Myanmar in ASEAN : regional cooperation experience 9789812302106, 9812302107

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Reproduced from Myanmar in ASEAN: Regional Cooperation Experience, by Mya Than (Singapore: Institute of Southeast Asian Studies, 2005). This version was obtained electronically direct from the publisher on condition that copyright is not infringed. No part of this publication may be reproduced without the prior permission of the Institute of Southeast Asian Studies. Individual articles are available at < http://bookshop.iseas.edu.sg >

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The Institute of Southeast Asian Studies (ISEAS) was established as an autonomous organization in 1968. It is a regional centre dedicated to the study of socio-political, security and economic trends and developments in Southeast Asia and its wider geostrategic and economic environment. The Institute’s research programmes are the Regional Economic Studies (RES, including ASEAN and APEC), Regional Strategic and Political Studies (RSPS), and Regional Social and Cultural Studies (RSCS). ISEAS Publications, an established academic press, has issued more than 1,000 books and journals. It is the largest scholarly publisher of research about Southeast Asia from within the region. ISEAS Publications works with many other academic and trade publishers and distributors to disseminate important research and analyses from and about Southeast Asia to the rest of the world.

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First published in Singapore in 2005 by ISEAS Publications Institute of Southeast Asian Studies 30 Heng Mui Keng Terrace Pasir Panjang Singapore 119614 E-mail: [email protected] Website: http://bookshop.iseas.edu.sg All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the Institute of Southeast Asian Studies. © 2005 Institute of Southeast Asian Studies, Singapore The responsibility for facts and opinions in this publication rests exclusively with the author and his interpretations do not necessarily reflect the views or the policy of the publisher or its supporters. ISEAS Library Cataloguing-in-Publication Data Mya Than. Myanmar in ASEAN: regional cooperation experience. 1. ASEAN. 2. Regionalism—Asia, Southeastern. 3. Burma—Foreign relations—Asia, Southeastern. 4. Asia, Southeastern—Foreign relations—Burma. 5. Burma—Foreign economic relations—Asia, Southeastern. 6. Asia, Southeastern—Foreign economic relations—Burma. 7. Burma—Politics and government—1948– I. Title. DS528.8 A9M99 2005 ISBN 981-230-210-7 (soft cover) Typeset by Superskill Graphics Pte Ltd Printed in Singapore by Seng Lee Press

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This book is dedicated to my mother and all of those who taught me aspects of life.

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The country casts a kind of spell over its friends which they cannot break if they would. John F. Cady A History of Modern Burma (1958)

This is Burma, and it will be quite unlike any land you know about. Rudyard Kipling Letters from the East (1898)

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Table of Contents

List of Tables and Boxes Preface Acknowledgements Abbreviations ASEAN Organizational Structure 1.

2.

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x xii xiv xv xviii

Introduction: Southeast Asia, Myanmar and ASEAN 1.1 What is Southeast Asia? 1.2 Socio-economic Characteristics of Southeast Asian Nations: A Brief Overview 1.3 Myanmar: Geography, Demography and Natural Resources 1.4 What is ASEAN? 1.5 Objective of the Study ASEAN: Evolution of Regional Cooperation in Southeast Asia 2.1 Evolution of Regional Cooperation and the Formation of ASEAN 2.1.1 Objectives of ASEAN 2.2 Political and Security Cooperation 2.2.1 Intra-ASEAN Security Cooperation 2.2.2 ASEAN and the Major Powers 2.2.3 The ASEAN Regional Forum (ARF) 2.2.4 ASEAN and Other Regional Organizations 2.3 Economic Cooperation: From PTA to AFTA and AFTA-Plus 2.3.1 From PTA to AFTA 2.3.2 ASEAN Free Trade Area (AFTA) 2.3.3 Cooperation beyond AFTA 2.3.4 ASEAN Investment Area (AIA) 2.3.5 ASEAN Vision 2020 2.3.6 Intra-ASEAN Trade and Investment 2.3.7 External Linkages of ASEAN Economic Cooperation

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1 1 2 7 9 9 11 11 14 15 21 22 23 24 25 26 29 36 37 38 39 40

viii CONTENTS

2.4 2.5 2.6

Functional Cooperation The ASEAN Organizational Structure Achievements and Problems of ASEAN

47 51 55

3.

Political and Economic Development of Myanmar: An Overview 3.1 Myanmar: A Brief History 3.1.1 Constitutional Democracy, 1948–61 3.1.2 Revolutionary Council, 1962–73 3.1.3 Burma Socialist Programme Party, 1974–88 3.1.4 Under the SLORC and SPDC, 1988–2001 3.2 Recent Developments in the Social Sector 3.3 Summary

59 59 61 65 66 69 76 79

4.

Myanmar in ASEAN 4.1 Why Myanmar Decided to Join ASEAN 4.2 How Ready was Myanmar to Join ASEAN? 4.3 Myanmar’s Participation in ASEAN

83 84 86 88

5.

Myanmar-ASEAN Cooperation for Development 5.1 Myanmar-ASEAN Political and Security Cooperation 5.2 Myanmar-ASEAN Cooperation for Economic Development 5.2.1 Myanmar-ASEAN Economic Relations 5.2.2 Myanmar in ASEAN Economic Cooperation Schemes 5.3 Myanmar-ASEAN Functional Cooperation 5.4 Impact and Implications of Myanmar Joining ASEAN 5.4.1 Political Implications of Joining ASEAN 5.4.2 Economic Implications of Joining ASEAN 5.5 Summary

91 91 93 93 99 103 104 104 109 118

6.

Conclusion: Issues and Challenges 6.1 Issues and Challenges Relating to ASEAN 6.2 Issues and Challenges Relating to Myanmar’s Accession to ASEAN

121 121 124

Postscript

127

Bibliography

129

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CONTENTS

Appendix I:

ix

The ASEAN Declaration (Bangkok Declaration), 8 August 1967

137

Zone of Peace, Freedom and Neutrality Declaration (Kuala Lumpur Declaration), 27 November 1971

141

Treaty of Amity and Cooperation in Southeast Asia, Indonesia, 24 February 1976

144

Protocol Amending the Treaty of Amity and Cooperation in Southeast Asia, Philippines, 15 December 1987

149

Second Protocol Amending the Treaty of Amity and Cooperation in Southeast Asia

151

Declaration of ASEAN Concord, Indonesia, 24 February 1976

153

Appendix V:

Hanoi Plan of Action

158

Appendix VI:

ASEAN Vision 2020

180

Appendix VII:

Treaty on the Southeast Asia Nuclear Weapon-Free Zone

186

Agreement on the Common Effective Preferential Tariff Scheme for the ASEAN Free Trade Area

197

Protocol to Amend the Agreement on the Common Effective Preferential Tariff Scheme for the ASEAN Free Trade Area

204

Joint Statement on East Asia Cooperation, 28 November 1999

207

Appendix II: Appendix III: Appendix III (a):

Appendix III (b): Appendix IV

Appendix VIII: Appendix VIII (a):

Appendix IX:

Index

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List of Tables and Boxes

Table 1.1 Table 1.2

Selected Economic Indicators, 2001: ASEAN Selected Social Indicators, 2001: ASEAN

Table 2.1 Table 2.2 Table 2.3 Table 2.4 Table 2.5

Number of Tariff Lines in the Tentative CEPT Product List for 2001 Number of Tariff Lines with Tariffs 0–5 Per Cent by 2001 Average CEPT Tariff Rates (1999–2003) Intra-Regional Export Shares, 1990–98 Intra-ASEAN Trade: Trade Share (1975–2001)

31 32 33 39 40

Table 3.1 Table 3.2 Table 3.3 Table 3.4 Table 3.5 Table 3.6 Table 3.7 Table 3.8

GDP, Per Capita GDP and Consumption (in million kyats) Sectoral Shares of GDP (%) Share of Employment by Economic Sectors (%) Average Annual Growth Rates and Sectoral Shares of GDP (%) Economic Performance: 1962–88 Economic Performance: 1989–2001 GDP Growth Rates (1989/90–2000/01) Selected Social Indicators in Selected Countries

63 64 64 68 69 74 75 77

Table 5.1 Table 5.2 Table 5.3 Table 5.4

Myanmar’s Exports and Imports with ASEAN-6 Myanmar-ASEAN Trade: Imports of Myanmar Myanmar-ASEAN Trade: Balance of Trade Foreign Direct Investment (Approved) Flow into Myanmar (as of 31/1/02) Tourist Arrivals in Myanmar by Country CEPT Scheme of Myanmar CEPT Product List for ASEAN-10 Trade and FDI Flows between CLMV and ASEAN-6

95 96 97

Table 5.5 Table 5.6 Table 5.7 Table 5.8

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3 6

97 98 100 100 115

LIST OF TABLES AND BOXES

Box I Box II Box III

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Significant Reform Measures in Myanmar Status of Economic Reforms in Myanmar Myanmar-ASEAN Environmental Cooperation

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xi

72 73 106

Preface

The objective of this book is to help tertiary students of economics, history, international studies and economic geography in Myanmar to widen their knowledge of ASEAN and its integration process in general and ASEAN-Myanmar cooperation and Myanmar’s accession to ASEAN in particular. Textbooks and reference books in English for university students in Myanmar in all academic disciplines have become rare as a result of the country’s isolation since 1962, when the military took over. Soon after the military takeover, nationalization was introduced in economic and service sectors such as foreign trade, domestic wholesale trade, foreign and domestic banks, industries, fisheries, and mining, under the “Burmese Way to Socialism”. Even private hospitals and schools were nationalized as required by the new self-reliance policy. Consequently, in 1964, the medium of instruction in all academic institutions of primary, secondary and tertiary levels was changed — from English to Burmese. University staff were asked to prepare textbooks in Burmese; many of them were translated from old English textbooks. A number of compulsory textbooks in Burmese were published in the late 1960s and early 1970s but most of these have never been updated. Then in 1981, English was reintroduced as a medium of instruction at schools and universities but at a very slow pace. The English language was again taught at primary schools despite many obstacles such as the lack of qualified teachers and teaching aids. After a military coup in 1988, the ruling State Law and Order Council (SLORC) opened up the economy. Part and parcel of the economic reforms included liberalization of foreign and domestic trade, introduction of foreign and domestic investment laws, and private sector development. Thus English has once again become an important medium of communication and is being revived at the universities. The private sector has also been active in opening up English language schools, business schools and computer schools. Moreover, SLORC (which changed its name to the State Peace and Development Council [SPDC] in 1997), unlike previous military regimes, has a proactive foreign

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PREFACE xiii

policy by involvement in international forums, including securing ASEAN membership. Thus interest in the English language has also rapidly grown in the country as the role of English as a language of learning, business, technology, international relations and diplomacy is being recognized. However, there remains the enormous problem of a lack of textbooks and reference books in English at all levels of education, particularly academic books on subjects related to Myanmar compiled by native scholars. Moreover, due to a lack of foreign earnings, school libraries have been unable to buy textbooks and reference books in foreign languages. Furthermore, as Myanmar joined ASEAN in 1997, the author feels that students of economics, history and international relations and businessmen should understand the impact and implications of Myanmar joining ASEAN. While there are several articles and book chapters by Myanmar citizens (locals as well as expatriates), these are either not in a book form or not in English. Hence, it is obvious that there is an urgent need to fill the vacuum created by the lack of reference material in English, particularly on Myanmar’s accession to ASEAN, for students, businessmen, scholars and others interested in the subject. The author hopes that this book will help fill the gap in a small way. This book begins with the formation of ASEAN, its evolution and its integration process. Before it continues to explain and analyse the impact of Myanmar’s accession to ASEAN, a brief overview of the country’s political and economic development is also presented. However, there are limitations to this study. There are a plethora of studies on ASEAN in its more than 35 years of existence and the author could not include all aspects of the regional association’s operations. As an economist, the author might be biased in his presentation of ASEAN’s evolution and the associated issues and challenges as well as his analysis of Myanmar’s development, and the impact and implications of its accession. However, he also tries to assess ASEAN and its relations with Myanmar from political and security perspectives. The author would be delighted, despite these limitations, if readers find this work useful.

Mya Than

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Acknowledgements

First of all, I would like to thank Dr Lau Sim Yee, Program Advisor, the Sasakawa Peace Foundation (SPF), for his encouragement and trust in me to prepare this work. My thanks also go to my friends and colleagues U Myat Thein (former Rector of the Institute of Economics, Yangon), Dr Tin Maung Maung Than (Senior Fellow, Institute of Southeast Asian Studies [ISEAS], Singapore), Professor Suchit Bunbongkarn (former Dean of the Faculty of Political Science, Chulalongkorn University, Bangkok), Professor Amitav Acharya (Deputy Director and Head of Research at the Institute of Defence and Strategic Studies, Nanyang Technological University, Singapore), and Dr Pranee Thiparat (Chairperson, Department of International Relations, Faculty of Political Science, Chulalongkorn University, Bangkok) whose encouragement and comments concerning my work have been inspirational and valuable. Also, I would like to express my appreciation to the Sasakawa Peace Foundation (SPF) for its generous and kind sponsorship for this project. My gratitude is also due to Dr Chookiat Panaspornprasit, the Director, and the staff of the Institute of Security and International Studies (ISIS), Chulalongkorn University, without whose hospitality and provision of facilities this book project would not have been possible. Furthermore, I would like to thank my friends and colleagues from ISEAS, Singapore, particularly, Ms Dayaneetha De Silva and her colleagues from the Publications Unit who made this book possible. Last but not least, my gratitude and appreciation to my wife, Yee May Kaung, for her dedicated support and understanding.

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Abbreviations

ADB AEGDM AEM AEMM AFDM AFMM AFPFL AFTA AIA AIC AICO AIDC AIEDP AIJV AIP AMBDC AMM APEC APIAN APII ARF ASA ASC ASCLA ASCOE ASEAN ASEM ASM ASOD ASOEN

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Asian Development Bank ASEAN Expert Group on Disaster Management ASEAN Economic Ministers ASEAN Economic Ministers Meeting ASEAN Finance and Central Bank Deputies Meeting ASEAN Finance Ministers Meeting Anti-Fascist People’s Freedom Party ASEAN Free Trade Area ASEAN Investment Area ASEAN Industrial Complementation ASEAN Industrial Cooperation Asian Industrial Development Council Asian Institute for Economic Development and Planning ASEAN Industrial Joint Ventures ASEAN Industrial Projects ASEAN-Mekong Basin Development Cooperation ASEAN Ministerial Meeting Asia Pacific Economic Cooperation APEC International Assessment Network Asia Pacific Information Infrastructure ASEAN Regional Forum Association of Southeast Asia ASEAN Standing Committee ASEAN Subcommittee on Labour Affairs ASEAN Subcommittee on Education Association of Southeast Asian Nations Asia-Europe Meeting ASEAN Summit Meeting ASEAN Senior Officials on Drug Matters ASEAN Senior Officials on the Environment

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xvi ABBREVIATIONS

ASEM ASPAC ASY ATFOA BSPP BWS CBMs CEPT CER

Asia Europe Meeting Asian and Pacific Council ASEAN Subcommittee on Youth ASEAN Task Force on AIDS Burma Socialist Programme Party Burmese Way to Socialism confidence-building measures Common Effective Preferential Tariff Australia and New Zealand Closer Economic Relations Trade Agreement Chiang Mai Initiative Cambodia, Myanmar, Laos and Vietnam (ASEAN) Committee on Culture and Information (ASEAN) Committee on Social Development (ASEAN) Committee on Science and Technology Central Statistical Organization Department of Foreign Affairs and Trade, Australia Economic Commission for Asia and the Far East East Asian Analytical Unit (DEFAT) Eminent Persons Group Economic Commission for Asia and the Pacific (UN) European Commission European Union foreign direct investment free trade area General Agreement on Tariffs and Trade General Exclusion List (of products under CEPT) Generalized System of Preferences Hanoi Plan of Action human resource development Initiative for ASEAN Integration Information and Communications Technology Intellectual Property Rights Inclusion List (under CEPT) International Monetary Fund import-substituting industrialization information technology Common Market of the South most-favoured-nation

CMI CMLV COCI COSD COST CSO DEFAT ECAFE EEAU EPG ESCAP EC EU FDI FTA GATT GEL GSP HPA HRD IAI ICT IPR IL IMF ISI IT MERCOSUR MFN

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ABBREVIATIONS xvii

NAFTA NBIP NIEs NLD NTB NTM OECD PBEC PECC PMC PPP PTA RTA SAARC SADC SC SEANWFZ SEATO SEE SEOM SL SLORC SME SMEWG SOE SOM S&T SPDC TAC TEL TFP TILF TRIMs TRIPs TRQ UNDP USDA WTO ZOPFAN

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North American Free Trade Agreement non-binding investment principles newly industrializing economies National League for Democracy non-tarriff barrier non-tariff measure Organization for Economic Cooperation and Development Pacific Basin Economic Council Pacific Economic Cooperation Council Post-Ministerial Conference purchasing power parity Preferential Trading Arrangement regional trade agreements South Asian Association for Regional Cooperation South Africa Development Community Standing Committee Southeast Asian Nuclear Weapons Free Zone Southeast Asia Treaty Organization state economic enterprises Senior Economic Officials Meeting Sensitive List (of products under CEPT) State Law and Order Restoration Council small- and medium-enterprise Small and Medium Enterprise Working Group state-owned enterprise Senior Officials Meeting science and technology State Peace and Development Council Treaty of Amity and Cooperation (ASEAN) Temporary Exclusion List (under CEPT) total factor productivity trade and investment liberalization and facilitation Trade-Related Investment Measures Trade-Related Aspects of Intellectual Property Rights tariff-rate quotas United Nations Development Program Union of Myanmar Solidarity and Development Association World Trade Organization Zone of Peace, Freedom and Neutrality

17

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Working Groups

SOM

ASEAN Economic Ministers Meeting ASEAN Ministerial Meeting ASEAN Finance Ministers Meeting Senior Economic Officials Meeting ASEAN Standing Commitee Senior Officials Meeting ASEAN Finance and Central Bank Deputies Meeting

Source: www.aseansec.org

AEMM : AMM : AFMM : SEOM : ASC : SOM : AFDM :

Working Groups

Sub-committees/ Working Groups

AMM

ASEAN Secretariat

ASC

SEOM

AEMM

ASEAN SUMMIT

Sub-committees/ Working Groups

Sub-committees/ Working Groups

Others

Committees

AFMM

AFDM

FIGURE I ASEAN Organizational Structure

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Science & Technology

e-ASEAN / ICT

Finance & Macroeconomic Surveillance Statistics Infrastructure Energy Minerals Transport Telecommunications

ASEAN Plus 3 ASEAN Dialogue Partners ASEAN Non-dialogue Partners Inter-regional Organization Programme Coordination ASEAN Cooperation Plans Evaluation Trust Fund Accounts Resource Mobilization

Human Development Labour Civil Service Social Policies Health Education Natural Resources Agriculture/Fisheries Forestry Environment Culture and Information

Bureau for Resources Development

Special Projects Unit Transnational Issues Drugs Disaster management Immigration

Deputy Secretary-General (Functional Cooperation)

Bureau for External Relations and Coordination

Special Assistant (Institutional Affairs) Finance Personnel and Training Administration ASEC IT Special Duties: Food, Agriculture, Fisheries and Forestry; COCI; ASEAN Foundation Special Assistant (Executive Affairs) ASEAN Summit, AMM, ARF, SOM, ASC Research and Analysis Public Affairs Office

Office of the Secretary-General

Bureau for Finance and Integration Support

Source: www.aseansec.org

Trade Policies Tariffs, Non-Tariffs Customs Standards & Conformance IPR Liberation of Services Tourism External Trade Investment Industry SMEs Legal

Bureau for Economic Integration

IAI Unit

Deputy Secretary-General (Economic Cooperation)

Secretary-General

FIGURE II ASEAN Organizational Structure

Reproduced from Myanmar in ASEAN: Regional Cooperation Experience, by Mya Than (Singapore: Institute of Southeast Asian Studies, 2005). This version was obtained electronically direct from the publisher on condition that copyright is not infringed. No part of this publication may be reproduced without the prior permission of the Institute of Southeast Asian Studies. Individual articles are available at < http://bookshop.iseas.edu.sg >

MYANMAR IN ASEAN 1

1 Introduction: Southeast Asia, Myanmar and ASEAN

1.1 WHAT IS SOUTHEAST ASIA? Before the Second World War, historians and geographers, especially Western academics, divided Asia into two — the Near East and the Far East. Present-day Southeast Asia was included in the Far East. However, the term “Southeast Asia” was occasionally used by European, especially German writers, in the late 19th century. According to McCloud (1992), “it was first brought to general prominence with the establishment of a Southeast Asia military command by the British during World War II — one of the first attempts to bring together the previously fragmented colonial perspectives of the British, Dutch, French and Americans” (p. 12). Actually, the Southeast Asia Command (SEAC) was created by President Franklin D. Roosevelt and Prime Minister Winston S. Churchill at the First Quebec Conference in August, 1943 (Fifield 1992). Ironically, the SEAC was located in Ceylon (Sri Lanka), which is a part of South Asia. In other words, Southeast Asia as a regional political unit was first recognized during the Second World War. Milton Osborne, a noted historian of Southeast Asia, agrees: For the most part, however, neither the foreigners who worked in Southeast Asia before the Second World War, whether as scholars or otherwise, nor the indigenous inhabitants of the countries of Southeast Asia, thought about the region in general terms. The general tendency to do so came with the Second World War when, as a result of military circumstances, the concept of a Southeast Asian region began to take hold (1983, p. 12).

Generally, Burma (now Myanmar),1 Thailand, Laos, Cambodia, Vietnam, Malaysia (including present-day Brunei and Singapore) and Indonesia, were considered as some kind of geographical unit. However, the Philippines was not

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INTRODUCTION: SOUTHEAST ASIA, MYANMAR AND ASEAN

included. Osborne noted that while the omission of the Philippines was deliberate at the time of the Second World War, the question of whether the Philippines formed part of Southeast Asia was to remain a matter of scholarly uncertainty as late as the 1960s. Presently, Southeast Asia denotes ten nation–states: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Thailand, Singapore and Vietnam. One unique characteristic of the region is the historical influence of India and China upon its cultures, especially in religion, art and politics. However, each country has its individual style. For example, Islam predominates in Brunei, Indonesia, Malaysia, and in southern Philippines. Buddhism is the main religion of Myanmar, Thailand, Laos, Cambodia and Vietnam. Vietnam’s Buddhism is more of the northern Buddhism (Mahayana) similar to that of China, Korea and Japan, whereas the rest of the region practices Theravada Buddhism. Another important characteristic is the linguistic unity cutting across the boundaries established by colonial powers. For example, the Indonesian/Malay language is spoken throughout Indonesia, Malaysia and southern Philippines, as well as in some settlements along the southern coastal regions of Thailand, Cambodia and Vietnam, although there are different dialects from region to region. Another example is the Tai language which is spoken in Thailand, Shan State in Myanmar, and Laos, again with some variations. In other words, there are unities and diversities in the region. Southeast Asia is a region of many contrasts. Take geography: there are the snow-covered mountains of northern Burma and Papua and at the other extreme, the desert-like Dry Zone of middle Myanmar. Also, one can find a conglomerate of geographical and agricultural contrasts in the region — from the rolling pastoral grasslands of northwestern Vietnam to the steep terraced rice fields of the Philippines islands. Apart from the various determinants of regional identity mentioned above, perhaps some credit should be given to the Association of Southeast Asian Nations (ASEAN) itself, in developing a sense of the region — the essence of the “one Southeast Asia” concept. After all, the role of regionalism in “imagining” Southeast Asia as a region is crucial.2 1.2 SOCIO-ECONOMIC CHARACTERISTICS OF SOUTHEAST ASIAN NATIONS: A BRIEF OVERVIEW ASEAN’s member economies vary widely in size, population and income, as summarized in Table 1.1 for the year 2001. ASEAN has a total population of about 530 million and land area of 4,495 thousand sq. km. Among the ASEAN member countries, Indonesia is the largest, with more than 214 million people and land area of 1,919 million sq. km. Singapore is the smallest country with 4.1 million people

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3

5,765 181,036 1,919,317 236,800 329,758 676,577 300,000 648 514,000 330,955

4,494,855

Brunei Cambodia Indonesia Laos Malaysia Myanmar Philippines Singapore Thailand Vietnam

Total 527.4

0.3 13.5 214.4 5.4 23.5 48.2 77.2 4.1 61.6 79.2

Pop. (million)

2.2

2.9 2.5 1.8 2.2 2.5 1.8 2.3 2.3 1.5 1.9

Pop. Growth (%) 1975–2001

260.54

0.14 6.5 102.0 2.6 10.0 25.8 33.3 1.9 37.2 41.1

Labour Force (million)

560.6

5.3 3.4 145.3 1.8 88.0 16.0 a 71.4 85.6 114.7 32.7

GDP (US$ billion)

393.6

4,726 c 3.9

3.3 1.5 64.9 0.4 88.2 2.8 32.1 121.7 65.1 13.6

18,000 a 278 695 326 3,699 396 a 912 20,733 1,874 411

3.0b 6.3 3.3 5.7 0.4 11.1b 3.2 –2.4 1.9 6.4

Exports (US$ billion)

GDP/ Per Cap (US$)

Real GDP Growth (%)

344.4

1.3 1.5 38.8 0.7 74.4 2.7 29.6 116.0 62.1 16.6

Imports (US$ billion)

Notes: Estimates b ASEAN, Annual Report 2000–2001. c Average for ASEAN. Sources: UNDP, Human Development Report 2003; World Bank, World Development Indicators 2003; IMF, Direction of Trade Statistics 2002.

a

Land Area (’000) (sq km)

Countries

TABLE 1.1 Selected Economic Indicators, 2001: ASEAN

2.5

– –0.5 11.5 7.8 1.4 21.2 6.1 1.0 1.6 0.6

Inflation (%)

MYANMAR IN ASEAN 3

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INTRODUCTION: SOUTHEAST ASIA, MYANMAR AND ASEAN

in an area of 648 sq. km. However, where national wealth is concerned, in the year 2001, Singapore had the highest per capita GDP of US$20,733 followed by Brunei with US$17,377 and Malaysia with US$3,699. Thailand and the Philippines had US$1,874 and US$912 respectively. Cambodia had the lowest per capita GNP of about US$278 and Laos had US$326 only (UNDP 2003). Myanmar’s per capita GNP was estimated at US$332. The average per capita income of ASEAN countries would be about US$4,726 in 2001 (Table 1.1). In terms of the size of GDP, Indonesia has the largest economy with US$145.3 billion; the smallest economy belonged to Laos with US$1.8 billion in 2001. The total GDP of ASEAN countries in 2001 was US$560.6 billion. It is interesting that most of the older member countries are economically very open. For example, the total foreign trade figures of Singapore and Malaysia are more than twice that of their GDP. The total volume of exports of ASEAN-10 in 2001 was US$393.6 billion and that of total imports was US$344.4 billion. GDP growth rates also differ between the countries. In 2002, the fastest growing economies were Myanmar and Vietnam with rates of 11.1 per cent and 6.4 per cent respectively, closely followed by Cambodia with 6.3 per cent. Singapore’s economic growth in 2001 was disappointing, with a negative growth rate of –2.4 per cent due to the economic recession in the United States and Japan. The average GDP growth rate for ASEAN-10 in 2001 was 3.9 per cent. This is because almost all original ASEAN members were yet to recover from the regional economic crisis. The new members were almost unscathed. Economic performance improved in 2002.3 However, except in Myanmar, inflation in the ASEAN region during the period was stable with an average inflation rate of 2.5 per cent. Most of the older ASEAN member countries have an outstanding achievement of economic and social progress over the past quarter of a century. According to the World Bank’s World Development Report 2000/2001, between 1971 and 1980, the economies grew between 6–8 per cent and in the period 1981–90, the growth rates of the countries, with the exception of the Philippines, rose impressively from 5.5 per cent (Indonesia) to 7.9 per cent (Thailand). During the period 1990–99, the region was growing at an average rate of more than 5.2 per cent. Meanwhile, Vietnam and Singapore scored the highest growth rates of 8.1 per cent and 8.0 per cent respectively whereas the slowest performing economy, the Philippines, achieved 3.2 per cent. Myanmar’s GDP growth rate between 1990 and 1999 was 6.3 per cent (World Bank 2000). It was predicted that by 2001, many economies of Southeast Asia would be hit by the economic recession in the world’s two largest economies and their largest trading partners — the United States and Japan. However, fortunately, this did not happen as expected.

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MYANMAR IN ASEAN 5

In terms of social indicators, older ASEAN member countries generally perform better than the new members (Table 1.2). In terms of life expectancies, Singaporeans (77.8 years), Malaysians (72.8 years) and Filipinos (69.5 years) are expected to live longer than the rest, whereas Cambodians, Myanmar citizens and Laotians (57.4, 57.0 and 53.9 years respectively) have lesser life expectancy rates. Regarding adult literacy rates, as measured by the percentage of literate people of 15 years and above, Thailand (95.7 per cent), and Singapore (92.5 per cent) outperformed other ASEAN countries in 2001. On the other hand, literacy in Cambodia was 68.7 per cent, and in Laos, 65.6 per cent in 2001 (see Table 1.2). According to respective national surveys on poverty in Southeast Asian countries, 36.1 per cent of Cambodians (in 2000) and 26.3 per cent of Laotians (in 2001) were below the poverty line. Singapore had no poor; Malaysia and Thailand had less than 1 per cent and 2 per cent of people below the poverty line of US$1 per day, respectively. In terms of the infant mortality rate per 1,000 and the percentage of the population with access to improved water, the older members are also better off than the new members. Overall, it is obvious that the social indicators of the original members are better than those of the new members. This is most probably because, the older member countries have spent more on education and health than the rest and the impact of 30 years of the devastating Indochina wars and sanctions imposed by the West affected the economic and social development of Cambodia, Laos and Vietnam. Here it could be generally concluded that the older member countries perform better both in economic and social sectors than Cambodia, Laos, Myanmar and Vietnam (CLMV). However, it should be noted that in terms of some social indicators such as literacy and infant mortality rates and access to improved water, Vietnam is better than some of the original members of ASEAN due to its social sector policies that prioritize the basic needs of its citizens. Hence, in general, in terms of development levels, the group can be divided into two: the original ASEAN-6, which enjoys a higher degree of development and the new member countries, which have a lesser degree of development. Because of this difference between the two groups, many critics have argued that ASEAN enlargement would produce a two-tier relationship. It should also be noted that the older members are capitalist countries whereas the new members, specifically, Vietnam and Laos, are under communist regimes; Myanmar is ruled by a military junta and Cambodia has a democratically elected government. With the exception of Singapore, ASEAN economies are generally competitive rather than complementary. “They were mainly commodity exporters until the 1970s, after which they began to switch into import-substitution industrialization and labour-intensive, export-oriented industrialization” (Hill 1997, p. 19). However,

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76.1 57.4 66.2 53.9 72.8 57.0 69.5 77.8 68.9 68.6

Brunei Cambodia Indonesia Laos Malaysia Myanmar Philippines Singapore Thailand Vietnam 91.6 68.7 87.3 65.6 87.9 85.0 95.1 92.5 95.7 92.7

Adult literacy (%) – 36.1c 7.2 26.3 less than 1 22.9e 14.6 – less than 2 17.7

Pop. below poverty linea (%) – 95 92 81 98 83 93 – 85 95

Net enrolment ratiob 4.8 1.9 1.0 2.3 6.2 0.5 4.2 3.7 5.4 3.0

Education expendit. % of GDP 3.1 7.1 2.7 3.4 3.4 2.2 3.3 3.6 3.7 5.3

Health expendit.c % of GDP

Notes: a Population under poverty line (income of US$1 a day) b for primary level c both public and private d live births e for 1997 Sources: UNDP, Human Development Report 2003 ; ADB, Key Indicators of Developing Asia and Pacific Countries 2003.

Life expectancy (yrs)

Countries

TABLE 1.2 Selected Social Indicators, 2001: ASEAN

6 97 33 87 8 77 29 3 24 30

– 30 78 37 89 d 72 86 100 84 77

Infant Access to mortality rate improved water (per 1000d) (% of pop.)

6 INTRODUCTION: SOUTHEAST ASIA, MYANMAR AND ASEAN

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MYANMAR IN ASEAN 7

there are some complementarities among them. Brunei, Indonesia and Malaysia are energy-rich whereas the rest are more or less energy-importing countries. As the resource-rich countries industrialized, each country has found different niches and products based on its comparative advantages. Complementarity has also been enhanced when the four new members, which are at different levels of development, joined the grouping. The older members are relocating most labour-intensive industries to the new member nations. Thailand and Malaysia are complementary in food since Malaysia imports food products from Thailand. Thailand, Indonesia and the Philippines are the main exporters of labour to Singapore and Malaysia. As ASEAN industrialization continues at a rapid pace, trade within the region will increasingly become intra- rather than inter-industry in nature, as it (the region) is in the more industrialized groupings such as the European Union (EU), North America Free Trade Area (NAFTA), and Closer Economic Relations (CER) of Australia and New Zealand (Hill 1997, p. 20).

1.3

MYANMAR: GEOGRAPHY, DEMOGRAPHY AND NATURAL RESOURCES Myanmar has a land area of more than 676,000 sq. km. occupied by more than 51.14 million people in 2001/02. It shares a border over 6,000 km long with China (on the northeast), India (on the northwest), Bangladesh (on the west), Thailand and Laos (on the east). Its coastline, bordering the Bay of Bengal and the Andaman Sea, is about one-third of Myanmar’s perimeter — more than 2,830 km. Three parallel chains of mountain ranges that begin from the eastern extremity of the Himalayas run from north to south, separating the central plain into two regions. The three ranges are the Western Yoma or Rakhine Yoma, the Bago Yoma and the Shan Plateau. There are three river systems; the Ayeyarwady (Irrawaddy), the Sittoung (Sittang) and the Thanlwin (Salween). Of the three, the longest is the Ayeyarwady River which flows from the north of the country into the Gulf of Martarban in the southwest of Yangon (Rangoon). It is about 2,170 km long and has played a very important role in the country’s transportation and communications throughout history. These geographical characteristics have sometimes dictated the direction of the political history of the largest country in mainland Southeast Asia. According to official statistics, there are 135 nationalities and hence the country is a multi-ethnic, multi-cultural and multi-religious society. The latest census of 1983 suggests Bamar (Burman), the largest ethnic group, comprises about 70 per cent of the country’s total population followed by the Shan, the largest minority

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INTRODUCTION: SOUTHEAST ASIA, MYANMAR AND ASEAN

group, with 8.5 per cent of the country’s inhabitants. Other major ethnic groups include the Kayin (Karen), 6.2 per cent, Rakhine (Arakanese), 4.5 per cent, and other indigenous races, 6.5 per cent. Myanmar’s census records show that Buddhists comprise 89.4 per cent, Christians, 4.9 per cent and Muslims, 3.9 per cent. Myanmar is also rich in natural resources: forests, minerals and fish. Forests cover about half the land area of the country although forest cover is declining. There are over 8,570 different plant species including teak and hardwood trees, bamboo and cane, among others. Myanmar is also well endowed with mineral resources, which include lead, silver, zinc, copper, tin, coal, gypsum, limestone, dolomite, tin-wolfram-scheelite, gold and precious stones such as rubies, sapphires, diamonds and jade. Above all, there is an abundance of human resources — literate labour. The country still possesses large areas of land for cultivation; of the total area of 67.6 million hectares (ha) only about 15 per cent is under cultivation. Currently, the total area under irrigation accounts for about 20 per cent of the total cultivated area. All these indicate that the country has vast potential for further agricultural expansion. Since agriculture accounts for about 40 per cent of Myanmar’s GDP, the present government emphasizes the decisive role of this sector. Prevalence of different agro-ecological tracts has made it possible to grow a multitude of over 60 crops ranging from typical tropical ones to moderate temperate varieties which are cereals such as rice, wheat, maize, millet, beans, pulses and oil seeds, industrial crops such as cotton, jute, rubber, sugar cane, toddy palm, tobacco and spices and also others both edible and non-edible (Ministry of Planning and Economic Development 1995, p. 14).

The country breeds pedigree stocks of cattle, buffalo, sheep, goats, pigs, poultry and other livestock. Livestock breeding is more of a traditional householdbased business and it forms an integral part of the rural economy. There is an abundance of vast pasture land available for the livestock industry in different parts of the country. Fisheries also play an important role in Myanmar’s economy, contributing an important part of the diet and nutrients, employment and foreign earnings that the country needs desperately. There are two types of fisheries: freshwater and marine. According to official surveys, the maximum sustainable yield of the country is estimated at about 1.05 million metric tons per year, out of which 0.59 million metric tons was exploited in 1994 (ibid, p. 15). With these resources, Myanmar joined ASEAN in July 1997 committing to political, security, economic, social and cultural cooperation with the other members.

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1.4 WHAT IS ASEAN? The Association of Southeast Asian Nations was created in 1967. The founding member nations were Indonesia, Malaysia, the Philippines, Singapore and Thailand. Some outsiders have assessed ASEAN as one of the most successful regional cooperation efforts.4 As in the case of the European Union (EU), the primary motivation for establishing ASEAN was political rather than economic. ASEAN was seen as a means of maintaining regional peace and stability by providing a forum for the discussion and resolution of regional security issues. ASEAN can be called the very first “regional” organization in Southeast Asia in the sense that it now represents all 10 Southeast Asian nations. ASEAN initiation and composition came from within the region without any interference from outside countries. ASEAN is also a symbol of an attempt to work for solidarity of a group of developing countries who, bound by their history and culture, seek channels of regional cooperation which will boost economic levels of the member countries, and to create a limited bargaining power in the arena of international politics (Sukrasep 1989, p. 3).

It is important to note that ASEAN is not a regional organization with legal obligations. This is because the Bangkok Declaration (Appendix I), which is the founding document signed by the Foreign Ministers of the member countries, was not a treaty with legal obligations. Nonetheless, after more than three decades, ASEAN has widened and deepened cooperation or integration among its member countries. 1.5 OBJECTIVE OF THE STUDY Vietnam joined ASEAN in 1995, Myanmar and Laos followed suit in 1997 and Cambodia was accepted as a member in 1999. However, the timing of the new members’ accessions to ASEAN seems unfortunate: Laos and Myanmar joined the regional association when the currency crisis widened into a financial crisis and then a regional economic slowdown. Cambodia became a member in 1999 when the regional crisis was not yet over. Although the regional economic crisis did not have a direct impact on the new members, there has been an indirect effect in terms of trade and investment. Moreover, they joined ASEAN while in the midst of transforming their centrally planned or controlled/command economies into market-oriented systems. Hence it is important to study how the new member countries are coping with their membership in the regional framework and the impact of their membership. Myanmar has been selected here as a case study of regional cooperation to evaluate the process and impact of joining ASEAN.

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10 INTRODUCTION: SOUTHEAST ASIA, MYANMAR AND ASEAN

The objective of this monograph is to depict the accession of Myanmar to ASEAN and explore and assess multilateral forms of political and security, social and cultural, and economic cooperation, respectively. Chapter 2 will explore and analyse the evolution of regional cooperation in Southeast Asia and the formation of ASEAN. The chapter also briefly analyses ASEAN’s political, security and economic cooperation within the region and beyond. In Chapter 3, a brief overview of Myanmar’s political and economic history is presented to give some insights and context to the readers. Chapter 4 addresses the process of accession of Myanmar into ASEAN and analyses its political, security, economic and social impact. Myanmar-ASEAN cooperation on politics, economics and wider social issues is depicted and analysed in Chapter 5. In the concluding chapter, issues and prospects for ASEAN as well as Myanmar’s membership in ASEAN are discussed. For the purpose of this study, the words “cooperation” and “integration” will be used interchangeably. The terms “old ASEAN members” and “ASEAN-6” indicate Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand; and the terms “new ASEAN members” and CLMV represents the group of Southeast Asian countries that joined ASEAN after 1995 onwards, namely, Cambodia, the Lao People’s Democratic Republic (Lao PDR or Laos), Myanmar and Vietnam in this study. “ASEAN-10” indicates the current, full group. NOTES 1

2

3

4

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The name of the country of Burma was changed to Myanmar in June 1989. As some parts of this study predate the name change, “Burma” is retained where it is appropriate. For details, refer to Amitav Acharya, The Quest for Identity: International Relations of Southeast Asia (2000). GDP growth of ASEAN countries in 2002 Country GDP growth rate (%) Cambodia 5.2 Indonesia 3.7 Laos 5.8 Malaysia 4.1 Myanmar 11.1 Philippines 4.4 Singapore 2.2 Thailand 5.2 Vietnam 6.4 Source: Regional Outlook: Southeast Asia 2004–2005 (Singapore: ISEAS 2004). See, for instance, R. Beuter, “The Association of Southeast Asian Nations: Towards Closer Economic Cooperation”, in Hosli and Saether (1997).

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Reproduced from Myanmar in ASEAN: Regional Cooperation Experience, by Mya Than (Singapore: Institute of Southeast Asian Studies, 2005). This version was obtained electronically direct from the publisher on condition that copyright is not infringed. No part of this publication may be reproduced without the prior permission of the Institute of Southeast Asian Studies. Individual articles are available at < http://bookshop.iseas.edu.sg >

MYANMAR IN ASEAN 11

2 ASEAN: Evolution of Regional Cooperation in Southeast Asia

This chapter explores and analyses the evolution of regional cooperation or integration and the establishment of ASEAN. Political and economic cooperation among ASEAN members as well as ASEAN’s cooperation with other regional groupings and third countries will also be discussed.

2.1

EVOLUTION OF REGIONAL COOPERATION AND THE FORMATION OF ASEAN The Association of South-East Asian Nations (ASEAN) is a regional cooperative organization established by the Bangkok Declaration on 8 August 1967 (Appendix I). The founding members of ASEAN are Indonesia, Malaysia, Philippines, Singapore and Thailand. Actually, attempts for regional cooperation among the Southeast Asian countries started much earlier. According to Lyon (1992, pp. 277–80), regional cooperation among ASEAN countries went through three tumultuous stages since 1945.1 The first phase, which lasted from the end of World War II till the mid-1950s, was mainly dominated by the (anti-communist) ideology prevailing in both the United States and Britain on the nature and type of regional association for Southeast Asia (ASEAN Secretariat 1997). During this period, there were three groups of countries in the region. One group included Malaya, the Borneo territories, and Singapore (which belonged to the British), and Laos, Cambodia and part of Vietnam, which were under French influence. Meanwhile, Burma and Indonesia, which belonged to the second group, were founding members of the Non-Aligned Movement. The third group comprising Thailand and the Philippines leaned toward the United States.

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Thailand and the Philippines were the only Southeast Asian signatories of the Manila Treaty when the Southeast Asia Treaty Organization (SEATO) was established in 1954 under the influence of the United States. The other participating countries of SEATO were Britain, Australia, New Zealand and Pakistan. The main objective of the Manila Treaty was to form an anti-communist bloc in Southeast Asia and to call for collective action in the event of an armed attack on any Southeast Asian country. At the same time, the Economic Commission for Asia and the Far East (ECAFE), the predecessor of the United Nations Economic and Social Commission for Asia and the Pacific (UN/ESCAP), and the so-called Colombo Plan, were formed in 1947 and 1950 respectively, with the aims of providing technical assistance and economic cooperation. Both these organizations depended largely upon the postwar non-communist superpowers, United States and Britain. During the second phase, other forms of cooperation also came into existence, namely, the Association of Southeast Asia (ASA), the Asian and Pacific Council (ASPAC), and Maphilindo. The ASA, proposed by Malaysia, was established in 1961, could be said to mark the second phase of regional cooperation. However, it survived for only two years due to the dispute between the Philippines and the newly formed Federation of Malaysia over Sabah. In fact, ASA was considered a predecessor of ASEAN. After the demise of ASA, another regional organization, Maphilindo, was founded by Malaysia, Philippines and Indonesia in 1963. However, it did not evolve into a significant regional organization due to political disputes among member countries. The other regional organization, ASPAC, was initiated by South Korea, with non-communist countries to form a “second front” for US military action in Vietnam to assist member countries in dealing with external aggression, and to provide a framework for future cooperation efforts. Its members were Malaysia, New Zealand, Japan, Australia, Taiwan, the Philippines, South Korea, Thailand and South Vietnam. Since Malaysia, the Philippines and Thailand were pro-West countries in Southeast Asia and were preoccupied with the communist threat inside as well as outside their territories, they joined both ASA and ASPAC. However, ASPAC followed the fate of ASA and Maphilindo due to normalization of ties with China by the United States and non-communist nations in 1973. At the same time, however, other regional organizations dating back to the 1960s such as the Asian Development Bank (ADB), the Mekong Commission, Asian Institute for Economic Development and Planning (AIEDP), Asian Industrial Development Council (AIDC), and the Asian Institute of Technology, are still lending credence to regional cooperation (ASEAN Secretariat 1997).

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The successive dissolutions of ASA, ASPAC and Maphilindo led to the third phase of regional cooperation that started with the establishment of ASEAN in 1967. The push factors for the formation of ASEAN were the US-Vietnam war and China’s Cultural Revolution, which led to the fear of the domino effect of communism (Mya Than and Singh 2001). Despite the common interest among ASEAN countries to contain the influence of communism, ASEAN was not set up primarily as a political-military alliance and therefore could not concretize cooperation in this field. Subsequent events made the founding of ASEAN almost prophetic. In July 1969, President Nixon proposed the withdrawal of the US military presence in Asia. This was simultaneous to the Soviet Union’s suggestion to set up a “system of collective security in Asia and the British Government’s announcement of its military withdrawal east of the Suez Canal” (ASEAN Secretariat 1997, p. 3). However, the official statement of the Bangkok Declaration specified that ASEAN’s objective is to “accelerate the economic growth, social progress and cultural development in the region through joint endeavour and partnership to strengthen the foundation for a prosperous and equal community of Southeast Asian nations” (Hagiwara 1973). As the association matured, the number of members increased slowly; Brunei joined ASEAN in 1983, Vietnam in 1995, Laos and Myanmar in 1997, and finally, Cambodia in 1999. Now, ASEAN has become the only organization which represents all 10 Southeast Asian nations. And this stage can be considered as the fourth phase of regional cooperation in Southeast Asia. Since the formation of ASEAN, peace and stability have substantially improved in the region.2 Also, economic and cultural relations among the member nations have improved. Moreover, since there is peace and stability in the region and ASEAN’s credibility is firmly established, its role in international cooperation progresses — politically and economically. It has now been more than 35 years since ASEAN was established and cooperation has widened and deepened. It is expected that Timor Leste, Australia and New Zealand may join ASEAN. In fact, China and India have already signed the ASEAN Treaty of Amity and Cooperation (TAC) in 2003 at the Bali Summit and Japan has pledged to follow suit. Moreover, ASEAN countries are advocates of open regionalism, simply because the region is too small for inward-looking regionalism. In reality, ASEAN is the world’s largest free trade area (FTA) grouping in terms of population, but the smallest in terms of GDP. Therefore, it is building external linkages with Asia-Pacific Economic Cooperation (APEC), Australia and New Zealand Closer Economic Relations Trade Agreement (CER), the European Union (EU), North American Free Trade Association (NAFTA), and other organizations. ASEAN and China have already agreed to form

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a free trade area (FTA) in 2010. Apart from this country-related widening, a broadening of issues is underway, covering investment, cross-border spillovers such as environmental protection, cross-border crime control, meteorological research, natural disaster prevention, anti-terrorism and emergency relief. ASEAN has also deepened its economic, political, social and security cooperation. It moved forward from the ASEAN Preferential Trading Arrangement (PTA), which was mainly to promote intra-regional trade to a Free Trade Area (FTA) scheme. The AFTA-Plus programme is also designed to deepen regional economic integration. Moreover, the ASEAN Investment Area (AIA) was established recently to jointly attract FDI from outside and inside the region. The ASEAN Regional Forum (ARF) was introduced in 1994; it provides the region with an institution for multilateral dialogues on security and for developing the concepts of confidence building, preventive diplomacy and conflict resolution. 2.1.1 Objectives of ASEAN As in any other organization, ASEAN has its own aims, principles and purposes. There are at least seven aims and purposes, according to the Bangkok Declaration of 1967.3 They are: 1.

2.

3.

4. 5.

6.

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To accelerate the economic growth, social progress and cultural development in the region through joint endeavours in the spirit of equality and partnership in order to strengthen the foundation for a prosperous and peaceful community of Southeast Asian nations; To promote regional peace and stability through abiding respect for justice and the rule of law in the relationship among countries of the region and adherence to the principles of the United Nations Charter; To promote active collaboration and mutual assistance on matters of common interest in economic, social, cultural, technical, scientific and administrative fields; To provide assistance to each other in the form of training and research facilities in the educational, professional, technical and administrative spheres; To collaborate more effectively for the greater utilization of agriculture and industries, the expansion of trade, including the study of the problems of international commodity trade, the improvement of transportation and communication facilities and the raising of the standards of living of their people; To promote Southeast Asian studies;

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7.

To maintain close and beneficial cooperation with existing international and regional organizations with similar aims and purposes, and to explore all avenues for even closer cooperation.

