The 2nd ASEAN Reader 9789812305299

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THE 2ND ASEAN READER

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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). The Institute is governed by a twenty-two-member Board of Trustees comprising nominees from the Singapore Government, the National University of Singapore, the various Chambers of Commerce, and professional and civic organizations. An Executive Committee oversees day-to-day operations; it is chaired by the Director, the Institute’s chief academic and administrative officer.

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THE 2ND ASEAN READER Compiled by Sharon Siddique and Sree Kumar

Institute of Southeast Asian Studies, Singapore

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Published in Singapore in 2003 by Institute of Southeast Asian Studies 30 Heng Mui Keng Terrace Pasir Panjang Singapore 119614 Internet e-mail: [email protected] World Wide Web: 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 copyright holders and the Institute of Southeast Asian Studies. © 2003 Institute of Southeast Asian Studies, Singapore Cataloguing-in-Publication Data The 2nd ASEAN reader/compiled by Sharon Siddique and Sree Kumar. 1. ASEAN. 2. Regionalism—Asia, Southeastern. 3. Asia, Southeastern—Politics and government. 4. Asia, Southeastern—Social conditions. 5. Asia, Southeastern—Economic integration. 6. Asia, Southeastern—Strategic aspects. 7. Asia, Southeastern—Foreign relations. I. Siddique, Sharon. II. Sree Kumar. III. T: Second ASEAN reader. IV. T. ASEAN reader. JX1979 A854 2003 ISBN 981-230-233-6 (soft cover) ISBN 981-230-234-4 (hard cover) Every effort has been made to identify copyright holders; in case of oversight, and on notification to the publisher, corrections will be made in the next edition. The responsibility for facts and opinions expressed in this publication rests exclusively with the authors and their interpretations do not necessarily reflect the views or the policy of the Institute or its supporters. Typeset by Superskill Graphics Pte Ltd Printed in Singapore by Seng Lee Press Pte Ltd

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CONTENTS

xiii

Preface

xv

Director’s Message K. KESAVAPANY

xvi

Foreword: New Challenges for ASEAN WANG GUNGWU

xix

Member States of ASEAN SECTION I: ASEAN: INSTITUTIONAL REDESIGN AND DYNAMICS Introduction by Sree Kumar 1.

3

Early Southeast Asian Political Systems

5

O. W. WOLTERS

2.

Post-Colonial Southeast Asia

12

JOHN BASTIN AND HARRY J. BENDA

3.

Post-War Regional Co-operation

16

PETER LYON

4.

The Formation of ASEAN

18

YOSHIYUKI HAGIWARA

5.

Institutional Framework: Recommendations for Change

22

MUTHIAH ALAGAPPA

6.

The Structure of Decision-Making

28

ZAKARIA HAJI AHMAD

7.

The Association of Southeast Asian Nations: Challenges and Responses

33

M. C. ABAD, Jr.

8.

ASEAN Institution Building

36

CHIN KIN WAH

9.

ASEAN during the Crisis

40

HADI SOESASTRO

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vi 10.

Contents The “ASEAN Way”

45

DAVID CAPIE AND PAUL EVANS

11.

ASEAN and Non-interference

52

ROBIN RAMCHARAN

12.

ASEAN: An Image Problem

58

GREG SHERIDAN

13.

Intramural Challenges to the “ASEAN Way”

62

JÜRGEN HAACKE

14.

Strategic Centrality: Indonesia’s Changing Role in ASEAN

66

ANTHONY L. SMITH

SECTION II: MEMBERSHIP EXPANSION ON A NEW POLITICAL CANVAS Introduction by Sree Kumar 15.

73

Intra-ASEAN Political, Security and Economic Co-operation

75

CHAN HENG CHEE

16.

ASEAN and Indochina: The Dialogue

81

CARLYLE THAYER

17.

Challenges for Society and Politics

85

CAROLINA G. HERNANDEZ

18.

Expectations and Experiences of the New Members: A Vietnamese Perspective

88

NGUYEN PHUONG BINH AND LUAN THUY DUONG

19.

Between China and ASEAN: The Dialectics of Recent Vietnamese Foreign Policy

97

DAVID WURFEL

20.

Vietnam and Its Neighbours: The Border Dispute Dimension

104

RAMSES AMER

21.

ASEAN Enlargement and Myanmar

108

TIN MAUNG MAUNG THAN AND MYA THAN

22.

