Asean integration by 2015: Is the Philippines ready?

“GUARDED optimism” was the reply of Trade and Industry Secretary Gregory Domingo when asked by reporters about his sentiment on Asean integration by 2015. And this is how it is proceeding despite the euro experience. In a recent article by Esther Samboh of The Jakarta Post, the World Bank (WB) says that Asean should learn from the mistakes of the crisis-stricken European Union (EU). The WB’s managing director, who happens to be Indonesia’s former finance minister, said that Asean integration was still a relevant plan despite the EU’s current troubles. Here’s the rest of that article:

Debt-battling Greece may leave the union while other heavily indebted members like Portugal, Italy, Iceland and Spain may strain the other member states’ finances.

“Inconsistency in macroeconomic policy and fiscal management must be avoided,” she told reporters on the sidelines of the Asean Finance Ministers’ Investor Summit (AFMIS) at the Shangri-La Hotel in Jakarta on Tuesday.

There are concerns that the 10 Southeast Asian nations may decline like the EU as their economies are not equal and Asean leaders have different political agendas. Home to 600 million people, Asean has a combined gross domestic product (GDP) of US$1.8 trillion with total trade valued at $2 trillion among the countries.

“Some countries are advanced, some still need to catch up, but it’s our commitment to reach this Asean economic integration by 2015. And we are still on track,” Indonesian Finance Minister Agus Martowardojo told a press briefing.

Singapore, Malaysia and Thailand are more advanced, but the rest are still lagging while some, like Cambodia and Laos, are far behind, as highlighted in several competitiveness surveys.

Malaysian Second Finance Minister Ahmad Husni Hanad-zlah said the Asean grouping “fully understands the position of each country.”

“The capital market integration is a challenge. In terms of trade we have done well. We have to really make sure that we know the non-trade barriers between countries. Investment-wise, it’s very strong,” Ahmad sad.

Asean would “cautiously” move forward to establish a single currency once the Asean Economic Community had solved its disparity issues, as the region would learn from eurozone failures, Cambodia’s Minister of Economy and Finance, Kong Vibol, said.

“We learned those problems in the 1997 Asian financial crisis. We are now more resilient in terms of the financial system of the Asean members. That’s why the Chiang Mai Initiative took place,” Kong added.

The $120 billion Chiang Mai Initiative is a multilateral currency swap arrangement among Asean countries and China, Japan and South Korea, allowing members with cash flow problems to withdraw from the account at times of crisis, with the Asean+3 Macroeconomic and Research Offices (AMRO) having a surveillance function to offer early warnings.

As the world economy “enters a dangerous new phase”, Sri Mulyani said it was important for Asean states to “always focus on creating healthy environments for investment” in order to strengthen domestic economies and offset weaker exports due to slowing global demand.

Asean’s finance ministers agreed to address investors’ concerns through better policies as they saw the need to accelerate investment, given that the global economic uncertainties will affect respective economic growth, they said.

How similar or different is Asean from the EU? The aims of both bodies are quite similar: economic prosperity and the preservation of competitiveness in a globalized world, regional security, and stronger influence vis-à-vis powerful neighbors. Asean seeks to mirror the EU’s economic integration. Its three decision-making and implementing bodies mimic the EU’s set-up. However, the respective forms of integration within the EU and Asean are fundamentally different. The EU is a supranational model of cooperation. Member countries share in decision-making that transcends national boundaries. The Asean Charter, on the other hand, defines the regional bloc as a legal entity and inter-governmental organization that has authority over its members. Underlying the move toward unity and integration is its new motto: “One vision, one identity, one community.”

Decision-making and implementing bodies are currently split into three defined groups: the Asean Summit, the Asean Coordinating Council, and the Asean Community Council. The bloc’s charter strengthens the authority of the Asean Summit as the highest decision-making body. If it discovers that a member country is not implementing Asean proposals or decisions, or discovers a serious breach of the charter or the bloc’s basic principles, the Summit is empowered to issue a resolution on the matter. The Summit will also receive an annual report from the secretary-general as well as three separate reports and suggestions from the Community Council.

Asean integration will strengthen it as a regional player and perhaps offset the dominance of greater powers in the area. It is a great idea, but let us make sure our industries are ready when 2015 comes.

God is Great! –THELMA DUMPIT-MURILLO, Manila Times

thelmadm@yahoo.com