Although the main stated objective was economic the prime motive at the time was political. Naya and Plummer have emphasized this point in their work: “At a time political stability in the region was the driving force behind ASEAN, and it has been argued that much of the attraction of the economic integration was merely its use as a “cover” for political cooperation, in particular, vis-a-vis instability in Indochina” (Naya and Plummer 1997). 2.2 POLITICAL AND SECURITY COOPERATION4 A little after a year of its existence, ASEAN was well on its way to instituting regional integration. Several committees were formed in areas such as food production and supply, civil air transport, air traffic services, shipping, meteorology, and commerce and industry. Moreover, a seven-day visa-free scheme for ASEAN nationals was introduced. During the first decade of its establishment, ASEAN’s political cooperation among member countries remained low.5 Serious disputes and mistrust between member nations, between Indonesia and Singapore, Singapore and Malaysia, and Malaysia and the Philippines, hindered any meaningful multilateral efforts. For example, in October 1968, Singapore-Indonesia relations hit their lowest level when two Indonesian marines were executed by the Singapore authorities for exploding bombs in Singapore. (The marines had been captured during the Konfrontasi [Confrontation] between Malaysia and Indonesia when Singapore was still part of Malaysia.) The Malaysia-Philippines dispute over territory eight months after the creation of ASEAN added more complications to the grouping’s internal politics. However, by the early 1970s, the political atmosphere in ASEAN had improved. At the conference of foreign ministers in 1971, an ASEAN common market and a payment union for economic cooperation were proposed, though they did not get far. An agreement in principle was concluded to include the promotion of peace and security within the region. In November 1971, the Malaysian proposal for creating a Zone of Peace, Freedom, and Neutrality (ZOPFAN) with the objective of declaring a neutral Southeast Asia was formally endorsed by ASEAN (Appendix II). Informal ministerial meetings held in July 1972 and February 1973 discussed the possible settlement of the

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Indochinese conflict and then the implications of the Paris Peace Treaty on Southeast Asia. These activities suggested the readiness of ASEAN as a regional organization to tackle peace and security issues. Moreover, as an essential component of ZOPFAN, ASEAN formed the Southeast Asia Nuclear Weapons-Free Zone on 15 December 1995 (Appendix VII). Furthermore, for the first time in ASEAN documents, political cooperation was expressly recognized as an ASEAN objective by member nations being urged “to maintain regular contacts and consultations with one another on international and regional matters to co-ordinate views, actions and policies” (Mya Than and Singh 2001, p. 173). TAC also provides for a dispute settlement mechanism through regional processes with the High Council as a “continuing body”, comprising a representative at ministerial level from each of the member nations, and to refrain from threat or use of force (Appendix III). In the meantime, the Declaration of ASEAN Concord (Appendix IV) lent further support to ASEAN as a political organization by exhorting member states to improve the ASEAN machinery and use it to “promote the harmonization of views, co-ordinate positions and whenever possible, take common actions”. These documents indicate the member states’ growing political maturity, which could only be explained in terms of their firmer commitment to respect each other’s sovereignty and territorial integrity instead of creating a supranational community. As far as security is concerned, the Concord deals with it in one line, advocating “the continuation of co-operation on a nonASEAN basis between the member states in accordance with their mutual needs and interests” (Peou and Tin Maung Maung Than 1998, p. 12). During ASEAN’s second decade (1977–86) one more summit was held, only to review the progress related to the implementation of the Bali programme of action and this was held in Kuala Lumpur in 1977. There was not much improvement in political or economic cooperation in the region. It should be noted that it took ten years for ASEAN to decide to hold the Third Summit in 1987 because Malaysia refused to meet in the Philippines since it was the turn of Manila to host the subsequent Summit. However, at the beginning of the third decade of ASEAN’s existence, there was progress in political cooperation. The Manila Declaration of the Third Summit in 1987 indicates that the ASEAN member nations sought to further their political cooperation at the intra- and extra- regional levels. The goal was political stability and security within the region (ibid., 1998). ASEAN’s regional political and economic cooperation significantly improved when the Heads of States met at the Fourth ASEAN Summit in 1992 in Singapore.

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In contrast with the pre-1992 period, the Singapore Summit decided that summits would take place every three years with informal meetings in between. In that sense ASEAN has become more institutionalized. The Heads of States also decided to restructure and strengthen the ASEAN Secretariat. However, the Singapore Declaration says nothing about members surrendering political sovereignty to the ASEAN Secretariat. Increased political cooperation is also reflected in the Summit statement that “ASEAN shall move towards a higher plane of political and economic cooperation to secure regional peace and stability” and “ASEAN shall constantly seek to safeguard its collective interests in response to the formation of large and powerful economic groupings among the developed countries” (ASEAN Secretariat 1995, p. 68). In fact, ASEAN was formed to bring about regional reconciliation after the end of the Indonesian Confrontation. The idea was for regional states to put aside their quarrels, improve the atmosphere and substance of regional relations, and focus on economic development. This impulse was given added impetus by the sense of a growing communist threat in the region. Indonesia had just had a narrow escape from communism, the Communist Party of Malaya was showing signs of revival, war was raging in Vietnam, and China, entering the Cultural Revolution, was calling upon the pro-Beijing communist parties of Southeast Asia to overthrow the established governments of the region. Moreover, ASEAN played a very important role in resolving Cambodia’s conflict during 1979–91. ASEAN helped to bring in the three armed political adversaries to sign the peace accord in Paris in October 1991. As a result, general elections in Cambodia were held in 1992 under the auspices of the United Nations and economic aid and other assistance flowed into the country from the international community. Although dubbed the Association of Southeast Asian Nations, the membership of the grouping was initially confined to the five essentially non-communist and pro-Western states of Indonesia, Malaysia, Philippines, Singapore and Thailand. Burma and Cambodia were approached but did not want to join, while Vietnam and Laos were embroiled in conflict and were not approached. Apart from Thailand, the members of the new organization had relatively brief histories as independent states and jealously guarded their sovereignty. Indeed the willingness of all members to adhere strictly to the principle of non-intervention in the internal affairs of members was central to the successful establishment of ASEAN in view of the past history of suspicion and conflict. So was the principle of making decisions by consensus.

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Avoidance of interstate conflict Arguably, ASEAN’s biggest achievement has been the avoidance of conflict and improvement of political relations between member states (see also note 2). This is no mean accomplishment because interstate conflicts in Southeast Asia in the past had earned it its description as the Balkans of Asia. Peace between member states allowed them to concentrate their energies and resources on the economic and social development of their countries. Economic growth and higher standards of living in turn helped to dissolve communist insurgencies and subversion by reducing exploitable grievances. How was avoidance of conflict between members achieved? The simple answer is through the “ASEAN Way”. Since a primary purpose of setting up ASEAN was to keep the peace between members, it was not too difficult, over the years, for members to be socialized into the habit of not using force or the threat of force to deal with bilateral problems. The ASEAN Way places a premium on informal approaches and on personal relationships between political and governmental elites. It assumes that relations between members should not be held hostage to the inability to resolve bilateral disputes, whether territorial or otherwise, for indeed the disputes may be complex and not easy to resolve. Rather, problems which cannot be resolved should be put aside until such time, which may be many years, that they become more amenable to resolution because of changed circumstances. The maintenance and development of good and cooperative relations in other areas are seen as too important to be held up by a few intractable problems. This informal commitment to the peaceful settlement of disputes was reinforced by the formal commitment to do so in two of the key documents issued at the first ASEAN summit meeting held in Bali in 1976. The Declaration of ASEAN Concord states: “Member states, in the spirit of ASEAN solidarity, shall rely exclusively on peaceful processes in the settlement of intra-regional disputes.” And Article II of TAC says that relations among members should be guided, among other things, by “Renunciation of the threat or use of force” while Article 13 states that members “shall have the determination and good faith to prevent disputes from arising. In case of disputes on matters directly affecting them they shall refrain from the threat or the use of force and shall at all times settle such disputes among themselves through friendly negotiations”. TAC also provides for a dispute settlement mechanism through a ministerial level High Council. However this mechanism has never been used by ASEAN countries because of their reluctance to be seen to be taking sides in a dispute between fellow members. Rather, there have been two instances in recent years of disputes being referred to

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the International Court of Justice: the dispute between Singapore and Malaysia over the ownership of the island of Pedra Branca; and the dispute between Malaysia and Indonesia over the Sipadan and Litigan islands off the coast of Sabah. The Court has yet to decide on the two cases. How is the principle of the non-use of force or the threat of force faring after ASEAN expanded from 6 to 10 members between 1995 and 1999? The new members from the mainland of Southeast Asia (Vietnam, Laos, Myanmar and Cambodia) have different political cultures and histories from the older six. Although so far there have been no real problems, it would be fair to say that because of their different backgrounds it will take them time to be fully socialized into habits of avoidance of threat or use of force. There have also recently been signs that ASEAN’s own dispute settlement mechanism, which has so far existed only on paper, may be given some life. The Hanoi Action Plan (Appendix V), issued at the ASEAN summit in Hanoi in December 1998, calls for the formulation of draft rules of procedure for the operation of the High Council as envisaged in the TAC and draws attention to the importance of resolving border disputes between members. And at the 1999 Manila Informal Summit, an agreement in principle was reached to set up a permanent ministerial troika to address issues of peace and stability. These are among the steps being considered to improve ASEAN’s image following the setbacks suffered by the organization in the past few years (Singh 2000).

The principle of non-interference in internal affairs This principle is of course not unique to ASEAN. Indeed it has been the governing principle in relations between states since the Treaty of Westphalia in the 17th century. However, it has been under review internationally so that it can be made relevant to changes in international society. In ASEAN the matter came to a head in 1998 when Thai Foreign Minister Surin Pitsuwan said in a speech that ASEAN countries should be prepared to “intervene” in domestic affairs “in the form of peer pressure or friendly advice, when a matter of domestic concern poses a threat to regional stability”. This concept was known as “constructive intervention” and it was directed against Myanmar. Starkly put, what Surin was asking was that if domestic developments in a member country threaten the stability of neighbouring countries or the credibility of ASEAN, should everyone keep quiet in strict keeping with the principle of non-interference in internal affairs? The answer obviously is no, but it all depends on how “intervention” is carried out. In ASEAN’s 33 years of history, “intervention” has in fact taken place in the

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form of quiet representations or even attempts to mediate or mitigate strained bilateral relations between members (Funston 1999). Such “interventions”, made in the ASEAN Way, have sometimes been successful. But there is no way of compelling a country to change its behaviour if it does not want to. There are no political or economic sanctions for unacceptable behaviour within the framework of ASEAN. Later Surin softened his position by proposing “flexible engagement”. With this new proposal, Surin was not advocating any radical departure from the principle of non-intervention but addressing an image problem that ASEAN has, that is, the impression in the West and among civil society groups in Asia that it is prepared to condone abuses, especially human rights abuses, among its members. While ASEAN has quietly “intervened” where there have been large-scale violations of human rights, this is generally not known to the international community since the “intervention” has had to be outside the gaze of the media.6 Surin was arguing that more open discussion of such problems would help ASEAN’s international image, and it would also show civil society groups within ASEAN that ASEAN was genuinely concerned about these issues and was not an organization dedicated to the protection of repressive regimes. He made it clear that ASEAN must adhere to the principle of non-intervention in internal affairs but at the same time find a way to address new problems and challenges which could damage ASEAN’s credibility if left unaddressed. ASEAN’s “constructive engagement” approach to the Myanmar issue, ASEAN’s weak response to the Asian crisis and its initial inaction to the haze over several Southeast Asian countries caused by unchecked fires in Indonesia, were root causes of Surin’s advocacy of “flexible engagement”.7 In fact, “constructive engagement” was Thailand’s foreign policy towards Myanmar during the Chatichai government in the late 1980s based on the following objectives: • To promote a close relationship with Myanmar as a neighbouring country with which it shares a border, for the benefit of security • To encourage Myanmar to be a good and stable neighbour • To co-operate with the Myanmar government in various issues of conflicts in accordance with the mutual interest of both countries in order to develop close co-operation in economic, social, technical and cultural fields. The underlying rationale of this policy was to encourage political coexistence rather than isolation and criticism as the most effective means to influence positive changes in Myanmar … Amitav Acharya, a scholar on Southeast Asia regional security, has argued that while the nature and scope of the

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policy of constructive engagement was somewhat obscure, the political restraint it embraced was consistent not only with the ASEAN principle of non-interference in the internal affairs of the state but it was also a pragmatic move (Maung Aung Myo 2002, p. 4).

However, this policy of “constructive engagement” attracted strong criticism from the West as well as the ASEAN region itself. Myanmar’s response to “flexible engagement” was straightforward — “There is no such thing as engagement within the family. And ASEAN is a family” (Asian Wall Street Journal, 6–7 November 1998, p. 10). As a follow up to the debate over “flexible engagement”, ASEAN’s notion of “enhanced interaction” was adopted in consensus. ASEAN’s creation of a “troika” to resolve the Cambodian issue in 1998 was a result of this “enhanced interaction” policy of ASEAN. Since then, “sensitive” issues, especially those involving domestic affairs, are usually not discussed at the formal ASEAN meetings, and if discussed, only in a circumspect manner, even though these discussions are behind closed doors, without the presence of the media. One outcome of Surin’s call was the institution of a “retreat” at the ASEAN Ministerial Meeting in Singapore in July 1999, in addition to the formal meeting. At the retreat ministers could talk frankly on all manner of subjects, outside the gaze of the media. Such “retreats” are likely to become a regular feature of the Annual ASEAN Ministerial Meetings (AMM).

2.2.1 Intra-ASEAN Security Cooperation While ASEAN has been preoccupied with regional security issues in the broad sense of the term, it has never sought to be a military alliance. A collective defence alliance would have entailed some surrender of sovereignty as well as a level of trust that members were not prepared for. In any case, even during the Cold War, a collective defence alliance was not seen as relevant to the principal threat, namely communist subversion and insurgency. (A conventional military threat from China or Vietnam was not considered very likely; if such a threat had ever become real, a military alliance of five weak military states would have made little difference). Thus there is no multilateral military cooperation involving all ten ASEAN members or even the older five members. However, there is bilateral cooperation in the form of military exercises, exchanges between military staff colleges and intelligence exchanges relating not only to issues like crime and narcotics but also to perceptions of broader issues of regional security. This criss-crossing web of bilateral security relations is well established, in particular between the older

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members of ASEAN, and has contributed significantly to confidence building between their militaries. 2.2.2 ASEAN and the Major Powers Southeast Asia has traditionally been a magnet for the great powers, attracted by its resources and its strategic location between the Indian and Pacific oceans. It was a region of rivalry between the British and the Dutch, and the British and the French, at various times during the colonial period. (All the countries of Southeast Asia, except Thailand, had been colonized by Britain, France, the Netherlands, Portugal or the United States during the 18th and 19th centuries). The region remained a cockpit of great power rivalry during the Cold War, even though most of the colonial empires had been dismantled in the 1940s and 1950s. During Indonesia’s Confrontation against Malaysia, China backed Indonesia while Britain supported Malaysia. The long Vietnam War saw France and then the United States pitted against communist forces supported by China and the Soviet Union, while the Cambodian conflict (1978–91) was in a sense a proxy war between China and the Soviet Union. One of the goals of ASEAN from the beginning has been to prevent, as far as possible, Southeast Asia from being a pawn of great power conflict and rivalry. It is felt that a collective stand in relation to the major powers would give ASEAN much better bargaining power and clout than if the members were to deal with the outside powers individually. The declaration of Southeast Asia as a zone of neutrality in 1971 was in fact an expression of the wish that Southeast Asian countries would want, as far as possible, to determine their own destinies without the interference of outside powers. Yet the reality is that the great powers cannot be wished away. They are part of the regional landscape — China is on Southeast Asian borders, the United States has security alliances with two Southeast Asian countries and the Seventh Fleet has sailed the Western Pacific since the end of the Second World War, and Japan has extensive economic interests in the region. As the settlement of the Cambodian conflict in 1991 showed, the great powers will continue to play an important role. What ASEAN can hope for is to influence this role in a direction beneficial to regional peace and stability. Indeed ASEAN has sought to engage the major powers for this purpose from the 1970s. One institution for doing so was the “Post-Ministerial Conferences” (PMC) established with “Dialogue Partners”8 in the late 1970s in order to shore up confidence in the region after the fall of the Indochina countries to communism. The Dialogue Partners then were ASEAN’s main trade and security partners, namely

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Japan, the United States, the European Community, Australia, New Zealand and Canada. In the 1980s, South Korea became the seventh dialogue partner. The dialogue partners were happy to lend their support to ASEAN because of the anticommunist orientation of the ASEAN countries. Since the end of the Cold War, the number and character of dialogue partners has changed. China, Russia, and India were added to the list and, unlike the past, all three are not Western or pro-West countries. This illustrates ASEAN’s flexibility and ability to adjust to new circumstances. China is of growing importance both economically and strategically and a worthwhile candidate for ASEAN’s engagement. Russia is a traditional great power even if weakened for the time being, while India too has growing economic and geopolitical links with Southeast Asia. Post-Ministerial Conferences have continued, despite the existence of ARF. 2.2.3 The ASEAN Regional Forum (ARF) After the end of the Cold War, there was growing interest among Asia-Pacific countries to establish a multilateral forum to discuss security issues. It was felt that such a forum was urgently needed to help build confidence in a region marked by a dearth of common institutions and a history of rivalries and animosities. Through a mixture of design and accident, ASEAN came to assume a central role in this forum, the ARF. A major security forum is not easy to establish from scratch. ASEAN’s advantage was that it already had the PMCs which included all ASEAN members and observers as well as the dialogue partners, a total of 15 AsiaPacific countries plus the European Community. Only China and Russia needed to be added to have a grouping that included all the main players in the region. Another advantage of ASEAN was that China, a key player, was willing to join a grouping led by an organization of smaller countries rather than by a military ally of the United States such as Japan or Australia. The fact that the Forum was called the ASEAN Regional Forum (ARF) rather than the Asian or Asia-Pacific Regional Forum attests to ASEAN’s pivotal role in it. The meetings are held at Foreign Ministers’ level in an ASEAN capital after the annual AMMs. An ASEAN Foreign Minister chairs them. And ASEAN plays a critical role in setting the agenda, though in consultation with other ARF members. ARF had 18 members at its inception and now has 23. They are the 10 ASEAN countries plus Australia, Canada, China, the European Union, India, Japan, Republic of Korea, North Korea, Mongolia, New Zealand, Papua New Guinea, Russia, and the United States. Thus all the world’s major powers are included. To try to help manage Asia-Pacific security well beyond ASEAN’s borders is indeed an ambitious undertaking for ASEAN. Critics have questioned the ability of

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a group of relatively weak countries to lead an organization which also includes the world’s great powers. Some Western countries are also irked by ARF’s slow progress. However, ASEAN can be expected to remain in the driver’s seat so long as China will not have it any other way. ARF, established in 1993, is a cooperative security endeavour. Following the Concept Paper of 1995, ASEAN has begun efforts towards a more cooperative security climate in the region in three stages: confidence building measures (CBMs), preventive democracy and conflict resolution. It has so far been engaged only in security dialogues and undertaken limited CBMs. It is in no position, and may never be, to resolve or even prevent conflict, given the fact that decisions have to be by consensus and certain countries, in particular China, believe that security problems in the region should be resolved bilaterally by the parties involved, and not by ARF. The Asia-Pacific will continue to depend on a balance of power for its security, in particular American military power, but the ARF will remain a useful supplement to it. However, advocates of multilateralism hope that, through the habit of cooperation, ARF will reduce the dependence of regional countries on balance of power approaches. 2.2.4 ASEAN and Other Regional Organizations ASEAN has close links with three other regional organizations or forums. The first is the Asia-Pacific Economic Cooperation (APEC) forum which was set up in 1989 for trade liberalization and economic cooperation in the Asia-Pacific. ASEAN does not have the sort of pivotal role in APEC as it has in ARF. Indeed not all members of ASEAN are members of APEC (Cambodia, Laos and Myanmar are not) and there have been differences between ASEAN members on the value attached to APEC. However, ASEAN members still constitute an important constituency in APEC and, in deference to this, the annual APEC ministerial meeting, together with the informal APEC summit, alternates between an ASEAN and a non-ASEAN venue. Another major forum initiated by some ASEAN countries is the Asia-Europe Meeting (ASEM). This is the summit meeting between European and East Asian leaders which first took place in Bangkok, Thailand, in March 1996. The summits have become biannual affairs: the second summit was held in London in 1998, the third was held in Seoul, Korea, in October 2000 and the fourth, in Hanoi, Vietnam in October 2004. In between there are Foreign and Economic Ministers’ meetings as well as various issue related meetings ranging from trade, investments to environmental technology. The purpose of the ASEM process is to foster closer

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relations between Europe and Asia, especially economically. On the part of ASEAN only those countries that were members of ASEAN in March 1996 when the first ASEM took place have continued to be part of the ASEM process: Myanmar, Laos and Cambodia, which joined later, are not members. Thus the Asian half of ASEM comprises seven ASEAN countries plus China, Japan and South Korea. The ASEAN group continues to play a key role in the ASEM process. In ASEM, Myanmar has become the bone of contention between ASEAN and EU due to Myanmar’s allegedly poor human rights record. After years of feuding over Myanmar, it was allowed to attend the ASEM meeting in Brussels in January 2003 — despite the EU’s sanctions imposed on Myanmar. Finally, over the last few years, ASEAN has been playing a central role in the development of an ASEAN Plus Three9 process, that is the ten ASEAN countries plus China, Japan and South Korea. This group met for the first time after the second Informal ASEAN Summit in Kuala Lumpur in 1997 soon after the regional financial crisis hit the region. That crisis showed that, by itself, ASEAN did not have the critical mass to ensure the financial and economic well-being of the region in a world of huge daily transcontinental flows of speculative funds. It was desirable to team up with the larger economies of Northeast Asia. Ambitious governments have been articulate for East Asian regionalism, including an eventual free trade area to be established by a building block approach and promotion of lasting peace and stability. These will not be easy to realize in view of the diversity of the region and historical suspicions between some countries, especially China and Japan. The immediate objective seems to be to establish a mechanism for cooperation in the event of massive speculative attacks on currencies. ASEAN plays the pivotal role in the process. As in the ARF, the meetings are held in an ASEAN capital and chaired by an ASEAN leader. 2.3 ECONOMIC COOPERATION: FROM PTA TO AFTA AND AFTA-PLUS There is a plethora of literature on ASEAN economic cooperation; mostly by officials, journalists and academics. Some assessments on ASEAN economic cooperation come from scholars outside the region. Many of these assessments are positive while others are negative. The ASEAN Secretariat correctly stated, Although there is no direct causality that can be attributed to the dynamic economic performance of the ASEAN economies in the last twenty five years, it cannot be denied that the relative peace and stability in the region, and the increasing interactions among ASEAN states (officials, businesses,

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citizens) greatly enhanced the process and character of growth (ASEAN Secretariat 1997, p. 37).

ASEAN economic cooperation is wide-ranging. Areas involved in regional cooperation are trade (intra- and inter-regional); industrial development, food, agriculture, and forestry; transport, communications, tourism; minerals and energy, and e-commerce. For the purpose of this section, ASEAN intra- and inter-regional trade and investment along with ASEAN’s external linkages will be discussed. This section will be divided into two parts: ASEAN economic cooperation from Preferential Trading Agreement (PTA) to ASEAN Free Trade Area (AFTA) and beyond AFTA. 2.3.1

From PTA to AFTA

Preferential Trading Agreement (PTA) Although the main focus of ASEAN in the foundation years was political and regional security, the significance of ASEAN economic cooperation was perceived in 1969 when a United Nations team was commissioned by the ASEAN Foreign Ministers. The UN team came up with the Kansu report, named after the leader of the team. The report, which came out only in 1974, proposed the Preferential Trade Agreement (PTA) because it did not consider ASEAN countries ready for very close integration in the form of a free trade area or customs union. The PTA, as the lowest form of economic integration, provided for tariff preferences for trade among ASEAN member countries. The PTA which was the principal instrument in carrying out the promotion of intraASEAN trade was signed in 1977. This effort was the first ever commitment of ASEAN countries to preferential joint trade liberalization. The PTA set no specific targets to achieve a higher level of integration such as a customs union or free trade area. Preferences were extended on a voluntary, product-by-product basis. The PTA was appropriate for the earlier stage of ASEAN since it was a mechanism whereby intraASEAN trade could be liberalized at a pace that was acceptable to all member countries. One of the basic rules of PTA was the rule of origin. According to the rule, the total value of the materials, parts or produce originating from non-ASEAN countries may not exceed 50 per cent of the value of the products manufactured or obtained and the final process of manufacture is performed within the territory of the exporting contracting state.10 This rule of origin is still valid under AFTA. From its inception, the PTA’s achievements were not impressive and it had little impact on intra-regional trade. As Mohamed Ariff correctly pointed out “This (PTA) was based on a cumbersome item-by-item approach which did not result in

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any significant increase in intra-regional trade” (Ariff 2001, p. 47). Only a limited number of products were approved for preferential tariff reductions. According to one estimate, concessional tariff rates applied to only US$47 million worth of intraASEAN imports (1976 figures), less than 2 per cent of total intra-ASEAN trade. After 1980 PTA switched from being voluntary to an across-the-board approach under which a minimum preferential tariff cut of 20 per cent was applied to all intraregional imports below a certain ceiling value. However, this import ceiling was progressively raised until 1984, when it was abolished (EAAU 1994). According to the ASEAN Secretariat, there are at least three reasons for this failure.11 First, the tariff cuts were not implemented on an across-the-board basis. Even by 1986, the PTA applied to only about 5 per cent of intra-ASEAN trade (Edwards and Wong 1996). Second, the size of the tariff cuts itself; until 1981, most of the items on the list had tariff reductions of only 10 per cent. The failure of the PTA to deal adequately with non-tariff barriers (NTBs), was the third reason for the low impact of the PTA on intra-regional trade since NTBs can be more traderestricting than tariffs. Apart from these reasons, “the failure of the PTA is perhaps symptomatic of the unpreparedness of ASEAN members to pursue trade liberalization at the time. Fear and apprehension about the likely detrimental impact on production and employment in domestic industries, infant manufacturing sector in particular, was rife” (Menon et al. 1997, p. 6). Despite this failure, the PTA can be considered as the first remarkable step towards closer economic cooperation in the ASEAN region and one of the earliest manifestations of promoting intra-ASEAN trade. At the same time when the PTA was adopted at the Bali Summit in 1976, ASEAN also introduced three other schemes; the ASEAN Industrial Projects (AIP) which have been replaced by the ASEAN Industrial Complementation (AIC)/Brand-to-Brand Complementation (BBC), and the ASEAN Industrial Joint Ventures (AIJV). Despite some improvements, ASEAN has failed to notch up an impressive record in economic cooperation because of historical and political constraints. Since this section deals with trade and investment linkages, these industrial projects will not be discussed in detail here.

ASEAN Industrial Projects (AIP) Launched in 1980, the ASEAN Industrial Projects (AIP) scheme was essentially a vehicle to assign large-scale, government initiated projects to different member countries. It was envisaged that each member would at least participate in one such project serving the entire ASEAN market. The host would hold 60 per cent of the project’s equity with the balance shared by the other countries. The rationale of the

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AIP was to permit maximum utilization of potential scale economies and comparative advantages within the organization. The AIP has produced disappointing results. Of the five original projects contemplated, only two got off the ground. One of these would probably have gone ahead in any case. Numerous reasons have been cited for this poor performance. The scheme failed to win the wholehearted support of ASEAN countries which were reluctant to limit their freedom to invest where they pleased. The AIP projects were ill-conceived, hurriedly put together and not subjected to careful feasibility studies. The private sector avoided participation. Above all, the AIP appeared to be based on a false premise: that governments rather than the market should decide where industries should be located (EAAU 1994, p. 29).

ASEAN Industrial Complementation/Brand-to-Brand Complementation (AIC/BBC) The ASEAN Industrial Complementation (AIC) was established in 1981 with the aim of dividing different production stages of an industry among ASEAN countries to avoid duplication of capacity in ASEAN and allow greater economies of scale. “In contrast to the AIP scheme, AIC sought detailed input from the private sector, taking the ASEAN Chamber of Commerce and Industry to identify and promote suitable projects. At least four of the then five ASEAN members were required to participate in each undertaking” (EAAU 1994, p. 29). The first scheme was launched in 1983 targeting automobile industrial complementation. The total sale for this first scheme during 1982–85 was only US$13.63 million which was less than one per cent of the value of intra-ASEAN trade during that period (Sukrasep 1989, p. 49). The first scheme was a failure and hence the second scheme was based on Brand-to-Brand Complementation (BBC) in the automotive sector for cooperation in the production of particular brands. The BBC allowed the private sector to determine the location of production across countries. Intra-industry linkages were facilitated by the granting of a 50 per cent margin of preference to BBC products. This BBC scheme has been relatively successful, with eight projects approved so far. However, the obvious drawback of BBC is the non-participation of Indonesia, which limits the scheme’s market and economies of scale (EAAU 1994, p. 30). The AIC/BBC was shelved because it failed to achieve its objectives. ASEAN Industrial Joint Venture (AIJV) As a result of the Basic Agreement on ASEAN Industrial Joint Ventures signed on 7 November 1983, the AIJV scheme was launched. The objective of the AIJV was

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to replace grandiose government-to-government AIP projects with more flexible, private sector oriented initiatives. Hence the scheme was a flexible and decentralized framework to promote regional industry. The scheme uses tariff preferences as an investment incentive. Participating countries charge 10 per cent of their prevailing tariff (that is, grant a 90 per cent margin of preferences) for goods produced by approved joint ventures. There are at least five basic rules. They are: • • • • •

ASEAN participation (at least two ASEAN countries must be involved); Location of production (must be located in one of the participating countries); Foreign participation (non-ASEAN equity of up to 60 per cent must be allowed); Rules of origin (the AJIV product must satisfy the PTA rules of origin requirements); Preferential tariffs (participating countries grant a 90 per cent margin of preference to the AJIV product for a period of four years, which can be extended to eight years. Tariff protection is conferred by requiring participating ASEAN countries to freeze their tariffs on products similar to those produced by the AJIV for a period of four years).

“In the first decade of operation, 26 products have been granted AIJV status, including automotive components and parts, mechanical power rack and steering systems, chemical heavy equipment and some food products. Almost half of the approved ventures involve participation of two ASEAN countries” (EAAU 1994, p. 30). The AIJV scheme has had little impact on intra-ASEAN trade and investment mainly due to poor promotion, cumbersome application procedures and its inconsistency with AFTA. All three schemes including AIJV, AIP and AIC/BBC failed to live up to the great expectations that were raised when they were first introduced. 2.3.2 ASEAN Free Trade Area (AFTA) In 1992, there was a breakthrough during the Fourth ASEAN Summit in Singapore. The ASEAN Free Trade Area (AFTA) was to be established in the face of stronger integrated trading blocs, such as the European Community (EC) and the North American Free Trade Agreement (NAFTA) (see also pp. 42 and 43). A few months earlier, ASEAN economic ministers laid down the groundwork for the free trade area concept by putting the Common Effective Preferential Tariff (CEPT) scheme in place. CEPT provides a means for harmonizing internal tariff rates. This means, it took a quarter of a century for ASEAN to implement the originally envisaged

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economic cooperation programme in the form of AFTA. In order to understand AFTA, a few questions need to be addressed. First, why is AFTA necessary for ASEAN? There are political as well as economic reasons. Many in ASEAN felt that the regional association was at a crossroads because of the absence of the Cold War imperative that had helped forge and sustain regional cooperation. Thus there was a need to sustain and enhance regional cooperation — hence the creation of AFTA. Then there is an economic justification. AFTA was introduced at the time when the United States accelerated agreements for NAFTA while the EU held on to the “Maastricht Treaty”. These events urged ASEAN to take bolder steps in regional cooperation. In other words, the establishment of AFTA was more “reactive” or “defensive”, given the global uncertainties at the time. What are AFTA’s objectives? The EAAU reported (1994) on AFTA’s three objectives. First, AFTA was to liberalize trade in ASEAN by progressively removing intra-regional tariffs and, ultimately, non-tariff barriers. Second, AFTA would attract foreign investors to the region by presenting a larger coordinated market. And third, AFTA would adapt ASEAN to changing international economic conditions, in particular the rise of regional trading arrangements (RTA) in the developed world (p. 34). What is the framework of AFTA? According to the ASEAN Secretariat, amidst difficulties with the 1987 Enhanced PTA Programme, ASEAN started a framework for the ASEAN Free Trade Area (AFTA) and couched it as a CEPT scheme (Appendix VIII). The CEPT Scheme is the centrepiece of the AFTA proposal. It is a cooperative arrangement among ASEAN member states that would reduce intra-regional tariffs and remove non-tariff-barriers (NTBs) over a 15-year period commencing 1 January 1993. It covers all manufactured products, including capital goods and processed agricultural products and those products falling outside the definition of agricultural products as defined in Article 1 (7) of the agreement. The ultimate aim of AFTA was to achieve tariff rates for intra-ASEAN trade at 0 to 5 per cent while maintaining other supplemental measures of the 1987 PTA Programme. In other words, the CEPT scheme is the basis with the goal of reducing tariffs and non-tariff barriers on all intra-ASEAN trade in manufacturing processed goods. It will be accomplished by two different tracks — a fast track and normal track. Under the fast track, for the important tariffs for items with more than 20 per cent, the tariff fell to 0 to 5 per cent by 1 January 2000, and under the normal track, to 20 per cent by 1 January 1998. According to the original plan, ASEAN agreed to reduce the tariff rates in normal track under CEPT to 0–5 per cent within 15 years

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starting from 1993. For products on the fast track list, the tariff reduction will be completed by the year 2003. However, after the Hanoi Summit in 1998, the six original members agreed to accelerate the CEPT schedule for the normal track by one year from 2003 to 2002 and set the target to achieve a minimum of 90 per cent tariff lines to 0–5 per cent by 2000.12 For Vietnam, the target date was accelerated from 2006 to 2003, for Laos and Myanmar, 2008 to 2005, and for Cambodia to 2010. However, some countries for instance, Malaysia, have asked for exemption for some products (For the CEPT product list, see Tables 2.1, 2.2 and 2.3). In fact, the ASEAN-6 members had already agreed to establish AFTA by 2008 at the ASEAN Heads of State meeting in 1992. This deadline was moved forward to the year 2005 in 1995, then to the year 2003 in 1996. At the ASEAN Summit at Hanoi in 1998, implementation of the CEPT scheme was speeded up to the year

TABLE 2.1 Number of Tariff Lines in the Tentative CEPT Product List for 2001 Country

Inclusion List

Temporary Exclusion List

General Exception List

Sensitive List

Total

Brunei Darussalam Indonesia Malaysiaa Philippines Singapore Thailand ASEAN-6 Total Percentage

6,276 7,192 10,025 5,621 5,859 9,104 44,077 98.34

0 21 218 6 0 0 245 0.55

202 68 53 16 0 0 339 0.76

14 4 83 50 0 7 158 0.35

6,492 7,285 10,379 5,693 5,859 9,111 44,819 100.00

Cambodia Laos Myanmar Vietnam New Member Total Percentage

3,115 1,673 2,984 4,233 12,005 54.21

3,523 1,716 2,419 1,877 9,535 43.06

134 74 48 139 395 1.78

50 88 21 51 210 0.95

6,822 3,551 5,472 6,300 22,145 100.00

ASEAN Total

56,082

9,780

734

368

66,964

83.75

14.60

1.10

0.55

100.00

Percentage

Notes: Data as of May 2001 a Malaysia: including 1,168 items of wood products which came from the extension of eleven items. Source: Soesastro 2001, Table 12.1.

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TABLE 2.2 Number of Tariff Lines with Tariffs 0–5 Per Cent by 2001 Country

Number of Tariff Lines 0–5% >5% Other Total

Percentage of IL 0–5% >5% Other

Brunei Darussalam 6,107 Indonesia 6,487 Malaysia 9,189 5,040 Philippinesa Singapore 5,859 Thailand 8,195 ASEAN-6 Total 40,873

157 709 836 530 0 908 3,140

12 0 0 51 0 1 64

Cambodia Laos Myanmar Vietnam New Member Total

238 1,028 2,426 2,963 6,654

2,877 645 558 1,270 5,342

0 0 0 0 0

3,115 1,673 2,984 4,233 11,996

7.64 61.45 81.30 70.00 55.47

47,527

8,482

64

56,073

84.76

ASEAN Total

6,276 97.31 7,192 90.14 10,025 91.66 5,621 89.66 5,859 100.00 9,104 90.02 44,077 92.73

2.50 9.86 8.34 9.43 0 9.97 7.12

Total

0.19 0 0 0.91 0 0 0.15

100 100 100 100 100 100 100

92.36 38.55 18.70 30.00 44.53

0 0 0 0 0

100 100 100 100 100

15.13

0.11

100

Notes: Data as of May 2001 a For the Philippines, among those items where the 2001 CEPT rates are not 0–5 per cent, there are 87 items with the MFN rates already at 0–5 per cent so that the percentage number of items with 0–5 per cent tariff in 2001 would be more than 91 per cent. Source: Soesastro 2001, Table 12.2.

2002, that is, tariffs would be reduced to 0–5 per cent by the year 2002 for ASEAN-6. For the new members, the deadlines remained the same; for Vietnam, it is 2006; for Laos and Myanmar it is 2008; and for Cambodia, the year 2010 to cut tariffs on as many items as possible to reduce to 0 per cent. However, in January 2002, ASEAN pushed back the deadline from 2002 back to 2003 to ensure economic stability of its members due to the economic impact of the 11 September 2001 terrorist attacks and resistance from some quarters in the private sector (The Nation, 21 January 2002). Under CEPT, there are four product lists: the Inclusion List (IL), the Temporary Exclusion List (TEL), the Sensitive List (SL), and the General Exception List (GEL) (Table 2.1). They are used as key instruments to determine the pace and scope of trade liberalization. The IL consists of the items subject to the tariff reductions immediately to bring down in the range of 0–5 per cent by the year 2003. Although the TEL items were initially excluded from the tariff reductions, these items were transferred to the IL by 2000 in five equal instalments beginning from 1996 and then reduced to 0–5 per cent by the year 2003. The SL consists of unprocessed agricultural

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48782

– 1247 2356 2984 7.90

6264 6931 8354 5335 5746 9062 41692

5.01

– 7.54 4.45 4.43 6.31

1.55 5.36 3.2 7.34 0 9.528 4.79

Average

1999 Tariff Lines

Note: As of May 2001. Source: Soesastro 2001, Table 12.3.

Total ASEAN-10

Cambodia Lao PDR Myanmar Vietnam ASEAN-4

Brunei Darussalam Indonesia Malaysia Philippines Singapore Thailand ASEAN-6

Country

53759

3115 1247 2386 3487 10981

6264 7176 8864 5550 5821 9103 421778

Tariff Lines

4.43

10.39 7.07 4.43 7.11 7.51

1.26 4.76 3.32 5.18 0 6.12 3.64

Average

2000

51785

3115 1673 2984 4233 7772

6264 7192 10025 5570 5859 9103 44013

Tariff Lines

3.85

10.39 7.08 4.57 7.25 7.45

1.17 4.27 2.7 4.41 0 5.66 3.21

Average

2001

TABLE 2.3 Average CEPT Tariff Rates (1999–2003)

51785

3115 1673 2984 – 7772

6264 7192 10025 5570 5859 9103 11013

Tariff Lines

3.48

8.89 6.42 4.57 – 6.7

0.96 3.69 2.58 4.3 0 5.01 2.91

Average

2002

51794

3115 1673 2984 – 7772

6273 7192 10025 5570 5859 9103 44022

Tariff Lines

2.93

7.93 5.6 4.56 – 6.19

0.96 2.17 1.94 3.81 0 4.63 2.37

Average

2003

MYANMAR IN ASEAN 33

34 ASEAN: EVOLUTION OF REGIONAL COOPERATION IN SOUTHEAST ASIA

product items to be phased into the IL during the period of (2001–03) and to be reduced to 0–5 per cent by 2010 for ASEAN-6. The deadlines for compliance by the new member countries is the year 2013 for Vietnam, 2015 for Laos and Myanmar and 2017 for Cambodia. In 2001, a total of 368 tariff lines, or 0.55 per cent of all tariff lines in ASEAN, were in the list. The items which satisfy Article XX of the GATT are included in GEL. These items are permanently excluded from the tariff reductions for reasons of protection of national security; public morals; protection of human, animal and plant life and health; and the protection of articles of artistic, historic and archaeological value. According to the AFTA agreement, all quantitative restrictions and non-tariff barriers for goods brought within the CEPT scheme are to be removed within five years of the goods reaching the 20 per cent tariff level. However, services are not included in this agreement. Although a green line system for express customs clearance of AFTA products has been introduced, overall progress is slow. After all, it took almost three decades for ASEAN to establish AFTA. Economic cooperation among ASEAN member countries is improving and gaining momentum. Economic cooperation in AFTA in terms of trade and investment linkages is impressive; although intra-regional trade is low by international standards it has increased over time. The OECD (1993) observed that the reason for low intraregional trade was that it was not as important as extra-regional trade. However, ASEAN’s intra-regional trade has increased by substantially larger margins than that of any of the other developing country groupings. Intra-ASEAN trade increased from about 15 per cent in pre-AFTA years to more than 23 per cent in 1997 within 5 years of the AFTA agreement but it slowed down after 1997 due to the regional economic crisis. Moreover, unlike other regional groupings among the developing countries, OECD noted that the ASEAN countries had been able to avoid trade diversion with its extra-regional trade partners. As far as AFTA’s achievement in reduction of tariffs is concerned, in May 2001, the six original member countries had 98.34 per cent of the items in its Inclusion List whereas the new member countries had 54.21 per cent. With the participation of four new members (Vietnam, Laos, Cambodia and Myanmar), the Inclusion List under CEPT increased from 42,253 in 1993 to about 56,082 tariff lines, or about 84 per cent of the total tariff lines in ASEAN (ASEAN Secretariat 2001). Table 2.1 shows the number of tariff lines in each of the CEPT product list. As of May 2001, 92.73 per cent (40,873 tariff lines out of total 44,077 tariff lines in their IL) of products in the IL of the six original signatories to the CEPT Agreement was in the tariff range of 0 to 5 per cent (Table 2.2). On the other hand,

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for the new members, 55.47 per cent of products (6,654 tariff lines out of total 11,996 tariff in their IL) was in the tariff range of 0 to 5 per cent. Based on her legal enactment, Vietnam would have 70 per cent of its IL with tariffs of 0–5 per cent in year 2001. The year 2001 legal enactment of Lao PDR and Myanmar show that they would have 86.54 per cent and 78.18 per cent respectively of their IL at tariffs 0–5 per cent range in the year 2005. Cambodia, who had not joined ASEAN when the Bold Measures was announced, would nevertheless reduce the tariffs on 91.94 per cent of its current Inclusion List items to 0–5 per cent in the year 2007 (ASEAN Secretariat 2001).

Again, at the Third Informal ASEAN Summit in November 1999 in Manila, the leaders agreed to eliminate all import duties by 2010, ahead of the original schedule, for the old ASEAN members. For newer members including Cambodia, Lao PDR, Myanmar and Vietnam, the leaders agreed in principle to advance the schedule of eliminating all import duties from 2018 to 2015, but allowing some sensitive products to follow the original schedule. ASEAN’s trade links have also been intensified by the introduction of economic cooperation at the sub-regional level — growth triangle arrangements. There exist at least five sub-regional economic cooperation arrangements in ASEAN: IndonesiaMalaysia-Singapore Growth Triangle (IMS-GT), Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT), Brunei-Indonesia-Malaysia-Philippines East ASEAN Growth AREA (BIMP-EAGA), and the Greater Mekong Subregional Economic Cooperation arrangement (GMS) including six riparian countries — Yunnan Province of China, Myanmar, Thailand, Laos, Cambodia and Vietnam. Most recently, as a bridge between ASEAN and South Asia, one more subregional framework called Bangladesh, India, Myanmar, Sri Lanka and Thailand Economic Cooperation (BIMST-EC) was established. Out of these five subregional economic cooperation arrangements, the IMS-GT is most successful. However, there is one major drawback in the AFTA arrangement. It has failed to fuel intra-ASEAN trade growth significantly. This is because member countries are deliberately leaving out heavily traded goods, especially agriculture-related products, in the tariff reduction scheme. It is expected that AFTA would have boosted intra-regional trade growth by only 5 per cent when participating countries cut tariffs on 9,000 products to zero per cent in 2003. In 2001 intra-ASEAN trade recorded growth of a mere 3 per cent, indicating the tariff reduction scheme was ineffective (The Nation, 12 June 2002).

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36 ASEAN: EVOLUTION OF REGIONAL COOPERATION IN SOUTHEAST ASIA

In addition, it is important to note that the whole region is still not out of the woods; the recent regional economic turmoil continues to have an impact although the worst is clearly over. Moreover, the 2001 terrorist attacks affected the US economy and the Japanese economy is still not performing well. Unless these longterm problems are overcome, it may hinder ASEAN’s prospects of successful and sustainable economic cooperation. 2.3.3

Cooperation beyond AFTA

AFTA Plus Despite all the measures and agreements, ASEAN nations are not coping with the planned reduction in tariffs. AFTA-Plus is a device that appears to deepen regional integration. AFTA Plus refers, in addition to reduction of intra-ASEAN tariffs on traded goods, to various measures to increase regional integration by extending the agenda beyond just liberalization of barriers to trade in goods. It contains provisions to increase cooperation in banking, finance, transport and communications. Other measures such as the harmonization of standards, reciprocal recognition of tests and certification of products, harmonization of customs procedures, removal of barriers to foreign investment, macroeconomic consultations, rules of fair competition, and promotion of venture capital are also included. These measures are mentioned in the Framework Agreement on Enhancing ASEAN Economic Cooperation concluded at the Fourth ASEAN Summit Meeting in Singapore in January 1992. AFTA-Plus also aims to deal with issues such as trade-related investment measures (TRIMs) and trade-related intellectual property rights (TRIPs), as well as the protection of copyrights, patents, and trademarks (Menon 2000, p. 59). These measures help to deepen ASEAN economic cooperation. This is in line with what Lee (1994, p. 4) noted when she stated “in order to achieve the goals of AFTA, ASEAN would need to go beyond tariff reduction to include nonborder issues ranging from non-tariff barriers (NTBs) to investment policies … in other words, what is needed is not AFTA per se, but an ‘AFTAPlus’ ”.13 Actually, the list does not stop here; there are still many areas of agreements to be concluded. So far, cooperation agreements have been concluded in areas such as NTBs, services, foreign investments, intellectual property, customs and tourism. Apart from trade and investment cooperation, ASEAN economic integration measures taken in 2000–01 has spread to areas such as services (liberalization, facilitation and cooperation), industry (ASEAN Industrial Cooperation — AICO,

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small and medium enterprises, and intellectual property), infrastructure (transport, energy and telecommunications), finance (the Chiang Mai Initiative, ASEAN Surveillance Process and Finance Work Program), information technology, tourism, Mekong Basin Development, food, agriculture (crops, livestock, fisheries, agricultural training and extension cooperatives, and regional and international issues), and forestry.14 However, AFTA’s attempt to increase the integration process through AFTAPlus has had limited success. In assessing AFTA, Menon made a fair comment: Apart from harmonizing customs procedures and tariff nomenclature, and a fast-tracking common customs valuation method, progress has been limited. In the area of foreign investment, the establishment of ASEAN Investment Area (AIA) has been marred by its preferential access components, which run counter to the free, open and non-discriminatory investment regimes that have been the hallmark of ASEAN countries in the past (2000, p. 70).

2.3.4 ASEAN Investment Area (AIA) In October 1998, the ASEAN Heads of Government in Hanoi approved the framework agreement (AIA Agreement) including measures to establish an ASEAN Investment Area (AIA) to further enhance the region’s competitiveness and conduciveness for attracting higher and sustainable levels of FDI flows. This will give impetus to investors to invest more in ASEAN. AIA is to be achieved by providing a competitive, open and liberal investment environment, and in promoting ASEAN as an investment region. Even before the AIA was approved, ASEAN had already been implementing various investment cooperation and facilitation, and promotion and awareness programmes of activities. In implementing the AIA Agreement and the Hanoi Plan of Action (HPA) (Appendix V) announced at the Sixth ASEAN Summit, ASEAN implemented several investment promotion, facilitation and liberalization measures in 2000 in addition to the numerous activities completed in 1999. Among these activities were the ASEAN joint investment missions, which were sent to Tokyo, New York, Minneapolis, San Jose, London, Paris and Munich in 2000. One critic of AIA activities commented that it is not only unnecessary, but also likely to be inefficient and unfair. This is because of its failure to consider harmonizing investment-related incentives, rather than simple rules, which could be considered as a missed opportunity “where the regional approach could have been effective” (Menon 2000).