The ASEAN Troika on Cambodia

114

JUANITO P. JARASA

23.

The Greater Mekong Subregion: An ASEAN Issue

117

KAO KIM HOURN AND SISOWATH D. CHANTO

24.

The Security Challenges in the GMS

123

SUCHIT BUNBONGKARN

25.

The GMS Co-operation Within the ASEAN Context

126

KAVI CHONGKITTAVORN

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Contents 26.

vii

Impact of ASEAN Enlargement on GMS Countries

129

MYA THAN AND GEORGE ABONYI

27.

Neighbourhood Watch and the East Timor/Aceh Crises

132

KHOO HOW SAN

SECTION III: SOCIETY, CULTURE AND RELIGION: INGREDIENTS FOR A NEW TAPESTRY Introduction by Sharon Siddique

28.

137

Managing Mobilization and Migration of Southeast Asia’s Population

139

GRAEME HUGO

29.

Media in Southeast Asia

141

RUSSELL HENG HIANG-KHNG

30.

The Role of Education in ASEAN Economic Growth

144

GAVIN JONES

31.

Climbing up the Technological Ladder

150

GOH CHOR BOON

32.

Human Rights and Regional Order

153

AMITAV ACHARYA

33.

Promoting Human Rights

159

SIDNEY JONES

34.

Human Security in Vietnam, Laos, and Cambodia

161

PIERRE P. LIZÉE

35.

Role of Nonstate Actors in Building an ASEAN Community

165

MAKITO NODA

36.

Ethnicity and Religion in Social Development

168

WANG GUNGWU

37.

Asia: Al Qaeda’s New Theatre

171

ROHAN GUNARATNA

38.

Islam and Society in Southeast Asia after 11 September

173

BARRY DESKER

39.

Islam in Southeast Asia: At the Crossroads

175

SHARON SIDDIQUE

40.

Building Knowledge Societies: ASEAN in the Information Age

178

RODOLFO C. SEVERINO

41.

ASEAN, the Wider Region and the World: The Social Agenda

182

CHANDRA MUZAFFAR

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viii

Contents SECTION IV: ECONOMICS, MODERNIZATION, AND CRISIS: AFTA AND AFTER

Introduction by Sree Kumar 42.

187

The ASEAN Model of Regional Co-operation

189

JOHN WONG

43.

The ASEAN Free Trade Area: The Search for a Common Prosperity

194

LEE TSAO YUAN

44.

Co-operation and Institutional Transformation in ASEAN: Insights from the AFTA Project

198

HELEN E. S. NESADURAI

45.

AFTA and the Politics of Regional Economic Co-operation

205

RICHARD STUBBS

46.

Intra-ASEAN Economic Co-operation

211

MARI PANGESTU, HADI SOESASTRO, AND MUBARIQ AHMAD

47.

The Expansion of AFTA

220

JAYANT MENON

48.

AFTA = Another Futile Trade Area?

226

MOHAMED ARIFF

49.

Foreign Direct Investment in ASEAN: Can AFTA Make a Difference?

230

PREMA-CHANDRA ATHUKORALA AND JAYANT MENON

50.

Privatization and Deregulation in ASEAN

234

NG CHEE YUEN AND NORBERT WAGNER

51.

ASEAN and the Asian Crisis

243

JÜRGEN RÜLAND

52.

External Capital Flows and Policy Challenges in the ASEAN Economies

249

J. MALCOLM DOWLING AND NARHARI RAO

53.

ASEAN and the Idea of an “Asian Monetary Fund”

254

SHAUN NARINE

SECTION V: GEOPOLITICS, DEFENCE AND SECURITY Introduction by Sharon Siddique 54.

263

Is ASEAN a Security Organization?

265

MICHAEL LEIFER

55.

A Post-Cold War Architecture for Peace and Security

269

SARASIN VIRAPHOL

56.

ASEAN and the Southeast Asian Security Complex

273

YUEN FOONG KHONG

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Contents 57.

ix

The ASEAN Regional Forum

276

AKIKO FUKUSHIMA

58.

The ASEAN-ISIS and CSCAP Experience

280

CAROLINA G. HERNANDEZ

59.

Evolution of the Security Dialogue Process in the Asia-Pacific Region

285

DALJIT SINGH

60.

