ASEAN Economic Community 2015 goal ‘ambitious’

ASEAN’s role in maintaining regional peace and stability and the hurdles to economic integration were the dominant themes at the ASEAN Insights Conference at Asia House on 11 September.

ASEAN Secretary General HE Le Luong Minh gave the keynote speech ahead of panels that included representatives from the Foreign and Commonwealth Office, the European Commission, JCB, Standard Chartered, the Economist and ASEAN Confidential.

The first panel focused on ASEAN’s clout as a regional power and its relationships with China, the United States and Europe. In opening remarks, Tom Dodd, head of the ASEAN department at the Foreign and Commonwealth Office, noted that ASEAN was one of the few institutions in Asia Pacific helping to provide security to the region but also expressed concern over growing tensions in the South China Sea. He cited clashes between Vietnamese and Chinese vessels earlier this year after China deployed an oil rig in disputed waters.

“ASEAN sits on one of the great flashpoints of the world, which is the South China Sea,” Dodd said. “The South China Sea is very important because it’s where almost half the world’s trade flows through and any serious crisis there would have a massive destabilising impact on global markets, on global supply chains.”

Professor Chris Dixon, head of the Asia programme at the Global Policy Institute, argued that while there are rising dangers in Southeast Asia, these are often exaggerated by commentators.  In recent years China has become the key driver of regional growth and integration and has enormous vested interest in maintaining economic and political stability in the region, he said.

China’s increasing leverage in ASEAN was one of the three major trends identified by Megha Kumar, deputy director of analysis at Oxford Analytica. Chinese overseas direct investment is rising rapidly to compete with Japan’s, she said, giving one example.

“We’re not sure how ASEAN is going to be able to develop a coherent policy vis a vis China given that China is a major economic player in ASEAN,” she said. “It is the largest trading partner and it is also developing rapidly as one of the key investors in the region in key economies.”

Dominic Ziegler, Asia editor at The Economist, argued that domestic political challenges in certain ASEAN member states could also complicate efforts to craft a unified response to an increasingly unpredictable China. In Indonesia, ASEAN’s largest member and the world’s third largest democracy, president-elect Joko Widodo would probably be focused on domestic problems, he said.

“I think this will incidentally affect the ASEAN Economic Community (AEC) because you won’t see much leadership from Indonesia, particularly because there are so many small- and medium-sized enterprises there that have big concerns about trade liberalisation.”

The second panel continued to discuss the status and prospects for ASEAN economic integration, as well as the opportunities for UK firms in the region.

Marjut Hannonen, a member of the cabinet of EU Trade Commissioner Karel de Gucht, provided an overview of EU-ASEAN trade relations and said the EU would revisit plans for a regional free trade agreement following the launch of the ASEAN Economic Community (AEC), which is scheduled for the end of 2015. Negotiations for the FTA collapsed in 2009 due to the EU’s concerns over the large disparity in economic development within ASEAN.

The EU is now negotiating agreements with individual member states and concluded its first with Singapore in 2012, Hannonen said. It is currently in talks with Vietnam and Malaysia and started investment negotiations with Myanmar in March.

Philip Bouverat, director of construction equipment manufacturer JCB, said the need for massive infrastructure spending in ASEAN provided significant opportunities for his company, which generates 20 per cent to 23 per cent of its global income from Southeast Asia and India. ASEAN countries have to spend an estimated $60 billion per annum in the next decade just to get their infrastructure fit for purpose.

While JCB is strong in Malaysia and Singapore, Bouverat said countries like Myanmar and Vietnam were most interesting. “I think that the potential of Vietnam and Myanmar for this country is enormous,” he said.

Bouverat gave a blunt assessment of the 2015 deadline for the AEC, saying: “I don’t think there’s a hope in hell of it being met.” There were too many vested interests, he said, and JCB would go ahead “as if it’s not going to happen.”

Liz Chong, principal at ASEAN Confidential, said it didn’t matter whether the AEC is put in place by the end of 2015 because “you’re already seeing increasing volume in terms of cross-border trade where it is possible for these countries to see goods transported across borders very easily. I think that’s actually where we’re seeing the really granular changes happening.”

For Vasuki Shastry, group of head of public affairs at Standard Chartered, the 2015 deadline was ambitious. “There are too many caveats, there are too many exclusions in building a genuine ASEAN Economic Community,” he said.

In his keynote speech, Minh said although the creation of the AEC was still a work in progress, there had been “substantial advancement” in the run up to 2015. ASEAN was moving towards the creation of a tariff-free zone for ASEAN products, he said, with close to 90 per cent of products subject to zero duties.

He added that greater efforts were being made to improve competitiveness in the region.

“The establishment of competition laws in all ASEAN member states is part of the AEC Blueprint,” he said. “Already five member states have competition laws in place…Similarly in the area of intellectual property protection, nine member states have IP laws being enforced and the remaining one will pass its IP legislation soon.”

The conference marked the start of a programme of events at Asia House devoted to ASEAN. Minh addressed both the conference on 11 September and a private breakfast briefing for Asia House corporate members on 12 September.

A slideshow of the conference and the networking reception can be viewed below:

Ambassadors from ASEAN member states, government officials and business leaders gathered for drinks and canapés at a networking reception following the ASEAN Insights conference on 11 September. In a speech, ASEAN Secretary-General HE Le Luong Minh spoke of the achievements of the 10-member bloc.

“Amidst great diversity in our histories and cultures, amidst the many complexities of the world, ASEAN has been able to maintain peace and stability in the region and cooperate with one another to enable our economies to flourish and be resilient,” he said.

Listen to the audio recording of the ASEAN Secretary-General’s speech below:

Tosin Sulaiman is a freelance business journalist working for Asia House.

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