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38 ASEAN: EVOLUTION OF REGIONAL COOPERATION IN SOUTHEAST ASIA

2.3.5 ASEAN Vision 2020 To deepen regional cooperation, apart from AFTA-Plus and AIA, the ASEAN Vision 2020 was launched in December 1997 in Kuala Lumpur, Malaysia (Appendix VI). ASEAN leaders felt that it was necessary to go beyond AFTA if regional integration was to be strengthened. ASEAN Vision 2020 deals with peace, freedom, neutrality, justice, the rule of law, national and regional resilience, development and shared prosperity, confidence building and conflict resolution. All are defined in broad terms: “In the economic domain, the ASEAN Vision 2000 seeks to chart a new direction through partnership in dynamic development to forge economic integration within ASEAN with emphasis on sustainable and equitable growth and national and regional resilience.” The Vision seeks to create “a stable, prosperous and highly competitive economic ASEAN region in which there is a free flow of goods, services and investments, a freer flow of capital, equitable economic development and reduced poverty and socio-economic disparities” (Ariff 2001, p. 53). This new arrangement also emphasizes the importance of macroeconomic and financial stability, modern and competitive small- and medium-enterprises (SMEs), development of science and technology, food security, improved infrastructure and communications, human resource development, among others. Accordingly, the ASEAN Vision 2000 seems complete, comprehensive, laudable and promising. As this long-term vision needs action plans, the Hanoi Plan of Action (HPA) has been drawn up and put in place by ASEAN with a six-year time frame (1999–2004). According to Ariff, the HPA attempts to 1. Strengthen macroeconomic and financial cooperation; 2. Enhance greater economic integration; 3. Promote science and technology (S&T) development and develop information technology (IT) infrastructure; 4. Promote social development and address the social impact of the 1997–98 crisis; 5. Promote human resource development (HRD); 6. Protect the environment and promote sustainable development; 7. Strengthen regional peace and security; 8. Enhance its role as a force for peace, justice and moderation internationally; 9. Promote its awareness and standing in the world community; and 10. Improve its structure and mechanism (Ariff 2001, pp. 53–54). The HPA is quite a tall order that includes an ASEAN surveillance process, liberalization of the financial services sector, development of regional capital markets,

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acceleration of the AFTA process, implementation of the framework agreement on AIA, liberalization of trade in services, focus on food security, intensification of industrial cooperation, promotion of SMEs, cooperation in intellectual property, development of e-commerce, promotion of ASEAN tourism, development of regional infrastructure, development of growth areas, and establishment of the ASEAN Information Infrastructure (AII). However, the HPA seems to be “quite ambitious if not awesome” and it needs more than vision. 2.3.6 Intra-ASEAN Trade and Investment With these attempts to deepen the integration process through AFTA Plus and ASEAN Vision 2000, AFTA’s commitment has become stronger. Let us look at the results of the economic integration of ASEAN in terms of trade and investment. After more than three decades of economic cooperation, ASEAN’s intraregional export share is around 21 per cent of its total trade, compared with EU’s 62 per cent and NAFTA’s 51 per cent as of 1998 (Table 2.4). The table also suggests that in terms of intra-regional export shares, NAFTA is leading the crowd, followed by the EU; MERCOSUR and AFTA are at about the same level. If not for the regional economic crisis in 1997, AFTA should have performed better than MERCOSUR. The OECD (1993) observed that the reason for low intra-regional trade was that it was not as important as extra-regional trade. However, ASEAN’s intraregional trade has increased substantially, by larger margins than that of any other developing country groupings — it increased from 16.8 per cent in 1990 to 23.2 per cent in 2000 within 10 years of AFTA’s existence (Table 2.5). As far as ASEAN investments are concerned, the FDI inflow into ASEAN increased from US$12 billion in 1992 to US$26 billion in 1997 — an increase of more than double within the five years of AFTA creation. However, FDI declined

TABLE 2.4 Intra-Regional Export Shares, 1990–98 Grouping

1990

1992

1995

1996

1997

1998

NAFTA

41.4

43.7

46.2

47.6

49.1

51.0

EU

59.0

59.5

63.5

62.8

62.1

62.5

MERCOSUR

18.7

14.0

20.3

22.7

24.8

24.8

Source: IMF, World Economic Outlook, October 1999.

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40 ASEAN: EVOLUTION OF REGIONAL COOPERATION IN SOUTHEAST ASIA

TABLE 2.5 Intra-ASEAN Trade: Trade Share (1975–2001) 1975 1980 1985 1990 1995 1996 1997 1998 1999 2000 2001 Exports

15.5 16.2 18.4 18.6 23.1 26.1 23.2 21.3 21.5 23.0 23.2

Imports

10.1 14.0 17.8 15.2 16.8 18.7 19.5 23.1 23.3 23.4 19.5

Total trade

12.7 15.1 18.1 16.8 19.8 22.3 21.2 22.1 22.4 23.2 21.2

Note: 1997 data includes Cambodia, Laos, Myanmar & Vietnam. Values for 1998, 1999 and 2000 are calculated based on the data from the IMF Direction of Trade Statistics. These data include Cambodia, Myanmar and Vietnam but not Laos. Sources: IMF, Direction of Trade Statistics, various issues; Menon et al. 1997, Table 5.

since 1997 due to the regional economic crisis. The inflow of FDI in 1998 was US$19.5 and it continued to drop to US$16.2 billion in 1999. Most FDI inflow is from Japan, EU and the United States. It is surprising that between 1988 and 1999, FDI from the United States increased more than seven times, mostly in the form of reinvestments and cross-border mergers and acquisitions.15 However, it should be noted that it was most often bilateral or sub-regional, with a number of sub-regional growth areas within ASEAN. Meanwhile, intra-ASEAN investment flow (on balance of payment basis) performance was not impressive. It increased from US$4.7 billion in 1995 to US$2 billion in 1996 and then increased to US$5.5 billion in 1997. However, the intraASEAN investment declined to US$2 billion again in 1998 and it continued to drop to US$1.2 billion in 1999 mainly due to the economic crisis. As ASEAN countries are still struggling to fully recover from the crisis, intra-ASEAN investment is not expected to increase in the near-term perspective (ASEAN Secretariat 2000). 2.3.7 External Linkages of ASEAN Economic Cooperation ASEAN is trying hard not only to bring in economic integration among its members but also maintaining external relations, dialogues and cooperation with several countries and trading groups outside the region. Significant partners are Asia Pacific Economic Cooperation (APEC); Closer Economic Cooperation (CER) of Australia and New Zealand; ASEAN Plus Three (China, Japan and the Republic of Korea); and the Andean Community including Bolivia, Colombia, Peru and Venezuela. Besides, ASEAN established a system of “dialogue partnerships” mainly with its trading partners, in 1976. There are three types of partners: a regional grouping (EU); individual countries (Australia, Canada, China, India, Republic of

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Korea, Japan, Russia, United States, Mongolia, North Korea, and Papua New Guinea) and an international development institution (UNDP). ASEAN discusses not only economic relations but also politics and security issues with its dialogue partners. Pakistan joined ASEAN as a Sectoral Dialogue Partner to discuss sectoral issues and was promoted to a Dialogue Partner in 2004. The following are brief accounts of significant external economic relations that ASEAN maintains.

ASEAN-APEC Relations Under the Asia Pacific Economic Cooperation (APEC), AFTA is just a subregional grouping. “The original signatories of ASEAN CEPT scheme are members of APEC and under APEC’s classification of its members, all are classified as developing countries. It is aiming for a free and open trade and investment area by 2010 for its developed members and 2020 for its developing members” (Austria and Avila 2001, p. 76). Here it is notable that ASEAN’s goal for a free trade area is a decade earlier than APEC’s timetable. As far as ASEAN’s extra-regional trade is concerned, APEC countries remain the most significant trading partners of ASEAN. NAFTA comes second, followed by EU and CER. This is because the United States, and Japan and CER are key countries in APEC and intra-APEC trade represented 72 per cent of the member countries’ total trade (Young 1997). Between the first half of 1999 and the first half of 2000, ASEAN exports to most major trading partners increased significantly, except for Canada, Russia and the United States, where ASEAN exports declined by 1.5 per cent. 11.8 per cent, and 7.0 per cent respectively. There has been a strong growth of ASEAN exports to the Northeast Asian countries — Japan (49.7 per cent), Korea (49.3 per cent) and China (39.4 per cent). Imports from all major Dialogue Partners increased, except the United States. Imports from the Northeast Asian countries such as Japan, Korea and China grew strongly during the same period at the rate of 41.2 per cent, 40.2 per cent and 29.4 per cent respectively (ASEAN Secretariat 2001). ASEAN-Closer Economic Relations (CER) AFTA-CER is a linkage between AFTA and Australia and New Zealand.14 It was launched in 1995 with the objective of facilitating trade and investment between the two regions by building upon their existing complementarities. Since its establishment, cooperation between the two groups has been improving significantly in various areas such as human resource development, exchange of information, customs

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42 ASEAN: EVOLUTION OF REGIONAL COOPERATION IN SOUTHEAST ASIA

matters, standards and conformance, trade and investment facilitation and promotion, competition policy and industrial cooperation. “To date an AFTA-CER Free Trade Area is the most-advanced among the possibilities for an inter-regional arrangement with AFTA” (Austria and Avila 2001 p. 81). The fifth consultation on October 2000 of the ASEAN Economic Ministers (AEM) and the Ministers from CER considered the Report of the High-level ASEAN-CER Task Force, which recommended that establishing a free trade area between the two groupings was not only feasible but also advisable. According to the Task Force’s findings, the proposed FTA would bring about a net discounted benefit of about US$48 billion in additional GDP to the region up to 2020 (ASEAN Secretariat 2001). Although the current trade between the two regions are small, it is growing, with the exception of the regional crisis period because both are sub-regions of APEC and members of WTO, AFTA and CER are committed to full liberalization and open regionalism. Currently, CER accounted for about 2.5 per cent of AFTA’s total trade and AFTA accounted for about 10–12 per cent of CER’s total trade. AFTA can learn from CER since the latter arrangement has experience of deep integration and the CER agreement was completed five years ahead of its planned target of 1995.

ASEAN-EU EU is the only Dialogue Partner that represents a regional grouping. The economic relations between ASEAN and EU began in the early 1970s and in 1997, a dialogue with the Committee of Permanent Representatives of the EU Council of Ministers, was established. In 1980, an ASEAN-EU Cooperation Agreement, which gave ASEAN countries access to EU market, was signed. The relationship between ASEAN and EU is not as strong as that of ASEAN’s relationships with Japan or the United States although many of ASEAN’s members had colonial ties with some members of EU. ASEAN’s trade with EU is significant for ASEAN in terms of the share of its total foreign trade (about 13–14 per cent) whereas, for EU, the reverse is not true since its trade with ASEAN contributes only a small part of its total trade. Similarly EU’s investments are significant for ASEAN (EU accounts for about 20 per cent of foreign investment inflows into ASEAN) but not the other way round, as ASEAN’s investments in EU form a much smaller share in EU’s total investment (Tan 1996). The ASEAN-Europe Meeting (ASEM) was established in 1996 and it gave a new impetus to the group-to-group relationship. This relationship has matured from

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the earlier donor–recipient relationship in development cooperation to one based on an equal partnership. However, the ASEAN-EU relationship has had some hiccups since Myanmar joined ASEAN in 1997 because EU imposed sanctions on Myanmar due to the latter’s alleged human rights violations.

ASEAN-NAFTA NAFTA is a free trade area formed by the United States, Canada and Mexico. Since the grouping comprises two large developed economies (the United States and Canada) and one large developing economy (Mexico), it created a strong and complementary regional free trade area. Generally speaking, developing countries provide low-cost labour, while the developed members supply capital, technology, and skills. Although investment and trade figures do not suggest any serious trade diversion or investment relocation from ASEAN as a result of the establishment of NAFTA, there are fears among ASEAN members that products from Mexico, which enjoy preferential treatment, will displace competing exports from ASEAN. However, the ASEAN-NAFTA relationship is mutually beneficial. In fact, ASEAN exports to NAFTA almost doubled between 1992 and 1997 (Abidin 2001). There are some suggestions of the possibilities of linking NAFTA with AFTA since both have similar tariff liberalization goals and both are considering an expansion of membership (Plummer and Imada 1994). ASEAN Plus Three (ASEAN+3) This arrangement is between ASEAN and three Northeast Asian countries, namely China, Japan and South Korea. The basic concept of this cooperation is not a new one; Malaysia’s Prime Minister Mahathir proposed it in 1990 — as an alternative to APEC minus the United States, Canada, Australia and New Zealand. At first the proposed arrangement was called the East Asian Economic Grouping (EAEG) and later it was changed to East Asian Economic Caucus (EAEC). Even though some member countries had reservations about the concepts, the proposal slowly came into shape in later years. Since 1994 ASEAN countries have regularly met with China, Japan and Korea at the annual PMC to discuss political, security and economic issues. The issue of the free trade area including AFTA and three Northeast Asian countries was discussed at the meetings. Since then they have been holding regular meetings and coordinating themselves in preparation for the ASEM meetings. Then there was the regional financial crisis in 1997. After the regional crisis, all members felt that ASEAN cooperation had no clout to assist the most hard-hit

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44 ASEAN: EVOLUTION OF REGIONAL COOPERATION IN SOUTHEAST ASIA

member countries such as Indonesia and Thailand and the existing economic cooperation mechanism was found to be weak. Thus ASEAN felt that they would have to cooperate more with Japan, Korea and China. Actually, it all started in October 1998 with former Prime Minister of Japan Miyazawa’s initiative, which was to provide a package of support measures totalling US$30 billion; of which US$15 billion was made available for the medium to longterm financial needs for economic recovery in the Asian countries and another US$15 billion to be set aside for their possible short-term capital needs during the process of implementing economic reform. However, since the Miyazawa initiative is quite narrow in scope, in May 2000 the finance ministers of ASEAN, China, South Korea and Japan announced a currency swap arrangement among their respective central banks to be used during emergencies (Pillay 2001). Only in 1999, two years after the regional financial crisis, did the leaders agree to somewhat formalize their relations at the Manila summit for two reasons: the membership of ASEAN and the Northeast Asian countries at ASEM had compelled them to act as a regional group vis-à-vis Europe and the regional financial crisis forced ASEAN and the three Northeast Asian countries to cooperate on financial issues. According to the joint statement of the Manila summit in 1999, the leaders of the participating countries promised to enhance cooperation between ASEAN and the three Northeast Asian countries (Appendix IX). Following the adoption of the Joint Statement on “East Asian Cooperation” by the leaders of ASEAN, China, Japan and the Republic of Korea in 1999, the pace of cooperation under the ASEAN+3 process accelerated (ASEAN Secretariat 2001, p. 106). On 6 May 2000, the Chiang Mai Initiative (CMI) was adopted, outlining a set of financial self-help and support mechanisms such as an expanded ASEAN Swap arrangement that would include all ASEAN countries and a network of bilateral swap and repurchase arrangement facilities among ASEAN countries, China, Japan and the Republic of Korea within the framework of ASEAN+3. ASEAN also has instituted a financial surveillance process. The creation of an Asian Monetary Fund could be a part of a regional financial architecture. Furthermore, ideas for creating some kind of a common currency basket have been proposed. Ariff (2001) questioned that it remained to be seen how these ideas and initiatives could bring about institutional integration as they deeply impinged on sovereignty issues that were still regarded as highly sensitive. ASEAN Plus Three does not cover financial issues only. It covers (i) economic and social issues, (ii) monetary and financial matters, (iii) social and human resource

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development, scientific and technology development, (v) culture and information, (v) development cooperation and (vi) political and transnational issues. At the Fourth ASEAN+3 Summit an East Asian Study Group was established to assess the recommendations of the East Asian Vision Group, and to explore the idea and implications of an East Asian Summit. At this meeting the leaders agreed to work towards an “Asian IT Belt” linking up cities of IT excellence in Asia (ASEAN Secretariat 2001). One year later, the Third Meeting of the ASEAN Economic Ministers and the Trade Ministers of China, Japan and Korea in Cambodia in May 2001 endorsed projects such as strengthening the competitiveness of ASEAN SMEs; a Training Programme on Practical Technology for Environmental Protection; an Asian Common Skill Standards Initiative for IT Engineers; a Conformity Assessment Development Programme in Industrial Standards; Software Development for the Mekong Basin Project; and an ASEAN Satellite Image Archive and Environmental Study. At the same meeting, a working group on e-ASEAN+3 has been established. The ASEAN+3 framework also includes international labour issues of common concern, particularly, in human resource development. The framework also embraces the cooperation in the agriculture and forestry sectors. The ministers of agriculture and forestry from thirteen Asian countries also met to discuss exploring ways and means of cooperating in agriculture and forestry. As a follow up, the economic ministers from ASEAN, Japan, Korea and China met in Yangon in 2000 and formally agreed to pursue joint efforts in industrial, trade and investment cooperation. Austria and Avila (2001) give the figures for the volume of trade between ASEAN and three Northeast Asian countries in their study; during the period 1994–98, ASEAN+3 accounted for an average 19.1 per cent and at the same time 29.7 per cent of AFTA’s total exports and imports respectively, whereas ASEAN accounted for 13.5 per cent and 11.6 per cent of the ASEAN+3 exports and imports respectively (p. 88). Apart from the above mentioned regional groupings, ASEAN is expanding its relationships with other similar groupings such as MERCOSUR, the South Asian Association for Regional Cooperation (SAARC), the Andean Community, the South Pacific Forum, the Economic Cooperation Organization, the Gulf Cooperation Council, the Rio Group, and the South Africa Development Community (SADC).

Dialogue Partnerships As mentioned before, there are three main types of Dialogue Partnerships:

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(i) relations with EU which is, in fact, inter-regional cooperation; (ii) relations with individual countries; and (iii) relations with an international development institution such as UNDP. Here we will deal with ASEAN’s relations with individual countries. These relations involve: (i)

ASEAN-Australia Relations under the ASEAN-Australia Forum covering mostly political and security issues and development cooperation; (ii) ASEAN-Canada Relations under the ASEAN-Canada Economic Cooperation Agreement; (iii) ASEAN-China Relations under ASEAN-China Senior Officials Consultations and ASEAN-China Working Group dealing with political and security issues and cooperation in science and technology; (iv) ASEAN-European Union Relations under the ASEAN-EC Joint Cooperation Committee that involves activities in trade facilitation, standards and conformance, intellectual property rights, customs, trade in services, investment, environment, energy, human resource development, science and technology and business cooperation; (v) ASEAN-India Relations under ASEAN-India Working Group covering science and technology information technology, human resource development, tariffs and non-tariffs, investment regulations and SME cooperation; (vi) ASEAN-Japan Relations under the ASEAN-Japan Summit encompassing a broad range of development cooperation activities in the areas of human resource development, information technology, cooperation in the Hanoi Plan of Action and capacity building for the newer members of ASEAN; (vii) ASEAN-Korea Relations under the ASEAN-Republic of Korea Dialogue; (viii) ASEAN-New Zealand Relations under the ASEAN-New Zealand Economic programme; (ix) ASEAN-Russia Relations under the ASEAN-Russia Joint Cooperation Committee Meeting; and (x) ASEAN-United States Relations under the ASEAN US Dialogue covering economic, social, environment, and regional and international security issues” (Austria and Avila 2001, p. 89). Out of the all Dialogue Partners, the United Nations Development Program (UNDP) is the only multilateral organization which has been accorded Dialogue status in ASEAN. The UNDP has been providing financial and technical assistance to ASEAN projects since 1977.

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The rest of the Dialogue Partners are Mongolia, North Korea, and Papua New Guinea (ASEAN’s lone observer). ASEAN’s Sectoral Dialogue Partner is Pakistan under the ASEAN-Pakistan Joint Sectoral Cooperation Committee. More importantly, ASEAN and China have agreed that the ASEAN-China Free Trade Area might be implemented in ten years by 2010 to further enhance ASEANChina economic cooperation. ASEAN’s Dialogue relations with third countries and other international and regional organizations have been exceedingly fruitful. Through the cooperation extended by its Dialogue Partners, ASEAN has been able to expand its social and economic development efforts and secure greater access to foreign markets, technology and capital. Moreover, ASEAN has been able to present its views and positions on regional and global issues with considerable impact and has secured support from major countries for its positions on various issues (ASEAN Secretariat 1998).

ASEAN also has consultations with countries representing economic groupings such as the European Free Trade Association (EFTA), MERCOSUR and NAFTA. To sum up, expanding AFTA to link up with other RTAs is beneficial for the region simply because there are enormous opportunities in trade and investment cooperation and AFTA can learn from others’ experiences. However, there are problems such as the economic situation, political relations, and institutional and legal frameworks of respective RTAs.

2.4 FUNCTIONAL COOPERATION Besides political, security and economic cooperation, ASEAN has another agenda — functional cooperation. Currently, functional cooperation includes areas such as culture and information, environmental protection, rural development and poverty, science and technology, social development, and the ASEAN University Network. ASEAN’s functional cooperation has been always overshadowed by political, security and economic cooperation. For that, ASEAN has its own explanation. “First, ASEAN elevated its political and economic cooperation to a higher level at the Singapore Summit in 1992. After that it would virtually be inevitable that ASEAN would, as a logical next step, do the same for its Functional Cooperation” (ASEAN Secretariat 1998). However, it seems that the functional cooperation is still keeping a low profile. Although the term “functional cooperation” appeared for the first time at the Manila Summit in 1987, the idea of it was already expressed in the ASEAN

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Declaration of 1967 in Bangkok as cooperation to accelerate social progress and cultural development through collaboration in the social, cultural, technical, scientific and administrative fields. The declaration also mentioned promoting mutual assistance in training and research in the educational, professional, technical and administrative spheres. At the same time, it encouraged the promotion of Southeast Asian studies. Also at the First Summit in Bali in 1976, ASEAN leaders cited functional cooperation, without using the term, among the objectives in their Declaration of ASEAN Concord. Objectives related to the functional cooperation in the ASEAN Concord included the development of an awareness of regional identity and a sense of an ASEAN community; the elimination of poverty, hunger, disease and illiteracy; and the extension of assistance to members in distress. The Concord also called for support for the involvement of women and youth in development efforts; cooperation in the prevention and eradication of drugs and narcotics abuse and trafficking; the launching and promotion of Southeast Asian studies; and support for ASEAN scholars, writers, artists and media professionals who would help foster regional identity and solidarity. Moreover, in TAC, which was also a product of the 1976 Bali Summit, the leaders committed themselves to providing assistance to one another in the form of training and research facilities in the social, cultural, technical, scientific and administrative fields. In the statement of the Third Summit in Manila in 1987, the signatories stressed that Functional Cooperation should promote increased awareness of ASEAN, wider involvement and cooperation among the peoples of ASEAN and the development of its human resources. In order to promote people-to-people relations, in particular among professionals, academics, scientists and scholars in the region, the ASEAN University Network (AUN) was established in 1995. It was at the Fifth ASEAN Summit in Bangkok that the ASEAN leaders declared that ASEAN should elevate functional cooperation to a higher plane to bring shared prosperity to all its members and to take steps to further strengthen the ASEAN identity, spirit and sense of community through wider participation of the region’s citizens. The Framework for Elevating Functional Cooperation to a Higher Plane was adopted in 1996 with the theme “Shared prosperity through human development, technological competitiveness, and social cohesiveness”. Functional Cooperation is guided by the following: • • •

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ASEAN Plan of Action on Social Development; ASEAN Plan of Action on Culture and Information; ASEAN Plan of Action on Science and Technology;

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• • •

ASEAN Strategic Plan of Action on Environment; ASEAN Plan of Action on Drug Abuse Control; and ASEAN Plan of Action in Combating Transnational Crime.

In order to implement these plans, ASEAN created five committees together with the Functional Cooperation Bureau. They are the ASEAN Committee on Science and Technology (COST), the ASEAN Senior Officials on the Environment (ASOEN), the ASEAN Committee on Culture and Information (COCI), the ASEAN Committee on Social Development (COSD), and the ASEAN Senior Officials on Drug Matters (ASOD). COST coordinates cooperative efforts in science and technology. The aim of the Committee is to achieve the following objectives: a high level of intra-ASEAN cooperation in science and technology that is synergistic and self-sustaining and having the active participation of the private sector; a network of science and technology infrastructures and programmes for public and private sector human resources development; an active and economically beneficial institution–industry technology transfer; an enhanced state of public awareness of the importance of science and technology to ASEAN’s economic development; and expanding science and technology cooperation with the international community. COST has adopted the Medium-Term Program for ASEAN Science and Technology Development (ASEAN Secretariat 1998). The second committee, ASOEN, initiates and promotes ASEAN cooperation on regional environmental matters. There are six areas that a working group, under the committee, carries out, including seas and marine environment; environmental economics; nature conservation; environmental management; transboundary pollution; and environmental information, public awareness and education. ASOEN is implementing some of these projects and an ASEAN Cooperation Plan on transboundary pollution is being implemented. The third committee, COCI, coordinates ASEAN cooperation in a wide range of cultural and information activities to achieve the following objectives: to enhance mutual understanding and solidarity among ASEAN member countries while promoting regional development; to accelerate cultural development in the region through joint endeavours in order to strengthen the foundation of a peaceful and prosperous ASEAN community; to promote better understanding and appreciation of the ASEAN cultures and their similarities, differences and historical as well as present-day ties; to promote a flow of information conducive to the growth of awareness of a regional identity among the peoples of ASEAN; and to promote a positive international image of ASEAN.

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The Committee on Social Development (COSD) is the fourth committee to implement the objectives of Functional Cooperation by formulating and recommending policies, programmes and strategies for regional cooperation in social development. Under the COSD, there are six sub-committees including sub-committees on Education (ASCOE); Health and Nutrition (ASCH&N); Youth (ASY), Women (ASW), Labour Affairs (ASCLA); an Expert Group on Disaster Management (AEGDM) and the ASEAN Task Force on AIDS (ATFOA); and ASEAN Cooperation on Children, Population and Social Welfare. The fifth Committee, ASOD, coordinates cooperative tasks in four major areas, namely; Preventive Education and Information; Law Enforcement Treatment and Rehabilitation; and Research. Four training centres based in Bangkok, Manila, Kuala Lumpur, and Singapore complement ASOD’s efforts. Besides these activities ASEAN has established the ASEAN Foundation with objectives to promote ASEAN awareness, greater interaction among the peoples of ASEAN, and their wider participation in ASEAN’s activities. To this end, an ASEAN Award has also been launched to give recognition to individuals and organizations for their outstanding work and contributions towards the achievement of the objectives of ASEAN Functional Cooperation (ASEAN Secretariat 1998). Recently, the ASEAN Task Force on Social Safety Nets has been working to integrate relevant projects under the Plan of Action on Rural Development and Poverty Eradication into the outputs of the ASEAN-UNDP Sub-Regional ProgramASP6. Also the ASEAN-Australia Social Safety Nets project document was finalized in September 2000. At the same time ASEAN is active in many social development programmes such as initiating a project against trafficking of women and children, youth development programmes, the ASEAN Youth Award, ASEAN Student Exchange Programme, promotion of the welfare of elderly, Work Program on HIV/ AIDS Prevention and Control (1997–2000), among others. In the same year, COCI adopted three strategies to address the challenge of promoting awareness of regional identity and exert all efforts to create a strong ASEAN community through cultural promotion and appreciation; preservation of cultural heritage; and cultural showcasing. The committee also organized the ASEAN Youth Camp with the theme “Trial of Unity” in Malaysia in June 2001. Also many competitions were held to promote ASEAN cultures in the region. It is expected that ASEAN will be more and more active in functional cooperation in future. However, it is obvious that, out of the three areas of ASEAN cooperation, functional cooperation is the weakest link among the member countries since it is not considered a priority.

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2.5 THE ASEAN ORGANIZATIONAL STRUCTURE At its creation ASEAN was a loose regional association without any representative central body. The ASEAN Secretariat was established only in 1977 in Jakarta, Indonesia, “as nothing more than a glorified post office and headed by the SecretaryGeneral of the ASEAN Secretariat” (Dewi Anwar 2001, p. 39). However, member countries were reluctant to give meaningful power to the Secretary-General. As ASEAN cooperation has intensified, the position was raised to ministerial rank in 1992 and the position revised to that of Secretary-General of ASEAN. The structure of ASEAN at the beginning was simple; it consisted mainly of four main working organs to implement ASEAN activities during the first decade of its existence: • • • •

an Annual Meeting of Foreign Ministers; a Standing Committee; Permanent and Ad Hoc Committees of specialists and officials on specific subjects; and The National Secretariat.

After the first meeting of the ASEAN Heads of Government (which is also known as the ASEAN Summit Meeting — ASM) in Bali in 1976, several improvements to ASEAN’s organizational structure have taken place. Since then, the ASEAN Secretariat has been given more authority to facilitate economic cooperation and the establishment of AFTA, and simplified the various economic committees which were formerly overseen by the ASEAN Economic Ministers’ Meetings (AEMM) (See Fig I). After the meeting, the revised machinery of ASEAN included: • • • • • • • •

ASEAN Summit Meeting (ASM); The Annual Ministerial Meeting (AMM) or the annual meeting of the Foreign Ministers; The Economic Ministers Meeting; The Meeting of other ASEAN Ministers; The Standing Committee (SC); The ASEAN Secretariat; Office of the Director-General (formerly the National Secretariat); and Committees of experts and relevant government officials.

The ASEAN Summit Meeting (ASM) is the supreme decision-making body of ASEAN. Up to 2002, there have been eight ASMs since 1976 when the first ASM

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was held in Bali where four landmark agreements such as the Declaration of ASEAN Concord (Appendix V), the Agreement on the Establishment of the ASEAN Secretariat, the Agreement of ASEAN Preferential Trading Agreements (PTA), and the Treaty of Amity and Cooperation (TAC). Unlike AMM, the ASM does not occur on a regular basis. It is held only when there are important policy directions to agree upon or important agreements to ratify. The Annual Meeting of Foreign Ministers, ASEAN Ministerial Meetings (AMM), is held regularly once a year in the capital cities of the member countries in alphabetical and rotational order. The AMM is the highest decision-making body for ASEAN to formulate policy matters for all aspects of intra-cooperation, the coordination of policy implementation and also to make final decisions on proposals submitted by the Standing Committee (SC). In addition to the SC, the AMM is also served by a Senior Officials Meeting (SOM), which is made up of senior officials (usually at Permanent Secretary level) of the Ministries of Foreign Affairs of the member countries. The AMM are also held occasionally as required. The Post Ministerial Conference (PMC), which is held immediately after the AMM, is the most important forum for consultations with ASEAN’s dialogue partners which comprise the foreign Ministers of ASEAN and all dialogue partners. The Economic Ministers Meeting (AEMM) was instituted in 1976 to organize regular meetings and activities relating to ASEAN economic matters. The AEMM is responsible for formulating policy guidelines, accelerating ASEAN economic cooperation, monitoring and reviewing previously agreed projects, and consultations between member countries regarding economic cooperation. The meetings are held every six months or as required. A Senior Economic Officials Meeting (SEOM) aids the AEMM in its tasks. Under AEMM, there are a number of important permanent economic committees such as the Committee of Trade and Tourism (COTT), Committee on Industry, Minerals and Energy (COIME), the Committee on Food, Agriculture and Forestry (COFAF), the Committee on Transport and Communications (COTAC), and the Committee on Finance and Banking (COFAB). COTT has taken care of the ASEAN Preferential Trading Arrangements (PTA) while COIME has been involved in the ASEAN Industrial Projects (AIPs), the ASEAN Complementation scheme (AIC) and the ASEAN Industrial Joint Venture scheme (AIJV). Apart from above mentioned committees, there are non-economic committees such as the Committee of Science and Technology (COST), the Committee on Social Development (COSD), and the Committee on Culture and Information (COCI). The committees report to the SC and the committee meetings are held in rotation among the ASEAN capitals.

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The Meeting of Other Ministers, which was established after 1976, is a forum for the ministers to formulate policies and accelerate activities on matters other than economic. This organ meets occasionally and COCI, COST and COSD take responsibilities for the meetings of other ASEAN Ministers and carrying out their policies. A Standing Committee (SC) was also created and its role is to carry out the day-to-day work of ASEAN and to follow up on the projects agreed upon at annual AMMs. Meetings of the Standing Committee are organized in the country where the AMM is held and is under the chairmanship of that host nation’s Foreign Minister. The Committee meets three to five times a year and submits the annual report to AMM. The Committee members are the accredited ambassadors of the other member countries. The objective of the committee meeting is to enable ASEAN activities, including primary decision-making, to function without any interruption. A number of special committees are set up under SC to deal with extra-ASEAN relations and submit reports to the SC. The SC oversees these committees dealing with Dialogue partners and international bodies such as EU, WTO, UNDP, etc. The ASEAN Secretariat takes direct responsibilities for all matters directed to it by AMM and SC. The Secretary-General is assisted by three Bureau Directors (one each for Economic, Science and Technology and Social and Cultural Affairs). There are five Deputy Directors who assist the Bureau Director for Economics (Tan 1997, p. 18). Formerly, the Secretary-General, a position of the ambassador rank, appointed diplomats on an alphabetical rotational basis for two years. Since the Summit Meeting in 1992, the Secretary-General has held the rank of minister and has more authority for initiatives. He is responsible to the AMM when it is in session and to the SC. In every ASEAN member country an ASEAN National Secretariat is instituted to coordinate all ASEAN activities in the country. The ASEAN National Secretariat is headed by a Director-General usually from the Foreign Ministry. Since 1976, it has been called the Office of the Director-General. In addition to the above organs, ASEAN also has committees of experts and relevant government officials such as the Committee on Budget, the Audit Committee and the ASEAN Committee in Third Countries. Their meetings are held on a rotational basis. The main features of ASEAN’s organizational structure are shown in Fig. II. This structure has become more complex over time as more committees were established. There are also problems with the organization and administration of ASEAN. For example, the line of responsibilities of two major decision-making

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bodies, the AMM and the AEMM, is not clear. Although the AMM is responsible for regional cooperation in the fields of political, security, social and cultural relations and the AEMM is fully responsible for all matters pertaining to economic cooperation, the external relations between ASEAN and its dialogue partners was to remain the responsibility of AMM. However, after the mid-1980s, AEMM had become more and more involved in activities relating to external economic matters and there is rivalry between the AMM and AEMM. Clearly ASEAN’s organizational structure creates some problems. For example, the principle of rotation in the venue of meetings has led to a number of shortcomings. It is sometimes difficult to find experts and some resources are required for the meeting in some countries where the meeting is held. Moreover, if the meeting is not held in Jakarta, the ASEAN Secretariat is not always directly or fully involved in the meeting. In addition, since many ASEAN member countries do not have full-time professional staff, the host country has to source other officers assigned to different government duties to work for them for the meeting. Another problem is the lack of full participation of the private sector in ASEAN decision-making. In fact, there are several non-governmental organizations (NGOs) affiliating with ASEAN and one of them is the ASEAN Chamber of Commerce and Industry (ASEAN-CCI). It was established in 1992 with the aim of providing private sector input on economics and business matters, but many businessmen feel that they are often left out by the bureaucrats (Tan 1997, p. 80). Dewi Fortuna Anwar (2001), an Indonesian academic, has commented on the Secretariat’s status as follows: The ASEAN countries are happy that the Secretariat can now do most of the studies needed for implementing ASEAN co-operation, as few of the officials in the respective ASEAN countries have the continuity of assignments to develop expertise on ASEAN, or the time to prepare the paper-work for the numerous ASEAN meetings. Nevertheless, ASEAN is still regarded as a dependent variable, so that the ASEAN Secretariat is not allowed to assume a decision-making role, which remains the exclusive domain of the national governments (p. 41).

Other areas that need to be improved within ASEAN’s organizational and administrative structure are the streamlining of its organizational structure, a clear demarcation of lines of authority, the provision of permanent expert staff, increased flexibility in the decision making process, and increased private sector involvement, among others. Unless these issues are addressed properly along with the much debated “ASEAN Way”, the ASEAN could end up as a loose association.

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2.6 ACHIEVEMENTS AND PROBLEMS OF ASEAN In sum, ASEAN has been more successful in political than in economic cooperation. Since its creation in 1967, there has been relative peace and stability in the region. ASEAN’s credibility is firmly established and its role in international cooperation continually progresses. In addition, as the association has matured, the number of members has increased; Brunei joined ASEAN in 1984, Vietnam in 1995, Laos and Myanmar in 1997 and finally, Cambodia in 1999. Now ASEAN represents all 10 Southeast Asian nations. However, ASEAN is still far behind the EC in both political and economic integration. In order to assess the achievements and challenges of ASEAN in political and security cooperation since its establishment, Jusuf Wanandi’s (2001) brief but excellent overview should be referred to here. According to him, ASEAN’s establishment was mainly for political and security reason. “ASEAN’s founding document, the Bangkok Declaration of 1967, may have spoken of promoting economic, social, and cultural cooperation, but the association’s basic underpinnings was political-security concerns. This explains why from the beginning ASEAN has been dominated by the foreign ministers” (p. 25). Perhaps this is the reason why ASEAN has had more success in political cooperation than in economic cooperation. However, ASEAN members’ policies and strategic outlook on the region were never the same or completely congruent until the end of the Cold War in the 1990s. “Cooperation between the ASEAN members was more often based on bilateral terms, on issues concerning the domestic security of both sides, such as joint border patrols, exchange of views on strategic developments, and intelligence exchanges” (ibid., p. 27). However, there have been some outstanding achievements on the political and security front. ASEAN’s unity played a key role in successfully finding a solution to the Cambodian problem. Another achievement was the establishment of the ARF in 1993 which reflects the members’ efforts towards a more cooperative security climate in the region. One of the more important demonstrations of ASEAN unity was the common stand the member countries took in response to China and the disputes over the Spratley islands in the South China Sea. One may also add the successful enlargement of ASEAN by bringing in the three Indochinese countries and Myanmar and thus making it a truly regional association. ASEAN countries have also had to work together on security measures to fight against terrorism after the 2001 attacks in the United States and the Bali bomb blasts in September 2002. On the other hand, the United States’ unilateral war against Iraq divides the ASEAN countries although the line is not clear — and depends on

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member countries’ respective relationship with America. Singapore, Philippines and Thailand, to some extent, supported the US while Indonesia and Malaysia were against. Vietnam is, on principle, against US invasions into any other country, given its own recent history. The rest of the ASEAN member states have not openly declared their positions vis-à-vis the Iraq War and occupation. On the economic front, ASEAN was able to establish a free trade area, AFTA, about a quarter of a century after the founding of ASEAN. As far as economic cooperation among the ASEAN members is concerned, deepening and widening trade and investment cooperation activities are moving gradually, if not fast. The CEPT scheme has been moved forward to complete the AFTA process with tariffs of 0–5 per cent range for older members in 2003. For new members to complete their transition process to AFTA: Vietnam will cut the tariffs between 0–5 per cent in 2006, Lao and Myanmar in 2008, and Cambodia in 2010. Also, the target of “zero duties” has already been agreed upon. ASEAN-6 will eliminate all import duties by 2010 and by 2015 for new members.17 ASEAN also extends its cooperation with economic groupings and countries outside the region. However, compared with other regional entities such as NAFTA and EU, the economic cooperation programmes of ASEAN are minimal. On the other hand, its contribution to individual member economies has been significant. Between 1993 and 1997, the value of intra-ASEAN trade almost doubled, from less than US$44 billion to more than US$85 billion, from less than 21 per cent to almost 25 per cent of total trade.18 However, due to the regional crisis in 1997, intraASEAN trade dropped in 1998, rising again in 1999. Also, ASEAN was able to cooperate in the non-traditional security issues such as the environment, drug-trafficking, migration, AIDS and other epidemic diseases, piracy and transnational crime. However, as far as traditional security issues are concerned, ASEAN could not do much due to its limited military power. Functional cooperation in ASEAN is running quietly and not as visible. There has been cooperation in areas such as culture and information, the environment, rural development and poverty eradication, science and technology, social development, and the ASEAN University network. However, the pace of and publicity given to functional cooperation lags behind other ASEAN activities. All in all, the establishment of ASEAN which represents the whole of Southeast Asia could be said to be a remarkable achievement. If ASEAN can overcome the financial and economic crisis as well as the divide between the old and the new members in the medium term, ASEAN will become much stronger in facing its future challenges. In this regard, the long established practice of what has come to be known as the “ASEAN

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Way” must be radically changed, if not completely done away with (Wanandi 2001, p. 99).

NOTES 1

2

3 4

5

6

7

8 9 10

11 12

13 14 15 16 17

18

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However, it is important to note that the first attempt for regional cooperation of sorts was mooted by the Japanese during the Second World War under their “East Asia Coprosperity Sphere”. In fact, it did not effectively materialize. However, there have been hiccups such as small scale cross-border clashes between Thailand and Myanmar in May 2001 and anti-Thai riots in Phnom Penh in January 2003. See Appendix I. This section is heavily drawn from Mya Than and Daljit Singh, “Regional Integration: The case of ASEAN”, in Regional Integration in Southern Africa: Comparative International Perspectives (Clapham et al., 2001). For details, see Sorpong Peou and Tin Maung Maung Than, “ASEAN’s Political Cooperation” (1998). It is widely understood that some of the older fellow member countries have used friendly “pressure” to intervene in the case of human rights abuses in some new member countries. For detailed comprehensive accounts of the “non-interference norms and attempts, see Acharya, Constructing a Security Community in Southeast Asia (2001). See more details in Section 2.3.7, especially pp. 45–46. For details refer to Section 2.3.7, pp. 43–45. There was also a cumulative rule of origin specifying that products which used imported inputs which were themselves subject to preferential tariffs must have an aggregate ASEAN content of not less than 60 per cent by value (Gerald Tan, “ASEAN Preferential Trading Agreement: An Overview,” in The ASEAN Reader (Singapore: ISEAS, 1962), p. 237. For details, refer to ASEAN Secretariat 1997, pp. 43–51. As an interim measure, ASEAN reduced tariffs on 60 per cent of products to 0 per cent by 2003. But, at Malaysia’s request, ASEAN economic ministers agreed to extend the deadline for car tariff cuts to 2005. Quoted in Menon (2000, p. 59). For details, see Association of Southeast Asian Nations, Annual Report 2000–2001. Statement by Rodolfo C. Severino, Secretary-General of ASEAN, in Tokyo. ASEAN-CER is also known as ASEAN-ANZCERTA. Southeast Asia has agreed to bring forward by three years key free trade deadlines that form the backbone of its roadmap towards an EU-style trade bloc by 2020 (The Nation, 26 August 2004). Statement by R.C. Severino, Secretary-General of the ASEAN, Bangkok, 2 October 2000.

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Reproduced from Myanmar in ASEAN: Regional Cooperation Experience, by Mya Than (Singapore: Institute of Southeast Asian Studies, 2005). This version was obtained electronically direct from the publisher on condition that copyright is not infringed. No part of this publication may be reproduced without the prior permission of the Institute of Southeast Asian Studies. Individual articles are available at < http://bookshop.iseas.edu.sg >

MYANMAR IN ASEAN 59

3 Political and Economic Development of Myanmar: An Overview

3.1 MYANMAR: A BRIEF HISTORY Before we explore and analyse the accession of Myanmar into ASEAN, it is necessary to understand the political and economic development of the country from a historical perspective. A brief overview of Myanmar’s development history is presented below. The history of Myanmar can be described as one long series of internecine warfare, with development and peace between the wars. There have been independent kingdoms at Arakan (Rakhine), Pegu (Bago), Tavoy (Dawei), Prome (Pyay), Toungoo and Ava (Innwa). The stronger and dominant kingdom varied from time to time. Only under King Anawrahta of Bagan (1044–77), was Myanmar united for the first time. Hence it can be said that Myanmar’s nation building began around the 11th century with the establishment of Bamar (formerly known as Burman) hegemony over other indigenous “nations” (Tin Maung Maung Than 2001). According to Aung Thwin (1998), “Considered Burma’s most glorious achievement in civilization, it lasted for more than four centuries between the mid-ninth and fourteenth and was a primary force in the history of mainland Southeast Asia during this period (p. 1).” The second unification occurred in 1539 under the Toungoo King Tabinshwehti, and the third and last dynasty was founded by King Alaungpaya which lasted from 1755 to 1855 when the British occupied the whole country. This dynasty was known as the Konbaung Dynasty and its last king, Thibaw, was deported to India after the British conquest. The economic policy of the Burmese kings was akin to mercantilism. As a result of the First and the Second Anglo-Burmese Wars, the British annexed Lower Burma in 1852 while Upper Burma was still ruled by Burmese kings. The last two Burmese kings were King Mindon (1852–78) and King

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Thibaw (1878–85). In 1886, the British again annexed Upper Burma after the third war between the two countries. Britain’s reasons for the war included countering the growing influence of France in Burma, the massacres at the royal court over the accession to the throne, the dispute between the king and the Bombay Burma Trading Company and the resulting fine, and to exploit the country’s rich natural resources. Thus, the whole of Burma was conquered and colonized by the British from 1886 to 1948, apart for a short period during the Japanese Occupation during the Second World War. During the colonial period, “(l)aissez-faire and competitive enterprise, two adjuncts of Anglo-Saxon liberalism, were the basic principles of commercial and economic policy of British rule in Burma” (Mali 1962, p. 13). In other words, Burma/Myanmar was economically developed by the British with their basic principles of colonial commercial and economic policy — laissez-faire and competitive enterprise — soon after they annexed the country. The economic policy was for development and, to a certain extent, the principles of “free trade” as practiced in England were applied and economic forces were given full play. On the other hand, even though the market economy was working, there existed monopolies such as the Steel Brothers Company which handled threequarters of the total European rice trade. As a result, most economic benefits flowed out of the country. The political and economic institutions of the country, especially in Lower Burma, were transformed as the area was rapidly drawn into a capitalistic, commercially oriented global economy. Consequently, feudal lands became private property and the commercialization of the country’s agriculture and globalization started to work. Thus the country’s conquest by the British marked the end of the feudal system in the country.1 The worst period for the country towards the end of the colonial period was the Japanese Occupation during the Second World War, which resulted in extensive damages and losses. The whole economy was seriously affected due to British and Japanese scorched-earth policies. Furthermore, cultivators abandoned almost half of the land due to the war. During the earlier colonial period, when the traditional (barter) system was transformed into a market (money) economy, cultivators in the Myanmar Delta were most probably prosperous. Towards the end of the colonial period and before the Japanese Occupation, the standard of living in towns in the Delta might have been rising as the cost of living (at least in Yangon) was declining. The cost of living index in Yangon showed that it fell from 100 in 1931 to 88 in 1938. Even though workers were protected by laws, there was no compulsory insurance for them.

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Many political, social and economic development changes have taken place since Myanmar gained its independence from the British in January 1948. To get a clear picture of the developments, the modern history of Myanmar’s development will be divided into four periods since 1948: Constitutional Democracy (1948–61), Revolutionary Council (1962–73), Burmese Socialist Programme Party (BSPP) (1974–87), and the State Law and Order Council (SLORC) and the present State Peace and Development Council (SPDC) since 1988.

3.1.1

Constitutional Democracy, 1948–61

Political Development After the successful resistance movement against the Japanese led by the national hero General Aung San and his Anti-Fascist People’s Freedom Party (AFPFL) and political confrontation with the British in 1947, the country gained independence from the British on 4 January 1948. Unfortunately, in July 1947, General Aung San and his provisional government colleagues were assassinated by the opposition. The AFPFL won a landslide victory in the general elections in 1947 and adopted the parliamentary democracy system under the Constitution as the national political system with its “left-leaning” elements. Many leaders were nationalists influenced by leftist ideology. The first government was headed by the Prime Minister U Nu, the trusted friend of General Aung San and the president of the ruling party. Civil war broke out three months after independence when the Communist Party of Burma (CPB), one faction of the AFPFL, and some ethnic dissidents took up arms and rebelled against the government. At that time, the government was called the “Rangoon Government” since significant areas of the country were occupied by the rebels.2 However, after three years, the threat of civil war subsided. Although the AFPFL won the three general elections of 1947, 1951 and 1956 successively, the opposition parties won more and more seats in the 1951 and 1956 general elections, suggesting the falling popularity of the ruling party. Moreover, personal grudges and differences among the top leaders led to a split among the leaders of the ruling AFPFL party which resulted in the party breaking up into two factions in 1958. This led one faction to attempt to draw the military into the infighting. “In September, as the danger of violent conflict between the contenders for state power loomed large, the prime minister invited (albeit under pressure) the head of the armed forces to form a non-partisan caretaker government mandated with the task of holding free and fair elections” (Tin Maung Maung Than 2001, p. 205). Although General Ne Win was handed over the prime-ministership formally by the then Prime Minister U Nu at the parliamentary session to hold the general elections

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62 POLITICAL AND ECONOMIC DEVELOPMENT OF MYANMAR: AN OVERVIEW

within six months, it took General Ne Win 18 months to accomplish his mission. “The caretaker government remained in office for 18 months, during which time it sought to clean up the cities, modernize the administration, end the insurrection, and prepare the elections” (Silverstein 1977, p. 28). During the elections the U Nu group (Clean AFPFL) won the elections in February 1960 overwhelmingly over the other faction of “Stable AFPFL”. However, there was an internal power struggle within the U Nu faction within a year after the elections. This situation was compounded by the demands by some ethnic-based politicians for more autonomy for their states and some small groups even called for secession as they were allowed to do so by the existing 1947 Constitution. “In March 1962, the armed forces leader General Ne Win staged a coup and established the ruling Revolutionary Council (RC), justifying the takeover as a pre-emptive measure to avoid national disintegration” (Tin Maung Maung Than 2001, p. 205). However, “some claim that the military was in any case bent on power, and this was the convenient excuse to assume control under the guise of the ever-popular slogan of unity for the state …” (Steinberg 1999, p. 8).

Economic Development Economic systems have also changed since Myanmar gained its independence from the British in 1948. The economic policy of the AFPFL government could be characterized as liberal, nationalistic and mildly socialistic. The AFPFL government placed emphasis on industrialization and the role of the state for long-run development. This was because the agriculture sector could not absorb the increasing adult working population and the country needed balanced growth. The emphasis on the role of the state in the economic development of Burma may be mainly attributed to the socialist convictions of its young leaders and partially also to the fact that the state was the only powerful instrument in Burma which could break the monopolistic position of the foreign enterprises or take them over by nationalization (Mali 1962, p. 23).

In addition, as U Tun Wai wrote “At the same time much of the academia, writing on development economics in the forties and fifties, stressed on need for government investment, intervention and controls.” (1991, p. 8). Therefore the government created a number of state enterprises and nationalized several foreign firms. Meanwhile, the government also encouraged the people to take a more active role in trade and industry, while welcoming foreign investment. Joint ventures were also allowed to be established with both local and foreign firms. However, foreign investors were discouraged because of a vigorous policy of nationalization. An import-substituting industrialization (ISI) policy was introduced

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during the period. Hence, up to 1962, a mixed economy with a dominant private sector was practiced. Planning was fashionable at the time. The thinking of the newly independent government in 1948 was influenced by the fact that foreigners, that is, British, Chinese and Indians, dominated the country’s economy during the colonial period. In response, Myanmar’s leaders during the independence period came up with the Two-Year Plan, followed by Pyidawtha Plan (Eight-Year Plan) in 1952. The Pyidawtha Plan had to be abandoned after three years due to its emphasis on industrialization at the expense of the agriculture sector, inefficiency in the public sector, a decline in rice prices in the international market and a rise in consumer prices, and corruption (Mya Than and Tan 1990). It was later substituted with two less unrealistic Four-Year Plans. Despite civil wars, planning mistakes and political upheavals, economic growth was at an average annual rate of 5.3 per cent during the period 1951 to 1961, compared with Thailand’s 5.8 per cent during the same period. Almost at the same time, Korea’s average annual rate of growth of GDP was only 4.0 per cent between 1953 and 1961 (Tin Maung Maung Than 2000, p. 3). Table 3.1 shows the GDP, per capita GDP, and consumption for the period (1938/39 — 1960/61) in 1947/48 prices in million kyats. The table suggests that,

TABLE 3.1 GDP, Per Capita GDP and Consumption (in million kyats) (in 1947/48 prices) Industries

1938/39

1947/48

1953/54

1958/59

1960/61*

1,907 360 273 182 633 117 – 31 153 165

1,451 273 29 125 286 63 1 14 229 151

1,521 289 49 125 278 68 2 22 412 177

1,797 347 115 147 429 82 13 31 570 215

1,883 385 112 151 512 85 20 59 605 225

1,124 4,945 – 302 195

935 3,557 – 200 163

1,103 4,046 3.8 210 140

1,274 5,020 6.9 248 161

1,503 5,540 1.4 263 180

Agri. & Fisheries Forestry Mining & quarying Rice processing State marketing State transport State banking Other public utilities General government Rental value of housing Other industries and Services GDP % increase of GDP Gross per capita output (kyats) Consumption per capita (kyats) Source: Taken from Mali (1962), Table 6.