New Security Issues and the Impact on ASEAN

289

KUSUMA SNITWONGSE AND SUCHIT BUNBONGKARN

61.

The Limits of Conflict Resolution in Southeast Asia

297

JUWONO SUDARSONO

62.

Alternative Security Models: Implications for ASEAN

303

WILLIAM T. TOW

63.

Disputes in the South China Sea: Approaches for Conflict Management

310

MOHAMED JAWHAR BIN HASSAN

64.

Integrating ASEAN and Fragmenting ARF in a Subregional and Regional Context

314

KWAN KWOK LEUNG

65.

Northeast Asia and ASEAN: Security Linkages, Implications and Arrangements

317

KUSNANTO ANGGORO

66.

Asia-Pacific Security: Strategic Trends and Military Developments

321

DEREK DA CUNHA

67.

The Interrelationship Between Global and Regional Security Issues

329

SEIZABURO SATO

SECTION VI: ASEAN AND MULTILATERAL RELATIONS Introduction by Sree Kumar 68.

337

ASEAN and the North-South Dialogue

339

ALI ALATAS

69.

The Parallel Tracks of Asian Multilateralism

342

SHELDON W. SIMON

70.

ASEAN and the International Trading System

348

H. S. KARTADJOEMENA

71.

EU-ASEAN Relationship

354

DJISMAN S. SIMANDJUNTAK

72.

The Asian Crisis Seen from Europe

358

ROLF J. LANGHAMMER

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x

Contents 73.

The ASEM Process and Co-operative Engagement in the 21st Century

366

K. S. NATHAN

74.

ASEAN and the Asia-Europe Meeting

370

TOMMY KOH

75.

APEC and ASEAN: Complementing or Competing?

373

MOHAMED ARIFF

76.

APEC and ASEAN: New Roles, New Directions

378

JANADAS DEVAN

77.

The Asian Crisis and the Adequacy of Regional Institutions

382

MICHAEL WESLEY

78.

AFTA and NAFTA: Complementing or Competing?

385

WISARN PUPPHAVESA AND MAUREEN GREWE

79.

Regionalism and Economic Integration in East Asia

390

SUNG-HOON PARK

80.

ASEAN Policy Responses to North American and European Trading Agreements

394

GORDON P. MEANS

SECTION VII: SIGNIFICANT OTHERS: ASEAN AND NATION-STATES Introduction by Sharon Siddique 81.

401

ASEAN’s Engagement with the U.S. in the 21st Century

403

CHIN KIN WAH

82.

Is There a U.S. Strategy for East Asia?

410

SHELDON W. SIMON

83.

The United States and the Aborted Asian Monetary Fund

415

RICHARD HIGGOTT

84.

Trends in U.S. Politics and Their Implications for America’s Asian Policy

420

WILLIAM J. BARNDS

85.

ASEAN-China Relations Turn the Corner

427

MELY CABALLERO-ANTHONY

86.

ASEAN’s Role in the Chinese Foreign Policy Framework

430

JOSEPH Y. S. CHENG

87.

ASEAN–China Trade and Investment Relations

436

CHIA SIOW YUE

88.

China–ASEAN Free Trade Area

440

SHENG LIJUN

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Contents 89.

xi

The Rhetoric of Australia’s Regional Policy

443

JAMES COTTON

90.

The ASEAN-10 and Japan

450

TAKANO TAKESHI

91.

Outlook for Japanese FDI in ASEAN

452

SEIICHI MASUYAMA

92.

ASEAN’s Role in Integrating Russia into the Asia Pacific Economy

458

AMADO M. MENDOZA, Jr.

93.

ASEAN in India’s Foreign Policy

463

AMITABH MATTOO

SECTION VIII: THE CHANGING LANDSCAPE: ASEAN GOING FORWARD Introduction by Sharon Siddique 94.

471

ASEAN Towards 2020: Strategic Goals and Critical Pathways

473

NOORDIN SOPIEE

95.

The Evolving Regional Role of ASEAN

478

MICHAEL LEIFER

96.

The Future of ASEAN

481

JULIUS CAESAR PARRENAS

97.

Prospects for Intra- and Extraregional Relations

484

SEKIGUCHI SUEO

98.

Future Directions for ASEAN

486

SURIN PITSUWAN

99.

ASEAN’s Past and the Challenges Ahead

489

JUSUF WANANDI

100.

ASEAN Vision 2020 and the Hanoi Plan of Action

493

SIMON S. C. TAY

101.

