equitable economic development and fully integrated into the global economy, connected to the global marketplace seamlessly" — will just remain at the doorstep of the elusive reality.
Credit must be given to the founding fathers of Asean who pledged in their Asean (Bangkok) Declaration in 1967 that they would "bind themselves together in friendship and cooperation and, through join efforts and sacrifices, secure for their peoples and posterity the blessings of peace, freedom and prosperity". Successive generations of the region's peoples also deserve praise for having faithfully abided by this vision painted on the canvas of the future.
POLITICAL AND SECURITY COOPERATION
Politically and strategically speaking, much has been achieved and the global recognition for such achievements has been loud and clear. Asean has that magic "convening power" that no other power in Asia Pacific can ever claim to possess. Every major power in the region has its own historical baggage or ideological burden that precludes of even dreaming about building much mutual trust. Asean is the only forum that excludes none and accommodates all — so much so that former US secretary of state Hillary Clinton once described it as "a fulcrum of emerging regional architecture" of cooperation in the wider Asia-Pacific. Thus, the Asean Regional Forum (ARF) remains the only official, legitimate and inclusive security forum for the entire region.
And yet, a few contentious issues are still percolating and could boil over into conflict. One is the tension over the conflicting claims over the murky waters of the South China Sea. Four member states of Asean — the Philippines, Vietnam, Malaysia and Brunei — have staked claims over territorial waters, islets and shoals that China has officially included in its maritime boundary.
Another issue is the ongoing national reconciliation and the unfinished colonial agenda of ethnic integration in Myanmar. Domestic political instability in many Asean countries including religious tensions, human rights violations, violent conflicts with ethnic minorities, and the widening gap between rich and poor remain worrisome.
And lately, the military coup in Thailand has added to the uncertainty and insecurity of a region aspiring to be stable and secure for trade and investment among the member states themselves, and for potential investors waiting to join the prosperity of a region with combined GDP of $2.5 trillion.
INTEGRATION INTO A SINGLE MARKET
On the economic front, Asean has survived the latest global economic downturn since 2008 quite impressively. Together with China, India, Australia, New Zealand, Japan and South Korea (Plus Six,) the 10 member states of Asean have become a new growth centre and a "locomotive of global recovery" in the past several years.
Together, developing Asia has registered a consistent annual growth rate between 5.5% and 6.5%, while more developed regions of the world have suffered negative or very low growth.
The Asean economies appear to be resilient enough to withstand the downward trends of the global economy. Collectively, it can be said that Asean has shielded itself from drastic negative impact of the global downturn.
But Project AEC or the Asean Economic Community is running into a formidable set of obstacles brought about by the region's very diversity. While members promised to bring down tariff barriers among themselves progressively to zero by 2020, it is alarming to see how many non-tariff barriers have been erected, even by larger and more developed economies, to protect domestic industries.
Many agreements have been achieved, but in some cases members have not followed up with enabling legislation or amendments to existing rules and regulations to implement even these already "ratified agreements."
On top of that, of the total $2.6 trillion in trade that Asean member states conduct annually, only about $600 billion (a quarter) represents intra-Asean trade among the 10 countries. This is a real obstacle to a viable economic community. Compared to the North American Free Trade Area (Nafta), whose own members account for 68% of all trade, and the European Union (75-80%), intra-Asean trade is a particularly challenging area for the competition of the "one integrated market and a single production base".
To increase that dismal intra-Asean trade figure, more cross-border investments must be encouraged, more SMEs must move into each other's economy, more trade liberalisation and trade facilitation among member states must be enhanced.
Aside from the free flow of goods and services, free flow of capital and skilled labour in selected areas has also been agreed to. Medical doctors, dentists, nurses, engineers, architects, accountants, people in the hospitality industry and surveyors have been slated to flow across the Asean economic landscape since 2009. But very little is being done to actually remove the barriers for these professionals to begin to move across Asean borders,
Without freer movement of these professionals, it is difficult to imagine how an integrated market could be achieved and function effectively. And on top of that, at the lower level of unskilled workers, a rising number of Asean nationals, to the tune of 5-6 million, are crossing borders irregularly with no formality or documentation.
This lack of management and control creates other more complicated problems of people trafficking and exploitation and violation of human rights, tarnishing the image and diminishing the confidence in the emerging Asean economic community.
Each year between $130 billion and $150 billion in foreign direct investment (FDI) flows into the Asean economies. Potentially more would be diverted from other less dynamic emerging markets. But due to the lack of connectivity, physical and otherwise, the 600-plus million consumers with an expanding middle class and rising purchasing power remain disconnected. Efficient logistics is sorely needed. As long as harmonised standards of manufactured goods and services, common rules and regulations are slow to be realised, potential growth will remain unfulfilled.