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64 POLITICAL AND ECONOMIC DEVELOPMENT OF MYANMAR: AN OVERVIEW

TABLE 3.2 Sectoral Share of GDP (%) (in 1961/62 prices) (in 1969/70 prices) (in 1985/86 prices) Sector

1952/53 1961/62

Agriculture Industry Construction Transport Admin/Services Trade Other primary

29.1 7.6 3.4 3.7 18.8 26.4 11.2

1961/62

22.9 16.9 3.0 3.7 19.9 26.1 9.2

1985/86 1985/86

29.3 12.3 1.9 6.8 16.2 29.3 8.6

28.5 13.1 2.7 6.3 20.8 20.8 8.8

1997/98

38.5 10.0 1.5 3.5 14.0 22.4 10.1

35.6 11.6 4.9 4.3 12.8 20.9 9.9

Source: Ministry of Planning and Finance, Myanmar.

TABLE 3.3 Share of Employment by Economic Sectors (%) Sector

1931

1965

1974

1987/88

1997/98

Agriculture Industry Construction Transport and Communications Admin/Services Trade Others

69.6 9.7 1.6 3.5

66.5 7.9 1.1 3.0

68.6 7.6 0.9 3.2

65.1 9.3 1.7 3.3

65.9 10.0 2.2 2.7

4.7 9.7 1.9

5.1 7.4 9.0

4.1 9.0 9.7

6.7 9.8 4.3

8.1 9.7 1.5

Note: The values may not add up to 100 due to rounding errors. Source: Ministry of Planning and Finance, Myanmar.

over the seven years from 1953/54 to 1959/60, the average rate of growth of GDP at constant price was 4.6 per cent, whereas, the average rate of increase in money supply for the same period approximated 10 per cent. Considering the rate of population growth of 1.8 per cent, the average standard of living of the people increased only at a rate of 2.8 per cent (Mali 1962, pp. 64–65). However, according to Myat Thein (1998), between 1951 and 1961, the average standard of living increased by 3.5 per cent, given the average annual growth rates of GDP of 5.3 per cent and that of population of 1.8 per cent. This increase in the standard of living had not been shared by all because of the inequitable distribution of the increased wealth, which inequity, has been again aggravated by inflation. For certain sections of the population, especially the agriculturists (for whom the price of paddy is fixed) and

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other fixed income groups, the standard of living deteriorated (Mali 1962, p. 65).

As economic performance during the democratic constitutional period was modest, there was little change in terms of relative contribution by major economic sectors to the GDP, as shown in Table 3.1. Similarly, the employment share of the major economic sectors also did not change significantly during the period (Table 3.3). 3.1.2

Revolutionary Council, 1962–73

Political Development As mentioned above, the Revolutionary Council (RC) formed by the military took over power from the democratically elected government of U NU’s Clean AFPFL in March 1962. During the period under the democratic governments (1948–61), the administration was similar to that of the British. However, under military rule, the Revolutionary Council government appointed committees, Security Councils, at various levels of administration. These councils were composed of leaders from the army, civil service and police with the aim of restoring law and order all over the country. Ministries and departments were reorganized and advisory councils were dissolved. In short, the military rulers “revolutionized” the administration by introducing reforms. The Union Constabulary, which was considered to be the tool of one of the factions of the ruling politicians, was abolished and absorbed into the army. The RC announced the abolition of all political parties and organizations under the Law to Protect National Unity and established a single cadre party called the Burma Socialist Programme Party (BSPP). The RC promulgated “The Burmese Way to Socialism”, a blend of Buddhism, nationalism and Marxism. Later in 1971, the BSPP was transformed into a mass party. After 11 years of RC rule, the government held a referendum in 1973 to promulgate the socialist constitution and followed up with the election of representatives at various levels. After the elections, the RC handed over power to an elected government of the BSPP in 1974. All the elected personnel at every level (national, state/division, township and ward/village levels) were members of the BSPP. Economic Development The country’s economic policy soon after the military takeover in 1962 was based on the Burmese Way to Socialism — a mix of socialism, inward-looking strategy of self-reliance, and Burmanization.

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66 POLITICAL AND ECONOMIC DEVELOPMENT OF MYANMAR: AN OVERVIEW

Faithfully adhering to that policy-mix, the government proceeded with great haste to lay the foundations for transition to a self-reliance socialist economy of the Myanmar. Banks, businesses, and industries — all the vital means of production and distribution — were nationalized and foreign trade became monopoly of the state (Myat Thein and Mya Than 1995, p. 212).

By doing so, the government also succeeded in ending the dominance of Chinese and Indian entrepreneurs and businessmen in the country. By the early 1970s, all major economic activities except agriculture, small businesses, retail trade, and some road and river transport, had been taken over by the government. As a result of this economic policy, the country’s economy stagnated. The average annual GDP growth rate during the period was 1.7 per cent, which was lower than the annual population growth rate of around 2.1 per cent. In the agricultural sector, per capita paddy production declined from 0.33 tons to 0.29 tons during the same period. Export of rice and rice products fell from 1.5 million tons in 1962 to 0.2 million tons in 1973/74. This resulted in labour (rice) riots and escalating inflation in 1967 and 1972. The main reason for the poor performance of the economy was the government’s egalitarian policy of maintaining low and stable consumer prices by keeping the prices of agricultural outputs low and unchanged, despite increases in other prices. This meant falling real farm income and lowered incentives for production and investment, as a result of which agricultural production stagnated (ibid, p. 212).

As a consequence, both exports and government revenue declined, which in turn meant a reduction in imports, investment and overall supply. This, in turn, again led to inflation, thus further exacerbating the fall in real income. In sum, during the Revolutionary Council period (1962–73), performance of the economy was poor with an average growth of GDP of 1.7 per cent, whereas the population grew at a rate of 2.1 per cent. This meant the standard of living of the population declined about 0.4 per cent per year in per capita terms. 3.1.3

Burma Socialist Programme Party, 1974–88

Political Development In accordance with the constitution promulgated on 3 January 1974, a one-party socialist unitary state was established and the RC handed over power to the newly elected national legislature soon after national elections in the same year. The BSPP,

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the only party allowed by the constitution, led the state. The legislature elected the members of the various executive, judicial and inspection councils. General Ne Win was elected as the chairman of the State Council. He became automatically the president of the Socialist Republic of the Union of Burma in accordance with the constitution. General San Yu became the secretary of the State Council. U Sein Win, a former high army official, was elected as the prime minister of the country. Many former military officers as well as active senior military officers were elected to the cabinet and the councils of People’s Justices, People’s Attorneys, and People’s Inspectors. In effect the country had officially a constitutional rule with military officers at the helm. Representation was based on a four-tier hierarchy, elected on a quadrennial basis, for the people’s councils (ward/village, township, and state/division) and the unicameral Pyithu Hluttaw (people’s assembly). However, given the BSPP’s prerogative of nominating “official” candidates, elections implied confirmation rather than competition (Tin Maung Maung Than, op. cit., p. 205).

As expected, all state organs were under the control of the BSPP. However, antigovernment armed ethnic groups and the communists (Communist Party of Burma — CPB) remained an unsettled issue throughout the BSPP period. In other words, the military Revolutionary Council continued to rule until 1974 when it implemented a constitution which permitted nominal sharing of power with the aid of the party it had created. This period lasted for 14 years from 1974 until 1988 when a military coup was staged after a popular upheaval swept throughout the cities. These mass demonstrations were caused by several factors: the 1987 demonetization of currency notes was just the spark. Other factors include the deteriorating economy since the 1962 military takeover, the transformation to a market-oriented system from the socialist system in the Soviet Union and Eastern Europe, economic reform in China, the success of the ASEAN economies in the region, and the People’s Power victory in 1988 in the Philippines.

Economic Development In the mid-1970s, the poor performance of the economy forced the government to take a number of reform measures supported by the World Bank and the International Monetary Fund (IMF). The country also joined the Asian Development Bank (ADB) and started accepting development assistance and loans from IMF and

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68 POLITICAL AND ECONOMIC DEVELOPMENT OF MYANMAR: AN OVERVIEW

foreign commercial banks. This was the first sign of opening up after more than a decade of isolation. The reform measures were taken to improve production incentives and mobilize resources, including the raising of government procurement prices of agricultural products (rice and some basic crops), introduction of the Green Revolution, tax reform, revision of costs and prices, and the adoption of more flexible management practices in state-owned enterprises (SOEs). Some reforms were introduced in the financial system such as the decentralization of the financial system, the raising of interest rates on deposits and loans, and the granting of a costof-living adjustment of 40 per cent in 1976 to low income government employees (U Tun Wai 1996). As a strategy to counter the poor performance of the economy, the government introduced the First Four-Year Plan in 1971. However, it was dropped in 1974 because of new policies emphasizing socialist principles, and the Long Term TwentyYear Plan was implemented in 1974 along with the Second Four-Year Plan. The Plan gave the agriculture sector priority over the industrial sector and recognized the role of the private sector in economic development. Increased support for the agricultural sector boosted output between 1974 and 1985. This led to a better performance of the economy with fairly high growth rates during the period with an annual average rate of 5.3 per cent. The significant recovery of the economy during the period was made possible mainly because of the reform measures since 1973/74. However, this growth could not be sustained when the Green Revolution effect faded and the government was forced to reduce the inflow of foreign capital mainly due to mounting debts, and as a result, the economy began to decline again from the mid-1980s. TABLE 3.4 Average Annual Growth Rates and Sectoral Shares of GDP (%) Growth Rates

1971–80

1981–90

1995–96

1999–00

2000–01

2001–02

4.3 4.0 4.7 4.4

–0.1 –0.3 –0.2 0.2

6.9 5.0 12.7 7.3

10.9 9.9 11.1 6.1

13.9 9.5 23.4 13.2

13.6 3.4 14.7 9.0

Sectoral Share

1970

1980

1990

2000

2001

Agriculture Industry Services

49.5 12.0 38.5

47.9 12.3 39.8

49.6 12.2 37.6

43.3 17.1 39.6

42.8 17.7 39.5

GDP Agriculture Industry Services

Sources: Ministry of National Planning and Economic Development, Pamphlet on Myanmar’s Economy, March 2003; EIU, Country Report, November 2000; and ADB, Asian Development Outlook, various issues.

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Table 3.5 clearly shows the declining trend in economic performance between 1962 and 1973. However, during the first decade of the BSPP period (that is, between 1974 and 1985), the economy had performed well, but it declined again from 1985 to 1988 (Table 3.5). At the same time, the inflation rate was around 20 per cent. And the fall in exports and imports led to a shortage of consumer goods and the emergence of a huge black market. It is important to note that the economy started to deteriorate soon after 1983 when export earnings began to decline as a result of the fall in rice procurement and the falling world price of rice (Mya Than and Tan 1990). 3.1.4

Under the SLORC and SPDC, 1988–2001

Political Development After the pro-democracy demonstrations and riots, sparked by the demonetization of 25-, 35-, and 75-kyat notes without any compensation in 1987, followed by a series of popular protests marred by violence and repression in August 1988, the BSPP collapsed and the military took over power in a coup in September 1988. According to Tin Maung Maung Than (1999), The performance legitimacy sought by the framers of the Burmese Way to Socialism (BWS) failed as the economy regressed and the self-imposed constraints of the political leadership aggravated by the ossification of the one-party (Burma Socialist Programme Party — BSPP) system of governance obviated bold and innovative options (p. 7).

The military coup leaders named themselves the State Law and Order Restoration Council (SLORC) as their objective was to restore law and order in the country.

TABLE 3.5 Economic Performance: 1962–88 (Average Annual Percentage Change) Years 1962–65 1966–69 1970–73 1974–77 1978–81 1982–85 1986–88 1986/87 1987/88

GDP Growth

Money Supply

Inflation (CPI)

Exports

Imports

4.9 2.2 1.3 4.7 6.5 4.7 –1.7 –1.1 –4.0

11.0 3.8 17.6 16.0 12.9 10.3 –2.4 14.5 54.4

3.2 6.1 7.8 19.5 0.1 5.7 17.4 9.2 23.9

248.3 138.1 128.7 185.5 399.2 368.2 215.0 351.2 257.7

222.8 157.8 167.4 250.8 719.6 687.2 272.0 549.9 623.9

Source: Myat Thein and Mya Than 1995, Table 8.1.

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70 POLITICAL AND ECONOMIC DEVELOPMENT OF MYANMAR: AN OVERVIEW

Since the constitution was declared to be no longer in force, they ruled by decree. One of the most politically significant economic measures was, unlike other transitional economies in mainland Southeast Asia, the official revocation in 1989 of the 1965 Law of Establishment of Socialist Economic System. Consequently, the country’s name was changed from the “Socialist Republic of the Union of Burma” to the “Union of Burma” and then to the “Union of Myanmar” in the same year. In 1990, the SLORC permitted elections in preparation for multiparty democracy. Political parties were allowed to be established to contest in the elections. There were more than 200 parties contesting in the elections including the National League for Democracy Party (NLD) led by Daw Aung San Suu Kyi, daughter of the national hero, Bo Gyoke Aung San. The NLD party won more than 80 per cent of the seats, however, the party was not allowed to form the government after the elections. The military junta did not even allow the parliament to be convened, saying that the elections were for drafting the constitution. Instead, a National Convention was established in January 1993 by the military government in order to draft a new constitution. The National Convention included representatives from political parties and government-nominated representatives from various groups. The representatives of the NLD party boycotted the National Convention in 1995 and were later expelled by the National Convening Committee. It has been almost a decade since the establishment of the National Convention and the New Constitution has yet to be drafted at the time of preparing this study. Eight months after the establishment of the National Convention, the Union of Myanmar Solidarity and Development Association (USDA) was formed with the aims of perpetuating the existence of the Union of Myanmar, promoting friendship among national races, the perpetuation of sovereignty and territorial integrity and the emergence of a modern and developed nation. Although it is considered a social organization and not a political party, USDA is headed by the Head of State and senior military officers and involved political activities such as organizing mass rallies in support of government policies. Later in 1997, the SLORC changed its name to the State Peace and Development Council (SPDC) with the aim of furthering peace and development of the country. There was a positive development in the political arena in Myanmar in January 2001, when an announcement was made by the government that there was a dialogue between the military government and the leader of the opposition party which won the national elections in 1990. This announcement was followed by a mild thaw — the release of political prisoners including 200 from the NLD party — although over 800 party members remained in jail (Seekins 2002). Meanwhile the United Nations envoy Razali Ismail visited Myanmar to facilitate the dialogue between the opposition and the government. The people of the country as well as

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friends of Myanmar welcomed this political improvement although the dialogue process seems to be an on-off event.

Economic Development Soon after the coup in 1988, SLORC announced that it would open up the economy by transforming the command/control economy into a market-oriented system. It was obvious that the continued deterioration of the economy since 1962 had become the motivating factor for Myanmar’s economic transition. However, the purely economic aspects of the nation were by no means the only motivating forces for the transition to a market-oriented economy. The international scene at the time — economic reforms in China, the People’s Power movement in the Philippines, perestroika and glasnost in the Soviet Union and Eastern Europe, the success of the newly industrialized countries (NICs) — all these must also have had some influence in uplifting the aspirations of the people of Myanmar and the government. In short, the main reason for the change is that the centrally planned economy neither generated growth nor sustained development in Myanmar. Hence, the objective of the reforms in Myanmar may have been to generate growth and sustain development within the shortest possible period so that the SLORC would achieve the support of the people. In order to achieve these objectives, an appropriate environment and a whole set of supportive measures were necessary. For that, macroeconomic stability, political stability and certain changes in the institutions, existing laws and regulations, and price and other reforms were required. These are reflected in a series of measures, undertaken by the government since 1988, provided in Box I. The assessment of the reform measures introduced in Myanmar is shown in Box II. As mentioned earlier, one of the most important measures taken by the SLORC was the official revocation in 1989 of the 1965 Law of Establishment of Socialist Economic System. The private sector was allowed to participate in domestic as well as external trade with some restrictions. Foreign and domestic firms were also permitted to invest in the country. Furthermore, prices of some commodities were decontrolled. However, many economic activities were still under government control (see Box II). Table 3.6 indicates the economic performance during the third phase of the military rule (1989–2001). The performance in the first three years was impressive as the reform measures were implemented reluctantly and cautiously. The growth rates of GDP between 1992 and 1997 were very impressive, averaging about 7 per cent. This was mainly due to the good performance in the agricultural sector, more participation of the private sector in the country’s economic activities and an inflow of foreign direct investment (FDI). However, it is important to note that the country’s

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72 POLITICAL AND ECONOMIC DEVELOPMENT OF MYANMAR: AN OVERVIEW

BOX I Significant Reform Measures in Myanmar 1988 1989

1990

1991

1992

1993 1994

1995

1996

• • • • • • • • • • • • • • • • • • • • • • • • • • • • • •

• •

03 Myanmar Ch 3

1997

•

1998

•

2000

• •

introduction of Myanmar Investment Law decontrol of prices revocation of 1965 law that established the socialist economic system introduction of State-Owned Economic Enterprise law delineating the scope of the state sector regularization of border trade introduction of Myanmar Tourism Law allowing 100 per cent retention of export earnings introduction of Private Industrial Enterprise Law introduction of the Central Bank of Myanmar Law introduction of Financial Institutions of Myanmar Law introduction of Commercial Tax law initiation of industrial zones in Yangon announcement of the Central Bank of Myanmar Rules and Regulations introduction of Promotion of Cottage Industries Law reestablishment of Myanmar Chamber of Commerce and Industry announcement to lease inefficient state-owned factories announcement of denationalization of sawmills announcement of the establishment of four private banks introduction of Tariff Law introduction of Savings Bank Law introduction of US$ denominated foreign exchange certificate (FEC) introduction of Myanmar Insurance Law introduction of Myanmar Citizens Investment Law licensing of representative offices of 11 foreign banks introduction of Science and Technology Development Law announcement of the formation of Privatization Committee announcement of permission to establish joint-venture banks between local private banks and foreign banks opening of licensed foreign exchange centre for FEC trading in Yangon permission given to local private banks to conduct foreign exchange business and to pay interest on foreign currency deposits establishment of the Myanmar Securities Exchange Centre Co. Ltd., a joint venture between Japan’s Daiwa Securities and the state-owned Myanmar Economic Bank introduction of law on development of computer knowledge official rate of exchange for levying custom duties changed to K100 per US$ accompanied by reduction of tariffs to a fraction of previous values announcement of paddy procurement through a tender bid system (not implemented) announcement of leasing of fallow and virgin land for paddy and cash-crop cultivation or livestock breeding by private entrepreneurs including foreigners entry into ASEAN across the board increase of public sector salaries by 5–6 times to be in line with private sector wages

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BOX II Status of Economic Reforms in Myanmar Macroeconomic reforms

Status

1. Fiscal reforms Tax reforms

Weak Existing system strengthened

Modern tax system

Several taxes and a narrow tax base; widespread evasion

Subsidies reform

Subsidies continue on a lesser scale; mainly for state employees

2. Monetary reform Interest rates liberalization

Weak Some adjustments but administered rates continue with negative real values; central bank rates reduced by 20% in April 1999

Banking system

Central bank under Finance Ministry; state banks and local private banks; the latter dominated by a few big players

Capital market

Practically non-existent

Exchange rate

Multiple rates exist; grossly overvalued official rate; quantitative controls imposed in 1998; foreign exchange licences of private banks revoked in 1998

3. Trade reforms Export/imports controls

Weak Government monopoly of rice, teak and mineral exports; licensing system for private sector; foreign trade restrictions imposed in 1998

Replacement of quantitative restrictions & tariffs reduction

Little action on former but joined ASEAN’s CEPT scheme

Source: P.B. Rana and Naved Hamid, From Centrally Planned to Market Economies (Hongkong: OUP, 1995).

per capita GDP income in 1985/86 level of kyat 1356 was surpassed only in 1995/96 at kyats 1432. Soon after 1996/97, the economy slowed down — from 6.4 per cent in 1996/97 to 5.7 per cent in 1997/98 and then to 5.0 per cent in 1998/99. This was mainly due to the decline in the agriculture sector growth because of droughts and flooding, from 3.8 per cent in 1996/97 to 2.9 per cent in 1997/98. Another reason was the decline in FDI flows due to the regional economic crisis especially the major investors from ASEAN who suffered most during the crisis. Also, the fall in

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74 POLITICAL AND ECONOMIC DEVELOPMENT OF MYANMAR: AN OVERVIEW

TABLE 3.6 Economic Performance: 1989–2001 (Average Annual Percentage Change)

(In US$ mil)

GDP Growth

Money Supply a

Inflation

Exports

Imports

1989–91

3.1

40.4

24.9

383.4

643.3

1992–94

7.7

31.9

26.1

826.0

1267.2

1995–97

6.3

28.6

Years

1998/99

5.6

25.2

1160.5

2495.9

26.2

b

49.1

1194.5

2373.5

b

11.4

1363.0

2211.0

1999/00

10.9

21.8

2000/01

13.2

42.4

–1.7

1824.0

2375.3

2001/02

13.6

43.9

34.5

2,782

2,627

2002/03

11.1

34.6

58.1

2,627

2,684

a

Notes: The government stopped publishing data on money supply since 1997. b M1, EIU, Country Report, 2003. Sources: Ministry of National Planning and Economic Development. Review of the Financial, Economic and Social Conditions, various issues; Central Statistical Organization, Selected Monthly Indicators, various issues; EIU, Country Report, November 2000.

the share of the private sector from 75.7 per cent in 1994/95 to 75.4 per cent in 1997/98 may have contributed to the slow economic growth between 1996/97 and 1998/99. However, it has grown again since 1999/2000. In terms of the private sector, the government repealed the rules and regulations that restricted or prohibited private sector participation in economic activities, such as domestic and external trade; a liberal investment law for the citizens was introduced and the Chamber of Commerce and Industry was revived. This resulted in an increase in the contribution of the private sector, in terms of value-added GDP, from 68.6 per cent in 1986/87 to 78.2 per cent in 1999/2000. However, this increase was concentrated largely in the trade sector and the contribution of the private sector in goods and services increased only marginally. Moreover, this increase in the goods and services sector appears to have been at the expense of the cooperative sector (Mya Than 2000). For detailed GDP growth rates, see also Table 3.7. The agriculture sector also played a major role in the country’s good economic performance during the period. The sector’s average direct contribution to overall GDP growth during the period (1989/90–2001/02) was 30.2 per cent. According to the official statistics, the best performance was in 1992/93 and 2001/02, with the annual growth rate of GDP of 9.7 per cent and 13.6 per cent respectively, most probably due to the new accounting method in which formerly unregistered economic

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2.0 38.7 27.6

Growth of Agr. Sector

Share of Agr. Sector in GDP

% GDP Growth Directly Caused by Agr. Growth 49.0

38.4

12.4

9.7

1992/ 93

29.7

37.9

4.7

6.0

1993/ 94

33.6

37.6

6.7

7.5

1994/ 95

22.7

37.1

5.5

6.9

1995/ 96

21.5

36.2

3.8

6.4

1996/ 97

22.4b

35.6

14.9

34.5

2.5

5.0

5.7a 2.9

1998/ 99

1997/ 98

32.3

34.3

10.5

10.9

1999/ 00

23.2

33.2

9.5

13.2

2000/ 01

38.1

33.0 c

15.7

13.6

2001/ 02

Notes: Percentage of GDP growth directly contributed by agricultural growth is computed as {(rate of growth of agriculture) × (share of agriculture in GDP)}/rate of GDP growth a revised upward from 4.6 per cent b calculated with original GDP growth rate of 4.6 per cent c estimates Sources: Ministry of National Planning and Economic Development, Review of the Financial, Economic and Social Conditions, various issues (The publication ceased in 1998. The last issue was for 1997/98); Ministry of National Planning and Economic Development, 2000.

2.8

1991/ 92

Growth of GDP

Average Annual Growth Rate

TABLE 3.7 GDP Growth Rates (1991/92–2001/02)

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76 POLITICAL AND ECONOMIC DEVELOPMENT OF MYANMAR: AN OVERVIEW

activities were included. In 1999/2000 the growth in the agriculture sector of 10.5 per cent (Table 3.7) might have contributed to this high growth of GDP. But, given the weakness in the industry and construction sector, compounded by the decline in FDI due to the financial crisis, some are skeptical about the figure (EIU 2000). Some institutions such as the Asian Development Bank (ADB) and the Economist Intelligence Unit have estimated the GDP growth rate in 2001/2002 and 2002/03 at about 4 to 6 per cent. Also FDI might have contributed to some extent to the impressive growth of the economy between 1991/92 and 1996/97. FDI (approved) increased from US$5.1 billion in 1991/92 to US$2.8 billion in 1996/97. Of total FDI inflow into the country, the oil and gas sector accounted for about 36 per cent followed by the manufacturing sector of about 19 per cent. However, agriculture, considered the engine of growth, attracted only about 0.05 per cent as of 31 January 2002 and then to US$7.4 billion in 2001. Later, FDI inflow declined drastically due to the Asian regional crisis. On the negative side, the budget deficit during the period was around 5–6 per cent of GDP, which is not encouraging. Money supply was averaging about 34 per cent per annum during 1988/89 and 2002/03, which in turn, raised the inflation level persistently (Table 3.6). The budget deficit was compounded by the fact that the budget of SOEs does not even cover their expenditure (Mya Than 2000). The expansion of the money supply since the present government took over power has resulted in an increase in inflation, measured by changes in the consumer price index (CPI) at the rate of around 29 per cent from 1988/89 to 2002/03. However, inflation started to a decline in 2000 due to a decline in rice prices created by a large supply of rice in government depots. This happened in spite of the 5 to 6 times increase in salaries of civil servants, including the military. However, it was a different story in 2001. Towards the end of that year, the prices of basic food items such as vegetables, peanut oil and eggs doubled. Fuel prices grew sharply which means that transportation costs also leaped. This in turn, made the inflation very high at 34.5 per cent (CSO, April–May, 2002).

3.2 RECENT DEVELOPMENTS IN THE SOCIAL SECTOR In spite of the good economic growth in recent years, social sector development was not impressive after market reforms were introduced. The development in social sectors can be assessed in terms of social indicators and allocation of resources. Selected social indicators of Myanmar and its neighbouring countries, mostly compiled from UN agencies, are shown in Table 3.8. As the table suggests, in terms of real GDP per capita (PPP US$), Myanmar has achieved only US$1,130; this is even lower than Bangladesh’s. However, according to a Japanese source (Institute of

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TABLE 3.8 Selected Social Indicators in Selected Countries

China Indonesia Malaysia Philippines Thailand Vietnam Myanmar Bangladesh

Real GDP Per cap (PPP $) 1995

Human Poverty Index (HPI-I) (%) 1995

Under 5 Mortality Ratea 1996

Adult Literacy Rate (%) 1995

2935 3971 9572 2762 7742 1236 1130 1382

17.1 20.2 – 17.7 11.9 26.1 27.5 46.5

47 71 13 38 38 44 150 112

18.5 16.2 16.5 5.4 6.2 6.3 16.9 61.9

Population Without Access to (%)

China Indonesia Malaysia Philippines Thailand Vietnam Myanmar Bangladesh

Health Service 1990–95

Safe Water 1990–96

12 7 – 29 10 10 40 55

33 38 22 16 11 57 40 3

Sanitation 1990–96

Life Expectancy at birth 1995

Daily/cap Supply of Calories 1995

76 49 6 25 4 79 57 52

69 64 71 67 70 66 59 57

2,000 1,859 2,518 1,670 2,148 2,122 1,997 2,177

Public Expenditure (% of GNP) Health Education 1990 1992 China Indonesia Malaysia Philippines Thailand Vietnam Myanmar Bangladesh

2.1 0.7 1.3 1.0 1.1 1.1 1.0b 2.3

2.0 2.2 5.5 2.9 4.0 – 2.4

Notes: aper 1000 births; bas percentage of GDP Sources: ILO, Statistics on Poverty and Income Distribution, 1996; Ministry of Labour, Hand Book on Human Development Indicators (HHDI), 1998; UNDP, Human Development Report, 1998.

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78 POLITICAL AND ECONOMIC DEVELOPMENT OF MYANMAR: AN OVERVIEW

Fiscal and Monetary Policy, June 1999), GDP per capita in (US) dollars would be US$3,697 if converted by the extremely overvalued official rate (about 6 kyats to the US dollar), but only US$72 if converted by the market rate (kyats 320 to the US dollar). The World Bank, on the other hand, estimated Myanmar’s per capita GDP at about US$300. Myanmar’s official source provided different figures. Myanmar’s real GDP per capita in local currency increased from K1,047 in 1960/61 to K1,510 in 1985/86, but fell to K1,492 in 1995/96. The real GDP per capita income surpassed the 1985/86 level only in 1996/97. Per capita GDP in 1999/2000 was 1,749 kyats, according to official sources, which is equivalent to about US$300 at the official foreign exchange rate and about US$35 at the market rate. Although the literacy rate was improved largely by the country-wide literacy campaign during the 1970s (Table 3.8), social indicators for Myanmar suggest that much work is needed to improve social conditions in the country. Myanmar fares better than China and Bangladesh and is almost on par with Malaysia and Indonesia. Myanmar’s literacy rate improved from 57 per cent in 1961 to 83 per cent in 1996. Although life expectancy at birth in Myanmar increased significantly from 44 per cent in 1961 to 59 per cent in 1996, it still lags behind its neighbouring ASEAN countries (see Table 3.8). Furthermore the ILO statistics estimated Myanmar’s human poverty index (HPI-1) for 1995 at about 28 per cent — much better than Bangladesh’s but still lagging behind other ASEAN neighbours and China. In addition, it is not encouraging to find that the proportion of the population without access to health services, safe water and sanitation is still high at 40 per cent and 57 per cent respectively. According to UNICEF’s regional headquarters in Bangkok, “… a third of children are malnourished and less than half graduate from grade four which is very worrying for the future” (Agence France-Presse, 8 May 2002). Of great concern too is the alarming spread of HIV/AIDS cases throughout the country. According to UN surveys quoted by a Johns Hopkins University researcher, Dr Beyrer, two per cent of adults in Myanmar have the HIV virus and about two per cent of pregnant women were infected by HIV/AIDS. In the education sector, the number of universities has increased since the early 1990s and the country now has 125 tertiary level institutions with 530,000 students, according to the official sources. However, many undergraduate courses at major universities have been suspended a few times between 1988 and 1996 when there were student demonstrations. It is disheartening that the government spent less than 30 cents per person in 1999 on education, according to the World Bank. From the perspective of allocation of expenditure, there has been an increase in public expenditure and budget allocations to social sectors in absolute terms but

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not in relative terms (Mya Than 2000). According to the United Nations Working Group (July 1998), “Economic growth can be sustained only when there are corresponding investment in people — in improving their health, education and living standards. Even though the economy has been recording positive rates of economic growth in recent years, public expenditure in Myanmar has been steadily falling” (p. 29). Furthermore, the report stated that in 1985/86 public expenditure accounted for 62 per cent of GDP. However, one decade later it had been reduced to less than half: by 1995/96 it was only 27 per cent of GDP (ibid.). It is obvious that the lacklustre performance of the social sector could be attributed to some extent to poor allocation of public expenditure. According to the government report, expenditure in the education sector increased more than twice between 1992/93 and 1997/98. However, it fell from 1.9 to 0.9 per cent in terms of its share in GDP during the same period. According to the IMF (2001), government expenditure on basic education has declined from 0.99 per cent in 1994/95 to 0.3 per cent in 1999/2000. This compares to an average of 3.3 per cent for low income countries generally (UNICEF, May 2002). According to one UN report, the constraining factors are low tax revenue mobilization, high defence spending, weak public administration, and an uncertain policy environment (1998, pp. 32–34). The UNDP’s Human Development Index3 (2001) has Myanmar ranked at 118th position, which is near the bottom of the Medium Human Development listings. Thus, the country’s HDI is far below that of other Southeast Asian countries such as Thailand (66), Malaysia (56), Philippines (70), Indonesia (102), and Vietnam (101) in this category. Meanwhile, a World Health Organization (WHO) study in 2000 ranked Myanmar 190 out of 191 countries in terms of the gap between its potential health services and its actual performance (AFF, May 8, 2000).4 In short, it is obvious that there is a lot to improve in the social sector, including health and education, in Myanmar. 3.3 SUMMARY As far as its post-war economic performance is concerned, Myanmar’s economy recovered, in terms of its GDP index, only in 1959–60 to the pre-war level of 1938–39. Paddy production and rice exports still lagged behind the pre-war level. The average annual GDP growth rate from 1951–61 was 5.3 per cent and that between 1962 and 1988 was 3.5 per cent. However, the GDP growth rate between 1989/90 and 2002/03 averaged 9.7 per cent as the government switched to a marketoriented policy after 1988. The difference was due to earlier market-hostile and trade prohibiting policies.

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80 POLITICAL AND ECONOMIC DEVELOPMENT OF MYANMAR: AN OVERVIEW

Throughout the 50 years of Myanmar’s post-war economic history, there were no significant structural changes in the economy nor employment. The pre-war level of paddy production was reached only in 1971–72 but post-war exports have yet to catch up with the 1938–39 level of 3.3 million tons. The highest post-war rice export record was 1.5 million tons in 1962, which is higher than the 1.2 million tons of rice exported in 1994/95. Per capita income in constant prices (1985–86 prices), increased from kyats 1,095 in 1961–62 to kyats 1,885 in 1973–74 and again to kyats 1,997 in 2000/01. Compared to other developing countries in the region this increase in per capita income is not impressive. The social and economic conditions of the country up to 1962 had improved slightly, compared with the colonial period, as a result of agricultural development. Between 1962 to 1988, social indicators such as the literacy rate, school enrolment ratios, teacher–student ratios, number of hospitals and medical staff, infant mortality rate, and life expectancy showed some improvements mainly due to the socialist policies which gave priority to the social sector. However, with the transformation from the centrally planned economy to the market-oriented system, there was a decline in social conditions, especially in health and education. It is likely that the income gap between the rich and poor became wider. Recent UN reports have indicated Myanmar’s social sector performed rather poorly in comparison to that of neighbouring countries, which could be attributed to low budget allocations, including to some extent the poor allocation of public expenditure that was designated for the social sector. Household surveys conducted by the World Bank revealed that about 13 million people had expenditures below minimum subsistence levels in 1997 (Mya Than 2000b). Myanmar is a low-income country, according to UN classification. However, because of the abundance of natural resources and self-sufficiency in basic food, most citizens do not think that Myanmar is poor. At the beginning of the introduction of a series of economic reforms in 1988, the average income increased in both urban and rural areas. When the government lifted control over the prices, cultivators were better off, especially those who grew cash crops. However, after the reforms slowed down in the mid-1990s, and during the late 1990s when the Asian crisis hit the country, the income of the people, particularly those in urban areas, was affected. Farmers’ incomes are also affected by the compulsory sale of paddy to the state. Inflation has been highly persistent since the early 1990s. However, the authorities have reacted with various measures such as opening the “tax-free”

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market and sharply increasing the salaries of government servants, including those in the armed forces. Despite these efforts, there is an urgent need to improve economic performance by introducing more reforms and upgrading the performance of the social sector by increasing state spending in both absolute and relative terms. After all, for Myanmar, it is of utmost importance to achieve political stability which plays a decisive role in the country’s ongoing economic and social development. NOTES 1 2

3

4

03 Myanmar Ch 3

For details, refer to Furnivall (1957) and U Tun Wai (1961). During the peak of insurgency in 1949, over 75 per cent of the country was in the hands of various armed insurgent groups (Hla Min 1999, p. 12). The Human Development Index which measures the overall achievements of a country in three basic dimensions of human development, is based on longevity, educational attainment and ability to buy basic goods and services. Sierra Leone ranked 191st (AFP, 8 May 2000).

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Reproduced from Myanmar in ASEAN: Regional Cooperation Experience, by Mya Than (Singapore: Institute of Southeast Asian Studies, 2005). This version was obtained electronically direct from the publisher on condition that copyright is not infringed. No part of this publication may be reproduced without the prior permission of the Institute of Southeast Asian Studies. Individual articles are available at < http://bookshop.iseas.edu.sg >

MYANMAR IN ASEAN 83

4 Myanmar in ASEAN

Myanmar was allowed to become an observer of the regional association at the 29th ASEAN Ministerial Meeting (AMM) held in Jakarta in July 1996 and one month later, the country applied for full membership. At the special AMM in Kuala Lumpur on 31 May 1997, it was decided that Myanmar would be accepted as a fullfledged member of the Association of Southeast Asian Nations in July 1997, along with Cambodia and Laos. Despite protests from the United States and its allies to defer this decision on account of Myanmar’s alleged human rights violations, Myanmar was formally admitted at a special ceremony held in Subang Jaya, Malaysia, on 23 July 1997 and Myanmar took part fully in ASEAN’s 30th anniversary celebrations. Laos was admitted at the same time as Myanmar, however, Cambodia’s admission was delayed due to political unrest in that country. The first ever meeting of the leaders of the ten Southeast Asian countries took place during this summit. This historic decision by ASEAN of admitting Myanmar and Laos was in line with the Bangkok Declaration of 1995, issued after the Fifth ASEAN Summit to which Myanmar’s then Prime Minister Senior General Than Shwe was invited by the host country for the first time. Myanmar’s process of joining ASEAN which was initiated by the country’s accession to the Treaty of Amity and Cooperation (TAC) at the 28th AMM in Brunei in July 1995 was most probably triggered by political considerations but there are both political and economic dimensions to the benefits accruing from Myanmar’s membership in ASEAN. Myanmar’s joining of ASEAN was not a smooth process. Even from inside ASEAN, voices of dissent against the admission of Myanmar into the regional association were heard. First, we should explore what were the reasons behind Myanmar’s joining ASEAN — from Myanmar’s perspective as well as that of ASEAN.

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4.1 WHY MYANMAR DECIDED TO JOIN ASEAN Soon after the formation of ASEAN in 1967 and also later on, Myanmar was approached by friends in ASEAN to join the regional association. However, at that time Myanmar was, as a founding member of the Non-Aligned Movement, adhering to the five principles of peaceful co-existence and neutrality, and decided not to join ASEAN. Myanmar was and is still to date, against allowing any country to set up military bases in the country, or using its country as a base for military attacks on any other country. However, at that time, some ASEAN members were members of the military bloc — the Southeast Asia Treaty Organization (SEATO) — and some member countries had allowed foreign military bases on their land. These were the reasons why Myanmar decided not to participate in ASEAN at the outset. Despite this decision, the country was friendly to all countries, including those from Southeast Asia — in the midst of the Cold War. In 1995, Myanmar decided to join the regional association and attained observer status, along with Laos and Cambodia, in July 1996. According to Khin Ohn Thant (2001), there were at least two reasons which led to Burma’s decision to join ASEAN. First, towards at the end of the millennium, internal and external conditions had changed in the country. Domestically, Myanmar had expended large resources on internal security measures for decades, and now “the government had signed peace treaties with most of the rebels, who have laid down their arms. This now allows the Myanmar Government to devote more attention to external matters, including ASEAN” (p. 264). The second reason, suggested by Khin, was that, “in this age of globalization and regionalism, the country realizes that it cannot continue to isolate itself. It needs to identify with a sympathetic group, which will treat it as one of them, and a group that will not exploit Myanmar’s weak situation.” Most probably, the “ASEAN Way”, that is, non-interference in each other’s internal affairs, and its consensus building and conflict resolution mechanisms, attracted Myanmar into the embrace of ASEAN. Myanmar’s critics have argued that the reasons behind Myanmar’s decision were both political and economic. Politically, as it was boycotted by the Western bloc led by the United States and the EU, the country needed international recognition and this led to the decision to join ASEAN. The economic reason was that the country needed development assistance and economic cooperation with groups of countries which were sympathetic to Myanmar and ASEAN was ready to accept it as a member, since the country was facing economic sanctions imposed by the West. Moreover, Myanmar expected benefits from joining ASEAN as Khin also pointed out, quoting a government press release, as follows:

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• Myanmar, through ASEAN, could now meet the group wishing to pose a threat to her collectively, and make her attitude known to them in specific and precise terms and act accordingly. • Opportunities emerge to open the door wider politically and economically with the help, understanding and sympathy of other fellow ASEAN members. • With greater co-operation with the friend in the region in various sectors, Myanmar does not have to place more emphasis on investments from the other parts of the world (Western hemisphere) than that from its own region. • With more contacts and communications among the peoples of the region in multifarious fields, the ten nations, with a common cultural traditions and colonial experience, can now formulate specific characteristics of ASEAN (ibid, p. 264).

Kyaw Tint Swe and Aung Htoo (1998) analysed Myanmar’s political, economic and cultural expectations from its ASEAN membership. “Politically, Myanmar’s membership to ASEAN will contribute to peace and stability in the region, better confidence building among members of ASEAN and strengthening of external security” (p. 171). In return, the authors expected that Myanmar would have a sense of greater security, a way out from its isolation and marginalization, and access to and participation in the regional grouping. Economically, according to Kyaw Tint Swe and Aung Htoo, Myanmar’s membership “will add up its already substantial economic space and will increase more trade and investment links within the region”. As a result, the country and the region would achieve greater development and this would lead to increased efficiency, among other benefits. When AFTA is realized new members like Myanmar will also benefit from the enhanced market access for agricultural goods to other members due to reduction of tariff and trade barriers. Benefits such as increased imports of manufactured goods and services, greater opportunities to receive FDI from the region as well as from outside, gaining experience in entrepreneurship from other ASEAN countries were also expected by joining the regional association (p. 171).

Culturally, Myanmar could contribute to ASEAN through promoting its own rich traditions. This would also result in a better understanding and tolerance of other cultures in the region through socio-cultural and information exchanges. This would serve to promote ASEAN identity arising out of various member countries’ national identities and the development of “Asian values” (ibid., pp. 171–72).

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On the other hand, ASEAN, in general, was happy to accept Myanmar — along with the so-called Indochinese countries, Vietnam, Laos and Cambodia — as its new member more for political than economic reasons. Politically, with the inclusion of all four new members, ASEAN would now represent the whole of Southeast Asia. In other words, by bringing in all of the 10 Southeast Asian countries under one roof, ASEAN would improve its political clout and bargaining power in international fora. Some critics have said that one of ASEAN’s reasons for including four new members was to weaken, if not halt, the influence of China, as some of them share a border with China and were under Chinese political and economic influence to some extent. However, it is important to note that ASEAN accepted Myanmar as a fullyfledged member in spite of the protests from the West led by the United States and the EU. And, according to press reports, even member countries such as Thailand and the Philippines were against the idea of bringing in Myanmar as a member because of its allegedly poor human rights record. However, it is rumoured that it was due to the strong insistence of former Malaysian Prime Minister Mahathir, the chairman of ASEAN at that time, that Myanmar was finally accepted as a member. At the same time, Cambodia’s membership was postponed indefinitely due to Hun Sen’s “coup” against Prince Ranarridh, his Co-Prime Minister in 1997, just before the ASEAN summit in Kuala Lumpur. It prompted criticism that ASEAN practised double standards by allowing Myanmar to become a member whereas Cambodia was not despite the fact that both had the same record as far as political repression is concerned. ASEAN’s economic interests behind the inclusion of new members are obvious: a market of nearly 540 million people with an abundance of natural resources and cheap labour. The resulting increasing investment inflow from ASEAN to the new member countries and growing trade between the two groups are evident. 4.2 HOW READY WAS MYANMAR TO JOIN ASEAN? As to whether Myanmar was ready to join ASEAN, the answer is a resounding “yes”. According to the ASEAN Secretariat, it was “technically ready” in terms of obligations for political, economic and functional cooperation. The conditions for “technical readiness” included acceding to all the basic agreements and declarations of ASEAN documents including the Bangkok Declaration of 1967, the Southeast Asian Nuclear Weapons Free Zone (SEANWFZ), Treaty of Amity and Cooperation (TAC), the ASEAN Free Trade Area (AFTA). Myanmar had even acceded to some of the agreements even before the country became a member of ASEAN. In this respect, Myanmar had no difficulty in acceding to all of these conditions.

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Myanmar could also meet the financial obligations for membership such as equally sharing the cost of running the Secretariat and subscribing to various ASEAN funds and covering costs for attending some 300 ASEAN meetings a year. In addition, it had already met a few other conditions such as having embassies in all ASEAN capitals (which Myanmar has had long before it even applied for membership), and having a large pool of government officials who can communicate in English. Myanmar’s accounting system is also similar to many of the older member countries of ASEAN. Moreover, a national ASEAN secretariat and an AFTA unit had already been established in Yangon. As a member of ASEAN, the country also had to become a member of AFTA, with its attendant privileges as well as obligations. Once again, Myanmar was in a far better position than the other new members such as Cambodia and Laos. All of Myanmar’s economic laws have English versions and are easily accessible. Regarding the question of granting most-favoured nation (MFN) status to other ASEAN members, Myanmar theoretically would have no problem since it is a founding member of the WTO and has been granting MFN status to other countries. On the other hand, Vietnam, Laos and Cambodia are not members of the WTO yet. Apart from that, Myanmar was prepared to give national treatment to ASEAN products on a reciprocal basis. As one of its AFTA membership obligations, Myanmar has to bring down its tariffs to 0 to 5 per cent by the year 2008. Unlike the other new members, the country has less problems since more than half its tariffs are already 5 per cent or less (see Table 1.1). Cambodia’s customs duties are mostly between 7 and 50 per cent, while those in the Lao PDR are mostly between 5 to 20 per cent. The shock of the impact of joining AFTA on the country’s state budget has been marginal compared to other new member countries. This is because Myanmar’s customs duties average about 16 per cent of total government revenues while those of Cambodia and the Lao PDR are 72 per cent and 30 per cent respectively. In this sense, Myanmar was more ready than the other new members. Moreover, Myanmar’s dual exchange rate system may be a blessing in disguise as it could help to buffer the shock on the state budget, at least in the short term. However, in the long run, it may affect the balance of payments. In short, Myanmar was more ready to join ASEAN than other new members like Cambodia and Laos, at least technically, economically and financially. To achieve the goal of creating a free trade area, based on a 0 to 5 per cent tariff range on trading with liberalization of some goods, the new members are given a grace period of 10 years, and for Myanmar the time frame appears to be more than adequate.

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The tariff lists presented by the Myanmar delegation at the ASEAN Economic Ministers meeting in Kuala Lumpur in October 1997 confirmed this. A Myanmar delegate said that about 68 per cent of products in Myanmar were already within the 0 to 5 per cent tariff rate. She said only 10 per cent of products and services had a tariff rate of between 30 per cent and 40 per cent as the government was trying to discourage certain activities, which included gambling businesses, liquor, the export of antiquities, imported cars and others. “Of the 5,400 tariff lines (in Myanmar’s product list for the AFTA), about 2,400 products are in the inclusion list. Over 2,900 are in the temporary exclusion list, 108 in the general exception list and 21 in the sensitive list” (The Star, 14 October 1997). As such, Secretary General of ASEAN Ajit Singh remarked that Myanmar could enter the old AFTA member group even before its stipulated deadline of 2008 (The Nation, 13 October 1997). 4.3 MYANMAR’S PARTICIPATION IN ASEAN Soon after Myanmar joined ASEAN, it participated in almost all activities at various institutional levels as required by ASEAN from the summits to ministerial meetings to officials’ meetings. Also Myanmar has been actively involved in ASEAN thinktank meetings after the establishment of the Myanmar Institute of Strategic and International Studies (Myanmar ISIS) under the Ministry of Foreign Affairs. In other words, Myanmar is fully and actively involved in the “first track” as well as “second track” of regional diplomacy. However, it has yet to participate in the “third track” movements such as meetings of civil societies. Even before Myanmar became a fully-fledged member, the government had formed the Steering Committee on ASEAN Affairs on 15 October 1996. The committee is to oversee and review Myanmar’s participation in ASEAN and to provide policy guidance on all Myanmar’s activities in the association. Several committees and sub-committees were formed to assist the ASEAN Economic Minister and to coordinate work on ASEAN Industrial Cooperation (AICO) scheme, smalland medium-enterprise activities, transport, and services. As a requirement of its ASEAN membership, a National AFTA Unit was set up to assist the AEM Policy Committee and liaise with the private sector, ministries and the ASEAN Secretariat. In the political sphere, just a few days before Myanmar became a member of ASEAN, the Department of ASEAN Affairs was established under the Ministry of Foreign Affairs, to act as the ASEAN National Secretariat. For functional cooperation with ASEAN, several committees at the national level such as the National Committee on Information and Culture, the National Committee on Science and Technology, and the National Committee on Social

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Development were formed to coordinate with relevant ASEAN committees and subcommittees. Moreover, the National Commission for Environmental Affairs (first under the Ministry of Foreign Affairs and then under the Prime Minister’s Office), the Central Committee for Drug Abuse Control (CCDAC), and the Public Service Selection and Training Board (PSSTB) were established to be in line with existing ASEAN committees. Apart from the above mentioned institutions, the government also set up ASEAN units under the respective ministries to coordinate ASEAN-related activities and to liaise with other ministries on ASEAN matters. These units are backbones of the senior officials who participate in various ASEAN fora. Where committees have not been set up, focal points were established for specific fields, such as electronic commerce, intellectual property cooperation, and standard and conformance, etc. (Kyaw Tint Swe and Aung Htoo, ibid., p. 177).