Overview of the Political Dimension of ASEAN’s Security

497

C.P.F. LUHULIMA

102.

ASEAN in a New Asia

500

TAN KONG YAM

103.

Towards an ASEAN Economic Community

503

HADI SOESASTRO

104.

Institutional Reforms to Achieve ASEAN Market Integration

509

NARONGCHAI AKRASANEE AND JUTAMAS ARUNANONDCHAI

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xii 105.

Contents Region, Security and the Return of History

514

ANTHONY MILNER

DOCUMENTATION ASEAN Declaration, Bangkok, 8 August 1967 Singapore Declaration of 1992, Singapore, 28 January 1992 ASEAN Vision 2020 Ha Noi Plan of Action Declaration on Terrorism, Phnom Penh, 2002

520 524 530 534 549

List of Abbreviations

551

Bibliography

559

The Contributors

593

The Compilers

603

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PREFACE

T

he Second ASEAN Reader has been designed to be either a stand-alone volume, or a companion volume to the (first) ASEAN Reader, published by ISEAS in 1992. The first volume contained excerpts from ASEAN-related scholarly publications, from the early days of regionalism up to the 1992 ASEAN Summit. The Second ASEAN Reader retains roughly ten per cent of the excerpts published in the first volume, but focuses on a selection of excerpts from scholarly writings published since the early 1990s. The present volume thus concentrates on documenting events and issues from 1990 to 2003. This timeframe can certainly be justified in terms of internal ASEAN developments — such as the expansion of ASEAN’s membership; the elaboration of an ASEAN Vision 2020; the implementation of AFTA; the founding of ARF; and the increased frequency of ASEAN formal and informal summits to name but a few. The regional and global economic, political, and security environments have also changed dramatically: the Soviet Union is no more; China has emerged as a global player; Japan has continued to struggle to overcome its economic and political malaise; and there have been fundamental shifts in U.S. foreign policy following September 11. In

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the region, the 1997 economic crisis has pushed ASEAN to rethink economic development models in the rapidly globalizing economic and security environments. Certainly the last decade has seen a flourishing of scholarly interest in things ASEAN, in the fields of international relations, economics, strategic and security studies, socio-cultural and religious studies, and last but not least, history. The excerpts in this volume thus are but a small sample of this vast literature. Selections were made to achieve some kind of balance of views across disciplines, and across countries, with authors from ASEAN countries, as well as the United States, Japan, China, India, Australia, Germany, and Britain. Although we would like to thank our colleagues for their assistance in introducing us to relevant materials, the final choice of selections was ours. The Reader is divided into eight sections, each highlighting an area that has been a concentration of scholarly interest. We assumed that this interest served, in a general sense, as an index of relevance in terms of issues, events, and activities, which have been pivotal to ASEAN’s evolution. Section I provides introductory background essays on the Southeast Asian region, during

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Preface

both pre- and post-ASEAN periods. Essays in Section II develop perspectives on one of the most significant processes of the last decade — ASEAN’s expansion from ASEAN-6 to ASEAN-10 — and the issues which this process raises both internally and with reference to external relations. Section III is devoted to the broad theme of social development, which includes such diverse topics as the impact of Islamic resurgence, information technology, and migration. Section IV discusses various dimensions of economic development in ASEAN, including AFTA, and ASEAN’s trading partners, and the impact and aftermath of the 1997 Asian financial crisis. Section V focuses on the evolving security dynamics of the region. Power realignments in the 1990s have prompted the redefinition of traditional security arrangements, while the enlarged scope of security to include human security has certainly impacted on regional conceptualizations. Sections VI and VII are devoted to portraying ASEAN’s relations with multilateral agencies, and with individual nation-states, respectively. The two sections illustrate the condition of the early twenty-first century, where nationstates and multilateral agencies both

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contribute to evolving power relations. Finally, in Section VIII, some future pathways are illuminated. The timetable for the realization of ASEAN’s Vision 2020 is being set. We would like to thank ISEAS Director, Mr K. Kesavapany, for his active interest in and support for the project. We would also like to thank ISEAS librarian, Ms Ch’ng Kim See, and staff for their valuable assistance. Our grateful thanks also to our “fellow collaborators”, the staff of the ISEAS Publications Unit: Mrs Triena Ong, Managing Editor, for her superb organizational skills; Mrs Celina Kiong, for her tenacity in tracking down copyright holders and authors, and also for collecting authors’ biodata; and finally, to Production Editor, Ms Rahilah Yusuf. She kept us on schedule, organized the bibliography, the documentation and photo sections, and managed the whole complex production process. However, we remain solely responsible for the contents of the volume.