Asean also is committed to expand its regional economic architecture to include the Plus Six countries in a new free trade area that would account for one-third of global GDP. The enterprise is known as the Asean Regional Comprehensive Economic Partnership (ARCEP), with Asean's own AEC as the hub of the largest economic wheel of East Asia.
But the initiative seems to be going frustratingly slowly. And in the face of the competition from the US-led Trans-Pacific Partnership (TPP), which includes some of the some countries (Japan, Korea, Singapore, Malaysia, Vietnam and Brunei), ARCEP seems to be facing strong headwinds. This in turn will have negative implications for the Asean community itself.
Only Singapore, a relatively small economy of 5 million population, so far has managed to escape the dreaded middle-income trap. Of all the 10 member states of Asean, only three — Singapore, Brunei and Malaysia — have made it to the higher-income ($10,000 per capita and more) bracket, with per capita income (in 2013) of $55,000 in Singapore, $39,000 in Brunei and $10,500 in Malaysia.
The remaining seven member states of Asean remain in the lower-income (Myanmar, Cambodia, Laos and Vietnam) and middle-income (Thailand, Indonesia and the Philippines) brackets. The economies of these countries cannot be based on abundant cheap labour any longer.
As natural resources deplete, labour costs rise, the price of environmental sustainability continues to climb, their competitiveness will diminish even more. Much reform, restructuring and investment in human resource development, scientific and technological capacity building and research and innovation is needed.
The sad reality is that not much innovation and intellectual property development has been undertaken by most Asean countries, which spend less than 1% of their GDP annually on scientific innovation and technological development, again with the exception of Singapore, spending almost 2.5% of its GDP. Unless and until Asean can stand on its own feel in terms of technological development and innovation, it will remain dependent on external sources and that will render it weak in the face of rising completion with other regions.
SOCIO-CULTURAL COMMUNITY
Asean is one of the most diverse regions in the world. Its people speak different languages, adhere to different cultural and religious norms, with habits and attitudes formed by different historical experiences and a wide spectrum of political and governance systems. And yet, there has been very little effort to cultivate a common Asean sense of ownership and belonging, which is necessary to solidify the popular base for the new regional identity. English has been designated as "the working language of Asean" in spite of the fact that over half of the population of the community will be or is already speaking Malay.
Almost half of the total population subscribe to the Islamic faith. The only one Christian Catholic state in Asia is the Philippines. The largest Muslim country in the world is Indonesia. Four connected Theravada Buddhist countries — Myanmar, Thailand, Laos and Cambodia — are within Asean.
Much needs to be done in terms of mutual respect and appreciation among the Asean population for the diversity within their ranks to prepare the ground for a viable regional community.
What is potentially grave is the emerging divisiveness among the various religious communities, representing diversity of interest and readiness to take advantage of the opportunities and potential emerging in the wake of Asean Community. Conservatism among some will fan the flames of frustration and bitterness against other elements that are better prepared and readily benefit from the new growth and new prosperity coming on the heels of new foreign investment.
Uneven development, both within and between member states, will render the Asean Community rather imbalanced and fragile with potential tension and violence waiting in the wings.
Inequity and the ever-widening gap between rich and poor within the emerging Asean Community will be a real challenge as we move into 2016 and beyond.
It has been estimated that Asean's GDP will overtake that of Japan by 2025. And by 2030, the Asean Community with a large middle class and rising purchasing power, will be the fourth largest single market after the EU, the US and China.
For these forecasts to be realised, it will depend very much on the ability of the Asean leaders and the people themselves to steer the course of their future in the direction of inclusive and balanced growth, of secure, stable and effective political cooperation and closer ties of friendship among vastly diverse neighbours.
Effective and visionary leadership will be sorely needed when it is not very much in supply. Political and economic reforms will generate instability and tension before bringing any rewards. And sensitive religious, cultural and ethnic fragility is present in every Asean member state.
As the region glides into 2015 amid excitement and much potential, difficult tasks and formidable challenges are lurking at every turn. Only with an unshakable commitment to the vision of common prosperity, to short-term sacrifices for long-term gains, and to the larger collective "We", can we all realise the dreams of our founding fathers more than four decades ago.
Dr Surin Pitsuwan is a former secretary-general of Asean (2008-12), a professor emeritus at Thammasat University, a Distingushed Fellow at King Prachadipok's Institute, a visiting professor at the University of Malaysia and a visiting professor at the Graduate Institute for Policy Studies in Tokyo (Japan).