Myanmar officials admitted that the country is still at the learning stage in institution building for ASEAN cooperation and there is a need to strengthen and refine the existing institutions to be effective in cooperation with ASEAN. Myanmar ISIS was established as an umbrella organization attached to the Ministry of Foreign Affairs to participate actively in the second track activities in ASEAN and serve as a think-tank on ASEAN affairs. Members include civil servants, academics and military officials. Myanmar ISIS organizes workshops, conferences and meetings related to ASEAN affairs in Myanmar, and its many members also attend regional workshops and conferences. There are also other commitments and obligations for Myanmar as a member of ASEAN. These include the obligations for acceding to all the existing agreements and treaties of ASEAN, participating in the meetings at various levels, setting up a fund to contribute to the regular budget of the ASEAN Secretariat, ASEAN Fund, ASEAN Science Fund, and so on. Here the question is whether these commitments and obligations have been fulfilled. In general, yes. In fact, at the Admission Ceremony in Kuala Lumpur on 23 July 1997, when Myanmar became an ASEAN member, it had acceded to the first package of ASEAN’s existing treaties and agreements. On the same day, the country also submitted its list of items for inclusion under CEPT for the implementation of AFTA. Three months later, on 15 October 1997, Myanmar acceded to nine more economic declarations and agreements. In addition, Myanmar signed eight Ministerial understandings and agreements during the first year of her membership.

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As a member of ASEAN, Myanmar contributed to various funds of ASEAN. According to Kyaw Tint Swe and Aung Htoo (1998, p. 178) Myanmar has contributed US$1 million to the ASEAN Fund, US$50,000 to the ASEAN Science Fund, and about US$700,000 per year to annual operation fund of ASEAN. In addition, it has pledged to contribute to US$100,000 for the endowment fund of the ASEAN Foundation. Myanmar is also obliged to attend various meetings from national level (ASEAN Summit meetings) to working group meetings. Every year, Myanmar participates in about 250 to 300 ASEAN-related meetings in the region, including its own country. In the first year of its membership alone, Myanmar participated in more than 250 ASEAN and related meetings, of which more than 230 meetings were attended by ministers and officials directly from Yangon. The rest were attended by embassy staff representing the respective ministries, sometimes, probably due to financial difficulties. Once Myanmar joined ASEAN, it automatically became a part of AFTA. As a member of AFTA, it also has obligations and commitments. The main obligation is to reduce tariff rates between 0–5 five per cent by 2008. Myanmar started its tariff reduction process in 2000. It has participated in all AFTA relate meetings at various levels. To conclude, Myanmar has been participating in ASEAN activities fully since its first day of entry into the regional association.

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Reproduced from Myanmar in ASEAN: Regional Cooperation Experience, by Mya Than (Singapore: Institute of Southeast Asian Studies, 2005). This version was obtained electronically direct from the publisher on condition that copyright is not infringed. No part of this publication may be reproduced without the prior permission of the Institute of Southeast Asian Studies. Individual articles are available at < http://bookshop.iseas.edu.sg >

MYANMAR IN ASEAN 91

5 Myanmar-ASEAN Cooperation for Development

As mentioned in the previous chapter, Myanmar has participated in all the various ASEAN activities: political and security cooperation, economic cooperation and functional cooperation. This chapter depicts and analyses Myanmar’s cooperation in the political, security, economic and social areas. 5.1 MYANMAR-ASEAN POLITICAL AND SECURITY COOPERATION Sandwiched between the two largest and most powerful countries in Asia — China and India, Myanmar is in a strategically important position in the region. Myanmar’s relationship with China is friendly, with the exception of the period of the Cultural Revolution, and based on the five principles of peaceful coexistence. The relationship seems to have improved especially after 1988, when the army took over power in Myanmar. This is because China has given Myanmar political and economic support while the West, led by the United States, has imposed sanctions due to the allegedly poor human rights situation in the country. China is also reportedly supplying Myanmar with military hardware. President Jiang Zemin paid a visit to Myanmar in 2001 and signed several agreements on economic cooperation. The relationship with its other neighbour India has been improving since the Vajpayee government’s “Look East” policy. Some analysts see India’s approaches toward Myanmar as a way to prevent it from tilting towards China, which had border clashes with India some decades ago; India is also worried that China could gain access to the Indian Ocean through Myanmar. However, given the improving relationship between India and China, neither India nor China is a threat for Myanmar. Instead, the good relationships among the three neighbouring countries contributed to peace and stability in the region.

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On the other hand, Myanmar’s geographical position neighbouring the two Asian giants, especially China, worries some ASEAN nations and Japan, according to some analysts. However, Myanmar believes that it can serve as a bridge between ASEAN and the two Asian nuclear powers. Meanwhile, Myanmar’s relationship with the ASEAN nations has improved remarkably since it joined the regional association with the exception of some cross-border “hiccups” between Myanmar and Thailand in early 2001. One year after Myanmar became a member, the government of Thailand led by Prime Minister Chuan Leekpai proposed “flexible engagement” (based on the idea in 1989 of “constructive intervention”), instead of ASEAN’s policy of “constructive engagement” towards Myanmar. Myanmar argued that it would be contrary to the basic principle of “non-interference” in a member country’s internal affairs mentioned in Article II of TAC. As the majority of ASEAN members agreed with Myanmar’s argument, the concept of “flexible engagement” was shelved. This “hiccup” died down when the government of Prime Minister Thaksin Shinawatra came to power in Thailand in early 2001. Despite this debate, Myanmar’s relations with ASEAN members has improved within the framework of the association. Exchanges of visits of heads of states between Myanmar and the other member states suggest the improving of the political and security climate in the region. Between 1988 and 2002, for instance, Myanmar leaders visited ASEAN member countries nine times: thrice to Laos, twice to Thailand, once to Singapore, Malaysia, the Philippines and Brunei. Meanwhile, other ASEAN heads of states visited Myanmar fifteen times during the same period: the Laos leader came four times, the Malaysian leader thrice; Singapore, Thai and Vietnamese leaders twice each, and the Cambodian and Philippines leaders once each. In fact, formal and informal summits have also enhanced the relationship between Myanmar and the other member nations. In addition, Myanmar hosted important meetings such as the ASEAN ministerial meeting on combating transnational crime and a meeting of ASEAN economic ministers. As part of its efforts to cooperate with ASEAN on regional security issues, and partly due to its obligations and commitments, Myanmar has acceded to the Treaty on the Southeast Asia Nuclear Weapon Free Zone, which came into force in 1997. Its accession to this Treaty is important because In seeking the elimination of all nuclear weapons and the establishment of a Zone of Peace, Freedom and Neutrality (ZOPFAN), the Treaty is in step with ASEAN’s continued advocacy for universal adherence to the Comprehensive Nuclear Test Ban Treaty and the Nuclear Non-Proliferation Treaty (ASEAN Secretariat 2001).

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ASEAN Regional Forum (ARF) and Myanmar The ARF serves as an important mechanism of ASEAN for promoting mutual understanding, and engaging in political and security dialogue and cooperation in the Asia-Pacific. According to officials from the Ministry of Foreign Affairs, ARF is regarded as a regional forum for enhancing understanding of the region’s political and security issues and confidence building. Myanmar believes that “any doubt or misunderstanding regarding situations and circumstances in any of the participating countries can be cleared away through enhanced understanding” (Kyaw Tint Swe and Aung Htoo 1999, p. 187). With this belief, Myanmar has regularly participated in all ARF meetings and joined the debates on security issues in the region, including those on Myanmar. ARF is one of the fora where Myanmar can actively engage in with the United States and its allies about their sanctions on Myanmar due to its alleged human rights violations. Myanmar has used these Forum meetings to defend its record on human rights and explain its … endeavours to improve the security and stability conditions within the country such as the process which brought armed ethnic groups back to the legal fold, the constitutional process, situation on the narcotic suppression, and displaced persons, which will greatly contribute to the regional security and stability as well as to the world peace (ibid., p. 188).

Since the very beginning, Myanmar has participated in ARF inter-sessional activities, which include confidence building, search and rescue operations and disaster relief. Myanmar also benefits from participating in ARF meetings in terms of sharing information with other participants from the region and “invaluable experience on security perceptions of forum participants as well as the interest shown by all to understanding one another and to find ways and means to work together to enhance confidence through increased understanding and transparency” (ibid., p. 189). 5.2

MYANMAR-ASEAN COOPERATION FOR ECONOMIC DEVELOPMENT

5.2.1 Myanmar-ASEAN Economic Relations This sub-section addresses economic cooperation between Myanmar and ASEAN in terms of trade, investment and tourism. Before discussing the overall MyanmarASEAN economic cooperation, trade relations between Myanmar and neighbouring Southeast Asian countries should be mentioned first. These relations have probably existed since the earliest days of Myanmar’s history.1 There were trade relations

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between Myanmar and Melaka and Sumatra (now Malaysia and Indonesia) from the sixteenth century. The first official recorded data of Myanmar shows that the country already exported rice to Malaya (the Straits Settlements and the Federated Malay States), Java and Sumatra, and the Philippines in the year 1871/72 (Mya Than 1992). Other exports included beans and pulses, chillies, groundnut cakes, sesame cakes, raw rubber, and dried and salted fish. The country’s main trading partners have been other Asian countries throughout history and this is likely to remain so in the foreseeable future (See Mya Than 1992, and Tables 5.1 and 5.2).

Myanmar-ASEAN Trade Relations Between 1991/92 and 2000/01, Myanmar’s exports to ASEAN increased to 1,354.7 million kyats in 1991/92 to 2,991.0 million kyats in 2000/01 at an average annual growth rate of 9.2 per cent. Meanwhile, Myanmar’s imports from ASEAN grew from 1,901.0 million to 6,873.8 million kyats at an annual growth rate of 15.4 per cent. At the same time, Myanmar’s total trade with ASEAN grew from 3,256 million in 1991/92 to 9,365 million kyats in 2000/01 at an average annual growth rate of 11.7 per cent. However, Myanmar’s share of exports to ASEAN as a percentage of its total trade declined from 46.2 per cent to 25.2 per cent between 1991/92 and 2000/01, while Myanmar’s share of imports from ASEAN increased from 35.6 per cent to 46.1 per cent (Tables 5.1 and 5.2). During 1980/81–1990/91 Myanmar’s average share of exports to and imports from ASEAN as percentages of its total exports and imports were 23 per cent and 12 per cent respectively, while between 1991/92 and 2000/01 they were 34.9 per cent and 42.7 per cent respectively. This suggests that Myanmar-ASEAN trade relations improved significantly after Myanmar switched from its “socialist” economic system to a market-oriented one. At the same time, Myanmar’s trade deficits with ASEAN grew from 546.3 million to 3,882.8 million kyats, that is an increase of about 7 times within 10 years (Table 5.3). The average annual trade deficit between 1991/92 to 2000/01 was 3,143.53 million kyats. The increase in deficits starting in the period 1991/92 was significant since it was the time when Myanmar started to transform from the command/control economy to the market-oriented system after the military junta took over power in 1988. During the period 1980/81–199/91, the balance of trade was in favour of Myanmar except in 1982 and 1990, while that of the period 1991/92–2000/01 was in favour of ASEAN and Myanmar’s average trade deficits during the period was 3,143.5 million kyats.

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n.a 53.4 39 4.6 683 574.7 – 10.4 – 1354.7 438.3 323.7 190.1 405.4 2712.9 63.7 12.4 133.2 2931

%

1994–95 Value 0.03 6 2.9 2.7 19.7 10.6 0.02 0.02 – 41.9 3.9 20.7 5.1 12.2 83.9 3 4.3 8.8 100

%

1995–96 Value

n.a n.a n.a 1.6 1.7 842.6 15.6 299.6 2.3 102 1.98 147.5 0.1 2.5 0.1 133.1 19.7 883.5 16.3 986.8 18.4 542.8 10.1 533.7 – 0.1 – 1 – – – 1.1 – – – – 42.1 2373.4 43.9 2103.2 5 277.5 5.1 195.1 15.9 695.4 12.9 1036.8 4.4 270 4.9 256.3 18.4 502.9 9.3 614.5 85.8 4119.2 76.2 4208.9 2.9 96.1 1.8 151.8 3.6 273 5.1 216.2 7.7 9258 17.1 442.2 100 5405.2 100 5017.3

%

1993–94 Value

n.a n.a n.a n.a 1.8 14.2 0.4 70.8 1.3 59.9 1.6 98.7 0.2 0.4 0.01 2.5 23.3 601.7 16.5 831.1 19.6 600.3 16.4 778.5 – 0.2 0.01 – 0.4 – – – – – – – 46.2 1276.7 34.9 1781.6 15 338.6 9.3 210.1 11 615.7 16.8 671.8 6.5 150.4 4.1 187.6 13.8 673.1 18.4 776.2 92.5 3054.5 83.7 3627.3 2.2 106 2.9 123.7 0.4 74.4 2 153.2 4.5 420.5 11.5 323.7 100 3655.4 100 4227.8

%

1992–93

Value 0.1 142.1 305.3 63.7 1007.3 544.2 – – – 2062.7 336.1 929 382.2 716.4 4426.4 270.9 257.5 418.9 5373.7 – 2.6 5.7 1.2 18.7 10.1 – – – 38.4 6.3 17.3 7.1 13.3 82.4 5 4.8 7.8 100

%

1996–97 Value – 117.9 165.2 18.1 828.8 723.9 n.a n.a n.a 1853.9 837 1425 240 518.2 4874.1 156.7 219 1197.1 6446.9 – 1.8 2.6 0.03 12.9 11.3 – – – 28.8 13 22.1 3.7 8 75.6 2.4 3.4 18.6 100

%

1997–98 Value n.a 203.1 252.7 36 701.5 565.2 n.a n.a n.a 1758.5 570.6 1040.2 296.3 575.9 4241.5 143.2 225.8 2115.3 6755.8 n.a 3 3.7 0.1 10.4 8.4 – – – 26 8.5 15.4 4.4 8.5 62.8 2.1 3.8 31.3 100

%

1998–99 Value

Notes: –: less than 0.1% n.a.: not available *: UK only Sources: Khin Ohn Thant 2001, Table 11.6; Central Statistical Organization, Ministry of National Planning and Economic Development, Myanmar.

Brunei Indonesia Malaysia Philippines Singapore Thailand Vietnam Cambodia Laos ASEAN Total China India Japan Rest of Asia Asia in Total EEC USA Rest of World World Total

%

1991–92

Value

TABLE 5.1 Myanmar’s Exports and Imports with ASEAN-6 (in million kyats)

n.a 188.5 335.1 13.2 812.9 552.5 n.a n.a n.a 1902.2 847 1346 361.9 587.3 5044.4 107.7 563 3232.2 8947.3

n.a 2.1 3.8 0.01 9.1 5.8 – – – 21.3 9.5 15 4 6.6 56.4 1.2 6.3 36.1 100

%

1999–2000 Value

n.a 220.7 449 37.4 668.8 1615.1 n.a n.a n.a 2991 725 1055.1 508.5 707.1 5986.7 218.7 1568.3 4090 1186.7

n.a 1.9 3.8 0.03 5.6 13.6 n.a n.a n.a 25.2 6.1 8.9 4.3 6 50.5 1.8 13.2 34.5 100

%

2000–2001 Value

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n.a 55.7 383.3 0.1 663.7 797.7 0.6 0.1 n.a 1901 395 147.8 1167.6 195.7 4307.1 578.3 165.6 285.6 5336.7

– 1 7.2 – 12.4 15 0.1 – – 35.6 16.8 2.8 21.9 3.7 80.7 10.8 3.1 5.4 100

– 117 329.4 0.2 575.8 695.6 0.2 3.5 – 1718.3 946 123.8 1536.1 278.4 4602.6 248.7 224.3 286.1 5365.3 – 2.2 6.1 – 10.7 13 – 0.1 – 32 17.6 2.3 28.6 5.2 85.8 4.6 4.2 5.3 100

%

1992–93

Value 0.01 321.6 567.3 2.3 820.3 865.4 0.02 – 0.02 2576.9 1261.4 281.4 2020.2 712.2 6852.1 455.9 282.8 315.1 7923.3 – 4.1 7.2 – 10.4 10.9 – – – 32.5 15.9 3.6 25.5 9 86.5 5.8 3.6 4 100

%

1993–94 Value – 320 781.9 13 1215.7 830.2 0.2 6.6 0.1 3161 1019.4 308.7 1962.7 801.8 4253.6 334.4 102.2 625.7 8332.3 – 3.8 9.4 0.2 14.6 10 – 0.1 – 37.9 12.2 3.7 25.6 9.6 58.8 4 1.2 7.5 100

%

1994–95 Value 0.02 350.3 615.9 4.9 1819.7 1318.8 10.6 0.01 – 4120.2 1433.8 344.9 2505.8 702.5 4269.9 668.6 360.1 165.8 1031.6 – 3.4 6 0.1 17.7 12.8 0.1 – – 40 13.9 3.4 24.3 6.8 89.2 6.5 3.5 1.6 100

%

1995–96 Value n.a 319.8 690.1 n.a 2791.5 1191.7 n.a n.a n.a 4993.1 1116.3 602.7 2465 774.3 9952.3 295 909.3 632.2 11778.8 2.7 5.9 – 23.7 10.1 – – – 42.4 9.5 5.1 20.9 6.6 84.5 2.5 7.7 5.3 100

%

1996–97 Value 677.8 995.8 n.a 4440.4 1325.4 n.a n.a n.a 7239.4 1524.4 645.7 2181.4 n.a 11590.9 88.1* 334.8 2352.2 14366 4.7 6.9 n.a 30.9 9.2 n.a n.a n.a 50.4 10.6 4.5 15.2 n.a 80.7 0.01 2.3 16.4 100

%

1997–98 Value 1264.9 1203.8 n.a 5187.7 2064.9 n.a n.a n.a 9721.3 1744.3 434.4 2158.2 n.a 14058.2 98.8* 216.2 2498.5 16871.7 7.5 7.1 n.a 30.4 12.2 n.a n.a n.a 57.6 10.3 2.6 12.8 n.a 83.3 0.1 1.3 14.8 100

%

1998–99 Value

Notes: –: less than 0.1% n.a.: not available *: UK only Sources: Khin Ohn Thant 2001, Table 11.6; Central Statistical Organization, Ministry of National Planning and Economic Development, Myanmar.

Brunei Indonesia Malaysia Philippines Singapore Thailand Vietnam Cambodia Laos ASEAN Total China India Japan Rest of Asia Asia in total EEC/EU USA Rest of World World Total

%

1991–92

Value

TABLE 5.2 Myanmar-ASEAN Trade: Imports of Myanmar (in million kyats)

654.9 1211 n.a 4559 2163.3 n.a n.a n.a 8588.2 1568.2 455.3 1808.2 n.a 12419.9 45.2 576.3 3830.3 16264.8

4 7.5 n.a 28.3 13.3 n.a n.a n.a 52.8 9.6 2.8 11.1 n.a 76.4 – 3.5 23.6 100

%

1999–2000 Value

534.3 794 n.a 3646.4 1899.1 n.a n.a n.a 6873.8 1760 533.5 1317.4 n.a 10484.7 9.7* 153.4 4170.9 14899.7

3.65 5.3 n.a 24.5 12.8 n.a n.a n.a 46.1 11.8 3.6 8.8 n.a 70.4 – 1 28 100

%

2000–2001 Value

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MYANMAR IN ASEAN 97

TABLE 5.3 Myanmar-ASEAN Trade: Balance of Trade (in kyat millions) 1991–92 1992–93 1993–94 1994–95 1995–96 1996–97 1997–98 1998–99 1999– 2000–01 2000 Exports

1354.7

1276.7

1781.6

2373.4

2103.2

2062.7

1853.7

1758.5 1902.2

2991

Imports

1901

1718.3

2576.9

3161

4120.2

4993.1

7239.4

9721.3 8588.2

6873.8

Balance

–546.3

–441.6

–795.3

–787.6

–2017 –2930.4 –5385.5 –7962.8 –6686 –3882.8

Source: Tables 5.1 and 5.2.

TABLE 5.4 Foreign Direct Investment (Approved) Flow into Myanmar (as of 31/1/02) (US$ million) Country Australia Austria Canada China Cyprus Denmark France Germany Hong Kong Indonesia Japan Korea Malaysia Netherlands Panama Philippines Singapore Thailand United Kingdom United States Others ASEAN Total World Total ASEAN/World (%)

No. of Projects

Amount

14 2 16 12 1 1 3 1 27 11 22 31 27 5 1 2 70 49 37 16 7

82.1 72.5 59.8 60.2 5.3 13.4 470.4 15.0 148.3 240.0 232.9 151.1 597.0 238.8 29.1 146.7 1541.6 1290.2 1404.0 582.1 15.3

132 355 37.2

3218.5 7394.8 43.5

Source: Ministry of Planning and Economic Planning, Myanmar, March, 2002

Tables 5.1 and 5.2 suggest that, for Myanmar, the ASEAN market continues to be second only to that of other Asian countries including India, China, Japan and the rest of Asia. However, since 1997–98, ASEAN has become Myanmar’s largest

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source of imports — more than 50 per cent of Myanmar’s total. That is the reason why Myanmar’s trade deficits vis à vis the region grew significantly. For the ASEAN nations, however, the Myanmar market ranks low. Even after Myanmar had become an ASEAN member, this pattern of the direction of total trade remained almost unchanged. In other words, ASEAN membership has not had any significant impact on Myanmar’s trade patterns.

Myanmar-ASEAN Foreign Direct Investment Relations Myanmar’s present regime introduced the liberal Union of Myanmar Foreign Investment Law in 1988. With this law, the country opened up its economy by inviting foreign investors from near and far. So far, 26 countries have invested in Myanmar. ASEAN countries are the most significant source with more than 43.5 per cent of Myanmar’s FDI (Table 5.4). Singapore ranks as the number one investor in Myanmar, followed by Thailand and Malaysia (the third and the fourth largest investors). This suggests that ASEAN’s FDI plays a significant role in Myanmar: it increased in total after the country joined ASEAN, but ASEAN’s FDI inflow declined significantly after 1997, on a year-by-year basis — mainly due to the regional financial crisis. The oil and gas sector has received the largest share of total FDI with 31.9 per cent, followed by manufacturing (21.3 per cent), hotels and tourism (14.3 per cent) and real estate (13.9 per cent) respectively. Although the agriculture sector is the most important economic sector in the country, it received only 0.5 per cent of the total FDI as of 31 December 2001. Since Myanmar is actively participating in AFTA and AIA, the prospects for further inflow of FDI are bright, provided the political situation improves.

TABLE 5.5 Tourist Arrivals in Myanmar by Country Year

No. of Tourists Total

1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02

170,143 210,289 329,379 345,829 309,418 272,900 181,000

ASEAN Tourists Number (% of Total) 12,457 19,734 15,277 14,448 15,137 18,271 18,521

(7.3) (6.5) (4.6) (4.2) (4.9) (6.7) (10.2)

Source: ADB, Preinvestment Study for the Greater Mekong Subregion: East-West Economic Corridor, vol. 5, Manila, 2001.

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Myanmar-ASEAN Tourism Relations Myanmar is promoting tourism as a source of national income relying not only on its natural beauty, but also on its diverse culture and ecology. This is because it is rich in tourist destinations such as the snow-capped mountains in the north and beautiful beaches in the south, along with varieties of flora and fauna as well as world heritage sites such as the city of Bagan. In addition, it has been exchanging information and experience in tourism coordination and harmonization of tourism policy and programmes, tourism marketing, training, research, and so on, mentioned in the Ministerial Memorandum of Understanding on ASEAN Cooperation in Tourism signed by the ASEAN tourism ministers on 10 January 1998. Despite the decline in the total number of tourist arrivals in Myanmar since the 1997 regional financial crisis, the number of tourists from ASEAN has increased steadily in absolute terms as has the percentage of tourists from ASEAN (Table 5.5). Data in the table suggest that total tourist arrivals increased during the second half of the 1990s significantly from 1995/96 to 1998/99 but fell afterwards, most probably due to the regional economic crisis and the political situation. Despite this trend, tourist arrivals from ASEAN increased throughout the decade; from 7.3 per cent of total tourist arrivals in 1995/96 to 10.2 per cent in 2001/02. However, tourists from ASEAN accounted for about only 6.3 per cent of the total tourists arriving in Myanmar, on average, during the period. In short, the ASEAN-Myanmar economic relationship, in terms of trade (at least in imports), investment and tourism, has been improving since the country joined ASEAN. It could have been better if the regional crisis which happened at the time of Myanmar’s joining the regional association had not occurred. 5.2.2 Myanmar in ASEAN Economic Cooperation Schemes This section will discuss how Myanmar is actively participating in ASEAN’s economic cooperation activities mainly with AFTA and AIA. The extent of Myanmar– ASEAN economic cooperation could be measured in terms of Myanmar’s efforts to reduce tariffs and participate in ASEAN’s other economic projects such as AICO, AIA, e-ASEAN, and so on. First, let us look at the tariff reduction package or CEPT scheme. According to Khin (2001), at the time of accession to ASEAN in July 1997, Myanmar had 5,473 tariff lines; 14 tariff rates ranging from zero to 40 per cent; with an average tariff rate of 9.9 per cent. Moreover, 68 per cent of the items have tariffs of less than or equal to 5 per cent. Myanmar, after becoming a member of the association, started tariff reduction, gradually phasing in the Temporary Exclusion List (TEL) in 2001. The CEPT package for 2002 is shown in Tables 5.6 and 5.7.

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MYANMAR-ASEAN COOPERATION FOR DEVELOPMENT

TABLE 5.6 CEPT Scheme of Myanmar Product List

Tariff Lines No. %

Inclusion List (IL) Temporary Exclusion List (TEL) Sensitive List (SL) General Exception List (GEL) Total

3580 1823 21 48 5472

65.4 33.3 0.4 0.9 100.0

Note: Table 5.6 shows the latest package whereas Table 5.7 is used for comparison among ASEAN members. Sources: Union of Myanmar, CEPT Product Lists and Tariff Reduction Plan; Ministry of Planning and Economic Development, Myanmar, 2001.

TABLE 5.7 CEPT Product List for ASEAN-10 for 2001 Country

Inclusion List (IL)

Temporary Exclusion List (TEL)

General Exclusion List (GEL)

Sensitive List (SL)

Total

Old Members Brunei Indonesia Malaysia Philippines Singapore Thailand Old Members Total (Percentage)

6,276 7,192 10,025 5,621 5,859 9,104 44,077 (98.34)

0 21 218 6 0 0 245 (0.55)

202 68 53 16 0 0 339 (0.76)

14 4 83 50 0 7 158 (0.35)

6,492 7,285 10,379 5,693 5,859 9,111 44,819 (100.0)

New Members Cambodia Laos Myanmar Vietnam New Members Total (Percentage)

3,115 1,673 2,984 4,984 12,756 (57.47)

3,523 1,716 2,419 1,177 8,835 (39.80)

134 74 48 139 395 (1.78)

50 88 21 51 210 (0.95)

6,822 3,551 5,472 6,351 22,196 (100.0)

ASEAN Total (Percentage)

56,833 (84.81)

9,080 13.55

734 1.10

368 0.55

67,015 (100.0)

Note: Data as of July 2001 Source: ASEAN Secretariat

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According to Myanmar’s AFTA Unit, the SL will be phased out into the IL beginning in 2003 and ending in 2015. The package indicates that by 2008, 99 per cent of the tariff lines will have 0–5 per cent tariff rates to be in line with the AFTA deadline. And by 2015, the number of tariff lines will be maximized in the 0 per cent category and at the same time some sensitive products will be allowed until 2018. “As it is, only 4 per cent of the tariff lines will have 0 per cent tariff rate in 2008. Some 2000 tariff lines have already been identified that can be eliminated with a minimum effect on customs revenues. Another 1800 plus tariff lines with rates less than or equal to 1 per cent can be eliminated if need be” (Khin 2001, p. 1). Myanmar is ahead of the other new member countries such as Vietnam, Laos and Cambodia. For example, Myanmar’s tariff lines as of May 2001 for the category of 0–5 per cent is 81.3 per cent whereas those of Vietnam, Laos and Cambodia are 70.0 per cent, 71.45 per cent and 76.4 per cent respectively. There is no doubt that Myanmar’s tariff reduction plan is on track. It is obvious that the Myanmar government is seriously trying to achieve the AFTA targets. However, the government is worried that there will be difficulties when the time comes for the elimination of quantitative restrictions and non-tariff barriers. As far as the liberalization of services is concerned, Myanmar is having difficulties, especially in the unfamiliar financial sector. The Myanmar National AFTA Unit found that the request and offer mode of negotiations is not satisfactorily performing. However, Myanmar has offered specific commitments on 35 services in the priority sectors of Air Transport, Business, Construction, Finance, Maritime Transport, Telecommunications and Tourism. There are 21 offers in the Common Sector category proposed by ASEAN for all member countries to liberalize. Another means of ASEAN economic cooperation is AICO. The aim of AICO is to enhance the performance of ASEAN’s industrial production, promote closer ASEAN integration, attract more FDI from both inside and outside the ASEAN region, increase intra-ASEAN trade, enhance private sector participation, and increase industrial complementation. Of 116 applications submitted for the consideration of ASEAN national authorities as of March 2001, 74 have been approved. Most firms utilizing the AICO scheme are multinationals incorporated in ASEAN member countries. The value of trade transactions of approved applications is estimated in excess of US$825 million per year (ASEAN Secretariat 2001). So far Myanmar does not have any AICO projects since Myanmar hosts few multinational corporations.

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As ASEAN has been struggling to attract back FDI into the region, it intensified its efforts to implement the Framework Agreement on the AIA in 2000 and 2001. The member countries are committed to immediately granting national treatment to ASEAN investors and opening up their industries for investment, with some exceptions. Some restrictions on investments have been lifted. Moreover, apart from the manufacturing sector, they have submitted their final TEL and SL for the four other sectors, namely agriculture, fishery, forestry and mining. Myanmar will join the old members in phasing out the exclusion list by 2003 to cooperate with ASEAN’s Bold Measures to enhance ASEAN’s investment climate. ASEAN sent its Investment Missions on “road shows” to the United States and Japan to attract investment into the region. Myanmar has also participated in these activities. Myanmar has introduced privatization of State Economic Enterprises (SEEs) in order to facilitate the inflow of FDI, albeit at a slow pace. According to the original Framework agreement, AIA will be fully operational in 2010. Another of Myanmar’s cooperative efforts with ASEAN is its participation in e-ASEAN. e-ASEAN was established as one of the measures to reduce the development gap between the old and new ASEAN members. Myanmar is actively implementing the guidelines adopted by ASEAN. It has formed an e-ASEAN National Committee to oversee the implementation of the e-ASEAN Agreement. The country is active in the e-ASEAN Working Group and the e-ASEAN Task Force. Myanmar is sending groups, including officials and those from the private sector, to other developed ASEAN countries to study such developments as e-government, software parks, and information and communications technology (ICT) parks. The private sector in Myanmar is actively involved. According to Khin (2001), in order to facilitate the work of the e-ASEAN Task Force, the Myanmar government has formed six sub-committees for the following tasks: Legal Infrastructure under the Attorney General Office, ICT Infrastructure under the Telecommunications Department, ICT Education under the Higher Education Department, ICT Application under the Computer University, Liberalization of ICT products under the Customs Department, and Standardization under Myanmar Computer Federation. Myanmar has identified 42 ICT products for liberalization and a study is underway although the members agreed to eliminate duties and non-tariff barriers on intra-ASEAN trade in ASEAN ICT products in three tranches and for Myanmar these tranches would take effect on 1 January 2008, 2009, and 2010 respectively. Furthermore, Myanmar has opened an ICT Park in January 2001 and hosted the e-ASEAN Working Group and Task Force Meetings in Yangon.

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As one of the six countries along the Mekong River, Myanmar participates in the ASEAN-Mekong Basin Development Cooperation (AMBDC), hosting the Mekong Basin Ministerial Meeting in Yangon in November 2001. Recommendations are being made to study road construction between Myanmar and Thailand. Myanmar also participates in ADB-initiated projects in the Mekong subregion and in trade, tourism and waterways development with the other riparian economies, including China’s Yunnan province. Myanmar also joins ASEAN’s other cooperation projects in the financial sector, the energy sector (Trans-ASEAN Gas Transmission System), the transport and telecommunications sectors (ASEAN Highway project), the private sector (ASEAN Chamber of Commerce and Industry — ASEAN CCI), among others. So far, Myanmar is not far behind other members in ASEAN economic cooperation and it is actively participating in ASEAN’s activities in regional economic cooperation as much as possible. 5.3 MYANMAR–ASEAN FUNCTIONAL COOPERATION Myanmar also fully participates in functional cooperation within ASEAN. ASEAN functional cooperation aims for “shared prosperity through human development and technological competitiveness” among its members, as mentioned in the framework for the ASEAN Plan of Action. This includes human resource development, culture and information, science and technology, social development, and the environment. Several national level committees in Myanmar such as the National Committee on Information and Culture, the National Committee on Science and Technology, and the National Committee on Social development were formed to coordinate with relevant ASEAN committees and subcommittees. For example, Myanmar, with its long traditions and rich culture, can participate in ASEAN’s cultural activities. Another example of Myanmar’s participation in functional cooperation is in the Youth and Development programme. Delegations of Myanmar youth have participated in various meetings such as the ASEAN Youth Environmental Awareness Camp and ASEAN Young Leaders Forum. Myanmar has also hosted an ASEAN Youth Day Meeting in Myanmar. In addition, the National Commission for Environmental Affairs (NCEA), the Central Committee for Drug Abuse Control (CCDAC), and the Public Service Selection and Training Board (PSSTB) were established to be in conformity with existing ASEAN committees. However, since functional cooperation has the lowest priority among the three types of ASEAN cooperation and also as ASEAN functional cooperation is

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new to Myanmar, the country’s activities in this area are not as evident: an example is shown in Box III which depicts Myanmar-ASEAN Environmental Cooperation. 5.4

IMPACT AND IMPLICATIONS OF MYANMAR JOINING ASEAN

5.4.1 Political implications of Joining ASEAN2 During the months of July and August 1997 a series of boxed inserts entitled “Facts about ASEAN” were run in Myanmar’s government-owned newspapers to highlight Myanmar’s admission to the regional grouping. In one item, it was stated that “Myanmar, through ASEAN, can now meet the groups wishing to pose a threat to her collectively, and make her attitude known to them in specific and precise terms and act accordingly” and new opportunities would open up “with the help, understanding and sympathy of fellow ASEAN members.”3 On the other hand, SLORC’s critics maintained the view that by joining ASEAN Myanmar’s military junta hoped to gain legitimacy at home and abroad.4 To some, it was seen as a calculated move by SLORC to counter Western sanctions, criticisms, and condemnations spearheaded by the US government as well as various pro-opposition lobbies. On the other hand, Myanmar authorities adamantly insist that this is not a reactive process but a pro-active one based on changing domestic and international circumstances. In answering the question on the appeal of ASEAN to Myanmar, the then Foreign Minister U Ohn Gyaw alluded to the ending of the Cold War and referred to the “shared destiny” of the ten Southeast Asian nations and added that Myanmar “feel that we are a Southeast Asian nation and we would like to aspire to the prosperity of Southeast Asian nations” and since “Asean is now very much solid in a leading role … we would like to be part of it.” (The Nation, 16 December 1995). Now that Myanmar is part of ASEAN, the political implications of its entry into the regional grouping may be identified in three areas: ASEAN’s relations with the West; ASEAN organizational matters and intra-ASEAN relations; and Myanmar’s domestic political development. From the beginning, SLORC had been ostracized by the Western powers, while the regional states and ASEAN have cooperated with Myanmar in its efforts to end its economic and political isolation. The United States and its European allies persistently accused SLORC of human rights violations and suppression of democracy activists and sought punitive measures to advance their vision of democracy. On the other hand, ASEAN states constructively engaged Myanmar in the belief that a

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gradual exposure to the market economy and regional cooperative efforts would be the best way to ensure regional security and the socio-economic development of Myanmar itself. The stark contrast between these two approaches has never been clearer than when in the last few months before Myanmar’s entry, the US government imposed sanctions and together with its European allies tried to block Myanmar’s early entry into ASEAN. Meanwhile, ASEAN decided to accord full membership to Myanmar in July, in time for the association’s 30th anniversary. In fact, on 22 April 1997 President Bill Clinton announced a ban on new American investments in Myanmar citing “large-scale repression of the democratic opposition”. This was followed on 20 May by an executive order “prohibiting United States persons from new investments in Burma” that formalized the earlier pronouncement (Myanview, July 1997, p. 4). Despite efforts by the Clinton administration to garner strong support from its allies, countries such as Japan, Australia, France, and Germany did not join in the United States censure effort. The US sanctions came at a time when selected purchase laws and bans on companies doing business with Myanmar, by states such as California and Massachusetts, as well as cities like New York. Such laws and bans had become the bane of both foreign and United States companies. The EU had withdrawn the community’s Generalized System of Preferences (GSP) benefits from Myanmar’s industries and also imposed a ban on SLORC members and senior military and government officials from obtaining visas. Such tensions between Myanmar and the United States as well as some Western developed nations suggest that discrimination against Myanmar in their relations with ASEAN would go against the grain of the grouping’s stand on nondiscriminatory treatment of its members. One example of a potential conflict is the current controversy over Myanmar’s participation in the Asia-Europe Meeting (ASEM). The confrontational stage was set with the European Union’s (EU) statement on 26 June 1997: the Council considers that the presence of Burma/Myanmar at the forthcoming ARF/PMC Ministerial Meetings does not prejudge in any way its participation as observer at the upcoming EU-ASEAN Joint Cooperation Committee in November 1997 and other meetings in the institutional EU-ASEAN framework (Myanview, July 1997, p. 5).

Moreover, British Foreign Secretary Robin Cook’s remarks during his Southeast Asian tour that Myanmar would not be invited to attend the forthcoming second

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BOX III Myanmar-ASEAN Environmental Cooperation Since becoming a member of the ASEAN in 1997, Myanmar has developed a closer and greater contact with the other ASEAN member countries through participation in regional programmes and projects, conferences, meetings, forums, workshops and training courses on various dimensions including economic, social, cultural and environmental aspects. This article is focussed on the environmental dimension of ASEAN cooperation. The ASEAN region, embracing ten countries in Southeast Asia, is spectacular for its rich natural resources including large extents of rain forests; rich variety of flora and fauna; and extensive rivers, lakes and seas. However, these resources are now under threat owing to population and economic pressures. Moreover, the environmental quality in the region is deteriorating as a result of air, water and soil pollution. Although each country may have different environmental issues, most ASEAN member countries share common environmental problems. Realizing that collective and cooperative actions are crucial for addressing the environmental problems, ASEAN initiated a framework for environmental cooperation within the first years of its establishment. With the assistance of the United Nations Environmental Program, ASEAN Subregional Program (ASEP) was formulated in 1977 and was adopted in the following year by the ASEAN Experts Group on the Environment (AEGE). The first ASEAN Ministerial Meeting on the Environment endorsed the ASEP I in 1981. ASEP II and ASEP III were endorsed at the subsequent Ministerial Meetings on the Environment. The current institutional framework for environmental cooperation in ASEAN consists of the ASEAN Ministers for the Environment with primary responsibility for policy matters related to the environment; the ASEAN Senior Officials on the Environment (ASOEN) with responsibility for formulation, implementation and monitoring of regional programmes and activities on the environment (the AEGE was elevated in 1989 to become the ASOEN); and the five subsidiary bodies to assist the ASOEN namely, the Working Group on Coastal and Marine Environment, the Working Group on Multilateral Environmental Agreements, the Working Group on Nature Conservation and Biodiversity, the Working Group on Water Resources Management, and the ASOEN Haze Technical Task Force. The ASOEN Secretariat coordinates and reports to ASOEN on all activities that do not fall within the purview of the respective working groups. The ASEAN Environmental Ministers meet every three years on a formal basis, and since 1994 have met on an informal basis annually in between these formal meetings. The ASOEN also meet annually. The eighth ASOEN Ministerial Meeting on the Environment (8th AMME) was held in Malaysia in 2000 and the Seventh Informal ASEAN Ministerial Meeting on the Environment (7th IAMME) was held in November 2002 in Lao PDR. ASEAN cooperation in general is guided by the ASEAN Heads of State/Government. At the ASEAN Summit meetings, the ASEAN Heads of State/Government provided the vision and broad strategic thrusts for ASEAN vision 2020. With respect to the environment sector, the Vision envisages a clean and green ASEAN with fully established mechanism for sustainable development to ensure the protection of the region’s environment, the sustainability of its natural resources and the high quality of life of its people.

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To ensure the realization of ASEAN Vision 2020, the Heads of State/Government adopted the Hanoi Plan of Action (HPA) on 15 December 1998. The HPA sets out 15 objectives on environment addressing areas of Primary concern to ASEAN. In April 2000, the ASEAN Environment (SPAE) 1999–2004, which translates the 15 objectives of the HPA on environment into specific projects and activities based on set time frames and targets. One of the major environmental issues in the region is the transboundary haze problem. In order to address the problem, the ASEAN Agreement on Transboundary Haze Pollution was adopted at the 9th ASEAN Ministerial Meeting on Haze (AMMH) held in Malaysia in June 2002. With the aim of promoting environmental education in the region, the ASEAN Environmental Education Action Plan (AEEAP) was adopted at the 8th ASEAN Ministerial Meeting on the Environment in 2000. Moreover, in order to raise environmental awareness in the region, the first ASEAN Environment Year (AEY) was launched in 1995 in Thailand and the second AEY was launched in 2000 in Brunei Darussalam. The AEY-2003 was recently launched in Cambodia. Throughout the AEY, ASEAN countries undertake campaigns including semiars, workshops, exhibitions and contests. The theme for AEY 2003 is “Together Towards Sustainable Development ”. The National Commission for Environmental Affairs (NCEA) is the national focal point for ASEAN environment cooperation in Myanmar. The Commission works closely with the ASEAN Secretariat to implement the ASEAN environmental activities. The NCEA collects and compiles environmental information and data relating to Mynmar for ASEAN State of the Environment Report and for other environment reports published by the ASEAN. Myanmar also participates in activities being carried out by the 5 Working Groups. Myanmar joined the other ASEAN member countries in celebrating the AEY 2000, and is now taking part in AEY 2003 activities such as Logo and Poster competitions, contribution of messages and information for AEY information kit and participation in the AEY 2003 launching ceremony. Myanmar has actively participated in formulating the ASEAN Environmental Education Action Plan and has presented project proposals at the third year review meeting of the AEEAP. Myanmar had signed the ASEAN Transboundary Haze Agreement and has sent the Instrument of Ratification to the ASEAN Secretariat. It is Myanmar’s turn to host the 9th ASEAN Ministerial Meeting on the Environmnet which is to be held during the first week of December this year.

The New Light of Myanmar Monday, 10 March, 2003 by Yin Yin Lay

ASEM in London, elicited strong reactions from some ASEAN leaders. In particular, Dr. Mahathir of Malaysia gave a “warning of a possible ASEAN boycott of the gathering” if the latter’s members are discriminated against.5 In the latest round of

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this saga of Myanmar in ASEM, a report from Manila indicated that ASEAN would ask for a postponement of the November 17–18, 1997 meeting of the ASEAN-EU Joint Cooperative Committee (ASEAN-EU JCC) in Bangkok if Myanmar and Laos are not allowed to participate as full members.6 Apparently, ASEAN seems to be determined to pursue its constructive engagement strategy by welcoming Myanmar warmly and to continue its helping hand for the transition period even to the extent of challenging its Western partners’ decisions in inter-group relations. The impasse appears to persist but the hope is that in the long run, as Myanmar’s membership of the regional grouping matures, there will be convergence between ASEAN and its Western partners over the Myanmar issue. ASEAN, though not as highly institutionalized as the European Union (EU), has a unique modus operandi known as the “ASEAN Way”. This has been characterized by informal interaction, quiet diplomacy, non-binding agreements, consensus-based decision making, and non-interference in each other’s internal affairs (Asiaweek, 27 June 1997). As such, it has been pointed out that the mindset of Myanmar “will not make things easier” for ASEAN’s smooth integration. More specifically, as Noordin Sopiee wrote: It is a different thing to generate consensus amongst a group of ten, many of whom have little experience in the Asean tradition of “agreeing to disagree without being disagreeable”, while working very hard to secure the highest possible common denominator.7 Nevertheless, given Myanmar’s past record in international relations and its political culture, it seems unlikely that Myanmar would be out of its depth in adapting to the ASEAN way. Myanmar’s comfort level with such operational procedures is likely to be comparable to those of the older ASEAN members. Moreover, Myanmar’s bilateral relations with all other member countries have been very good. Although, the lack of a comprehensive border demarcation between Myanmar and Thailand has given rise to some disagreement over territory along the Thaungyin/Moei River in Southeastern Myanmar, it is not expected to escalate further and being members of the same regional grouping may eventually turn out to be quite helpful in resolving this problem amicably.8 ASEAN membership will probably strengthen Myanmar’s bilateral relationship with other member countries through the diffusion of the ASEAN spirit; first among the ruling elites and then trickling down to the polities. On the other hand, there have been suggestions to change the way of engaging with Myanmar as the latter became a full-fledged member of the group. The desire to deepen and extend the “constructive engagement” concept by introducing a

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proactive element of a more comprehensive “constructive intervention” was mooted by several regional thinkers including Malaysia’s then Deputy Prime Minister Anwar Ibrahim.9 The aim seems to be to help Myanmar achieve a more rapid transition towards internationally acceptable behaviour and norms not only in international relations but also in tackling national economic and political issues. It is too early to say what will come out of such ideas but one can be assured that any change would be made in a way that would not put undue pressure on Myanmar to accommodate them and that the grouping would not in any way jeopardize the cohesion and amity amongst its members by introducing changes that are not undergirded by consensus and practicality. As for the implications for Myanmar’s domestic political issues, it has been pointed out that the country’s political temperature has been lowered by the government’s conciliatory gestures towards the opposition National League for Democracy and its leader Daw Aung San Suu Kyi particularly in 2001 and 2002. Though some critics have commented that SLORC was introducing cosmetic changes and restoring some of the rights which should have been granted in the first place, one cannot deny that these were positive signs. Although Myanmar authorities would most probably deny that such acts were the results of Myanmar’s membership in ASEAN, there are evidently some grounds to believe that the timing is not entirely coincidental. One would tend to agree with the Straits Times editorial comment that “Yangon would not have gone even to this trouble [of allowing the NLD congress to convene] if it were not responsive to Asean expectations”.10 Hence, given the situation in 2002, Myanmar’s ASEAN membership seems to imply a trend towards a more relaxed political atmosphere that would be conducive to bringing about a genuine reconciliation between the military government and its political opponents. 5.4.2 Economic Implications of Joining ASEAN11 Myanmar, like other new member countries, expects general regional trade area (RTA) advantages from joining ASEAN and AFTA. These include greater trade and investment links within the region; increased attractiveness to foreign direct investment (FDI) from outside the region, more secure access to the greater ASEAN market, improved resource allocation from specialization according to comparative advantage, economies of scale in an enlarged regional market, enhanced industrialization prospects of small and medium enterprises, spill-over effects, and infant industry learning effects with improved quality control, design, and marketing and thus improved competitiveness in the world market, among others (see Langhammer 1990).

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More specifically, at least in theory, Myanmar, as a new member of ASEAN, is likely to enjoy the following benefits: • •

•

• • •

•

As tariff rates and NTBs are reduced under the CEPT scheme, Myanmar should be able to export higher levels of agricultural goods to the ASEAN-6; Foreign investment confidence in Myanmar may be positively influenced by the relatively good reputation of the ASEAN-6 host countries (despite the recent crisis); Membership in ASEAN will support reform in Myanmar by providing assistance for — and potentially locking in — their current programmes, promoting continuation of the reform process, and providing support against some vested interests; Membership in AFTA and ASEAN can contribute towards easier access to world markets for Myanmar, and assist in trade negotiations; the ASEAN-6 can provide relevant economic development and policy advice; coordination of economic policies among the ASEAN-10, particularly in export industries such as textiles, garments, rice production, and agri-products processing, can expand both intra- and extra-ASEAN trade; and the enlargement may encourage sub-regional cooperation, particularly the Greater Mekong Subregion initiative, in which Myanmar is a member (see Gates and Mya Than 2001).

Thus, it will be easier to sell agricultural products to ASEAN-6 since tariff rates and non-tariff barriers will be reduced under the CEPT scheme. This means more exports of agricultural and mining products from new members can be expected. However, currently, some old ASEAN members still have high tariffs for agricultural products, and it is still early to reap benefits in this area. Meanwhile more imports of manufactured products and services such as construction, engineering, transportation, telecommunications, consultancy and education services from ASEAN-6 are expected in these countries (Sieh 1996). However, if this free flow of imports is not checked carefully, new members may lose out amidst the tough competition. Multinational corporations will be encouraged to invest more in the region by taking advantage of low tariffs and an enlarged market since one of the objectives of AFTA is creating a unified market to attract FDI. Moreover, ASEAN’s reputation as a good market for investment will spread over all new members including Myanmar. These factors will encourage foreign investors from inside and outside ASEAN to invest more in Myanmar.