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Sharon Siddique Sree Kumar

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DIRECTOR’S MESSAGE

A

SEAN was founded in 1967; ISEAS in 1968. Thus ASEAN has always been a focal point for ISEAS’ Southeast Asia vision. This has been reflected, through the years, in numerous seminars and meetings on ASEAN, and the sponsorship of many scholars researching ASEAN topics. These activities have resulted in hundreds of ISEAS publications, including articles, monographs, and books, on ASEAN. The first ISEAS ASEAN Reader was published in 1992. In late 2002 it was decided that it would be timely to produce The Second ASEAN Reader, which would concentrate mainly on evaluations and assessments of post-1992 internal ASEAN events, as well as concurrent fundamental regional and global changes. Former ISEAS Deputy Director, Sharon Siddique, and former ISEAS Fellow, Sree Kumar, were approached to co-ordinate the compilation of The Second ASEAN Reader.

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Many ISEAS research staff who have contributed to the body of literature on ASEAN are represented in the volume. Also, it can be noted with some pride that many of the authors — from ASEAN member states and the United States, Europe, Japan and Australia — have at one time or other in their careers been associated with ISEAS. Thus The Second ASEAN Reader is, in a way, a gathering of “friends of ISEAS”, as well as a testimony to ISEAS’ deep and abiding interest in the evolution of ASEAN in Southeast Asia. I would like to thank all those who contributed to the success of this project. My special thanks go to Sharon and Sree.

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K. Kesavapany Director Institute of Southeast Asian Studies Singapore

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FOREWORD New Challenges for ASEAN

WANG GUNGWU

N

o one in the 1950s expected that anticolonialism in Southeast Asia would give way to anti-communism and that this would be followed less than 40 years later by the triumph of capitalism. That last triumph did not mean that there would be greater certainty in the region. ASEAN has had to adjust to a world dominated by a single superpower. Since September 11, 2001, this dominance is starker still and all countries face a newly aroused United States of America. ASEAN will have to see if it now has more choice to pick its own script or will be told what new role it has to play. There are signs, however, that a series of changes may have stirred ASEAN to new life. After 35 years, this is a more mature ASEAN, whose member states have survived experiments with different regional organizations and have had their wits sharpened considerably by that experience. They now know better how small and medium-sized states can survive and how they must generate innovative thinking if they want to prosper. Since the financial crisis of 1997, they have been given additional lessons about the effects of globalization and become sensitive to the pressures from non-state actors and other transnational groups. The essays selected in this volume tell us how ASEAN has adapted

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to the radical and unpredictable changes that have dogged the organization since its foundation and how it might deal with uncertainties in the future. The victory of liberal capitalism in a globalized market economy requires that all Southeast Asian states be alert to America’s policies in the region if they want to maximize the benefits to themselves. It is, of course, not enough to do that. They must continue to look to the economic might of Japan whose commitments in Southeast Asia from before the foundation of ASEAN have been of major importance to the region’s development. It is obviously in ASEAN’s interest to ensure that Japan remains committed. In addition, a nuclear South Asia and the awakening of India’s high-tech entrepreneurship has great potential for the region’s security as well as the future growth of the ASEAN economies. Nevertheless, given America’s fresh interest in Asia, China’s role requires close attention. Now that America does not need to balance the ambitions of the Soviet Union, its relations with the People’s Republic of China have become vital. Increasingly, that relationship will impact directly on ASEAN. Should that become volatile, it could place in considerable

