My first guiding principle is this: willing and active co-operation between independent sovereign states. Europe will be stronger precisely because it has France as France, Spain as Spain, Britain as Britain, each with its own customs, traditions and identity. It would be folly to try to fit them into some sort of identikit European personality.

Margaret Hilda Thatcher, Prime Minister of the United Kingdom (1979-1990)


 

By Realttorney


 

The Association of Southeast Asian Nation (ASEAN) is not a stranger to the author. His undergraduate thesis at the University of the Philippines, Diliman was entitled “ASEAN Awareness Among Filipino Students.” It measured the level of awareness of Filipino college students in the early 1993 vis-à-vis the inter-governmental organization that just celebrated its silver anniversary the year before. 

Three years removed from its golden anniversary, ASEAN has been a surprisingly relevant organization to this day despite the creation of the Asia Pacific Economic Cooperation (APEC) in 1989 and the emergence of China as an economic powerhouse in the Asian Region. 

The grand vision of the organization is the establishment of the ASEAN Community by 2020 comprising of three (3) pillars, namely the ASEAN Political-Security Community, the ASEAN Socio-Cultural Community, and the ASEAN Economic Community (AEC). 

I think this is the attempt of ASEAN leaders to create a supranational entity that is likened to the European Union with a single currency called the Euro. The integration, so to speak, is based on the establishment of each of the 3 communities mentioned above by the year 2020.

At the 12th ASEAN Summit in Cebu City held on 13 January 2007, the leaders of the ASEAN member-states reaffirmed their collective commitment to accelerate the establishment of the ASEAN Community, including its AEC pillar, to 2015.

AECAccording to the ASEAN website, the AEC shall be the goal of regional economic integration by 2015. AEC envisages the following key characteristics: (a) single market and production base, (b) a highly competitive economic region, (c) a region of equitable economic development, and (d) a region fully integrated into the global economy.

Spire Research reports that the “AEC is an initiative to transform the [ASEAN] region into an area with free movement of goods, services, investment, skilled labor, and a freer flow of capital.

Moreover, as pointed out by Spire Research, “the vision for AEC 2015, is the partial economic union of 10 ASEAN countries namely Thailand, Myanmar, Laos, Vietnam, Malaysia, Singapore, Indonesia, the Philippines, Cambodia and Brunei, to usher in a new era of economic co-operation.”

In my mind, it is a step beyond the ASEAN Free Trade Area (AFTA) that was created way back in 1992 when ASEAN had only six members. And I bet a lot of ordinary Filipino business people and professionals alike have not heard of or know what AFTA is in the first place.

So, how big will this partial economic union be?

Spire Research estimates that ASEAN has an aggregate economic size of USD2.3 trillion, a combined population of 616 million, an average real GDP growth rate of 5.4% in 2012, and an estimated GDP per capita of USD3,745.

As a result, the major benefit the AEC brings is its positioning of ASEAN as a single market – similar to that of the European Union (EU), as mentioned earlier.

However, at the same time, Spire Research declared that ASEAN integration will be fraught with difficulties due to several reasons. And I fully subscribe to their commentary on this point.

I must emphasize that AEC is not a panacea to sustainable growth and poverty alleviation of each member-state of ASEAN. It will be a start towards a worthy framework to achieve economic success of ASEAN members albeit a very difficult one.

Faced with such difficulties, here are 4 reasons why the ASEAN integration may not succeed:

First, unlike the EU, ASEAN has no history of pan-regional unity at any time in the past. The ASEAN countries were never united under a common system of government, law, language and religion as was the case with the Roman Empire in Europe.

The divergence of culture, religion, customs, traditions, legal systems, dispute resolution mechanisms, language and a host of other differences between each member-states, are huge obstacles towards such a lofty goal of economic integration.

Simply put, the common culture and shared history that would facilitate greater regional co-operation is simply absent in our corner of the world in Southeast Asia.

Second, although we belong to a regional group, each country consider the other member-states of ASEAN as competitors in attracting foreign direct investment (FDI) to their own territories.

Since the rise of China and its increasing global share of trade and FDI, each ASEAN member state has been vying for a larger share of the pie within the region – particularly in the arenas of FDI and tourism, according to Spire Research.

More importantly, I think our country has never considered Thailand, Malaysia, Indonesia or Vietnam as a partner when it comes to seeking and drawing in FDI. It is a fact that competition between ASEAN members is fierce in the area of inviting foreign investors to set up shop in their respective countries.

Third, every member-state of ASEAN has an industry or sector within its economy that it wants to shield against foreign competition. This protectionist tendency is hard to shatter, much less overcome or laid aside.

Spire Research said that ASEAN countries have domestic political lobbies that are wary of the potential negative impact of AEC 2015. Specifically, in the Philippines, many politicians have called for the continued protection of the agricultural sector even past the year 2015.

It will be a tall order to convince all the various domestic political lobbies in ASEAN to relent and give AEC all the chance it can have to become successful.

Fourth, the economic insecurity of each member-state of ASEAN is the underlying basis for the successful implementation of a unified economic community.

It should be highlighted that the economic relationship of each ASEAN member will be critical in deciding if ASEAN will grow stronger. This is a reality that cannot be denied especially if one factors in the different level of economic growth and success each member-state has attained when 2015 deadline comes.

Most importantly, Spire Research posited that “should any individual member state be able to cultivate a strong partnership with China, the need for ASEAN cooperation would become less attractive.

In the end, it opined that, as each member experiences good growth, the will and desire to unite within the region will, paradoxically, dwindle.

When you pause and think about that statement, you will realize that the economic success of an ASEAN member from now until 2015 and beyond will be a great disincentive for economic integration in the Southeast Asian region.

In conclusion, Spire Research said however that the impact of AEC will only become apparent after 2015 and will depend on many factors that are difficult to foresee at this time.

The opportunities presented by the AEC should be tempered because it is not all rosy as some authors have written. There will definitely be winners and losers when AEC is ushered in 2015 – whether the Philippines is ready or not.

 

You can learn more about the impact of AEC in the “ASEAN Integration Forum” to be held in the afternoon of September 5, 2014 at the Real Estate Hub (REHub) Expo 2014 at the World Trade Center. This year’s theme is “ASEAN Integration in Real Estate and Tourism to Go Glocal – Global and Local Opportunities.