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According to the East Asian Analytical Unit (EAAU), ASEAN membership will provide the new ASEAN members with a common regional identity and through AFTA, a framework to rapidly develop and integrate into the region (1997, p. 321). In particular, the new ASEAN members are likely to benefit from and contribute to the emergence within ASEAN of a regional division of labour. Another way of assessing the likely impact of AFTA on the future trade performance and welfare of the ASEAN-10 countries is whether the trade creation effect outweighs the trade diversion effect or vice versa. According to Viner (1950), a regional trading agreement (RTA) such as a Free Trade Area (FTA) or Customs Union could confer net benefits to its members if the trade creation effect outweighed the trade diversion effect. For ASEAN-6, which has been conducting trade overwhelmingly with countries outside the region, substantial trade diversion is expected. However, since ASEAN members have been reducing tariffs not only in intra-ASEAN trade but also in extraASEAN trade and AFTA’s objective is to increase the trade welfare of ASEAN without affecting its trade with the world, the scenario of the trade diversion effect outweighing the trade creation effect is unlikely in the long term. For example, between 1994 and 1996, all ASEAN countries had announced at least one major (and several minor) package of tariff reductions on a Most Favoured Nation (MFN) basis (ASEAN Secretariat 1996). However, the EAAU (1997, p. 80) has a different opinion. It stated that, combined with the lower tariffs accorded by CEPT, strong economic growth in ASEAN has led to an expansion of both intra-ASEAN trade and ASEAN’s trade with the rest of the world. In 1995, intra-regional trade grew by a substantial 14.5 per cent to US$133 billion but remained overshadowed by the 19.4 per cent growth with extra-regional trade to US$651 billion. This suggests that increased ASEAN integration through AFTA has been more trade-creating than trade-diverting. In the case of Myanmar, its trade with ASEAN-6 has been growing faster than its trade with the rest of the world. Between 1985 and 1999, Cambodia, Laos, Myanmar and Vietnam’s (CLMV’s) trade with ASEAN grew at the average annual rate of about 22 per cent compared with 19 per cent with the rest of the world. At the same time, the volume of trade of the new members with ASEAN grew by US$5.6 billion while their trade with the rest of the world increased by US$18.8 billion. This means, trade between the new members and ASEAN-6 is growing rapidly without affecting their trade with the world. This, in turn, means, trade creation is expected to supersede the trade diversion effect. This trend is in line with Paul Krugman’s argument that some regional free trade areas (FTA) will create more than they divert because they are in some sense

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“natural”. According to him, although trade is based on the law of comparative advantage, it will be influenced by the realities of geography. Because near neighbours tend to trade a lot with each other anyway, an FTA between them will divert very little trade (EAAU 1997, p. 72). As far as comparative advantage is concerned, there would be an improvement in the competitiveness of Myanmar’s export products due to the CEPT scheme. According to Pham and Forbes (1996, p. 16), the CEPT scheme would significantly increase the new members’ competitiveness in three main ways: first, by lowering import tariffs, goods and materials will be available at lower prices and hence replace inefficient domestic production. Resources would be freed up to be more profitably employed elsewhere. This also requires the government focusing on its limited resources into labour intensive, export-oriented manufacturing projects. Second, since AFTA will, with its enlarged market, create an opportunity for the exploitation of economies of scale, CLMV firms will be allowed to invest in research and product innovation, or to specialize in production. Finally, as a result of free trade, competitiveness of CLMV firms would be gradually increased because they would be given the opportunity to learn to compete with ASEAN firms in the regional market before entering the world market. Similarly, according to Nattapong (2001), the enlargement of AFTA should have a positive effect on trade creation because of the expanded market size. However, he found that because of low endowment diversification in the ASEAN economies, trading with non-member countries would remain important for the ASEAN-10. He further argued that trade diversion should not be a major concern in the ASEAN enlargement because most tariff rates imposed on the products in the Inclusion Lists of the new members are less than 5 per cent and the impact of tariff reduction in the first stage is small. However, some question such a positive projection. They argue that Myanmar’s inefficient state-owned enterprises cannot compete with the ASEAN-6 in manufacturing. Under AFTA, they will not be able to protect infant industries which are mainly owned by the state. Moreover, their small-scale private enterprises cannot fill this gap, as they face shortages of capital, raw material, power supply, spare parts and entrepreneurial skills. From this perspective, there will be a long lag before Myanmar firms can begin to compete with ASEAN firms in most areas of manufacturing and higher-value-added goods. Some pessimists logically conclude that Myanmar may even become a “new periphery” of an ASEAN/AFTA centre; it will become again, as it was in colonial days, a supplier of raw material to the more industrialized ASEAN-6 economies. Though this is counterfactual to what has happened in the region during the past three decades when such economies have

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moved up the technological and value-added ladder, such fears are fuelling discontent among some industrial and state interests in the new member countries. However, the outcome of Myanmar’s competition greatly depends on how the government’s policies and economy responds to the new challenges. If the country accelerates reform, improves the investment and market environment, creates opportunities for entrepreneurs to renovate their firms and advance their competitive positions, Myanmar will be able to follow in the steps of — or even leapfrog — their regional competitors. If not, the country may likely lag behind. On the other hand, there are costs for the new members to pay for joining AFTA. First, the country’s capacity to determine its own macroeconomic, trade and investment policies will be reduced substantially as reform in the economy accelerates to meet AFTA requirements. There may also be some short-term adjustment costs in meeting AFTA obligations. The potential impact of AFTA on government revenues will cause some concern in Myanmar. For example, in the newer member states, customs duties form a significant share in the state budget; in Cambodia it is about 70 per cent, in Laos about 31 per cent, in Myanmar about 16 per cent, and in Vietnam about 19 per cent. Although Myanmar is least affected by the accession to AFTA, 16 per cent of the state budget is quite a big sum for one of the least developed countries. The other new member countries are careful in designing their tariff reductions so that they will not seriously affect the government revenues. However, they are already developing other sources of revenues. Fortunately, Myanmar’s dual exchange rate system may work in the government’s favour by bringing in more revenue from the tariff reduction process, just as in 1996 when the government changed the assessment of customs duties from the official rate of 6 kyat per US dollar to a more realistic market-based effective rate of about 100 kyat per dollar thereby raising revenues (in kyats per imported dollar terms) by about 16 times, while at the same time reducing the duty rate by 10 times. The net result was more revenue for the same quantum of imports (in dollar terms) in spite of tariff reductions. In other words, as one economist said “Myanmar is already on the fast track without having any detrimental effect to its revenue”. However, the dual exchange rate, on the other hand, may affect the balance of payments. Another cost will be the inability to protect infant and state-owned industries. Moreover, there may be industrial adjustment and possible contraction creating worker dislocation in economies where unemployment (and underemployment) is already high and little or no social welfare exists. Consequently, they have little choice but to restructure tariffs, the overall tax base, and government expenditures

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so as to meet AFTA obligations, budget demands, and requirements to maintain macroeconomic stability (Gates and Mya Than 2001). Nattapong (2001) also warned that there would be potential adjustment problems for the new members as a result of their integration into AFTA. These include negative fiscal effects (rising budget deficits owing to reduced tariff revenues); rising current account deficits; and increasing foreign competition due to lower tariffs and protection measures. In fact, Myanmar already has a budget deficit problem, not from the impact of joining ASEAN, but from weaknesses in its revenue collection system. Trade between Myanmar and ASEAN-6 and FDI flows from ASEAN-6 to CLMV even declined after the country joining ASEAN (Table 5.8). This is most probably because of the impact of the regional economic crisis. Hence it may be misleading if we conclude by looking at Table 5.8 that trade and FDI relations between the new and old members deteriorated after the enlargement of ASEAN — as against theories and expectations mentioned above. CLMV’s total trade with ASEAN-6 declined from US$7,789 million in 1996 to US$6,994 million in 1999; however, it started to pick up in the year 2000 to US$10,336 due to a significant increase in trade with Vietnam. At the same time, total FDI flows from ASEAN-6 to CLMV decreased from US$3,264 in 1996 to US$1,392 in 1999. Myanmar’s trade with ASEAN-6 recovered from US$1,117 in 1999 to US$1,160 in 2000.12 Based on Tables 5.2 and 5.3, the average annual growth rate of Myanmar’s total trade with ASEAN between 1991/92 and 2000/01 was 11.7 per cent whereas that of Myanmar’s trade with the world was 11.2 per cent. This indicates that Myanmar’s trade with ASEAN is growing faster than its trade with the rest of the world. Similarly, according to another study, the average annual growth rate of Myanmar’s trade with ASEAN was 23.3 per cent between 1985 (before joining ASEAN) and 1999 (after joining ASEAN) whereas that of Myanmar’s trade with the rest of the world was 22.0 per cent (Mya Than 2001b, p. 9). ASEAN’s FDI inflow slowed down since the regional financial crisis. Its total FDI inflow to CLMV countries declined from US$3,219 million in 1996 to US$2,475 million in 2000. For Myanmar, FDI from ASEAN increased from US$310 million in 1996 to US$240 million in 2000 (Table 5.8). As far as overall accumulated FDI is concerned, the flow from ASEAN to Myanmar plays a very significant role. The accumulated FDI from ASEAN 6 to Myanmar as of March 31, 2002, accounted for 43 per cent in Myanmar (Table 5.5). There also exist indirect effects of FDI flows from ASEAN-6 to new members including Myanmar. According to Freeman (2001), indirect factors by which ASEAN enlargement may augment investment inflows into the CLMV countries include

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115

7,789

Total 7,699

5,048

1,675

372

604

1999

7,010

4,795

1,184

468

563

2000

6,994

4,746

1,117

523

608

2001

10,336

8,076

1,160

–

1,100

1996

3,219

2,455

310

160

294

1997

2,482

2,800

387

91

204

1998

2,882

2,300

415

46

121

1999

2,520

2,000

315

79

126

2000

(FDI Flow from ASEAN-6)

Note: Informal border trade is not included. Source: ADB, Development Outlook 2003, IMF, Yearbook 2001, Washington and Direction of Trade Statistics, Manila.

4,559

Vietnam

425

1,292

1998

1,513

1997

Myanmar

Laos

Cambodia

1996

(Total Trade with ASEAN-6)

TABLE 5.8 Trade and FDI Flows between CLMV and ASEAN-6 (US$ million)

2,475

2,100

240

72

153

2001

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improved regional relations and understanding; improved information flow; “trickle down” business initiatives, “demonstration effects”, an ASEAN “conduit” role between the new members and the international community; the pull of AFTA; and the establishment of the ASEAN Investment Area (AIA). However, at the same time, Freeman (2001) warned that there are factors that may prevent the integration from augmenting FDI inflows into the new member countries. First, the domestic market environments of the new countries have not improved sufficiently to attract large investments. While ASEAN membership may encourage positive domestic institutional changes, the countries themselves must make the improvements. Second, the toll of the current economic crisis may prevent the ASEAN-6 countries raising their investment in the new countries for a number of years, despite continuing interest in these markets (Gates and Mya Than 2001, p. 20). There are also social costs which can accompany FDI such as disruption of socio-cultural patterns, corruption, and so on. More specifically, we will assess the impact of joining ASEAN/AFTA in terms of international trade, government revenues, FDI and Myanmar’s comparative advantage.

Myanmar’s trade cooperation with ASEAN Before Myanmar joined ASEAN, Myanmar’s exports to ASEAN comprised about 40–45 per cent of its exports to the world, but it fell to 25–28 per cent after it became a member of ASEAN. On the other hand, Myanmar’s imports from ASEAN before it joined the regional grouping was about 35–40 per cent of its imports from the world, however, after 1997 and up to now the country’s imports from ASEAN grew to 40–50 per cent of its imports from the world. This was possible mainly because Myanmar joined ASEAN when the regional crisis started. As discussed previously, Myanmar’s exports grew from 135.7 million kyats in 1991 to 2,991 million kyats in 2000/2001 at an average annual growth rate of 9.2 per cent. Most of these export items are agricultural products which are outside the CEPT scheme and they appear in either general or temporary exclusion lists. Therefore, the impact of tariff reduction (of the CEPT scheme) on these products is unlikely to be significant. That is, revenues from exports to ASEAN will not be significantly affected. ASEAN is also a very significant import market for Myanmar. Myanmar’s imports increased from 1,902 million to 6,874 million kyats at an average annual growth rate of 15.4 per cent during the same period. At the same time its exports to and imports from the world were growing at average annual growth rates of 9.0 per cent and 14.4 per cent respectively. Since most of the import

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items are capital goods (about 30 per cent of the total) and consumer goods (about 40 per cent of the total) and most of those tariffs have been reduced to 20 per cent or less, the impact of CEPT would not be very significant in terms of a reduction in tariffs. On the contrary, it could boost imports and may reduce smuggling of consumer goods. Here, it could be concluded that Myanmar’s trade with ASEAN is growing faster than its trade with the world and at the same time Myanmar’s volume of trade with ASEAN grew by 6,609 million kyats whereas its trade with the world increased by 7,696 million kyats. This, as in the case of the new member countries, indicates that the trade creation effect supersedes the trade diversion effect in Myanmar’s case. It is important to note that informal border trade is not included in these figures. However, Table 5.4 shows that the trade balance is in favour of other ASEAN countries, mainly the ASEAN-6. This suggests that there is a possibility that Myanmar’s balance of payments may be affected because even with the various non-tariff barriers, the country’s balance of trade has been in average deficit of about 3.2 billion kyats between 1990/91 and 2000/01 (equivalent to about US$500 million in official rate) and given the present situation, its exports cannot be expanded or diversified significantly. Therefore, with the removal of tariff and non-tariff barriers, the balance of payments may be in the red. There will also be the indirect effect on FDI of joining AFTA. Since the promulgation of the Foreign Investment Law in 1998, FDI has been growing fast and it reached the level of more than US$5 billion by the end of 1996 and US$7.4 billion in 2000/01. ASEAN’s share in Myanmar’s total FDI (approved) is significant, accounting for more than 43 per cent, with Singapore being the largest investor among ASEAN nations (Table 5.5). Since one of the main objectives of AFTA is establishing a unified market to attract foreign investment, multinational corporations will be encouraged to invest in ASEAN nations by taking advantage of low tariffs and an enlarged market. Moreover, ASEAN’s reputation as a good place for investment will spread over all its new members. These factors, along with the spillover effect, will encourage foreign investors from inside and outside ASEAN to invest more in Myanmar. The most significant impact of AFTA will be to enhance the ability of Myanmar to exploit its comparative advantage of abundant natural resources and cheap but literate labour, English-speaking urban populace, and its strategic location between India and China. All in all, the economic potential of Myanmar joining the enlarged ASEAN can outweigh its negative impact since AFTA is not a zero–sum game.

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5.5 SUMMARY Myanmar, along with the Lao PDR, was admitted to ASEAN on 23 July 1997 despite strong protests from the West. Myanmar joined ASEAN because of the forces of globalization and regionalism and because it needed to identify with a group that would treat it sympathetically. Moreover, through ASEAN, the country now could meet any group wishing to pose a threat to her. However, critics consider that Myanmar wanted to join the regional association to overcome the sanctions imposed by the West and because it needed development assistance and economic cooperation. Since Myanmar became a member of ASEAN, it has participated in almost all political, security, economic and functional cooperation activities at various levels as required by the organization. These include summit meetings, ministerial meetings, senior officials meetings and various working group level meetings. As part of AFTA, the country started its tariff reduction process in 2000. As a founding member of GATT and WTO, this process of tariff reduction is easier for Myanmar than for the other new members of ASEAN. More importantly, Myanmar joins ARF meetings where it has opportunities to counter allegation of human rights violations, drug trafficking, and forced labour. Hence Myanmar’s ASEAN membership seems to imply a trend towards a more relaxed political atmosphere that would be conducive to bringing about a genuine reconciliation between the military junta and its political opponents inside and outside the country. As far as the economic impact of Myanmar’s membership in ASEAN is concerned, the economic potential of the country can outweigh the negative impact. However, as mentioned previously, it seems that the economic benefits of membership are yet to be achieved. How can Myanmar gain economically from joining ASEAN? There are certain conditions including the existence of industries that have comparative advantage such as the establishment of processing industries for agricultural products, improvement in production and export performance, development of infrastructure fast enough to gain from industrialization, a strong and uncorrupted civil service, efficient state economic enterprises, skilled human resources, and the creation of a conducive investment environment by introducing more transparent laws and regulations to attract FDI. Myanmar’s trade with ASEAN has been growing since it opened up its economy (Tables 5.1 and 5.2). ASEAN is one of the main export markets for Myanmar, comprising about 25.3 per cent of its total exports to the world between 1977/78 and 2000/01 (Table 5.2) and it grew at the average annual rate of 19.4 per cent during the

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same period. Most of these export items are agricultural products which are outside the CEPT scheme and they appear in either general or temporary exclusion lists. Therefore, the impact of reduction of tariffs on these products is unlikely to be significant. That is, revenues from exports to ASEAN will not be significantly affected. Also, ASEAN is a significant import market for Myanmar. Myanmar’s imports from ASEAN account for more than 51 per cent of its total imports between 1977/78 and 2000/2001, however there was a decline in imports from ASEAN due to the regional crisis. Since most import items are capital goods (about 30 per cent of the total) and consumer goods (about 40 per cent of the total) and most of whose tariffs have been reduced to 30 per cent or less (see EIU 2003, p. 40), the impact of CEPT would not be very significant in terms of reduction in tariffs. On the contrary, it could boost imports and may reduce the smuggling of consumer goods. However, Myanmar’s balance of payments may be affected with the removal of tariff and various non-tariff barriers. This is because, even with the various nontariff barriers, the country’s trade deficits are quite large and its exports cannot be expanded or diversified significantly. As far as FDI prospects for Myanmar are concerned, there will also be an indirect positive effect from joining AFTA since multinational corporations will be attracted due to lower tariffs, minimum non-tariff barriers and the enlarged market. ASEAN’s reputation as a good place for investment and the spillover effect from the developed ASEAN members will encourage foreign investors to invest more in Myanmar. As mentioned earlier, the most significant impact of AFTA will be to enhance the ability of Myanmar to exploit its comparative advantage of abundant natural and human resources, and its geographically strategic location. In sum, Myanmar should benefit more by joining the enlarged ASEAN at least in the short- and medium-term. For longer term benefit, the country needs to introduce more political and economic reforms.

NOTES 1

2

3 4

05 Myanmar Ch 5

For details please refer to Mya Than, Myanmar’s External Trade: An Overview in the Southeast Asian Context (1992). This section is taken mostly from “ASEAN Enlargement and Myanmar” by Mya Than and Tin Maung Maung Than in ASEAN Enlargement: Impacts and Implications, edited by Mya Than and Carolyn Gates (2001). “Facts about ASEAN-6”, in New Light of Myanmar, 7 August 1997, p. 7. James Guyot’s comment on the Voice of America, 7 July 1997, in a Burmanet posting of 8 July 1997.

119

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120 5 6

7

8

9 10 11

12

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“It’s Our Party”, Far Eastern Economic Review, 25 September 1997. “ASEAN Lays Down Terms for EU”, Straits Times, 24 October, 1997, p. 14. See also the Postscript on p. 127. See Noordin Sopiee, “Fulfilling Dreams of Regional Unity”, New Straits Times (Malaysia), 6 June 1997. However, armed clashes across the border broke out in early 2001, soon after the annual US-Thai military exercise was conducted along the Thai-Myanmar border. See “The Word is ‘Constructive Intervention’, Straits Times (Singapore), 15 July 1997. See “Signs of Thaw in Myanmar”, Straits Times (Singapore), 13 October 1997. This section is heavily drawn from Gates and Mya Than (2001) and Mya Than and Tin Maung Maung Than (2001). In 2003/04, Myanmar’s trade with ASEAN 6 increased significantly to US$2,304 million.

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MYANMAR IN ASEAN 121

6 Conclusion: Issues and Challenges

This chapter will be divided into two parts; issues and challenges relating to ASEAN and those relating to Myanmar’s accession to ASEAN. 6.1 ISSUES AND CHALLENGES RELATING TO ASEAN As mentioned in previous sections, ASEAN has had more success in political than in economic cooperation while functional cooperation has become the weakest link. There has been relative peace and stability in the region since 1967 when ASEAN was established. Its credibility is firmly established in international forums. Its economic cooperation in terms of intra-ASEAN total trade as a percentage of its total trade with the world increased from 17 per cent in 1990 to 22.3 per cent in 1996 and 23.2 in 2000, but it fell to 21.2 per cent in 2001 (Table 7). As far as ASEAN’s inward FDI is concerned, in the period between 1992 and 1997, it more than doubled — from US$12 to US$26 billion. However, compared with similar free trade areas such as EU, NAFTA and MERCOSUR, ASEAN lags far behind in both political and economic cooperation (Table 2.4). It is also important to note that integration has been slow as it took ASEAN 25 years to agree to establish a free trade area. Extra-ASEAN trade has been more successful than intra-ASEAN trade since the APEC countries continue to be the most significant trading partners of ASEAN. Externally, “(b)uilding on its economic and political achievements, ASEAN had considerable success in engaging major powers through sub-groupings as the Asia Pacific Cooperation (APEC), the ASEAN Regional Forum (ARF) and the Asia-Europe Meeting (ASEM)” (Tay 1999, p. 5). Many analysts attributed this success and that of ASEAN enlargement to the pursuit of an “ASEAN Way”. The ASEAN Way has emphasized, among other things, “the norm of non-interference in

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other states’ affairs, preferred consensus and non-binding plans to treaties and legalistic rules, and relied on national institutions and actions, rather than creating a strong central bureaucracy” (ibid., p. 5). Institutionally, because of this ASEAN Way, especially the norm of noninterference and aversion to a strong bureaucracy, ASEAN, in fact, was more an association than an institution. It was only after 1992 with the Singapore Declaration and the establishment of AFTA that ASEAN introduced greater coordination and institutionalization. However, it still remains a weak institution compared with the EU. Some critics suggest that one of the reasons why ASEAN/AFTA is not as successful as NAFTA or the EU is that, with the exception of Singapore, the ASEAN members are developing and least developed countries. In other words, the more members from developing countries in the regional grouping, the less chance there is for success. Many scholars have criticized the gradualism (or slow pace) of economic cooperation in ASEAN. One important reason for the slowness was the ASEAN Way itself, which emphasizes consensus, and thus the grouping was able to move forward only when all member countries were ready. Another reason is the impact of the regional economic crisis in 1997. Regimes changed, social and political unrest took place, unemployment and poverty increased, exports fell, and investor confidence declined. Even though the regional crisis has ended for most ASEAN member countries, ASEAN cooperation in politics, security, economics, and the environment may depend to some extent on political and economic developments in Indonesia, ASEAN’s largest country. In addition, there are still vast differences in development levels, ideologies, legal systems, and historical baggage between the newer and older members of ASEAN. Moreover, the relationship between ASEAN and the EU has been strained mainly because of the inclusion of Myanmar. There are also successes and weaknesses in security matters. The reasons for ASEAN’s success include a determination to maintain peace and good neighbourliness between member states; and pragmatic leaderships which pursued economic development and relatively open economies. One other factor must be mentioned: the behaviour of the largest member, Indonesia. Indonesia is clearly the biggest country in ASEAN but it has been very careful not to give the impression that it wants to dominate the organization. That would destroy ASEAN. Rather, decisions are by consensus, and Indonesia behaves like a gentle giant, always listened to because of its importance, but never acting like an overlord.

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ASEAN’s main political achievement is that it has maintained peace and stability in interstate relations among its members. Second, its value also lies in the fact that it enables members to deal with outside countries, especially the major powers, as a collective body, in the process giving them considerably more weight than if they were to act individually. Third, ASEAN has sought, though with limited success, to manage the role of the outside powers in Southeast Asia, and with the establishment of the ASEAN Regional Forum, in East Asia as a whole. On the other hand, the expansion to ten members with such differing political outlooks could render unity of action on certain matters more difficult. This could affect ASEAN’s ability to deal collectively with other powers.

What are ASEAN’s prospects? In the economic arena, there is cause for optimism. First, at the Singapore meeting in September 1999, AFTA accelerated its tariff cutting measures to become a zero tariff area in 2015 (it has been moved forward again to 2010) for old members and 2018 for new members. ASEAN Vision 2020 reinforced this acceleration. Second, policy-makers in ASEAN realize that unless ASEAN moves rapidly to create a single market, it will be increasingly less attractive to foreign investors than the EU and NAFTA. Third, complementarity, which is the main driving force for intraregional trade, has increased significantly among ASEAN member countries, especially since resource rich countries such as Vietnam, Laos, Myanmar and Cambodia joined the grouping (Mya Than and Singh 1999, p. 183). Fourth, “the process of liberalization and deregulation of their economies over recent years has led to a consensus in ASEAN that while the reduction in tariff barriers could lead to short-term dislocations, long-term efficiency gains are in their favour” (Chia 1997, p. 19). More importantly, there is a sense that the worst of the crisis is almost over. Also, the Fourth ASEAN Summit in Hanoi approved a framework agreement including measures to establish an ASEAN Investment Area (AIA) to further enhance the region’s competitiveness and conduciveness for attracting higher and sustainable levels of FDI inflows. Even before AIA was approved, ASEAN had been implementing various investment cooperation and facilitation, and promoting awareness of its programmes. Under AIA, each member country opens itself up to investment from other ASEAN countries and extends national treatment to these investments. Furthermore, teams of ASEAN members were sent to Japan, United States and the EU to promote investment jointly.

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The political and security prospects can also be cautiously described as optimistic. Interstate peace between members will be maintained, but ASEAN countries have to work on this continually because of the many disputes and the incomplete socialization of some of the newer members in the practice of the ASEAN Way of dispute settlement. However, in the past few years, ASEAN’s credibility has been questioned because of its perceived inability to deal with regional economic, environmental and human rights issues, though such criticism is not entirely fair. ASEAN is aware of the problems and is seeking to overcome them through the implementation of the Hanoi Action Plan, and by developing closer links with China, Japan and Korea in the ASEAN Plus Three process. It is expected that ASEAN will continue to play a pivotal role in ARF. However its capacity to influence the policies of the major powers will remain limited. If US-China rivalry intensifies, ASEAN will need to act more in unison to safeguard its interests. However the expansion of membership to all ten countries of Southeast Asia has introduced greater political diversity to the association, leading to some analysts questioning whether ASEAN will be able to do so. To sum up, ASEAN will remain a political force because it is the only organization which gives Southeast Asian countries a collective voice and some clout in dealing with outside powers. However, it is still in the process of becoming a “fully qualified” regional organization in every aspect. In addition, as mentioned previously, functional cooperation is the weakest link among ASEAN member countries since it is still not considered a priority. 6.2

ISSUES AND CHALLENGES RELATING TO MYANMAR’S ACCESSION TO ASEAN It was unfortunate for Myanmar and Laos that they joined ASEAN during a regional economic crisis. Although there was no direct impact, Myanmar has suffered and is still recovering from the impact of the crisis, as most of the ASEAN member countries as a group happen to be one of Myanmar’s largest trading partners as well as foreign investors. Politically, Myanmar has gained more after joining the regional organization. There are several issues to address in terms of the possible consequence of Myanmar joining ASEAN/AFTA. The first is the fear that Myanmar will once again become a mere supplier of raw materials as it was in the colonial period. Such an effect is unlikely: due to rising wages and labour shortages most ASEAN countries are moving to more capital-intensive manufacturing; Singapore is moving towards

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skill-intensive high-technology manufacturing. Myanmar is expected to fill the vacuum left by advanced ASEAN countries. In addition, there are many projects underway or planned to enhance ASEAN economic cooperation which should benefit Myanmar. Another issue is that Myanmar’s inefficient state-owned enterprises will have to compete with ASEAN in the manufacturing sector. Currently, its small-scale enterprises in the private sector are facing a shortage of raw materials, power supply, capital and spare parts. Only with further liberalization of finance, banking, trade and agriculture can this issue of tough competition be overcome. Even in areas where competition between Myanmar and ASEAN exist, there are opportunities for complementarity and cooperation if they agree on free trade among themselves. On the other hand, Myanmar’s inclusion in ASEAN has itself occasionally been an obstacle to economic and political cooperation with the EU. The EU postponed ministerial meetings with ASEAN (ASEM) and many development projects are delayed mainly due to EU sanctions against Myanmar. The EU has also scrapped GSP benefits on Myanmar’s agricultural and industrial exports to EU and denies entry visas to senior government officials from Myanmar. However, in his address at the opening ceremony for the ASEAN Economic Ministers Retreat in Yangon on 1 May 2000, the Secretary-1 of the ruling SPDC, Lt-General Khin Nyunt said, “Myanmar will never become an obstacle or hindrance to ASEAN” (The New Light of Myanmar, 2 May 2000). In all, Myanmar’s membership in ASEAN/AFTA will have a positive impact on its economic development in the short- to medium-term. After all, the economic potential of ASEAN as a whole can be greater than the sum of its individual parts and more importantly, AFTA is not a zero–sum game. However in the longer term, unless the government of Myanmar is committed to more economic reforms and will “carefully ascertain what is in her best interests in order to take advantage of flexibilities” accorded under AFTA regulations, the country will lose out in this competitive world. In the political sphere, one hopes that, as stated by Myanmar’s former Foreign Minister U Ohn Gyaw in his address at the admission ceremony in Subang Jaya on 23 July 1997, Myanmar would be able to keep its “own house in order” with the support of ASEAN friends and “contribute towards order for the community” as well. At the end of the day, the positive effect of Myanmar joining ASEAN will depend on the country’s further economic liberalization as well as an improved political climate.

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POSTSCRIPT 127

Postscript

Two significant events related to Myanmar’s accession to ASEAN occurred in late 2003 and early 2004. In June 2003, unexpectedly, the 36th ASEAN Ministerial Meeting issued a joint statement in Phnom Penh, demanding the release of the opposition leader of Myanmar. Many ASEAN watchers consider this unprecedented for the regional organization which, for the first time in more than three and a half decades, was talking about other than non-interference in the domestic affairs of a member country. On the other hand, some analysts do not consider this as interference since the Myanmar government had given consent to the statement. However, three months later, the ASEAN Summit at Bali changed the earlier joint statement of the ASEAN foreign ministers by hailing Myanmar’s “Road Map to Democracy” on 7 October 2003 (The Nation, 8 October 2003). This was also unprecedented for ASEAN. Almost three-quarters of a year later, another significant event occurred. As mentioned earlier in this book (p. 42), Myanmar has again become a bone of contention for the ASEAN-Europe Meeting (ASEM) and the EU refused to attend the biennial summit in October 2004, in Hanoi, if Myanmar participated as a member of the Asian team (which would allow Myanmar to attain membership of ASEM). The EU stated that it would not attend because there had been no political reform in Myanmar. The EU even cancelled two earlier ministerial meetings, which were supposed to prepare the economic and commercial substance of the summit in Hanoi. In response to the EU’s statement regarding Myanmar’s participation, the ten Asian nations which belong to the eight-year-old ASEM insisted that Myanmar, Cambodia and Laos should be allowed to join the club since they were new members of ASEAN, if the EU brought its own ten new members to the meeting. The Asian team criticized the EU’s double standards. According to Reuters (19 July 2004), in April 2004 the EU demanded the release of the opposition leader and the participation of the largest opposition party in the ongoing National Convention (where principles for drafting the new constitution are under discussion) as conditions for allowing Myanmar to participate in the

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POSTSCRIPT

2004 ASEAN Summit. The Asian members of ASEM took offence at the EU’s attempts to set conditions for Myanmar’s participation in ASEM. Most of the ten new EU members are from Eastern Europe, and acceded to the Union only on 1 May 2004. Currently, the Asian members of ASEM include seven ASEAN nations (Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam) and three East Asian nations — China, South Korea and Japan. Vietnam is a member of ASEM because it was already a member of ASEAN when ASEM was established in 1996. In fact, the EU has sanctions on Myanmar by maintaining an arms embargo and targeting high officials of the military regime through an assets freeze and visa ban. However, as this book goes to press, both parties were seeking for an acceptable compromise since the meeting is crucial for cooperation between the two continents on political, security and economic issues.

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Appendix Basic ASEAN Documents

APPENDIX I THE ASEAN DECLARATION (BANGKOK DECLARATION) 8 August 1967 The Presidium Minister for Political Affairs/Minister for Foreign Affairs of Indonesia, the Deputy Prime Minister of Malaysia, the Secretary of Foreign Affairs of the Philippines, the Minister for Foreign Affairs of Singapore and the Minister of Foreign Affairs of Thailand. MINDFUL of the Existence of mutual interests and common problems among countries of South-east Asia and convinced of the need to strengthen further the existing bonds of regional solidarity and cooperation; DESIRING to establish a firm foundation for common action to promote regional cooperation in South-east Asia in the spirit of equality and partnership and thereby contribute towards peace, progress and prosperity in the region; CONSCIOUS that in an increasingly interdependent world, the cherished ideals of peace, freedom, social justice and economic well-being are best attained by fostering good understanding, good neighbourliness and meaningful cooperation among the countries of the region already bound together by ties of history and culture; CONSIDERING that the countries of South-East Asia share a primary responsibility for strengthening the economic and social stability of the region and ensuring their peaceful and progressive national development, and that they are determined to ensure their stability and security from external interference in any form or manifestation in order to preserve their national identities in accordance with the ideals and aspirations of their peoples;

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AFFIRMING that all foreign bases are temporary and remain only with the expressed concurrence of the countries concerned and are not intended to be used directly or indirectly to subvert the national independence and freedom of States in the area or prejudice the orderly processes of their national development; DO HEREBY DECLARE: FIRST, the establishment of an Association for Regional Cooperation among the countries of Southeast Asia to be known as the Association of South-East Asian Nations (ASEAN). SECOND, that the aims and purposes of the Association shall be: 1. To accelerate the economic growth, social progress and cultural development in the region through joint endeavours in the spirit of equality and partnership in order to strengthen the foundation for a prosperous and peaceful community of Southeast Asian Nations; 2. To promote regional peace and stability through abiding respect for justice and the rule of law in the relationship among countries of the region and adherence to the principles of the United Nations Charter; 3. To promote active collaboration and mutual assistance on matters of common interest in the economic, social, cultural, technical scientific and administrative fields; 4. To provide assistance to each other in the form of training and research facilities in the educational, professional, technical and administrative spheres; 5. To collaborate more effectively for the greater utilization of their agriculture and industries, the expansion of their trade, including the study of the problems of international commodity trade, the improvement of their transportation and communication facilities and the raising of the living standards of their peoples; 6. To promote Southeast Asian studies; 7. To maintain close and beneficial cooperation with existing international and regional organizations with similar aims and purposes, and explore all venues for even closer cooperation among themselves. THIRD, that to carry out these aims and purposes, the following machinery shall be established: a) Annual Meeting of Foreign Ministers, which shall be by rotation and referred to as ASEAN Ministerial Meeting. Special Meetings of Foreign Ministers may be convened as required;

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b)

c) d)

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A standing Committee, under the chairmanship of the Foreign Minister of the host country or his representative and having as its members the accredited Ambassadors of the other member countries, to carry out the work of the Association in between Meetings of Foreign Ministers; Ad-Hoc Committees and Permanent Committees of specialists and officials on specific subjects; A National Secretariat in each member country to carry out the work of the Association on behalf of that country and to service the Annual or Special Meetings of Foreign Ministers, the Standing Committee as may hereafter be established.

FOURTH, that the Association is open for participation to all States in the SouthEast Asian Region subscribing to the aforementioned aims, principles and purposes. FIFTH, that the Association represents that collective will of the nations of SouthEast Asia to bind themselves together in friendship and cooperation and, through joint efforts and sacrifices, secure for their peoples and for posterity the blessings of peace, freedom and prosperity. DONE in Bangkok on the Eighth Day of August in the Year One Thousand Nine Hundred and Sixty-Seven. For Indonesia: (sgd.) ADAM MALIK Presidium Minister of Political Affairs/ Minister for Foreign Affairs. For Malaysia: (sgd.) TUN ABDUL RAZAK Deputy Prime Minister, Minister of Defence and Minister of National Development. For The Philippines: (sgd.) NARCISO RAMOS Secretary of Foreign Affairs. For Singapore: (sgd.) S. RAJARATNAM Minister of Foreign Affairs.

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For Thailand: (sgd.) THANAT KHOMAN Minister of Foreign Affairs. On behalf of the Republic of Indonesia: ADAM MALIK Minister for Foreign Affairs On behalf of Malaysia: TUN ABDUL RAZAK BIN HUSSEIN Prime Minister and Minister for Foreign Affairs On behalf of the Republic of the Philippines: CARLOS P. ROMANO Secretary of Foreign Affairs On behalf of the Republic of Singapore: S. RAJARATNAM Minister for Foreign Affairs On behalf of the Kingdom of Thailand: THANAT KHOMAN Special Envoy of the National Executive Council

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APPENDIX II 141

APPENDIX II ZONE OF PEACE, FREEDOM AND NEUTRALITY DECLARATION (KUALA LUMPUR DECLARATION) 27 November 1971 We the Foreign Ministers of Indonesia, Malaysia, the Philippines, Singapore and the Special Envoy of the National Executive Council of Thailand: FIRMLY believing in the merits of regional cooperation which has drawn our countries to cooperate together in the economic, social and cultural fields in the Association of South-East Asian Nations; DESIROUS of bringing about a relaxation of international tension and of achieving a lasting peace in South East Asia; INSPIRED by the worthy aims and objectives of the United Nations, in particular by the principles of respect for the sovereignty and territorial integrity of all states, absent on from threat or use of force, peaceful settlements of international disputes, equal rights and self-determination and non-interference in the affairs of States; BELIEVING in the continuing validity of the “Declaration of the Promotion of World Peace and Cooperation” of the Bandung Conference of 1955 which, among others, enunciates the principles by which States may coexist peacefully; RECOGNIZING the right of every state, large or small, to lead its national existence free from outside interference in its internal affairs as this interference will adversely affect its freedom, independence and integrity; DEDICATED to the maintenance of peace, freedom and independence unimpaired; BELIEVING in the need to meet present challenges and new developments by cooperation with all peace and freedom loving nations, both within and outside the region, in the furtherance of world peace, stability and harmony; COGNIZANT of the significant trend toward establishing nuclear-free zones, as in the “Treaty for Prohibition of Nuclear Weapons in Latin America” and the Lusaka Declaration proclaiming Africa a nuclear-free zone, for the purpose of promoting

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world peace and security by reducing the areas of international conflicts and tensions; REITERATING our commitment to the principle in the Bangkok Declaration which established ASEAN in 1967, “that the countries of South-East Asia share a primary responsibility for strengthening the economic and social stability of the region and ensuring their peaceful and progressive national development, and that they are determined to ensure their stability and security from external interference in amy form or manifestation in order to preserve their national identities in accordance with the ideals and aspirations of their peoples”; AGREEING that the neutralisation of Southeast Asia is a desirable objective and that we should explore ways and means of bringing about its realisation; and CONVINCED that the time is propitious for joint action to give effective expression to the deeply felt desire of the peoples of Southeast Asia to ensure the conditions of peace and stability indispensable to their independence and their economic and social well-being, DO HEREBY STATE: 1)

2)

That Indonesia, Malaysia, the Philippines, Singapore and Thailand are determined to exert initially necessary efforts to secure the recognition of, and respect for, South-East Asia as a Zone of Peace, Freedom and Neutrality, free from any form or manner of interference of outside Powers; that South-East Asian countries should make concerted efforts to broaden the areas of cooperation which would contribute to their strength, solidarity and closer relationship.

Done at Kuala Lumpur on Saturday, the 27th of November, 1971. On behalf of the Republic of Indonesia: ADAM MALIK Minister for Foreign Affairs

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On behalf of Malaysia: TUN ABDUL RAZAK BIN HUSSEIN Prime Minister and Minister for Foreign Affairs On behalf of the Republic of the Philippines: CARLOS P. ROMANO Secretary of Foreign Affairs On behalf of the Republic of Singapore: S. RAJARATNAM Minister for Foreign Affairs On behalf of the Kingdom of Thailand: THANAT KHOMAN Special Envoy of the National Executive Council

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APPENDIX III TREATY OF AMITY AND COOPERATION IN SOUTHEAST ASIA Indonesia, 24 February 1976 The High Contracting Parties: CONSCIOUS of the existing ties of history, geography and culture, which have bound their peoples together; ANXIOUS to promote regional peace and stability through abiding respect for justice and the rule or law and enhancing regional resilience in their relations; DESIRING to enhance peace, friendship and mutual cooperation on matters affecting Southeast Asia consistent with the spirit and principles of the Charter of the United Nations, the Ten Principles adopted by the Asian-African Conference in Bandung on 25 April 1955, the Declaration of the Association of Southeast Asian Nations signed in Bangkok on 8 August 1967, and the Declaration signed in Kuala Lumpur on 27 November 1971; CONVINCED that the settlement of differences or disputes between their countries should be regulated by rational, effective and sufficiently flexible procedures, avoiding negative attitudes which might endanger or hinder cooperation; BELIEVING in the need for cooperation with all peace-loving nations, both within and outside Southeast Asia, in the furtherance of world peace, stability and harmony; SOLEMNLY AGREE to enter into a Treaty of Amity and Cooperation as follows: CHAPTER I: PURPOSE AND PRINCIPLES Article 1 The purpose of this Treaty is to promote perpetual peace, everlasting amity and cooperation among their peoples which would contribute to their strength, solidarity and closer relationship, Article 2 In their relations with one another, the High Contracting Parties shall be guided by the following fundamental principles:

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a. b. c. d. e. f.

Mutual respect for the independence, sovereignty, equality, territorial integrity and national identity of all nations; The right of every State to lead its national existence free from external interference, subversion or coercion; Non-interference in the internal affairs of one another; Settlement of differences or disputes by peaceful means; Renunciation of the threat or use of force; Effective cooperation among themselves. CHAPTER II: AMITY Article 3

In pursuance of the purpose of this Treaty the High Contracting Parties shall endeavour to develop and strengthen the traditional, cultural and historical ties of friendship, good neighbourliness and cooperation which bind them together and shall fulfil in good faith the obligations assumed under this Treaty. In order to promote closer understanding among them, the High Contracting Parties shall encourage and facilitate contact and intercourse among their peoples. CHAPTER III: COOPERATION Article 4 The High Contracting Parties shall promote active cooperation in the economic, social, technical, scientific and administrative fields as well as in matters of common ideals and aspiration of international peace and stability in the region and all other matters of common interest. Article 5 Pursuant to Article 4 the High Contracting Parties shall exert their maximum efforts multilaterally as well as bilaterally on the basis of equality, non-discrimination and mutual benefit. Article 6 The High Contracting Parties shall collaborate for the acceleration of the economic growth in the region in order to strengthen the foundation for a prosperous and peaceful community of nations in Southeast Asia. To this end, they shall promote the greater utilization of their agriculture and industries, the expansion of their trade

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and the improvement of their economic infrastructure for the mutual benefit of their peoples. In this regard, they shall continue to explore all avenues for close and beneficial cooperation with other States as well as international and regional organisations outside the region. Article 7 The High Contracting Parties, in order to achieve social justice and to raise the standards of living of the peoples of the region, shall intensify economic cooperation. For this purpose, they shall adopt appropriate regional strategies for economic development and mutual assistance. Article 8 The High Contracting Parties shall strive to achieve the closest cooperation on the widest scale and shall seek to provide assistance to one another in the form of training and research facilities in the social, cultural, technical, scientific and administrative fields. Article 9 The High Contracting Parties shall endeavour to foster cooperation in the furtherance of the cause of peace, harmony, and stability in the region. To this end, the High Contracting Parties shall maintain regular contacts and consultations with one another on international and regional matters with a view to coordinating their views actions and policies. Article 10 Each High Contracting Parties shall not in any manner of form participate in any activity which shall constitute a treat to the political and economic stability, sovereignty, or territorial integrity of another High Contracting Party. Article 11 The High Contracting Parties shall endeavour to strengthen their respective national resilience in their political, economic, sociocultural as well as security fields in conformity with their respective ideals and aspirations, free from external interference as well as internal subversive activities in order to preserve their respective national identities.

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Article 12 The High Contracting Parties in their efforts to achieve regional prosperity and security, shall endeavour to cooperate in all fields for the promotion of regional resilience, based on the principles of self-confidence, self-reliance, mutual respect, cooperation of solidarity which will constitute the foundation for a strong and viable community of nations in Southeast Asia. CHAPTER IV: PACIFIC SETTLEMENT OF DISPUTES Article 13 The High Contracting Parties shall have the determination and good faith to prevent disputes from arising. In case disputes on matters directly affecting them shall refrain from the threat or use of force and shall at all times settle such disputes among themselves through friendly negotiations. Article 14 To settle disputes through regional processes, the High Contracting Parties shall constitute, as a continuing body, a High Council comprising a Representative at ministerial level from each of the High Contracting Parties to take cognizance of the existence of disputes or situations likely to disturb regional peace and harmony. Article 15 In the event no solution is reached through direct negotiations, the High Council shall take cognizance of the dispute or the situation and shall recommend to the parties in dispute appropriate means of settlement such as good offices, mediation, inquiry or conciliation. The High Council may however offer its good offices, or upon agreement of the parties in dispute, constitute itself into a committee of mediation, inquiry or conciliation. When deemed necessary, the High Council shall recommend appropriate measures for the prevention of a deterioration of the dispute or the situation. Article 16 The foregoing provision of this Chapter shall not apply to a dispute unless all the parties to the dispute agree to their application to that dispute. However, this shall not preclude the other High Contracting Parties not party to the dispute from

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offering all possible assistance to settle the said dispute. Parties to the dispute should be well disposed towards such offers of assistance. Article 17 Nothing in this Treaty shall preclude recourse to the modes of peaceful settlement contained in Article 33(l) of the Charter of the United Nations. The High Contracting Parties which are parties to a dispute should be encouraged to take initiatives to solve it by friendly negotiations before resorting to the other procedures provided for in the Charter of the United Nations. CHAPTER V: General Provision Article 18 This Treaty shall be signed by the Republic of Indonesia, Malaysia, the Republic of the Philippines, the Republic of Singapore and the Kingdom of Thailand. It shall be ratified in accordance with the constitutional procedures of each signatory State. It shall be open for accession by other States in Southeast Asia. Article 19 This Treaty shall enter into force on the date of the deposit of the fifth instrument of ratification with the Governments of the signatory States which are designated Depositories of this Treaty and the instruments of ratification or accession. Article 20 This Treaty is drawn up in the official languages of the High Contracting Parties, all of which are equally authoritative. There shall be an agreed common translation of the texts in the English language. Any divergent interpretation of the common text shall be settled by negotiation. IN FAITH THEREOF the High Contracting Parties have signed the Treaty and have hereto affixed their Seals. DONE at Denpasar, Bali, this twenty-fourth day of February in the year one thousand nine hundred and seventy-six.

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APPENDIX III (a) PROTOCOL AMENDING THE TREATY OF AMITY AND COOPERATION IN SOUTHEAST ASIA Philippines, 15 December 1987 The Government of Brunei Darussalam The Government of the Republic of Indonesia The Government of Malaysia The Government of the Republic of the Philippines The Government of the Republic of Singapore The Government of the Kingdom of Thailand DESIRING to further enhance cooperation With all peace-loving nations, both within and outside Southeast Asia and, in particular, neighbouring States of the Southeast Asia region CONSIDERING Paragraph 5 of the preamble of the Treaty of Amity and Cooperation in Southeast Asia, done at Denpasar, Bali, on 24 February 1976 (hereinafter referred to as the Treaty of Amity) which refers to the need for cooperation with all peaceloving nations, both within and outside Southeast Asia, in the furtherance of world peace, stability and harmony. HEREBY AGREE TO THE FOLLOWING: Article 1 Article 18 of the Treaty of Amity shall be amended to read as follows: “This Treaty shall be signed by the Republic of Indonesia, Malaysia, the Republic of the Philippines, the Republic of Singapore and the Kingdom of Thailand. It shall be ratified in accordance with the constitutional procedures of each signatory State. It shall be open for accession by other States in Southeast Asia. States outside Southeast Asia may also accede to this Treaty by the consent of all the States in Southeast Asia which are signatories to this Treaty and Brunei Darussalam.”

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Article 2 Article 14 of the Treaty of Amity shall be amended to read as follows: “The settle disputes through regional processes, the High Contracting Parties shall constitute, as a continuing body, a High Council comprising a Representative at ministerial level from each of the High Contracting Parties to take cognizance of the existence of disputes or situations likely to disturb regional peace and harmony. However, this article shall apply to any of the States outside Southeast Asia which have acceded to the Treaty only in cases where that state is directly involved in the dispute to be settled through the regional processes.” Article 3 This Protocol shall be subject to ratification and shall come into force on the date the last instrument of ratification of the High Contracting Parties is deposited. DONE at Manila, the fifteenth day of December in the year one thousand nine hundred and eighty-seven.

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APPENDIX III (b) SECOND PROTOCOL AMENDING THE TREATY OF AMLTY AND COOPERATION IN SOUTHEAST ASIA The Government of Brunei Darussalam The Government of the Kingdom of Cambodia The Government of the Republic of Indonesia The Government of the Lao People’s Democratic Republic The Government of Malaysia The Government of the Union of Myanmar The Government of the Republic of the Philippines The Government of the Republic of Singapore The Government of the Kingdom of Thailand The Government of the Socialist Republic of Vietnam The Government of Papua New Guinea Hereinafter referred to as the High Contracting Parties: DESIRING to ensure that there is appropriate enhancement of cooperation with all peace-loving nations, both within and outside Southeast Asia and, in particular, neighboring States of the Southeast Asia region; CONSIDERING Paragraph 5 of the preamble of the Treaty of Amity and Cooperation in Southeast Asia, done at Denpasar, Bali, on 24 February 1976 (hereinafter referred to as the Treaty of Amity) which refers to the need for cooperation with all peaceloving nations, both within and outside Southeast Asia, in the furtherance of world peace, stability and harmony. HEREBY AGREE TO THE FOLLOWING: Article 1 Article 18, Paragraph 3, of the Treaty of Amity shall be amended to read as follows: “States outside Southeast Asia may also accede to this Treaty with the consent of all the States in Southeast Asia, namely, Brunei Darussalam, the Kingdom of Cambodia, the Republic of Indonesia, the Lao People’s Democratic Republic, Malaysia, the Union of Myanmar, the Republic of

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the Philippines, the Republic of Singapore, the Kingdom of Thailand and the Socialist Republic of Vietnam.” Article 2 This Protocol shall be subject to ratification and shall come into force on the date the last instrument of ratification of the High Contracting Parties is deposited. DONE at Manila, the twenty-fifth day of July in the year one thousand nine hundred and ninety-eight.