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Foreword: New Challenges for ASEAN

xvii

strain the historical differences among ASEAN members in their attitudes towards the PRC. The newest challenges have come from the war in Iraq. September 11 had galvanized the American people to a war in Afghanistan that provoked different reactions among ASEAN members. The states that faced terrorism threats of their own were quick to show sympathy, while states where the majority of the population is Muslim have been careful how much they should say or do. The war in Iraq has intensified the region’s concerns. It was not surprising that the United States won the war quickly. But the uncertainties afterwards are less predictable. How they will play out for each ASEAN member state will depend on two factors that provide special challenges for ASEAN. I refer to the sensitivities of countries with large Muslim populations, and the growing China factor in the larger East Asian region. China, of course, has always been there to the region’s north and Islam had penetrated deeply into parts of the Malay world for 700 years. Both are known variables, but the challenges are now more sharply focused. In Southeast Asia, what its Muslim extremists may do is unlikely to lead to anything like massive American interventions as in the Vietnam War. U.S. national interests are too peripheral to the region for ASEAN members to be so threatened. At most, this may allow the American government to pressure the national elites of each country to crack down on groups that support the enemies of the United States. For the ASEAN members who have benefited from American aid for decades, this is nothing new. But for them to single out their own Muslim nationals in any discriminatory way would be unacceptable. China provides yet another dimension in ASEAN’s relations with the outside world. Its Confucianism, Daoism and Buddhism do not match Islam in its capacity to advance

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universalist claims. Chinese values have been essentially agrarian and constrained by its deep-rooted bureaucracy. But the fact is, China’s physical and population size backed by an ancient lineage, with strong ideals of unity and cultural superiority, has enabled it to resist the claims of alien universalist faiths. Thus, although the Chinese cannot mount a serious challenge to modern values by appealing to their own past, they have the critical mass to absorb and digest whatever they wish to take from other cultures. What is more relevant, China is close to home. It is the land neighbour of three of its members, and within easy reach to two others on the mainland. Although peaceful trading has been the norm and relations had been mainly personal and feudal, China has been able, for at least the last 600 years, to exert pressure across the land borders from the provinces of Guangxi and Yunnan. Will future relations always be based on principles of sovereignty and state equality? Will the new China genuinely encourage multilateral relations through ASEAN regionalism? China has sought to transform residual suspicions in the region by engaging ASEAN as an economic entity. It might even use ASEAN to help overcome the present barriers to a larger East Asian regionalism. At another level, China is a fast growing economy that competes with Southeast Asia for foreign investment and markets. This could become a severe test of regional cooperation in the decades to come, but it may well be the challenge that the region needs to raise ASEAN to a higher level of cooperation. Furthermore, most of the descendants of Chinese immigrants who have settled in Southeast Asia still retain links with “Greater China” (the PRC, Taiwan, Hong Kong and Macao). Their entrepreneurial skills and family and language networks could serve both their adopted countries and whichever parts of China they choose to work with. It is

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Wang Gungwu

expected that these local citizens of Chinese descent would provide some of the bridges that ASEAN and “Greater China” might want to have in the future. But if closer relations fail to ameliorate the economic discrepancies that arise, what economic levers will the government in Beijing use? Given that this is still unknown, Southeast Asian leaders may try harder to strengthen their intra-region collaboration and also ensure that their economic links be further extended to the Asia-Pacific, South Asia and other major economic groupings. Southeast Asia does not have strong cards to play with. If ASEAN is perceived as ineffectual and possibly vulnerable to both Muslim extremists and PRC blandishments, interested powers like the United States are likely to go back to bilateral links to support their own vital interests. China and a destabilized Muslim world impinge on

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different sectors of Southeast Asian society and politics. The region’s dilemma is that, if it chooses to depend on the United States as the superpower, it risks internal divisions between those who prefer Asian compromises and those who want U.S. guarantees. ASEAN members recognize that they live in a world where the United States seeks absolute security for itself. If that remains so in the foreseeable future, the choices for Southeast Asia, with or without its ASEAN structure, are limited. The only alternative is to join other interested groups to persuade the superpower not to depend on military might or adjust to the sole superpower’s priorities.

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Member States of ASEAN (Association of Southeast Asian Nations) • • • • • • • • • •

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BRUNEI DARUSSALAM CAMBODIA INDONESIA LAOS MALAYSIA MYANMAR PHILIPPINES SINGAPORE THAILAND VIETNAM

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The signing of the Joint Declaration of ASEAN and China on Cooperation in the Field of Non-Traditional Security Issues at the Sixth ASEAN-China Summit in Phnom Penh in 2002.

Courtesy of the ASEAN Secretariat

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The leaders of the ten ASEAN member states and China, Japan, and Korea at the Fifth ASEAN + 3 Summit in Bandar Seri Begawan in 2001.

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The ceremony for the admission of Cambodia into ASEAN in 1999.

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Introduction

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Section

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ASEAN: INSTITUTIONAL REDESIGN AND DYNAMICS

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Introduction

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INTRODUCTION

Sree Kumar

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he history of the member states of ASEAN lends clues to how political systems evolved from the earliest times. The defining feature of such systems of the ancient times was the mobilization of socially definable loyalties for a common purpose rather than specifying a territorial scale of such activities. It can be argued that this approach to understanding Southeast Asian political systems provides an appropriate perspective on how ASEAN’s intra-regional relations have developed. But the ancient boundaries have been supplanted by nation-states created during colonial times. The British occupied Burma, Malaya, Singapore, Sarawak, Brunei, and North Borneo; the French in Indo-China; the Philippines had for a long time been first under Spanish, and then under the United States, and the Dutch had their jewel in the East — Indonesia and Western New Guinea. Only Thailand remained insulated from this scramble for Southeast Asia. The Second World War changed this mosaic as the Japanese occupied most of the region and provided the initial seeds of a nationalist sentiment. The end of the war and Japan’s defeat set nationalism aflame in most of Southeast Asia, resulting in the formation of states independent of their colonial masters. In some countries, colonial economic interests prevailing from before

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the war continued to operate, while in others, nationalization became a major preoccupation. The fear of creeping communism after the war led to the victors seeking to define responses to creating a regional entity. The first of such was the Southeast Asia Treaty Organization (SEATO) which only had two full members from the region. The second attempt was largely a political act that created the Association of Southeast Asia (ASA) and Maphilindo. These were both stillborn, and in 1967 ASEAN was formed among the five members of the region, with Indonesia playing a lead role. Membership was subsequently enlarged with the entry of Brunei, and the more recent incorporation of Myanmar and the countries of Indochina — Vietnam, Laos, and Cambodia. Since its inception, ASEAN has been characterized by a loose framework of relationships, formal in nature but not necessarily always binding on member countries. This soft relationship style has allowed a uniquely “ASEAN way” of addressing critical concerns within the region. The underlying principle for this approach is to reach a consensus among member countries, arriving at an agreement at the lowest common denominator. The 1990s saw the strengthening of the ASEAN institutional infrastructure with the profile

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of the Secretary General being raised; having a more structured ASEAN Secretariat; widening the internal ASEAN orbit from the foreign ministers to include other portfolios such as the economic and finance ministers; and the creation of the senior officials network of meetings. Perhaps, more demanding has been the need to extend ASEAN’s external relations as co-operative linkages with the EU, Australia, Canada, Japan, New Zealand, and the United States, and the UNDP were formed. Similarly, relations were established with China, India, and Russia. In 1994, the ASEAN Regional Forum was established to promote political and security dialogue among all the countries in the Asia-Pacific region. Although many of these developments gathered pace in the last decade, the overall process of institution-building in ASEAN has been gradual and adaptive, taking into account national and cultural sensitivities of member countries. Gradualism and adaptation have taken a knock in the wake of the financial crisis in the late 1990s. When the financial crisis enveloped the region it was apparent that a regional response to it was less than satisfactory. The affected member countries had to resort to the International Monetary Fund (IMF) while Malaysia went its own way. It may well be unkind to seek a concerted regional response at a time of deep financial upheaval. But the lessons of the time have now transcended national interests to some extent as a collective surveillance mechanism with the support of the Asian Development Bank has been agreed, with implementation to come on stream later. There is now a greater vigilance on economic volatility following in the slipstream of globalization and the need for more urgent regional responses is becoming paramount. When ASEAN will be tested again is, therefore, the crucial question. There are benefits to applying the “ASEAN way” of addressing regional

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concerns. But the consensus model reaches less than optimal solutions and may be an inadequate response to urgent matters. The “ASEAN way” enrobes the more fundamental principle of non-interference in national issues and has now come under strain. At a regional level the transborder pollution caused by forest fires has required intervention and diplomacy across member states to reach agreement on how best to prevent such negative spillovers. At another level, Myanmar’s severe treatment of its democratically elected leaders has required strong words of condemnation despite the earlier soft approach taken by ASEAN. So there is now a breach in the fragile shell of non-interference that has been the hallmark of ASEAN’s internal relationships. Redefining the ASEAN model of decision-making and crafting a new institutional approach to addressing internal and external relations remain essential pillars to overcoming ASEAN’s image concerns. The new international economy demands robust and quick responses to crises. The signals of such constructive actions remain long in the memories of investors and of dialogue members. Much will also depend on how the lead player in the ASEAN fold, Indonesia, emerges from its economic woes and its political experiments. A unitary Indonesia with a plural democratic system and a renewed economy will mean a stronger voice within ASEAN. So a disparate set of countries with different colonial experiences has coalesced into a regional group for common purposes. Many of the purposes are socially-definable such as economic well-being, security, and national integrity. If this is the pattern that we are seeing now, then have we gone back to the socially definable loyalties of the ancient times? And if so, should we not pay attention to the history of how countries in the region evolved before the colonial interlude?