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APPENDIX IV DECLARATION OF ASEAN CONCORD Indonesia, 24 February 1976 The President of the Republic of Indonesia, the Prime Minister of Malaysia, the President of the Republic of the Philippines, the Prime Minister of the Republic of Singapore and the Prime Minister of the Kingdom of Thailand: REAFFIRM their commitment to the Declarations of Bandung, Bangkok and Kuala Lumpur, and the Charter of the United Nations; ENDEAVOUR to promote peace, progress, prosperity and the welfare of the peoples of member states; UNDERTAKE to consolidate the achievements of ASEAN and expand ASEAN cooperation in the economic, social, cultural and political fields; DO HEREBY DECLARE: ASEAN cooperation shall take into account, among others, the following objectives and principles in the pursuit of political stability: 1.

2. 3.

4.

5.

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The stability of each member state and of the ASEAN region is an essential contribution to international peace and security. Each member state resolves to eliminate threats posed by subversion to its stability, thus strengthening national and ASEAN resilience. Member states, individually and collectively, shall take active steps for the early establishment of the Zone of Peace, Freedom and Neutrality. The elimination of poverty, hunger, disease and illiteracy is a primary concern of member states. They shall therefore intensify cooperation in economic and social development, with particular emphasis on the promotion of social justice and on the improvement of the living standards of their peoples. Natural disasters and other major calamities can retard the pace of development of member states. They shall extend, within their capabilities, assistance for relief of member states in distress. Member states shall take cooperative action in their national and regional development programmes, utilizing as far as possible the resources available in

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the ASEAN region to broaden the complementarity of their respective economies. Member states, in the spirit of ASEAN solidarity, shall rely exclusively on peaceful processes in the settlement of intra-regional differences. Member states shall strive, individually and collectively, to create conditions conducive to the promotion of peaceful cooperation among the nations of Southeast Asia on the basis of mutual respect and mutual benefit. Member states shall vigorously develop an awareness of regional identity and exert all efforts to create a strong ASEAN community, respected by all and respecting all nations on the basis of mutually advantageous relationships, and in accordance with the principles of selfdetermination, sovereign equality and non-interference in the internal affairs of nations.

AND DO HEREBY ADOPT The following programme of action as a framework for ASEAN cooperation. A.

POLITICAL 1. Meeting of the Heads of Government of the member states as and when necessary. 2. Signing of the Treaty of Amity and Cooperation in Southeast Asia. 3. Settlement of intra-regional disputes by peaceful means as soon as possible. 4. Immediate consideration of initial steps towards recognition of and respect for the Zone of Peace, Freedom and Neutrality wherever possible. 5. Improvement of ASEAN machinery to strengthen political cooperation. 6. Study on how to develop judicial cooperation including the possibility of an ASEAN Extradition Treaty. 7. Strengthening of political solidarity by promoting the harmonization of views, coordinating position and, where possible and desirable, taking common actions.

B.

ECONOMIC 1. Cooperation on Basic Commodities, particularly Food and Energy i) Member states shall assist each other by according priority to the supply of the individual country’s needs in critical circumstances, and priority to the acquisition of exports from member states, in respect of basic commodities, particularly food and energy.

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ii)

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Member states shall also intensify cooperation in the production of basic commodities particularly food and energy in the individual member states of the region.

2.

Industrial Cooperation i) Member states shall cooperate to establish large-scale ASEAN industrial plants particularly to meet regional requirements of essential commodities. ii) Priority shall be given to projects which utilize the available materials in the member states, contribute to the increase of food production, increase foreign exchange earnings or save foreign exchange and create employment.

3.

Cooperation in Trade i) Member states shall cooperate in the fields of trade in order to promote development and growth of new production and trade and to improve the trade structures of individual states and among countries of ASEAN conducive to further development and to safeguard and increase their foreign exchange earnings and reserves. ii) Member states shall progress towards the establishment of preferential trading arrangements as a long term objective on a basis deemed to be at any particular time appropriate through rounds of negotiations subject to the unanimous agreement of member states. iii) The expansion of trade among member states shall be facilitated through cooperation on basic commodities, particularly in food and energy and through cooperation in ASEAN industrial projects. iv) Member states shall accelerate joint efforts to improve access to markets outside ASEAN for their raw material and finished products by seeking the elimination of all trade barriers in those markets, developing new usage for these products and in adopting common approaches and actions in dealing with regional groupings and individual economic powers. v) Such efforts shall also lead to cooperation in the field of technology and production methods in order to increase the production and to improve the quality of export products, as well as to develop new export products with a view to diversifying exports.

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C.

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4.

Joint Approach to International Commodity Problems and Other World Economic Problems i) The principle of ASEAN cooperation on trade shall also be reflected on a priority basis in joint approaches to international commodity problems and other world economic problems such as the reform of international trading system, the reform on international monetary system and transfer of real resources, in the United Nations and other relevant multilateral fora, with a view to contributing to the establishment of the New International Economic Order. ii) Member states shall give priority to the stabilisation and increase of export earnings of those commodities produced and exported by them through commodity agreements including bufferstock schemes and other means.

5.

Machinery for Economic Cooperation Ministerial meetings on economic matters shall be held regularly or as deemed necessary in order to: i) formulate recommendations for the consideration of Governments of member states for the strengthening of ASEAN economic cooperation; ii) review the coordination and implementation of agreed ASEAN programmes and projects on economic cooperation; iii) exchange views and consult on national development plans and policies as a step towards harmonizing regional development; and iv) perform such other relevant functions as agreed upon by the member Governments.

SOCIAL 1. Cooperation in the field of social development, with emphasis on the well being of the low-income group and of the rural population, through the expansion of opportunities for productive employment with fair remuneration. 2. Support for the active involvement of all sectors and levels of the ASEAN communities, particularly the women and youth, in development efforts. 3. Intensification and expansion of existing cooperation in meeting the problems of population growth in the ASEAN region, and where possible, formulation of new strategies in collaboration with appropriate international agencies.

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4.

Intensification of cooperation among members states as well as with the relevant international bodies in the prevention and eradication of the abuse of narcotics and the illegal trafficking of drugs.

D.

CULTURAL AND INFORMATION 1. Introduction of the study of ASEAN, its member states and their national languages as part of the curricula of schools and other institutions of learning in the member states. 2. Support of ASEAN scholars, writers, artists and mass media representatives to enable them to play an active role in fostering a sense of regional identity and fellowship. 3. Promotion of Southeast Asian studies through closer collaboration among national institutes.

E.

SECURITY Continuation of cooperation on a non-ASEAN basis between the member states in security matters in accordance with their mutual needs and interests.

F.

IMPROVEMENT OF ASEAN MACHINERY 1. Signing of the Agreement on the Establishment of the ASEAN Secretariat. 2. Regular review of the ASEAN organizational structure with a view to improving its effectiveness. 3. Study of the desirability of a new constitutional framework for ASEAN.

DONE, at Denpasar, Bali, this Twenty-Fourth Day of February in the year One Thousand Nine Hundred and Seventy-Six.

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APPENDIX V HANOI PLAN OF ACTION Introduction The Second ASEAN Informal Summit, held in Kuala Lumpur on 15 December 1997, adopted the ASEAN Vision 2020 which sets out a broad vision for ASEAN in the year 2020: an ASEAN as a concert of Southeast Asian Nations, outward looking, living in peace, stability and prosperity, bonded together in partnership in dynamic development and in a community of caring societies. In order to implement the long-term vision, action plans are being drawn up to realise this Vision. The Hanoi Plan of Action (HPA) is the first in a series of plans of action building up to the realisation of the goals of the Vision. The HPA has a six-year timeframe covering the period from 1999 to 2004. The progress of its implementation shall be reviewed every three years to coincide with the ASEAN Summit Meetings. In recognition of the need to address the current economic situation in the region, ASEAN shall implement initiatives to hasten economic recovery and address the social impact of the global economic and financial crisis. These measures reaffirm ASEAN commitments to closer regional integration and are directed at consolidating and strengthening the economic fundamentals of the Member Countries. I.

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STRENGTHEN MACROECONOMIC AND FINANCIAL COOPERATION To restore confidence, regenerate economic growth and promote regional financial stability through maintaining sound macroeconomic and financial policies as well as strengthening financial system and capital markets enhanced by closer consultations, so as to avoid future disturbances. 1.1 Maintain regional macroeconomic and financial stability. 1.1.1 Strengthen the ASEAN Surveillance Process; and 1.1.2 Structure orderly capital account liberalisation. 1.2 Strengthen financial systems. 1.2.1 Adopt and implement sound international financial practices and standards, where appropriate by 2003; 1.2.2 Coordinate supervision and efforts to strengthen financial systems;

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1.2.3

1.3

1.4

1.5

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Develop deep and liquid financial markets to enable governments and private firms to raise long-term financing in local currency, thereby reducing the over dependence on bank finance and limiting the risks of financial crisis; 1.2.4 Adopt and implement existing standards of disclosure and dissemination of economic and financial information; and 1.2.5 Adopt prudential measures to mitigate the effects of sudden shifts in short-term capital flows. Promote liberalisation of the financial services sector. 1.3.1 Intensify deregulation of the financial services sector; and 1.3.2 Intensify negotiations of financial sector liberalisation under the ASEAN Framework Agreement on Services (AFAS). Intensify cooperation in money, tax and insurance matters. 1.4.1 Study the feasibility of establishing an ASEAN currency and exchange rate system; 1.4.2 Establish an ASEAN Tax Training Institute by 2003; 1.4.3 Enhance the role of “ASEAN Re Corporation Limited” as a vehicle to further promote regional cooperation in reinsurance business; and 1.4.4 Establish an ASEAN Insurance Training and Research Institute by 2003. Develop ASEAN Capital Markets. 1.5.1 Adopt and implement internationally accepted practices and standards by the year 2003, and where appropriate at a later date especially for the new Member Countries; 1.5.2 Establish a set of minimum standards for listing rules, procedures and requirements by 2003; 1.5.3 Coordinate supervision of and programmes to strengthen capital markets; 1.5.4 Improve corporate governance, transparency and disclosure; 1.5.5 Develop a mechanism for cross-listing of SMEs among ASEAN capital markets by 2003, and where appropriate at a later date for the new Member Countries; 1.5.6 Facilitate cross-border capital flows and investments; 1.5.7 Facilitate clearing and settlement systems within ASEAN; 1.5.8 Promote securitisation in ASEAN; 1.5.9 Foster collaborative and cooperative networks among capital market research and training centres in Member States;

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1.5.10 Prepare the framework to develop bond markets in ASEAN by 2000; and 1.5.11 Promote networking among development banks in Member States for financing of productive projects. II.

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ENHANCE GREATER ECONOMIC INTEGRATION To create a stable, prosperous and highly competitive ASEAN Economic Region in which there is a free flow of goods, services and investments, a freer flow of capital, equitable economic development and reduced poverty and socio-economic disparities. 2.1 Accelerate the implementation of the ASEAN Free Trade Area (AFTA). 2.1.1 Trade liberalisation a. Maximise the number of tariff lines whose CEPT tariff rates shall be reduced to 0–5% by the year 2000 (2003 for Vietnam and 2005 for Laos and Myanmar); b. Maximise the number of tariff lines whose CEPT tariff rates shall be reduced to 0% by the year 2003 (2006 for Vietnam and 2008 for Laos and Myanmar); and c. Expand the coverage of the CEPT Inclusion List by shortening the Temporary Exclusion List, Sensitive List and General Exception List. 2.1.2 Customs harmonisation d. Enhance trade facilitation in customs by simplifying customs procedures, expanding the Green Lane to cover all ASEAN products and implementing an ASEAN Harmonised Tariff Nomenclature by the year 2000; e. Promote transparency, consistency and uniformity in the classification of goods traded within ASEAN and enhance trade facilitation through the provision of facilities for obtaining pre-entry classification rulings/ decisions at national and regional levels by the year 2003; f. Promote the use of transparent, consistent and uniform valuation methods and rulings through the implementation of the WTO Valuation Agreement by the year 2000;

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g.

2.1.3

2.1.4

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Operationalise and strengthen regional guidelines on mutual assistance by the year 2003 to ensure the proper application of customs laws, within the competence of the customs administrations and subject to their national laws; h. Fully operationalise the ASEAN Customs Training Network by the year 2000; and i. Undertake customs reform and modernisation, in particular to implement risk management and postimportation audit by the year 2003. Standards and conformity assessment j. Harmonise product standards through alignment with international standards for products in priority sectors by the year 2000 and for regulated products by the year 2005; k. Implement the ASEAN Framework Agreement on Mutual Recognition Arrangements (MRAs) by developing sectoral MRAs in priority areas beginning in 1999; and l. Enhance the technical infrastructure and competency in laboratory testing, calibration, certification and accreditation by the year 2005, based on internationallyaccepted procedures and guides; and m. Strengthen information networking on standards and technical regulation through the use of, among others, the Internet, with the aim of meeting the requirements of the WTO Agreement on Technical Barriers to Trade and WTO Agreement on the Application of Sanitary and Phytosanitary Measures. Other trade facilitation activities n. Establish a mechanism of information exchange and disclosure requirements to promote transparency of government procurement regimes by the year 2003 to facilitate participation of ASEAN nationals and companies; o. Establish contact points in 1999 to facilitate ongoing exchange of the above information;

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p.

2.2

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Encourage the liberalisation of government procurement; q. Establish a mechanism of information exchange by 2003 to promote transparency of each domestic regulatory regime by publishing annual reports detailing actions taken by ASEAN Member States to deregulate their domestic regimes; and r. Encourage the increased use of regional currencies for intra-ASEAN trade transactions. Implement the Framework Agreement on ASEAN Investment Area (AIA). The ASEAN Investment Area aims to enhance the competitiveness of the region for attracting higher and sustainable levels of direct investment flows into and within ASEAN. Three broad-based programmes of action shall form the thrust of the AIA arrangement. These are Cooperation and Facilitation, Promotion and Awareness, and Liberalisation Programme. These programmes shall be implemented through individual and collective action plans, within the agreed schedules and timetable. The ASEAN Investment Area is to be realised through implementing, among others, the following key measures: a. Immediately extend national treatment and open up all industries for investments. However, for some exceptions, as specified in the Temporary Exclusion List and the Sensitive List, these will be progressively liberalised to all ASEAN investors by 2010 or earlier and to all investors by 2020 in accordance with the provisions of the Framework Agreement on AIA; b. Identify and progressively eliminate restrictive investment measures; c. Liberalise rules, regulations and policies relating to investment; rules on licensing conditions; rules relating to access to domestic finance; and rules to facilitate payment, receipts and repatriation of profits by investors; d. Complete implementation of all the measures and activities identified in the Schedule 1 of “Cooperation and Facilitation Programme” under the AIA Agreement by 2010 or earlier; e. Complete implementation of all the measures and activities identified in the Schedule II of “Promotion and Awareness Programme” under the AIA Agreement by 2010 or earlier;

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f.

2.3

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Improve and enhance the measures and activities of the Cooperation and Facilitation, and Promotion and Awareness Programmes to further strengthen the implementation process of the AIA arrangement; g. Undertake active and high profile joint investment promotion activities to promote greater awareness of investment opportunities in ASEAN to global and regional investors. This shall include, among others, joint publications of investment and business information as well as databases and statistics; h. Promote freer flow of capital, skilled labour, professionals and technology among ASEAN Member States; i. Work towards establishing a comparable approach of FDI data collection, measurement and reporting among the Member States; j. Undertake activities to increase transparency of investment regimes of Member States; and k. Identify areas for technical cooperation in human resource development, R&D, infrastructure development, SME and supporting industry development, information and industrial technology development. Liberalise Trade in Services. The ASEAN Framework Agreement on Services will strengthen service suppliers and introduce more competition into this large and important sector of ASEAN Member’s States and open new doors for service suppliers in the region. 2.3.1 Liberalisation a. Progressively liberalise trade in services by initiating a new round of negotiations beginning 1999 and ending 2001; b. Expand the scope of negotiations in services beyond the seven priority sectors, identified at the Fifth ASEAN Summit, to cover all services sectors and all modes of supply; c. Seek to accelerate the liberalisation of trade in services through the adoption of alternative approaches to liberalisation; and d. Accelerate the free flow of professional and other services in the region.

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2.3.2

2.4

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Facilitation e. Encourage the free exchange of information and views among professional bodies in the region with the view to achieving mutual recognition arrangements; f. Conduct an impact study by the year 2000 on the removal of transport, travel and telecommunication barriers in ASEAN; and g. Develop standard classification and categorisation of tourism products and services to facilitate the region’s implementation of the General Agreement on Trade in Services (GATS) and the ASEAN Framework Agreement on Services (AFAS). 2.3.3 Cooperation h. Strengthen and enhance existing cooperation efforts in service sectors through such means as establishing or improving infrastructure facilities, joint production, marketing and purchasing arrangements, research and development and exchange of information; i. Develop cooperation activities in new sectors that are not covered by existing cooperation arrangements; and j. Cooperate to harmonise entry regulations with regard to commercial presence. Enhance food security and global competitiveness of ASEAN’s food, agriculture and forestry products. ASEAN would strive to provide adequate levels of food supply and food accessibility within ASEAN during instances of food shortages to ensure food security and at the same time, enhance the competitiveness of its food, agriculture and forestry sectors through developing appropriate technologies to increase productivity and by promoting intra- and extra-ASEAN trade and greater private sector investment in the food, agriculture and forestry sector. 2.4.1 Strengthen food security arrangements in the region. a. Enhance ASEAN food security statistical database and information by establishing an ASEAN Food Security Information System (AFSIS) which would allow Member States to effectively forecast, plan and manage food supplies and utilisation of basic commodities;

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b.

2.4.2

2.4.3

2.4.4

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Develop a Common Framework to analyse and review the regional food trade policies in the light of the AFTA, and to enhance intra-ASEAN food trade by undertaking a study on the long-term supply and demand prospects of major food commodities (rice, corn, soybean, sugar, pulses and oilseeds) in ASEAN; c. Strengthen the food marketing system of agricultural cooperatives for enhancing food security in ASEAN; and d. Review the Agreement on the ASEAN Emergency Rice Reserve (AERR) to realise effective cross-supply arrangements of food during times of emergency. Develop and Adopt Existing and New Technologies. e. Conduct collaborative research to develop new/improved technologies in food, agriculture and forestry production, post-harvest and processing activities and sharing of research results and available technology; f. Conduct R&D in critical areas to reduce the cost of inputs for food, agriculture and forestry production; and g. Strengthen programmes in food, agriculture and agroforestry technology transfer, training and extension to increase productivity. Enhance the Marketability of ASEAN Food, Agriculture and Forestry Products/Commodities. h. Develop, harmonise and adopt quality standards and regulations for food, agriculture and forestry products; i. Promote diversification of forest products; and j. Promote and implement training programmes and share and exchange expertise in the field of food, agriculture and forestry. Enhance Private Sector Involvement. k. Conduct a study to identify high-impact investment opportunities in key areas under the food, agriculture and forestry sectors in ASEAN and to provide essential information for investment decisions on these opportunities; and

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2.6

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Establish networking and strategic alliances with the private sector to promote investment and joint venture opportunities in ASEAN. 2.4.5 Enhance ASEAN Cooperation and Joint Approaches in International and Regional Issues. m. Strengthen ASEAN’s cooperation and joint approaches in addressing issues and problems affecting trade in the region’s food, agriculture and forestry products including environment and labour issues; and n. Seek closer cooperation and negotiate, through relevant ASEAN bodies, with trading partners on market access for ASEAN products 2.4.6 Promote Capacity Building and Human Resources Development. o. Promote and implement training programmes in the field of food, agriculture and forestry, including the exchange of experts; and p. Develop and strengthen agricultural rural communities through enhanced human resource development. Intensify industrial cooperation. a. Expedite the implementation of AICO. b. Establish a Directory of Major ASEAN Manufacturing Companies; c. Explore the merits of common competition policy; d. Increase value-added contribution of ASEAN Manufacturing Sector; e. Explore/develop other areas of cooperation that has not been covered under the existing arrangement; and f. Establish R&D/Skill Development Centres. Foster small and medium enterprises (SMEs). Recognising that small and medium scale enterprises constitute the majority of industrial enterprises in ASEAN and that they play a significant role in the overall economic development of Member States, ASEAN needs to cooperate in order to develop a modern, dynamic, competitive and efficient SME sector. The SME cooperation will address priority areas of human resource development, information dissemination, access to technology and technology sharing, finance and market. The SME cooperation will also ensure

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the development and implementation of non-discriminatory marketoriented policies in ASEAN that will provide a more favourable environment for SME development. 2.6.1 Facilitation a. Encourage Member States to establish national export financing/credit guarantee schemes for SMEs; b. Explore the possibility of establishing regional export financing/credit guarantee scheme; c. Explore the possibility of establishing an ASEAN Investment Fund for SME; and d. Explore the possibility of establishing a trade or industrial cooperation scheme to promote intra-ASEAN cooperation for SMEs. 2.6.2 Cooperation e. Compile Member States’ SME policies and best practices in selected sectors to enhance mutual understanding and possible adoption; f. Compile and provide information to SMEs on policies and opportunities including electronic media such as the Internet websites; g. Promote information networking between existing SMErelated organisations in ASEAN; h. Promote awareness among SMEs on benefits and availability of other sources of finance such as venturecapital and equity; i. Enhance interactions between Government Sector Institutions (GSI) and Private Sector Institutions (PSI) on SME development by convening biennial GSI/PSI conference; j. Undertake selected sectoral regional study on the potential areas of finance, market, production technology and management for possible trade and industrial cooperation between/among SMEs in the region; k. Organise annual ASEAN match-making workshops to promote SME joint-ventures and linkages between SMEs and LSEs; l. Organise annual joint ASEAN trade promotion activities/ trade exposition;

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m.

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Encourage national venture-capital company to go regional; n. Organise annual meetings of all national Credit Guarantee Corporations (CGC) in ASEAN; o. Harness the capacity of non-ASEAN SMEs as a source of technology to ASEAN SMEs; p. Organise biennial ASEAN technology exposition; q. Organise regular joint training programmes, seminars and workshops for SMEs; r. Compile and publish a directory of resource persons in ASEAN in the area of production technology and management; s. Develop programmes on entrepreneurship development and innovation in all Member States; and t. Assist new members of ASEAN on SME development through specialised training programmes and technical assistance. Further intellectual property cooperation. To ensure adequate and effective protection, including legislation, administration and enforcement, of intellectual property rights in the region based on the principles of Most Favoured Nation (MFN) treatment, national treatment and transparency as set out in the TRIPS Agreement. 2.7.1 Protection a. Strengthen civil and administrative procedures and remedies against infringement of intellectual property rights and relevant legislation; and b. Provide and expand technical cooperation in relation to areas such as patent search and examination, computerisation and human resource development for the implementation of the TRIPS Agreement; 2.7.2 Facilitation c. Deepen Intellectual Property policy exchange among ASEAN Member States; d. Survey the current status of intellectual property rights protection in each ASEAN Member State with a view to studying measures, including development principles,

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for the effective enforcement of intellectual property rights; e. Develop a contact point list of public and business/ private sector experts on intellectual property rights and a list of law enforcement officers, the latter list for the purpose of establishing a network to prevent crossborder flow of counterfeits; f. Exchange information on well-known marks as a first step in examining the possibility of establishing a regionwide trademark system; g. Exchange information on current intellectual property rights administrative systems with a view to simplifying and standardising administrative systems throughout the region; h. Ensure that intellectual property legislation conform to the TRIPS Agreement of the World Trade Organisation through the review of intellectual property laws and introduction of TRIPS-consistent laws. This would begin with a comprehensive review of existing legislation to be completed by the year 2000; and i. Strengthen intellectual property administration by setting up an ASEAN electronic database by the year 2004 on patents, designs, geographical indications, trademarks and information on copyright and layout design of integrated circuits. Cooperation j. Implement an ASEAN Regional Trademark and Patent Filing System by the year 2000; k. Establish an ASEAN Regional Fund for Trademark and Patent by the year 2000; l. Finalise and implement an ASEAN Common Form for Trade Mark and Patent Applications; m. Establish a regional trademark and patent registration system; or establish a regional trademark or patent office (on voluntary basis); n. Promote accession of Member States to international treaties;

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o.

2.8

2.9

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Promote Intellectual Property public and private sector awareness; p. Introduce Intellectual Property as a subject in the curriculum of higher learning institutions; q. Develop training programmes for Intellectual Property officials; and r. Enhance intellectual property enforcement and protection through establishing mechanisms for the dissemination of information on ASEAN intellectual property administration, registration and infringement; facilitating interaction among legal and judicial bodies through seminars, etc.; facilitating networking among intellectual enforcement agencies; encouraging bilateral/ plurilateral arrangements on mutual protection and joint cooperation in enforcement of Intellectual Property Rights. Encourage electronic commerce. 2.8.1 Create policy and legislative environment to facilitate crossborder Electronic Commerce; 2.8.2 Ensure the coordination and adoption of framework and standards for cross-border Electronic Commerce, which is in line with international standards and practices; and 2.8.3 Encourage technical cooperation and technology transfer among Member States in the development of Electronic Commerce infrastructure, applications and services. Promote ASEAN tourism. 2.9.1 Launch the Visit ASEAN Millennium Year as the catalytic focus for the first plan of action; 2.9.2 Conduct Strategic Studies for Joint Marketing of the ASEAN Region in the 21st Century, and the convening of Top-level Tourism Marketing Missions to promote the region; 2.9.3 Develop a Website/Information Database on relevant tourism statistical data and other related information within the ASEAN Secretariat by the beginning of the year 2000; 2.9.4 Establish a Network among ASEAN Tourism Training Centres with emphasis on new job skills and new technologies by 2001 in tourism policy and planning;

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Develop trainer and training material database for ASEAN to be completed by 2001; 2.9.6 Conduct Eco-Tourism Promotion Programmes for Travel Trade and Consumers; 2.9.7 Complete cruise tourism development study in ASEAN by the year 2000. 2.9.8 Encourage the establishment of the ASEAN Lane for facilitating intra-ASEAN travel; 2.9.9 Increase the use of the Internet or other electronic global distribution systems in the ASEAN travel industry; and 2.9.10 Launch the ASEAN Tourism Investment Guide in 1999. Develop regional infrastructure. To intensify cooperation in the development of highly efficient and quality infrastructure, and in the promotion and progressive liberalisation of these services sectors: 2.10.1 Transport a. Develop the Trans-ASEAN transportation network by the year 2000 as the trunkline or main corridor for the movement of goods and people in ASEAN, consisting of major road (interstate highway) and railway networks, principal ports and sea lanes for maritime traffic, inland waterway transport and major civil aviation links; b. Operationalise the ASEAN Framework Agreement on the Facilitation of Goods in Transit by year 2000. For this purpose, its implementing Protocols will be finalised and concluded by December 1999; c. Target the conclusion and operationalisation of the ASEAN Framework Agreement on the Facilitation of Inter-State Transport by the year 2000; d. Implement the ASEAN Framework Agreement on Multimodal Transport; e. Develop a Maritime/Shipping Policy for ASEAN to cover, among others, transhipment, enhancing the competitiveness of ASEAN ports, further liberalisation of maritime transport services, and the integration of maritime transport in the intermodal and logistics chain; f. Adopt harmonised standards and regulations with regard to vehicle specifications (e.g. width, length, height and

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weight), axle load limits, maximum weights and pollution or emission standards; g. Institute the policy framework and modalities by the year 2000 for the development of a Competitive Air Services Policy which may be a gradual step towards an Open Sky Policy in ASEAN; and h. Develop and implement the Singapore-Kunming Rail Link and the ASEAN Highway Network Projects. 2.10.2 Telecommunications i. Achieve the interoperability and interconnectivity of the National Information Infrastructures (NIIs) of Member States by the year 2010; j. Develop and implement an ASEAN Plan of Action on Regional Broadband Interconnectivity by the year 2000; and k. Intensify cooperation in ensuring seamless roaming of telecommunications services (i.e., wireless communications) within the region, as well as in facilitating intra-ASEAN trade in telecommunications equipment and services. 2.10.3 Energy l. Ensure security and sustainability of energy supply, efficient utilisation of natural energy resource in the region and the rational management of energy demand, with due consideration of the environment; and m. Institute the policy framework and implementation modalities by 2004 for the early realization of the transASEAN energy networks covering the ASEAN Power Grid and the Trans-ASEAN Gas Pipeline Projects as a more focused continuation of the Medium-Term Programme of Action (1995–1999). 2.10.4 Water utility n. Cooperate on a regular basis, exchange of information, knowledge, and experiences among Member States as means to improve water resources management and water supply system within the region; and o. Support the development of Trans-ASEAN land and submarine pipeline for conveyance of raw water between ASEAN Member States.

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2.11

III.

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Further development of growth areas. To narrow the gap in the level of development among Member States and to reduce poverty and socio-economic disparities in the region. 2.11.1 Actively expedite the implementation and further development of growth areas such as the Brunei-IndonesiaMalaysia-Philippines East ASEAN Growth Area (BIMPEAGA), Indonesia-Malaysia-Singapore Growth Triangle (IMS-GT), Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT), and the inter-state areas along the West-East Corridor (WEC) of Mekong Basin in Vietnam, Laos, Cambodia and North-eastern Thailand within the ASEANMekong Basin Development Cooperation Scheme. 2.11.2 Facilitate the economic integration of the new Members into ASEAN.

PROMOTE SCIENCE & TECHNOLOGY DEVELOPMENT AND DEVELOP INFORMATION TECHNOLOGY INFRASTRUCTURE 3.1 Establish the ASEAN Information Infrastructure (AII). 3.1.1 Forge agreements among Member Countries on the design, standardization, inter-connection and inter-operability of Information Technology systems by 2001. 3.1.2 Ensure the protection of intellectual property rights and consumer rights. 3.2 Develop the information content of the AII by 2004. 3.3 Establish networks of science & technology centres of excellence and academic institutions by 2001. 3.4 Intensify research & development (R&D) in applications of strategic and enabling technologies. 3.5 Establish a technology scan mechanism and institutionalise a system of science & technology indicators by 2001. 3.6 Develop innovative systems for programme management and revenue generation to support ASEAN science and technology. 3.7 Promote greater public and private sector collaboration in science and technology, particularly in information technology. 3.8 Undertake studies on the evolution of new working conditions and living environments resulting from widespread use of information technology by 2001.

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PROMOTE SOCIAL DEVELOPMENT AND ADDRESS THE SOCIAL IMPACT OF THE FINANCIAL AND ECONOMIC CRISIS 4.1 Strive to mitigate the social impact of the regional financial and economic crisis. 4.2 Implement the Plan of Action on ASEAN Rural Development and Poverty Eradication and, in view of the financial and economic crisis, implement the ASEAN Plan of Action on Social Safety Nets to ensure that measures are taken to protect the most vulnerable sectors of our societies. 4.3 Use the ASEAN Foundation to support activities and social development programmes aimed at addressing issues of unequal economic development, poverty and socio-economic disparities. 4.4 Implement the ASEAN Plan of Action for Children which provides for the framework for ensuring the survival, protection and development of children. 4.5 Strengthen ASEAN collaboration in combating the trafficking in, and crimes of violence against, women and children. 4.6 Enhance the capacity of the family and community to care for the elderly and the disabled. 4.7 Strengthen the ASEAN Regional Aids Information and Reference Network. 4.8 Enhance exchange of information in the field of human rights among ASEAN Countries in order to promote and protect all human rights and fundamental freedoms of all peoples in accordance with the Charter of the United Nations, the Universal Declaration of Human Rights and the Vienna Declaration and Programme of Action. 4.9 Work towards the full implementation of the Convention on the Rights of the Child and the Convention on the Elimination of all Forms of Discrimination against Women and other international instruments concerning women and children. 4.10 Strengthen regional capacity to address transnational crime. 4.11 Implement the ASEAN Work Programme to Operationalise the ASEAN Plan of Action on Drug Abuse Control by 2004, and continue developing and implementing high-profile flagship programmes on drug abuse control, particularly those related to prevention education for youth, and treatment and rehabilitation.

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V.

PROMOTE HUMAN RESOURCE DEVELOPMENT 5.1 Strengthen the ASEAN University Network and move forward the process of transforming it into the ASEAN University. 5.2 Strengthen the education systems in Member Countries by 2001 so that all groups of people, including the disadvantaged, can have equal access to basic, general and higher education. 5.3 Implement the ASEAN Work Programme on Informal Sector Development to provide opportunities for self-employment and entrepreneurship. 5.4 Implement the ASEAN Work Programme on Skills Training for Out-of-School Youth by 2004, to strengthen their capacity to obtain gainful employment. 5.5 Strengthen regional networking of HRD centres of excellence and develop the regional capacity for HRD planning and labour market monitoring. 5.6 Establish and strengthen networks in education and training, particularly those promoting occupational safety and health, skills training for out-of-school youth, distance education by 2004. 5.7 Intensify efforts of the ASEAN Network for Women in Skills Training to enhance the capacity of disadvantaged women to enter the work force. 5.8 Begin to implement the ASEAN Science and Technology Human Resource Programme addressing the needs of industry and business by 2000. 5.9 Implement regional training programmes for ASEAN Civil Service Officers and strengthen networks among ASEAN Civil Service Commissions. 5.10 Establish networks of professional accreditation bodies to promote regional mobility and mutual recognition of technical and professional credentials and skills standards, beginning in 1999.

VI.

PROTECT THE ENVIRONMENT AND PROMOTE SUSTAINABLE DEVELOPMENT 6.1 Fully implement the ASEAN Cooperation Plan on Transboundary Pollution with particular emphasis on the Regional Haze Action Plan by the year 2001. 6.2 Strengthen the ASEAN Specialized Meteorological Centre with

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6.3 6.4

6.5 6.6

6.7

6.8 6.9 6.10 6.11 6.12

6.13

6.14 6.15

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emphasis on the ability to monitor forest and land fires and provide early warning on transboundary haze by the year 2001. Establish the ASEAN Regional Research and Training Centre for Land and Forest Fire Management by the year 2004. Strengthen the ASEAN Regional Centre for Biodiversity Conservation by establishing networks of relevant institutions and implement collaborative training and research activities by the year 2001. Promote regional coordination for the protection of the ASEAN Heritage Parks and Reserves. Develop a framework and improve regional coordination for the integrated protection and management of coastal zones by the year 2001. Strengthen institutional and legal capacities to implement Agenda 21 and other international environmental agreements by the year 2001. Harmonise the environmental databases of Member Countries by the year 2001. Implement an ASEAN regional water conservation programme by the year 2001. Establish a regional centre or network for the promotion of environmentally sound technologies by the year 2004. Formulate and adopt an ASEAN Protocol on access to genetic resources by the year 2004. Develop a Regional Action Plan for the Protection of the Marine Environment from Land-based and Sea-based Activities by the year 2004. Implement the Framework to Achieve Long-Term Environmental Goals for Ambient Air and River Water Qualities for ASEAN Countries. Enhance regional efforts in addressing climatic change. Enhance public information and education in awareness of and participation in environmental and sustainable development issues.

STRENGTHEN REGIONAL PEACE AND SECURITY 7.1 Consolidate and strengthen ASEAN’s solidarity, cohesiveness and harmony by strengthening national and regional resilience through enhanced cooperation and mutual assistance to further promote Southeast Asia as a Zone of Peace, Freedom and Neutrality.

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7.2.

7.3 7.4

7.5 7.6 7.7 7.8

7.9

7.10

7.11

7.12

7.13

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Promote coherent and comprehensive programmes of bilateral and regional cooperation and technical assistance to ASEAN member states to strengthen their integration into the community of Southeast Asian nations. Ratify the Second Protocol of the Treaty of Amity and Cooperation in Southeast Asia (TAC) as soon as possible. Encourage and facilitate the accession by ASEAN’s Dialogue Partners and other interested countries to the Treaty of Amity and Cooperation with a view to developing the TAC into a code of conduct governing relations between Southeast Asian States and those outside the region. Formulate draft rules of procedure for the operations of the High Council as envisioned in TAC. Encourage greater efforts towards the resolution of outstanding problems of boundaries delimitation between ASEAN member states. Ensure border security and facilitate safe and convenient border crossings. Encourage Member Countries to cooperate in resolving borderrelated problems and other matters with security implications between ASEAN member countries. Promote efforts to secure acceptance by Nuclear Weapon States of the Treaty on Southeast Asia Nuclear Weapon-Free Zone (SEANWFZ), including their early accession to the Protocol to the SEANWFZ Treaty. Convene the Commission for SEANWFZ Treaty to oversee the implementation of the Treaty and ensure compliance with its provisions. Support and participate actively in all efforts to achieve the objectives of general and complete disarmament, especially the non-proliferation of nuclear weapons and other weapons of mass destruction. Encourage ASEAN Member Countries parties to a dispute to engage in friendly negotiation and use the bilateral and regional processes of peaceful settlement of dispute or other procedures provided for in the U.N. Charter. Enhance efforts to settle disputes in the South China Sea through peaceful means among the parties concerned in accordance with universally recognized international law, including the 1982 U.N. Convention on the Law of the Sea.

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7.14 7.15 7.16 7.17

Continue efforts to promote confidence-building measures in the South China Sea between and among parties concerned. Encourage all other parties concerned to subscribe to the ASEAN Declaration on the South China Sea. Promote efforts to establish a regional code of conduct in the South China Sea among the parties directly concerned. Intensify intra-ASEAN security cooperation through existing mechanisms among foreign affairs and defense officials.

VIII. ENHANCE ASEAN’S ROLE AS AN EFFECTIVE FORCE FOR PEACE, JUSTICE, AND MODERATION IN THE ASIA-PACIFIC AND IN THE WORLD 8.1 Maintain ASEAN’s chairmanship in the ASEAN Regional Forum (ARF) process. 8.2 Undertake, actively and energetically, measures to strengthen ASEAN’s role as the primary driving force in the ARF, including directing the ASEAN Secretary-General to provide the necessary support and services to the ASC Chairman in coordinating ARF activities. 8.3 Formulate initiatives to advance, on a consensus basis and at a pace comfortable to all, the ARF process from its current emphasis on confidence-building to promoting preventive diplomacy. 8.4 Promote public awareness of the ARF process and the need for ASEAN’s role as the primary driving force in respective ASEAN Member Countries. 8.5 Continue the involvement of ASEAN defense and security officials together with foreign affairs officials in ARF activities. 8.6 Develop a set of basic principles based on TAC as an instrument for promoting cooperative peace in the Asia-Pacific region. 8.7 Enhance consultation and coordination of ASEAN positions at the United Nations and other international fora. 8.8 Revitalize ASEAN’s relations with Dialogue Partners on the basis of equality, non-discrimination and mutual benefit. IX.

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PROMOTE ASEAN AWARENESS AND ITS STANDING IN THE INTERNATIONAL COMMUNITY 9.1 Support the activities of the ASEAN Foundation and other available resources and mechanisms to promote ASEAN awareness among its people.

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9.2

9.3 9.4 9.5 9.6

9.7 9.8

9.9

9.10

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Launch, within ASEAN’s existing resources, a concerted communications programme to promote ASEAN’s standing in the international community and strengthen confidence in ASEAN as an ideal place for investment, trade and tourism. Establish and operate an ASEAN satellite channel by year 2000. Provide and disseminate materials on ASEAN’s efforts to cope with the financial and economic crisis. Publicise ASEAN’s HPA priorities through ASEAN’s external mechanisms with its Dialogue Partners. Develop linkages with mass media networks and websites on key areas of ASEAN cooperation to disseminate regular and timely information on ASEAN. Prepare and adopt an ASEAN Declaration on Cultural Heritage by year 2000. Mount professional productions of ASEAN performances and exhibitions within and outside ASEAN and provide adequate mass media coverage on such activities. Organize art and cultural immersion camps and exchange programmes for the youth and encourage their travel to other ASEAN Member Countries. Establish an ASEAN Multi-Media Centre by the year 2001 to conduct professional training programmes and provide production facilities and services for mass media and communication practitioners.

IMPROVE ASEAN’S STRUCTURES AND MECHANISMS 10.1 Review ASEAN’s overall organisational structure in order to further improve its efficiency and effectiveness, taking into account the expansion of ASEAN activities, the enlargement of ASEAN membership, and the regional situation. 10.2 Review and streamline ASEAN external relations mechanisms with its Dialogue Partners, regional organisations and other economic groupings. 10.3 Review the role, functions and capacity of the ASEAN Secretariat to meet the increasing demands of ASEAN and to support the implementation of the Hanoi Plan of Action.

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APPENDIX VI ASEAN VISION 2020 We, the Heads of State/Government of the Association of Southeast Asian Nations, gather today in Kuala Lumpur to reaffirm our commitment to the aims and purposes of the Association as set forth in the Bangkok Declaration of 8 August 1967, in particular to promote regional cooperation in Southeast Asia in the spirit of equality and partnership and thereby contribute towards peace, progress and prosperity in the region. We in ASEAN have created a community of Southeast Asian nations at peace with one another and at peace with the world, rapidly achieving prosperity for our peoples and steadily improving their lives. Our rich diversity has provided the strength and inspiration to us to help one another foster a strong sense of community. We are now a market of around 500 million people with a combined gross domestic product of US$600 billion. We have achieved considerable results in the economic field, such as high economic growth, stability and significant poverty alleviation over the past few years. Members have enjoyed substantial trade and investment flows from significant liberalisation measures. We resolve to build upon these achievements. Now, as we approach the 21st century, thirty years after the birth of ASEAN, we gather to chart a vision for ASEAN on the basis of today’s realities and prospects in the decades leading to the Year 2020. That vision is of ASEAN as a concert of Southeast Asian nations, outward looking, living in peace, stability and prosperity, bonded together in partnership in dynamic development and in a community of caring societies. A Concert of Southeast Asian Nations We envision the ASEAN region to be, in 2020, in full reality, a Zone of Peace, Freedom and Neutrality, as envisaged in the Kuala Lumpur Declaration of 1971. ASEAN shall have, by the year 2020, established a peaceful and stable Southeast Asia where each nation is at peace with itself and where the causes for conflict have

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been eliminated, through abiding respect for justice and the rule of law and through the strengthening of national and regional resilience. We envision a Southeast Asia where territorial and other disputes are resolved by peaceful means. We envision the Treaty of Amity and Cooperation in Southeast Asia functioning fully as a binding code of conduct for our governments and peoples, to which other states with interests in the region adhere. We envision a Southeast Asia free from nuclear weapons, with all the Nuclear Weapon States committed to the purposes of the Southeast Asia Nuclear Weapons Free Zone Treaty through their adherence to its Protocol. We also envision our region free from all other weapons of mass destruction. We envision our rich human and natural resources contributing to our development and shared prosperity. We envision the ASEAN Regional Forum as an established means for confidencebuilding and preventive diplomacy and for promoting conflict-resolution. We envision a Southeast Asia where our mountains, rivers and seas no longer divide us but link us together in friendship, cooperation and commerce. We see ASEAN as an effective force for peace, justice and moderation in the AsiaPacific and in the world. A Partnership in Dynamic Development We resolve to chart a new direction towards the year 2020 called, ASEAN 2020: Partnership in Dynamic Development which will forge closer economic integration within ASEAN. We reiterate our resolve to enhance ASEAN economic cooperation through economic development strategies, which are in line with the aspiration of our respective peoples, which put emphasis on sustainable and equitable growth, and enhance national as well as regional resilience.

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We pledge to sustain ASEAN’s high economic performance by building upon the foundation of our existing cooperation efforts, consolidating our achievements, expanding our collective efforts and enhancing mutual assistance. We commit ourselves to moving towards closer cohesion and economic integration, narrowing the gap in the level of development among Member Countries, ensuring that the multilateral trading system remains fair and open, and achieving global competitiveness. We will create a stable, prosperous and highly competitive ASEAN Economic Region in which there is a free flow of goods, services and investments, a freer flow of capital, equitable economic development and reduced poverty and socio-economic disparities. We resolve, inter-alia, to undertake the following: • maintain regional macroeconomic and financial stability by promoting closer consultations in macroeconomic and financial policies. • advance economic integration and cooperation by undertaking the following general strategies: fully implement the ASEAN Free Trade Area and accelerate liberalization of trade in services, realise the ASEAN Investment Area by 2010 and free flow of investments by 2020; intensify and expand sub-regional cooperation in existing and new sub-regional growth areas; further consolidate and expand extra-ASEAN regional linkages for mutual benefit cooperate to strengthen the multilateral trading system, and reinforce the role of the business sector as the engine of growth. • promote a modern and competitive small and medium enterprises (SME) sector in ASEAN which will contribute to the industrial development and efficiency of the region. • accelerate the free flow of professional and other services in the region. • promote financial sector liberalisation and closer cooperation in money and capital market, tax, insurance and customs matters as well as closer consultations in macroeconomic and financial policies. • accelerate the development of science and technology including information technology by establishing a regional information technology network and centers of excellence for dissemination of and easy access to data and information.

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•

•

•

• •

• •

•

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establish interconnecting arrangements in the field of energy and utilities for electricity, natural gas and water within ASEAN through the ASEAN Power Grid and a Trans-ASEAN Gas Pipeline and Water Pipeline, and promote cooperation in energy efficiency and conservation, as well as the development of new and renewable energy resources. enhance food security and international competitiveness of food, agricultural and forest products, to make ASEAN a leading producer of these products, and promote the forestry sector as a model in forest management, conservation and sustainable development. meet the ever increasing demand for improved infrastructure and communications by developing an integrated and harmonized trans-ASEAN transportation network and harnessing technology advances in telecommunication and information technology, especially in linking the planned information highways/multimedia corridors in ASEAN, promoting open sky policy, developing multi-modal transport, facilitating goods in transit and integrating telecommunications networks through greater interconnectivity, coordination of frequencies and mutual recognition of equipment-type approval procedures. enhance human resource development in all sectors of the economy through quality education, upgrading of skills and capabilities and training. work towards a world class standards and conformance system that will provide a harmonised system to facilitate the free flow of ASEAN trade while meeting health, safety and environmental needs. use the ASEAN Foundation as one of the instruments to address issues of unequal economic development, poverty and socioeconomic disparities. promote an ASEAN customs partnership for world class standards and excellence in efficiency, professionalism and service, and uniformity through harmonised procedures, to promote trade and investment and to protect the health and well-being of the ASEAN community, enhance intra-ASEAN trade and investment in the mineral sector and to contribute towards a technologically competent ASEAN through closer networking and sharing of information on mineral and geosciences as well as to enhance cooperation and partnership with dialogue partners to facilitate the development and transfer of technology in the mineral sector, particularly in the downstream research and the geosciences and to develop appropriate mechanism for these.

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A Community of Caring Societies We envision the entire Southeast Asia to be, by 2020, an ASEAN community conscious of its ties of history, aware of its cultural heritage and bound by a common regional identity. We see vibrant and open ASEAN societies consistent with their respective national identities, where all people enjoy equitable access to opportunities for total human development regardless of gender, race, religion, language, or social and cultural background. We envision a socially cohesive and caring ASEAN where hunger, malnutrition, deprivation and poverty are no longer basic problems, where strong families as the basic units of society tend to their members particularly the children, youth, women and elderly; and where the civil society is empowered and gives special attention to the disadvantaged, disabled and marginalized and where social justice and the rule of law reign. We see well before 2020 a Southeast Asia free of illicit drugs, free of their production, processing, trafficking and use. We envision a technologically competitive ASEAN competent in strategic and enabling technologies, with an adequate pool of technologically qualified and trained manpower, and strong networks of scientific and technological institutions and centers of excellence. We envision a clean and green ASEAN with fully established mechanisms for sustainable development to ensure the protection of the region’s environment, the sustainability of its natural resources, and the high quality of life of its peoples. We envision the evolution in Southeast Asia of agreed rules of behaviour and cooperative measures to deal with problems that can be met only on a regional scale, including environmental pollution and degradation, drug trafficking, trafficking in women and children, and other transnational crimes. We envision our nations being governed with the consent and greater participation of the people with its focus on the welfare and dignity of the human person and the good of the community.

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We resolve to develop and strengthen ASEAN’s institutions and mechanisms to enable ASEAN to realize the vision and respond to the challenges of the coming century. We also see the need for a strengthened ASEAN Secretariat with an enhanced role to support the realization of our vision. An Outward-Looking ASEAN We see an outward-looking ASEAN playing a pivotal role in the international fora, and advancing ASEAN’s common interests. We envision ASEAN having an intensified relationship with its Dialogue Partners and other regional organisations based on equal partnership and mutual respect. Conclusion We pledge to our peoples our determination and commitment to bringing this ASEAN Vision for the Year 2020 into reality. Kuala Lumpur 15 December 1997

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APPENDIX VII TREATY ON THE SOUTHEAST ASIA NUCLEAR WEAPON-FREE ZONE The States Parties to this Treaty: DESIRING to contribute to the realization of the purposes and principles of the Charter of the United Nations; DETERMINED to take concrete action which will contribute to the progress towards general and complete disarmament of nuclear weapons, and to the promotion of international peace and security; REAFFIRMING the desire of the Southeast Asian States to maintain peace and stability in the region in the spirit of peaceful coexistence and mutual understanding and cooperation as enunciated in various communiques, declarations and other legal instruments; RECALLING the Declaration on the Zone of Peace, Freedom and Neutrality (ZOPFAN) signed in Kuala Lumpur on 27 November 1971 and the Programme of Action on ZOPFAN adopted at the 26th ASEAN Ministerial Meeting in Singapore in July 1993; CONVINCED that the establishment of a Southeast Asia Nuclear Weapon-Free Zone, as an essential component of the ZOPPAN, will contribute towards strengthening the security of States within the Zone and towards enhancing international peace and security as a whole; REAFFIRMING the importance of the Treaty on the Non-Proliferation of Nuclear Weapons (NPT) in preventing the proliferation of nuclear weapons and in contributing towards international peace and security; RECALLING Article VII of the NPT which recognizes the right of any group of States to conclude regional treaties in order to assume the total absence of nuclear weapons in their respective territories; RECALLING the Final Document of the Tenth Special Session of the United Nations General Assembly which encourages the establishment of nuclear weaponfree zones;

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RECALLING the Principles and Objectives for Nuclear Non-Proliferation and Disarmament, adopted at the 1995 Review and Extension Conference of the Parties to the NPT, that the cooperation of all the nuclear-weapon States and their respect and support for the relevant protocols is important for the maximum effectiveness of this nuclear weapon-free zone treaty and its relevant protocols. DETERMINED to protect the region from environmental pollution and the hazards posed by radioactive wastes and other radioactive material; HAVE AGREED as follows: Article 1 USE OF TERMS For the purposes of this Treaty and its Protocol: (a) “Southeast Asia Nuclear Weapon-Free Zone”, hereinafter referred to as the “Zone”, means the area comprising the territories of all States in Southeast Asia, namely, Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam, and their respective continental shelves and Exclusive Economic Zones (EEZ); (b) “territory” means the land territory, internal waters, territorial sea, archipelagic waters, the seabed and the sub-soil thereof and the airspace above them; (c) “nuclear weapon” means any explosive device capable of releasing nuclear energy in an uncontrolled manner but does not include the means of transport or delivery of such device if separable from and not an indivisible part thereof; (d) “station” means to deploy, emplace, implant, install, stockpile or store; (e) “radioactive material” means material that contains radionuclides above clearance or exemption levels recommended by the International Atomic Energy Agency (IAEA); (f) “radioactive wastes” means material that contains or is contaminated with radionuclides at concentrations or activities greater than clearance levels recommended by the IAEA and for which no use is foreseen; and (g) “dumping” means (i) any deliberate disposal at sea, including seabed and subsoil insertion, of radioactive wastes or other matter from vessels, aircraft, platforms or other man-made structures at sea, and (ii) any deliberate disposal at sea, including seabed and subsoil insertion, of vessels, aircraft, platforms or other man-made structures at sea, containing

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radioactive material, but does not include the disposal of wastes or other matter incidental to, or derived from the normal operations of vessels, aircraft, platforms or other man-made structures at sea and their equipment, other than wastes or other matter transported by or to vessels, aircraft, platforms or other man-made structures at sea, operating for the purpose of disposal of such matter or derived from the treatment of such wastes or other matter on such vessels, aircraft, platforms or structures. Article 2 APPLICATION OF THE TREATY 1. 2.

This Treaty and its Protocol shall apply to the territories, continental selves, and EEZ of the States Parties within the Zone in which the Treaty is in force. Nothing in this Treaty shall prejudice the rights or the exercise of these rights by any State under the provisions of the United Nations Convention on the Law of the Sea of 1982, in particular with regard to freedom of the high seas, rights of innocent passage, archipelagic sea lanes passage or transit passage of ships and aircraft, and consistent with the Charter of the United Nations. Article 3 BASIC UNDERTAKINGS

1.

Each State Party undertakes not to, anywhere inside or outside the Zone: (a) develop, manufacture or otherwise acquire, possess or have control over nuclear weapons; (b) station or transport nuclear weapons by any means; or (c) test or use nuclear weapons.

2.

Each State Party also undertakes not to allow, in its territory, any other State to: (a) develop, manufacture or otherwise acquire, possess or have control over nuclear weapons; (b) station nuclear weapons; or (c) test or use nuclear weapons.

3.

Each State Party also undertake not to: (a) dump at sea or discharge into the atmosphere anywhere within the Zone any radioactive material or wastes; (b) dispose radioactive material or wastes on land in the territory of or under the jurisdiction of other States except as stipulated in Paragraph 2 (e) of Article 4; or

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(c) allow, within its territory, any other State to dump at sea or discharge into the atmosphere any radioactive material or wastes. 4.

Each State Party undertakes not to: (a) seek or receive any assistance in the Commission of any act in violation of the provisions of Paragraphs 1, 2 and 3 of this Article; or (b) take any action to assist or encourage the Commission of any act in violation of the provisions of Paragraphs 1, 2 and 3 of this Article. Article 4 USE OF NUCLEAR ENERGY FOR PEACEFUL PURPOSES

1. 2.

3.

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Nothing in this Treaty shall prejudice the right of the States Parties to use nuclear energy, in particular for their economic development and social progress. Each State Party therefore undertakes: (a) to use exclusively for peaceful purposes nuclear material and facilities which are within its territory and areas under its jurisdiction and control; (b) prior to embarking on its peaceful nuclear energy programme, to subject its programme to rigorous nuclear safety assessment conforming to guidelines and standards recommended by the IAEA for the protection of health and minimization of danger to life and property in accordance with Paragraph 6 of Article III of the Statute of the IAEA; (c) upon request, to make available to another State Party the assessment except information relating to personal data, information protected by intellectual property rights or by industrial or commercial confidentiality, and information relating to national security; (d) to support the continued effectiveness of the international non-proliferation system based on the Treaty on the Non-Proliferation of Nuclear Weapons (NPT) and the IAEA safeguard system; and (e) to dispose radioactive wastes and other radioactive material in accordance with IAEA standards and procedures on land within its territory or on land within the territory of another State which has consented to such disposal. Each State Party further undertakes not to provide source or special fissionable material, or equipment or material especially designed or prepared for the processing, use or production of special fissionable material to: (a) any non-nuclear-weapon State except under conditions subject to the safeguards required by Paragraph 1 of Article III of the NPT; or

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(b) any nuclear-weapon State except in conformity with applicable safeguards agreements with the IAEA. Article 5 IAEA SAFEGUARDS Each State Party which has not done so shall conclude an agreement with the IAEA for the application of full scope safeguards to its peaceful nuclear activities not later than eighteen months after the entry into force for that State Party of the Treaty. Article 6 EARLY NOTIFICATION OF A NUCLEAR ACCIDENT Each State Party which has not acceded to the Convention on Early Notification of a Nuclear Accident shall endeavour to do so. Article 7 FOREIGN SHIPS AND AIRCRAFT Each State Party, on being notified, may decide for itself whether to allow visits by foreign ships and aircraft to its ports and airfields, transit of its airspace by foreign aircraft, and navigation by foreign ships through its territorial sea or archipelagic waters and overflight of foreign aircraft above those waters in a manner not governed by the rights of innocent passage, archipelagic sea lanes passage or transit passage. Article 8 ESTABLISHMENT OF THE COMMISSION FOR THE SOUTHEAST ASIA NUCLEAR WEAPON-FREE ZONE 1. 2.

3. 4.

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There is hereby established a Commission for the Southeast Asia Nuclear Weapon-Free Zone, hereinafter referred to as the “Commission”. All States Parties are ipso facto members or the Commission. Each State Party shall be represented by its Foreign Minister or his representative accompanied by alternates and advisers. The function of the Commission shall be to oversee the implementation of this Treaty and ensure compliance with its provisions. The Commission shall meet as and when necessary in accordance with the provisions of this Treaty including upon the request of any State Party. As far as possible, the Commission shall meet in conjunction with the ASEAN Ministerial Meeting.

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5.

6. 7. 8.

9.

At the beginning of each meeting, the Commission shall elect its Chairman and such other officers as may be required. They shall hold office until a new Chairman and other officers are elected at the next meeting. Unless otherwise provided for in this Treaty, two-thirds of the members of the Commission shall be present to constitute a quorum. Each member of the Commission shall have one vote. Except as provided for in this Treaty, decisions of the Commission shall be taken by consensus or, failing consensus, by a two-thirds majority of the members present and voting. The Commission shall, by consensus, agree upon and adopt rules of procedure for itself as well as financial rules governing its funding and that of its subsidiary organs. Article 9 THE EXECUTIVE COMMITTEE

1. 2.

3.

4.

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There is hereby established, as a subsidiary organ of the Commission, the Executive Committee. The Executive Committee shall be composed of all States Parties to this Treaty. Each State Party shall be represented by one senior official as its representative, who may be accompanied by alternates and advisers. The functions of the Executive Committee shall be to: (a) ensure the proper operation of verification measures in accordance with the provisions on the control system as stipulated in Article 10; (b) consider and decide on requests for clarification and for a fact-finding mission; (c) set up a fact-finding mission in accordance with the Annex of this Treaty; (d) consider and decide on the findings of a fact-finding mission and report to the Commission; (e) request the Commission to convene a meeting when appropriate and necessary; (f) conclude such agreements with the IAEA or other international organizations as referred to in Article 18 on behalf of the Commission after being duly authorized to do so by the Commission; and (g) carry out such other tasks as may, from time to time, be assigned by the Commission. The Executive Committee shall meet as and when necessary for the efficient exercise of its functions. As far as possible, the Executive Committee shall meet in conjunction with the ASEAN Senior Officials Meeting.

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5.

The Chairman of the Executive Committee shall be the representative of the Chairman of the Commission. Any submission or communication made by a State Party to the Chairman of the Executive Committee shall be disseminated to the other members of the Executive Committee. Two-thirds of the members of the Executive Committee shall be present to constitute a quorum. Each member of the Executive Committee shall have one vote. Decisions of the Executive Committee shall be taken by consensus or, failing consensus, by a two-thirds majority of the members present and voting.

6. 7. 8.

Article 10 CONTROL SYSTEM 1. 2.

There is hereby established a control system for the purpose of verifying compliance with the obligations of the States Parties under this Treaty. The Control System shall comprise: (a) the IAEA safeguards system as provided for in Article 5; (b) report and exchange of information as provided for in Article 11; (c) request for clarification as provided for in Article 12; and (d) request and procedures for a fact-finding mission as provided for in Article 13. Article 11 REPORT AND EXCHANGE OF INFORMATION

1.

2.

Each State Party shall submit reports to the Executive Committee on any significant event within its territory and areas under its jurisdiction and control affecting the implementation of this Treaty. The States Parties may exchange information on matters arising under or in relation to this Treaty. Article 12 REQUEST FOR CLARIFICATION

1.

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Each State Party shall have the right to request another State Party for clarification concerning any situation which may be considered ambiguous or which may give rise to doubts about the compliance of that State Party with this Treaty. It shall inform the Executive Committee of such a request. The requested State Party shall duly respond by providing without delay the necessary

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2.

information and inform the Executive Committee of its reply to the requesting State Party. Each State Party shall have the right to request the Executive Committee to seek clarification for another State Party concerning any situation which may be considered ambiguous or which may give rise to doubts about compliance of that State Party with this Treaty. Upon receipt of such a request, the Executive Committee shall consult the State Party from which clarification is sought for the purpose of obtaining the clarification requested. Article 13 REQUEST FOR A FACT-FINDING MISSION

A State Party shall have the right to request the Executive Committee to send a factfinding mission to another State Party in order to clarify and resolve a situation which may be considered ambiguous or which may give rise to doubts about compliance with the provisions of this Treaty, in accordance with the procedure contained in the Annex to this Treaty. Article 14 REMEDIAL MEASURES 1.

2.

3.

4.

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In case the Executive Committee decide in accordance with the Annex that there is a breach of this Treaty by a State Party, that State Party shall, within a reasonable time, take all steps necessary to bring itself in full compliance with this Treaty and shall promptly inform the Executive Committee of the action taken or proposed to be taken by it. Where a State Party fails or refuses to comply with the provisions of Paragraph 1 of this Article, the Executive Committee shall request the Commission to convene a meeting in accordance with the provisions of Paragraph 3(e) of Article 9. At the meeting convened pursuant to Paragraph 2 of this Article, the Commission shall consider the emergent situation and shall decide on any measure it deems appropriate to cope with the situation, including the submission of the matter to the IAEA and, where the situation might endanger international peace and security, the Security Council and the General Assembly of the United Nations. In the event of breach of the Protocol attached to this Treaty by a State Party to the Protocol, the Executive Committee shall convene a special meeting of the Commission to decide on appropriate measures to be taken.

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Article 15 SIGNATURE, RATIFICATION, ACCESSION, DEPOSIT AND REGISTRATION 1.

2.

3. 4. 5.

This Treaty shall be open for signature by all States in Southeast Asia, namely, Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam. This Treaty shall be subject to ratification in accordance with the constitutional procedure of the signatory states. The instruments of ratification shall be deposited with the Government of the Kingdom of Thailand which is hereby designated as the Depositary State. This Treaty shall be open for accession. The instruments of accession shall be deposited with the Depositary State. The Depositary State shall inform the other States Parties to this Treaty on the deposit of instruments of ratification or accession. The Depositary State shall register this Treaty and its Protocol pursuant to Article 102 of the Charter of the United Nations. Article 16 ENTRY INTO FORCE

1. 2.

This Treaty shall enter into force on the date of the deposit of the seventh instrument of ratification and/or accession. For States which ratify or accede to this Treaty after the date of the seventh instrument of ratification or accession, the Treaty shall enter into force on the date of deposit of its instrument of ratification or accession. Article 17 RESERVATIONS

This Treaty shall not be subject to reservations. Article 18 RELATIONS WITH OTHER INTERNATIONAL ORGANIZATIONS The Commission may conclude such agreements with the IAEA or other international organizations as it considers likely to facilitate the efficient operation of the control system established by this Treaty.

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Article 19 AMENDMENTS 1.

2.

Any State Party may propose amendments to this Treaty and its Protocol and shall submit its proposals to the Executive Committee, which shall transmit them to all the other States Parties. The Executive Committee shall immediately request the Commission to convene a meeting to examine the proposed amendments. The quorum required for such a meeting shall be all the members of the Commission. Any amendment shall be adopted by a consensus decision of the Commission. Amendments adopted shall enter into force 30 days after the receipt by the Depositary State of the seventh instrument of acceptance from the States Parties. Article 20 REVIEW

Ten years after this Treaty enters into force, a meeting of the Commission shall be convened for the purpose of reviewing the operation of the Treaty. A meeting of the Commission for the same purpose may also be convened at anytime thereafter if there is consensus among all its members. Article 21 SETTLEMENT OF DISPUTES Any dispute arising from the interpretation of the provisions of this Treaty shall be settled by peaceful means as may be agreed upon by the States Parties to the dispute. If within one month, the parties to the dispute are unable to achieve a peaceful settlement of the dispute by negotiation, mediation, enquiry or conciliation, any of the parties concerned shall, with the prior consent of the other parties concerned, refer the dispute to arbitration or to the International Court of Justice. Article 22 DURATION AND WITHDRAWAL 1. 2.

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This Treaty shall remain in force indefinitely. In the event of a breach by any State Party of this Treaty essential to the achievement of the objectives of the Treaty, every other State Party shall have the right to withdraw from the Treaty.

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3.

Withdrawal under Paragraph 2 of Article 22, shall be effected by giving notice twelve months in advance to the members of the Commission.

IN WITNESS WHEREOF, the undersigned have signed this Treaty. DONE at Bangkok, this fifteenth day of December, one thousand nine hundred and ninety-five, in one original in the English language.

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APPENDIX VIII AGREEMENT ON THE COMMON EFFECTIVE PREFERENTIAL TARIFF SCHEME FOR THE ASEAN FREE TRADE AREA The Governments of Brunei Darussalam, the Republic of Indonesia, Malaysia, the Republic of the Philippines, the Republic of Singapore and the Kingdom of Thailand, Member States of the Association of South, East Asian Nations (ASEAN): MINDFUL of the Declaration of ASEAN Concord signed in Bali, Indonesia on 24 February 1976 which provides that Member States shall cooperate in the field of trade in order to promote development and growth of new production and trade; RECALLING that the ASEAN Heads of Government, at their Third Summit Meeting held in Manila on 13–15 December 1987, declared that Member States shall strengthen intra-ASEAN economic cooperation to maximise the realisation of the region’s potential in trade and development; NOTING that the Agreement on ASEAN Preferential Trading Arrangements (PTA) signed in Manila on 24 February 1977 provides for-the adoption of various instruments on trade liberalisation on a preferential basis; ADHERING to the principles, concepts and ideals of the Framework Agreement on Enhancing ASEAN Economic Cooperation signed in Singapore on 28 January 1992; CONVINCED that preferential trading arrangements among ASEAN Member States will act as a stimulus to the strengthening of national and ASEAN Economic resilience, and the development of the national economies of Member States by expanding investment and production opportunities, trade, and foreign exchange earnings; DETERMINED to further cooperate in the economic growth of the region by accelerating the liberalisation of intra-ASEAN trade and investment with the objective of creating the ASEAN Free Trade Area using the Common Effective Preferential Tariff (CEPT) Scheme;

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DESIRING to effect improvements on the ASEAN PTA in consonance with ASEAN’s international commitments; HAVE AGREED AS FOLLOWS: ARTICLE 1: DEFINITIONS For the purposes of this Agreement: 1. “CEPT” means the Common Effective Preferential Tariff, and it is an agreed effective tariff, preferential to ASEAN, to be applied to goods originating from ASEAN Member States, and which have been identified for inclusion in the CEPT Scheme in accordance with Articles 2 (5) and 3. 2. “Non-Tariff Barriers” mean measures other than tariffs which effectively prohibit or restrict import or export of products within Member States. 3. “Quantitative restrictions” mean prohibitions or restrictions on trade with other Member States, whether made effective through quotas, licenses or other measures with equivalent effect, including administrative measures and requirements which restrict trade. 4. “Foreign exchange restrictions” mean measures taken by Member States in the form of restrictions and other administrative procedures in foreign exchange which have the effect of restricting trade. 5. “PTA” means ASEAN Preferential Trading Arrangements stipulated in the Agreement on ASEAN Preferential Trading Arrangements, signed in Manila on 24 February 1977, and in the Protocol on Improvements on Extension of Tariff Preferences under the ASEAN Preferential Trading Arrangements (PTA), signed in Manila on 15 December 1987. 6. “Exclusion List” means a list containing products that are excluded from the extension of tariff preferences under the CEPT Scheme. 7. “Agricultural products” mean: • (a) agricultural raw materials/unprocessed products covered under Chapters 1–24 of the Harmonised System (HS), and similar agricultural raw materials/unprocessed products in other related HS Headings; and • (b) products which have undergone simple processing with minimal change in form from the original products. ARTICLE 2: GENERAL PROVISIONS 1. 2.

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All Member States shall participate in the CEPT Scheme. Identification of products to be included in the CEPT Scheme shall be on a sectoral basis, i.e., at HS 6-digit level.

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3.

4. 5.

6. 7.

Exclusions at the HS 8/9 digit level for specific products are permitted for those Member States, which are temporarily not ready to include such products in the CEPT Scheme. For specific products, which are sensitive to a Member State. pursuant to Article 1 (3) of the Framework Agreement on Enhancing ASEAN Economic Cooperation, a Member State may exclude products from the CEPT Scheme, subject to a waiver of any concession herein provided for such products. A review of this Agreement shall be carried out in the eighth year to decide on the final Exclusion List or any amendment to this Agreement. A product shall be deemed to be originating from ASEAN Member States, if at least 40% of its content originates from any Member State. All manufactured products, including capital goods, processed agricultural products and those products falling outside the definition of agricultural products, as set out in this Agreement, shall be in the CEPT Scheme. These products shall automatically be subject to the schedule of tariff reduction, as set out in Article 4 of this Agreement. In respect of PTA items, the schedule of tariff reduction provided for in Article 4 of this Agreement shall be applied, taking into account the tariff rate after the application of the existing margin of preference (MOP) as at 31 December 1992. All products under the PTA which are not transferred to the CEPT Scheme shall continue to enjoy the MOP existing as at 31 December 1992. Member States, whose tariffs for the agreed products are reduced from 20% and below to 0%–5%, even though granted on an MFN basis, shall still enjoy concessions. Member States with tariff rates at MFN rates of 0%–5% shall be deemed to have satisfied the obligations under this Agreement and shall also enjoy the concessions. ARTICLE 3: PRODUCT COVERAGE

This Agreement shall apply to all manufactured products, including capital goods, processed agricultural products, and those products failing outside the definition of agricultural products as set out in this Agreement. Agricultural products shall be excluded from the CEPT Scheme. ARTICLE 4: SCHEDULE OF TARIFF REDUCTION 1.

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Member States agree to the following schedule of effective preferential tariff reductions: • (a) The reduction from existing tariff rates to 20% shall be done within a time frame of 5 years to 8 years, from 1 January 1993, subject to a programme of reduction to be decided by each Member State, which shall

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2.

3.

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be announced at the start of the programme. Member States are encouraged to adopt an annual rate of reduction, which shall be (X-20)%/5 or 8, where X equals the existing tariff rates of individual Member States. • (b) The subsequent reduction of tariff rates from 20% or below shall be done within a time frame of 7 years. The rate of reduction shall be at a minimum of 5% quantum per reduction. A programme of reduction to be decided by each Member State shall be announced at the start of the programme. • (c) For products with existing tariff rates of 20% or below as at 1 January 1993, Member States shall decide upon a programme of tariff reductions, and announce at the start, the schedule of tariff reductions. Two or more Member States may enter into arrangements for tariff reduction to 0%–5% on specific products at an accelerated pace to be announced at the start of the programme. Subject to Articles 4 (1) (b) and 4 (1) (c) of this Agreement, products which reach, or are at tariff rates of 20% or below, shall automatically enjoy the concessions. The above schedules of tariff reduction shall not prevent Member States from immediately reducing their tariffs to 0%–5% or following an accelerated schedule of tariff reduction. ARTICLE 5: OTHER PROVISIONS

A. 1.

2.

B.

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Quantitative Restrictions and Non-Tariff Barriers Member States shall eliminate all quantitative restrictions in respect of products under the CEPT Scheme upon enjoyment of the concessions applicable to those products. Member States shall eliminate other non-tariff barriers on a gradual basis within a period of five years after the enjoyment of concessions applicable to those products. Foreign Exchange Restrictions Member States shall make exceptions to their foreign exchange restrictions relating to payments for the products under the CEPT Scheme, as well as repatriation of such payments without prejudice to their rights under Article XVIII of the General Agreement on Tariff and Trade (GATT) and relevant provisions of the Articles of Agreement of the International Monetary Fund (IMF).

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C.

Other Areas of Cooperation Member States shall explore further measures on border and non-border areas of cooperation to supplement and complement the liberalisation of trade. These may include, among others, the harmonisation of standards, reciprocal recognition of tests and certification of products, removal of barriers to foreign investments, macroeconomic consultations, rules for fair competition, and promotion of venture capital.

D.

Maintenance of Concessions Member States shall not nullify or impair any of the concessions as agreed upon through the application of methods of customs valuation, any new charges or measures restricting trade, except in cases provided for in this Agreement. ARTICLE 6: EMERGENCY MEASURES

1.

2.

3.

If, as a result of the implementation of this Agreement, import of a particular product eligible under the CEPT Scheme is increasing in such a manner as to cause or threaten to cause serious injury to sectors producing like or directly competitive products in the importing Member States, the importing Member States may, to the extent and for such time as may be necessary to prevent or to remedy such injury, suspend preferences provisionally and without discrimination, subject to Article 6 (3) of this Agreement. Such suspension of preferences shall be consistent with the GATT. Without prejudice to existing international obligations, a Member State, which finds it necessary to create or intensify quantitative restrictions or other measures limiting imports with a view to forestalling the threat of or stopping a serious decline of its monetary reserves, shall endeavour to do so in a manner, which safeguards the value of the concessions agreed upon. Where emergency measures are taken pursuant to this Article, immediate notice of such action shall be given to the Council referred to in Article 7 of this Agreement, and such action may be the subject of consultation as provided for in Article 8 of this Agreement. ARTICLE 7: INSTITUTIONAL ARRANGEMENTS

1.

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The ASEAN Economic Ministers (AEM) shall, for the purposes of this Agreement, establish a ministerial-level Council comprising one nominee from each Member State and the Secretary-General of the ASEAN Secretariat. The ASEAN Secretariat shall provide the support to the ministerial-level

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2.

3.

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Council for supervising, coordinating and reviewing the implementation of this Agreement, and assisting the AEM in all matters relating thereto. In the performance of its functions, the ministerial-level Council shall also be supported by the Senior Economic Officials’ Meeting (SEOM). Member States which enter into bilateral arrangements on tariff reductions pursuant to Article 4 of this Agreement shall notify all other Member States and the ASEAN Secretariat of such arrangements. The ASEAN Secretariat shall monitor and report to the SEOM on the implementation of the Agreement pursuant to the Article III (2) (8) of the Agreement on the Establishment of the ASEAN Secretariat. Member States shall cooperate with the ASEAN Secretariat in the performance of its duties. ARTICLE 8: CONSULTATIONS

1.

2.

3.

Member States shall accord adequate opportunity for consultations regarding any representations made by other Member States with respect to any matter affecting the implementation of this Agreement. The Council referred to in Article 7 of this Agreement, may seek guidance from the AEM in respect of any matter for which it has not been possible to find a satisfactory solution during previous consultations. Member States, which consider that any other Member State has not carried out its obligations under this Agreement, resulting in the nullifications or impairment of any benefit accruing to them, may, with a view to achieving satisfactory adjustment of the matter, make representations or proposal to the other Member States concerned, which shall give due consideration to the representations or proposal made to it. Any differences between the Member States concerning the interpretation or application of this Agreement shall, as far as possible, be settled amicably between the parties. If such differences cannot be settled amicably, it shall be submitted to the Council referred to in Article 7 of this Agreement, and if necessary, to the AEM. ARTICLE 9: GENERAL EXCEPTIONS

Nothing in this Agreement shall prevent any Member State from taking action and adopting measures, which it considers necessary for the protection of its national security, the protection of public morals, the protection of human, animal or plant life and health, and the protection of articles of artistic, historic and archaeological value.

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ARTICLE 10: FINAL PROVISIONS 1. 2. 3. 4.

5.

The respective Governments of Member States shall undertake the appropriate measures to fulfil the agreed obligations arising from this Agreement. Any amendment to this Agreement shall be made by consensus and shall become effective upon acceptance by all Member States. This Agreement shall be effective upon signing. This Agreement shall be deposited with the Secretary-General of the ASEAN Secretariat, who shall likewise promptly furnish a certified copy thereof to each Member State. No reservation shall be made with respect to any of the provisions of this Agreement. In witness Whereof, the undersigned, being duly authorised thereto by their respective Governments, have signed this Agreement on Common Effective Preferential Tariff (CEPT) Scheme for the Free Trade Area (AFTA).

Done at Singapore, this 28th day of January, 1992 in a single copy in the English Language.

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APPENDIX VIII (a)

APPENDIX VIII (a) PROTOCOL TO AMEND THE AGREEMENT ON THE COMMON EFFECTIVE PREFERENTIAL TARIFF SCHEME FOR THE ASEAN FREE TRADE AREA The Governments of Brunei Darussalam, the Republic of Indonesia, Malaysia, the Republic of the Philippines, the Republic of Singapore and the Kingdom of Thailand, Member States of the Association of South East Asian Nations (ASEAN); NOTING the Agreement on the Common Effective Preferential Tariff (CEPT) Scheme for the ASEAN Free Trade Area (AFTA) (“the Agreement”) signed in Singapore on 28 January 1992; RECALLING the Protocol to Amend the Framework Agreement on Enhancing ASEAN Economic Cooperation (1992) signed on 15 December 1995 in Bangkok by the Heads of Government reflecting the acceleration of the CEPT Scheme for AFTA from the year 2008 to the year 2003; RECOGNISING the need to amend the Agreement to reflect the latest developments in ASEAN; HAVE AGREED AS FOLLOWS: ARTICLE 1 Article 2, paragraphs 3,5 and 6 of the Agreement be amended to read as follows: “3. Exclusions at the HS 8/9 digit level for specific products are permitted for those Member States, which are temporarily not ready to include such products in the CEPT Scheme. For specific products, which are sensitive to a Member State, pursuant to Article 1 (3) of the Framework Agreement on Enhancing ASEAN Economic Cooperation, a Member State may exclude products from the CEPT Scheme, subject to a waiver of any concession herein provided for such products. These temporarily excluded products are to be gradually included into the CEPT by 1 January 2000. 5. All manufactured products, including capital goods, and agricultural products shall be in the CEPT Scheme. These products shall automatically

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APPENDIX VIII (a) 205

be subject to the schedule of tariff reduction set out in Article 4 of the Agreement as revised in Article 3 of this Protocol. In respect of PTA items, the schedule of tariff reduction provided for in the revised Article 4(A) set out in Article 3 of this Protocol shall be applied, taking into account the tariff rate after the application of tile existing margin of preference (MOP) as at 31 December 1992. 6. All products under the PTA which are not in the list for tariff reductions of the CEPT Scheme shall continue to enjoy the MOPs existing as at 31 December 1992.”. ARTICLE 2 Article 3 of the Agreement be amended to read as follows: “This Agreement shall apply to all manufactured products including capital goods, and agricultural products.”. ARTICLE 3 Article 4 of the Agreement be substituted with the following: “Schedule of Tariff Reduction and Enjoyment of concessions A. 1.

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Schedule of Tariff Reduction Member States agree to the following schedule of effective preferential tariff reductions: a. The reduction from existing tariff rates to 20% shall be completed within a time frame of 5 years, from 1 January 1993, subject to a programme of reduction to be decided by each Member State, which shall be announced at the start of the programme. Member States are encouraged to adopt an annual rate of reduction, which shall be (X-20)%/5, where X equals the existing tariff rates of individual Member States. b. The subsequent reduction of tariff rates from 20% or below shall be completed within a time frame of 5 years. The rate of reduction shall be at a minimum of 5% quantum per reduction. A programme of reduction to be decided by each Member State shall be announced at the start of the programme.

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c.

2.

B.

For products with existing tariff rates of 20% or below as at 1 January 1993, Member States shall decide upon a programme of tariff reductions, and announce at the start, the schedule of tariff reductions. The above schedules of tariff reduction shall not prevent Member States from immediately reducing their tariffs to 0%–5% or following an accelerated schedule of tariff reduction. Enjoyment of Concessions Subject to Articles 4(A) (1 b) and 4(A) (1 c) of the Agreement, products which reach, or are at tariff rates of 20% or below, shall automatically enjoy the concessions.”. ARTICLE 4

The following be inserted after Article 9 as a new Article 9A to the Agreement: “Accession of New Members New Members of ASEAN shall accede to this Agreement on terms and conditions, which are consistent with the Framework Agreement on Enhancing ASEAN Economic Cooperation (1992) and the Agreement, and which have been agreed between them and the existing Members of ASEAN.” ARTICLE 5 This Protocol shall enter into force upon the deposit of instruments of ratification or acceptance by all signatory governments with the Secretary-General of ASEAN which shall be done not later than 1 January 1996. This Protocol shall be deposited with the Secretary-General of ASEAN, who shall promptly furnish a certified copy thereof to each Member Country. IN WITNESS WHEREOF, the undersigned, being duly authorised thereto by their respective Governments, have signed the Protocol to Amend the Common Effective Preferential Tariff (CEPT) Scheme for the ASEAN Free Trade Area (AFTA). DONE at Bangkok, this 15th day of December 1995 in a single copy in the English Language.

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APPENDIX IX 207

APPENDIX IX JOINT STATEMENT ON EAST ASIA COOPERATION 28 November 1999 1.

2.

3.

4.

5.

6.

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The Heads of State/Government of Brunei Darussalam, Kingdom of Cambodia, People’s Republic of China, Republic of Indonesia, Japan, Republic of Korea, Lao People’s Democratic Republic, Union of Myanmar, Republic of the Philippines, Republic of Singapore, Kingdom of Thailand, and Socialist Republic of Vietnam, and the Special Representative of the Prime Minister of Malaysia at the ASEAN+3 Summit in Manila, expressed satisfaction with the rapidly developing relations among their countries. They noted the bright prospects for enhanced interaction and closer linkages in East Asia and recognized the fact that this growing interaction has helped increase opportunities for cooperation and collaboration with each other, thereby strengthening the elements essential, for the promotion of peace, stability and prosperity in the region. Mindful of the challenges and opportunities in the new millennium, as well as the growing regional interdependence in the age of globalization and information, they agreed to promote dialogue and to deepen and consolidate collective efforts with a view to advancing mutual understanding, trust, good neighborliness and friendly relations, peace, stability and prosperity in East Asia and the world. In this context, they underscored their commitment to handling their mutual relations in accordance with the purposes and principles of the UN Charter, the Five Principles of Peaceful Co-existence, the Treaty of Amity and Cooperation in Southeast Asia, and the universally recognized principles of international law. Recalling the decision of the Leaders of ASEAN, China, Japan and the Republic of Korea at the 6th ASEAN Summit in Hanoi in December 1998, on the importance of holding a regular meeting among them and recognizing the ongoing efforts of the East Asia Vision Group, they agreed to enhance this dialogue process and strengthen cooperation with a view to advancing East Asian collaboration in priority areas of shared interest and concern even as they look to future challenges. In this context, they underscored their commitment to build upon existing consultative and cooperative processes, as well as joint efforts, in various levels and in various areas, in particular:

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a.

Economic and Social Fields • in economic cooperation, they agreed to strengthen efforts in accelerating trade, investments, technology transfer, encouraging technical cooperation in information technology and e-commerce, promotion of industrial and agricultural cooperation, strengthening of SMEs, promotion of tourism, encouraging active participation in the development of growth areas in East Asia, including the Mekong River Basin; to promote broader private sector participation in economic cooperation activities through considering networking initiatives such as an East Asian Business Council and industryspecific business fora for major regional industries; and to continue structural reform and to strengthen cooperation since these are essential to sustained economic growth and indispensable safeguards against the recurrence of economic crises in East Asia. • in monetary and financial cooperation, they agreed to strengthen policy dialogue, coordination and collaboration on the financial, monetary and fiscal issues of common interest, focusing initially on issues related to macroeconomic risk management, enhancing corporate governance, monitoring regional capital flows, strengthening banking and financial systems, reforming the international financial architecture, and enhancing self-help and support mechanisms in East Asia through the ASEAN+3 Framework, including the ongoing dialogue and cooperation mechanism of the ASEAN+3 finance and central bank leaders and officials; • in social and human resources development, they agreed on the importance of social and human resources development for sustained growth of East Asia by alleviating economic and social disparities within and among East Asian countries. In this regard, they agreed to heighten cooperative efforts in such areas as the implementation of the ASEAN HRD Initiative by establishing a Human Resource Development Fund and the ASEAN Action Plan on Social Safety Nets; • in the area of scientific and technical development, they agreed to strengthen cooperation in these areas to enhance capacity-building for the promotion of economic development and sustained growth in East Asia; • in the cultural and information area, they agreed to strengthen regional cooperation in projecting an Asian point of view to the rest of the world and in intensifying efforts in enhancing people-to-people contacts and in promoting cultural understanding, goodwill and peace, focusing on the strengths and virtues of East Asian cultures and building upon the recognition that the region partly derives its strength from its diversity;

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•

b.

7.

8.

9.

in development cooperation, they agreed on the importance of generating and extending support for ASEAN efforts in the implementation of the Hanoi Plan of Action to advance economic and sustainable development, technical capability, and the standard of living of the people with the view to fulfilling long-term economic and political stability in the region; Political and Other Fields • in the political-security area, they agreed to continuing dialogue, coordination, and cooperation to increase mutual understanding and trust towards forging lasting peace and stability in East Asia; • in the area of transnational issues, they agreed to strengthen cooperation in addressing common concerns in this area in East Asia. Noting how their collective efforts and cooperation agenda support and complement the initiatives of various multilateral fora, the Leaders agreed to intensify coordination and cooperation in various international and regional fora such as the UN, WTO, APEC, ASEM, and the ARF, as well as in regional and international financial institutions. Determined to realize East Asia cooperation in the various areas, they tasked the relevant Ministers to oversee through existing mechanisms, particularly their senior officials, the implementation of this Joint Statement. They agreed to the holding of an ASEAN+3 Foreign Ministers Meeting in the margins of the Post Ministerial Conference in Bangkok, Thailand in the year 2000 to review the progress of the implementation of this Joint Statement. Finally, they expressed greater resolve and confidence in further deepening and broadening East Asia cooperation towards generating concrete results with tangible impact on the quality of life of the people of East Asia and stability in the region in the 21st century.

Manila, Philippines

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INDEX 211

Index

AFTA Plus, 14, 25, 36–37, 38, 40. See also ASEAN Free Trade Area Andean Community, 40, 45 Anglo-Burmese Wars, 59 Anti-Fascist People’s Freedom Party (Myanmar), 61, 62, 65 ASEAN achievements, 55, 56–57 aims, 14–15 committees, 49, 52 definition, 9–10 formation, 11–15 image, 20, 50 ministerial meetings, 21, 51, 52, 53, 54, 83, 88, 90, 106, 127 Myanmar, as member of, 83, 84–90, 92, 103–9, 91–119, 124–25 prospects, 123–24 structure, 51–54 ASEAN Brand to Brand Complementation (BBC), 27, 28 ASEAN Foundation, 50, 90 ASEAN Free Trade Area (AFTA), 13, 14, 25, 26, 29–37, 39, 41, 45, 51, 56, 86, 88, 89, 90, 98, 101, 110, 111, 112–13, 116, 119, 122, 123, 124–25. See also AFTA Plus ASEAN Industrial Complementation (AIC), 27, 28 ASEAN Industrial Cooperation (AICO), 36–37, 88, 101 ASEAN Industrial Joint Ventures (AIJV), 28–29 ASEAN Industrial Projects (AIP), 27–28

10 Myanmar Index

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ASEAN Information Infrastructure (AII), 39 ASEAN Investment Area (AIA), 13, 37, 98, 99, 102, 116, 123 ASEAN Plan of Action, 48, 103 ASEAN Plus Three, 25, 40, 43–44, 124 ASEAN Post-Ministerial Conferences (PMC), 22, 23, 43 ASEAN Preferential Trading Agreement (PTA), 14, 25, 26–27, 52 ASEAN Regional Forum (ARF), 14, 23–24, 25, 55, 93–94, 118, 121, 123, 124 ASEAN Secretariat, 17, 51, 52, 53, 89 ASEAN Six, 5, 10, 31–32, 34, 52, 110, 111, 112, 114, 116. See also individual member states ASEAN Summits, 51–52, 90 First (Bali), 13, 16, 18, 27, 48, 51, 52 Second (Kuala Lumpur), 16, 38 Third (Manila), 16, 17, 44, 47, 48 Fourth (Singapore), 16–17, 29, 31, 36, 123 Fifth (Bangkok), 48 Sixth (Hanoi), 19, 31, 37 Ninth (Bali), 127 ASEAN Ten, 4, 10, 13, 15, 83, 110, 111, 112, 123, 127. See also individual member states ASEAN Treaty of Amity & Cooperation (TAC), 13, 16, 18, 48, 52, 83, 86, 92 ASEAN University Network, 47, 48, 56, 121 ASEAN Vision 2020, 38–39, 106–7, 123 ASEAN Way, 18, 19–20, 21, 54, 56–57, 84, 92, 108, 121–22, 124 ASEAN-China Free Trade Area, 13–14, 47

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212

INDEX

Asia-Europe Meeting (ASEM), 10, 24–25, 42–43, 44, 121, 125 Myanmar issue, 105–7, 108, 127–28 Asian and Pacific Council (ASPAC), 12, 13 Asian Development Bank (ADB), 12, 13, 67, 76, 103 Asian financial crisis, 9, 20, 43–44, 73, 76, 80, 114, 122, 124 Asian Industrial Development Council (AIDC), 12 Asian Institute for Economic Development and Planning (AIEDP), 12 Asian Institute of Technology (AIT), 12 Asia-Pacific Economic Cooperation (APEC), 13, 24, 40, 41, 121 Association of Southeast Asia (ASA), 12, 13 Association of Southeast Asian Nations. See ASEAN Aung San, 61, 70 Aung San Suu Kyi, 70, 109, 127 Australia, 12, 13, 23, 40, 105 Australia & New Zealand Closer Economic Relations Trade Agreement (CER), 7, 13, 40, 41

Canada, 23, 40, 43 Chiang Mai Initiative, 37, 44 China, 2, 12, 13, 17, 21, 22, 23, 24, 25, 35, 40, 43–44, 55, 67, 71, 86, 92, 103 Cultural Revolution, 13, 17 relations with Myanmar, 81 Closer Economic Relations. See Australia & New Zealand Closer Economic Relations Trade Agreement (CER) Colombo Plan, 12 Common Effective Preferential Tariff (CEPT) Scheme, 29, 30–31, 31–34, 41, 56, 89, 90, 99–110, 116, 117, 119 Communist Party of Burma, 61, 67 Confrontation. See Konfrontasi Constitutional Democracy (Myanmar), 61–65 constructive engagement, 19–20, 21, 92, 108–9 constructive intervention, 109 crime, 48, 49, 62 cultural cooperation, intra-ASEAN, 10, 42, 48, 49, 52, 56

Bago, 59 Bangkok Declaration, 9, 11, 13, 14, 47–48, 55, 83 Bamar, 7, 59 bilateral relations, intra-ASEAN, 15, 18, 19, 20, 21–22, 55, 108 Britain, 11, 12, 22 Brunei, 2, 4, 7, 10, 13, 55 Burma, 11, 17, 59–60, 70. See also Myanmar Burma Socialist Programme Party, 61, 65, 66–69 Burman people. See Bamar Burmese way to socialism, 60, 65, 69

Dawei, 59 Declaration of ASEAN Concord, 16, 18, 48 Dialogue Partners, ASEAN, 22–23, 40–41, 45–47. See also individual countries dispute settlement. See ASEAN Way drug abuse, 48, 49, 62

Cambodia, 1, 2, 4, 5, 9, 10, 11, 13, 17, 19, 21, 24, 25, 31, 32, 34, 35, 55, 56, 83, 84, 86, 87, 101, 111, 112, 123 Cambodia conflict, 17, 22, 55

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e-ASEAN, 102 East Asian Economic Caucus (EAEC), 43 Economic and Social Commission for Asia and the Pacific (UN/ESCAP), 12 economic cooperation extra-ASEAN, 40–47 intra-ASEAN, 10, 15, 25–36, 37, 44, 121, 122 Myanmar-ASEAN, 91–92, 93–94, 99, 103

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INDEX 213

Economic Cooperation Organization, 45 economic growth triangles, 35 economic integration measures, ASEAN, 36–37 environmental cooperation intra-ASEAN, 47, 49, 56, 103, 106–7 Myanmar-ASEAN, 107 European Community. See European Union (EU) European Free Trade Area (EFTA), 47 European Union (EU), 7, 13, 23, 29, 30, 39, 40, 41, 42, 55, 56, 84, 86, 105, 108, 121, 122, 123, 127 relations with Myanmar, 25, 124 sanctions against Myanmar, 104, 105, 125, 127 flexible engagement, 20, 21, 92 France, 22 free trade agreements, 13–14, 18, 25, 111–12 functional cooperation intra-ASEAN, 24, 47–50, 56, 121 Myanmar-ASEAN, 91–92, 103 Gulf Cooperative Council, 45 Hanoi Action Plan, 19, 37, 38–39, 107, 124 haze problem, 20, 106 human rights, 20 India, 2, 13, 23, 40, 91 Indonesia, 2, 4, 7, 9, 19, 11, 12, 13, 14, 17, 19, 20, 22, 44, 56 Innwa, 59 International Monetary Fund, 67–68 investment flows, 37, 39–40, 114–16, 121, 123 intra-ASEAN, 40, 114–16 Myanmar-ASEAN, 98, 101–2, 114–16 Japan, 2, 4, 13, 22, 23, 25, 36, 40, 41, 43–44, 92, 105, 123

10 Myanmar Index

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Kansu Report, 26 Kayin, 8 Khin Nyunt, 125 Konfrontasi, 15, 17, 22 Korea. See North Korea, South Korea Laos, 1, 2, 4, 5, 9, 10, 11, 13, 17, 19, 24, 25, 31, 32, 34, 35, 55, 56, 83, 84, 86, 87, 101, 111, 108, 123 Mahathir Mohamed, 43, 86, 107 Malaysia, 1, 2, 4, 5, 7, 9, 10, 11, 12, 13, 17, 19, 20, 31, 56, 79 relations with Myanmar, 93–94 Manila Declaration, 16, 17 Manila Treaty, 12 Maphilindo, 12, 13 Mekong Commission, 12, 13 MERCOSUR, 39, 47, 121, 122 Mexico, 43 Mongolia, 23, 41, 46, 47 Myanmar, 1, 2, 17, 19, 20, 21, 24, 25, 31, 32, 34, 35, 55, 56, 121, 122, 123, 124. See also Burma agriculture, 8, 66, 68, 73–76, 80 British rule, 59–60, 61 demography, 7–8 development plans, 63, 68 economic development, 60, 62–81, 111–17, 125 elections, 61, 69, 70 GDP, 64–66, 71–72, 74–76, 77–78, 79 geography, 7 history, 59–81 human development index, 79 human rights, 25, 83, 104 in ASEAN, 8, 9, 10, 13, 83, 84–90, 91–119, 103–9, 110, 114–17, 118, 119, 124–25 investment flows, 71, 73, 76, 94–98, 102, 110, 114, 116, 119 Japanese Occupation, 60 military coup, 67, 69

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214

INDEX

political development, 61–62, 65–67, 69–71, 125 relations with ASEAN states, 92, 93–94, 94–98, 108, 111–12, 114–17 relations with non-ASEAN countries, 25, 43, 91, 92, 105, 108, 125 resources, 8 sanctions against, 91, 92, 104, 105, 125, 127 social development, 5, 66–79, 80, 81 state-owned enterprises, 58, 76, 102, 111, 125 tariff rates, 31, 32, 34, 87, 88, 90, 99–101, 102, 111, 119 tourism, 99–95 Myanmar Institute of Strategic & International Studies, 88, 89 National Convention (Myanmar), 70 National League for Democracy Party, 70, 109 Ne Win, 61–63, 67 Netherlands, 22 New Zealand, 12, 13, 23, 40 Non-Aligned Movement, 84, 111 non-interference. See ASEAN Way North America Free Trade Association (NAFTA), 7, 13, 30, 39, 41, 43, 47, 56, 121 North Korea, 23, 41, 46, 47 Nu, U, 61, 62, 65 Ohn Gyaw, U, 104, 125 Pakistan, 12, 41, 46, 47 Papua New Guinea, 2, 23, 41, 46, 47 Paris Peace Treaty, 16, 17 Pedra Branca, 18 Philippines, 2, 4, 5, 7, 9, 10, 11, 12, 13, 14, 17, 56, 67, 71 Pitsuwan, Surin, 19, 20, 21

10 Myanmar Index

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political cooperation intra-ASEAN, 10, 15–17, 18–21, 55, 121, 122, 123 Myanmar-ASEAN, 91–92 Portugal, 22 poverty, 47, 48, 50, 56 Pyay, 59 Pyidawtha Plan, 63 Rakhine, 8, 59 Regional organizations, 9, 11, 24–25, 45 Revolutionary Council (Myanmar), 61, 62, 65–69 Rio Group, 45 rural development, 47, 48, 50, 56 Russia, 23, 41. See also Soviet Union San Yu, 67 science and technology, 47, 48, 49, 56 security cooperation Asia-Pacific, 23–24 bilateral, 21–22, 23 intra-ASEAN, 10, 15, 17, 21–24, 55, 122 Myanmar-ASEAN, 91–92 Sein Win, U, 67 Shan, 7–8 Singapore, 1, 2, 4, 5, 6, 9, 10, 11, 13, 14, 19, 17, 56, 122, 124–25 Singapore Declaration, 17, 122 SLORC. See State Law & Order Council social cooperation, intra-ASEAN, 10, 49, 50, 52, 56 South Africa Development Community (SADC), 45 South Asian Association for Regional Cooperation (SAARC), 45 South Korea, 12, 13, 23, 25, 40–41, 43–44, 63 South Pacific Forum, 45 Southeast Asia Nuclear Weapon-Free Zone, 16, 92

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INDEX 215

Southeast Asia Treaty Organization (SEATO), 12 Southeast Asia, 1–2, 22 Soviet Union, 13, 22, 67, 71. See also Russia SPDC. See State Peace & Development Council State Law & Order Council (Myanmar), 61, 69–81, 104–5, 108, 109 State Peace & Development Council (Myanmar), 61, 69–81, 70 Taiwan, 13 tariff cuts, 27, 20–36, 56, 87, 88, 101, 123 terrorism, 24, 26, 36, 55 Thailand, 1, 2, 4, 5, 7, 9, 10, 11, 12, 13, 17, 20, 35, 44, 56, 63, 79 relations with Myanmar, 92 Than Shwe, 83 Timor Leste, 13 Toungoo, 59 trade extra-ASEAN, 41, 43, 111, 121

10 Myanmar Index

215

intra-ASEAN, 7, 14, 25–40, 56, 111, 114, 116–19, 121 Myanmar-ASEAN, 94–98, 101, 111, 114, 116, 117 Union of Myanmar Solidarity & Development Association (USDA), 70 United Nations Development Programme (UNDP), 41, 46 United States, 4, 11, 12, 22, 23, 30, 40, 41, 55, 83, 84, 86, 105, 123 relations with Myanmar, 104, 105, 108 sanctions against Myanmar, 91, 92 Vietnam, 1, 2, 4, 5, 9, 10, 11, 13, 17, 19, 21, 31, 32, 34, 35, 55, 56, 79, 86, 101, 111, 123 Vietnam War, 13, 16, 22 World Bank, 4, 67–68, 78 World Trade Organization (WTO), 87 Zone of Peace, Freedom & Neutrality (ZOPFAN), 15–16, 22, 92

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