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Early Southeast Asian Political Systems

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5

EARLY SOUTHEAST ASIAN POLITICAL SYSTEMS

O.W. WOLTERS

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remarkable development in Southeast Asian studies since the Second World War has been the steadily improving knowledge of the region’s prehistory.’1 The best known discoveries, made possible by scientifically conducted excavations and the tools of carbon dating, thermoluminescence, and palaeobotany, are signs of bronze-working and domesticated agriculture at certain sites in northeastern Thailand attributable to the fourth millennium BC. Iron-working, too, seems to have been under way at one of these sites by about 1500 BC. Moreover, by the second half of the second millennium BC at the latest, metallurgy had become the most recent stage in a local cultural process over a sufficiently wide area in northern Vietnam to permit Vietnamese archaeologists to broach sophisticated sociological enquiries. For my purpose, the important consequence of current prehistoric research is that an outline of the ancient settlement map is beginning to be disclosed. The map seems to comprise numerous networks of relatively isolated but continuously occupied

dwelling sites, where residential stability was achieved by exploiting local environmental resources to sustain what is sometimes called continually expanding “broad spectrum” subsistence economies. The inhabitants’ original skills were those of “forest efficiency”, or horticulture, although during the second millennium BC domesticated modes of wet-rice agriculture were probably appearing in the mainland alluvial plains.2 These tendencies in prehistoric research provide helpful perspectives for historians of the early Southeast Asian political systems, for they are now being encouraged to suppose that by the beginning of the Christian era a patchwork of small settlement networks of great antiquity stretched across the map of Southeast Asia. For example, no less than about three hundred settlements, datable by their artifacts as belonging to the seventh and eighth centuries AD, have been identified in Thailand alone by means of aerial photography.3 Seen from the air, they remind one of craters scattered across the moon’s surface. The seventh-century inscriptions of

Excerpted from O.W. Wolters, History, Culture, and Region in Southeast Asian Perspectives (Singapore: Institute of Southeast Asian Studies, 1982), by permission of the publisher.

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Cambodia mention as many as thirteen toponyms sufficiently prominent to be known by Sanskritic names. The multiplicity of Khmer centres, for there were surely more than thirteen, contradicts the impression provided by Chinese records of protohistoric Cambodia that there was only a single and enduring “kingdom of Funan”.4 “Funan” should not, I shall suggest below, be invoked as the earliest model of an “Indianized state” in Southeast Asia. The historian, studying the dawn of recorded Southeast Asian history, can now suppose with reasonable confidence that the region was demographically fragmented. The ethnic identity and remotest origins of these peoples are questions that I shall eschew. Before the Second World War, prehistorians framed hypotheses based on tool typology to argue that culturally significant migrations into the region took place from the second half of the second millennium BC. These hypotheses have now been overtaken by the disclosing chronology of much earlier technological innovation established by means of prehistoric archaeology. Rather than assuming migrations from outside the region, we can be guided by Donn Bayard’s view that prehistoric Southeast Asia was a “continually shifting mosaic of small cultural groups, resembling in its complexity the distribution of the modern hill tribes”.5 The focus of attention must be on what some of these groups could do inside the region and what they became. The ancient inhabitants of Southeast Asia were living in fairly isolated groups, separated by thick forests, and would have had power ful attachments to their respective localities. I shall have occasion later to discuss the continuation of the prehistoric settlement pattern in historical times, and I shall content myself here by noting that in Java, for example, local scripts6 and local sung poems 7 survived through the centuries. Or again, Malyang, a small principality in north-western

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Cambodia during the seventh century, disappears from the records after the late eighth century but reappears in the late twelfth century as a rebellious area when Angkor was sacked by the Chams in 1177.8 The modern names of villages and subregions are also often identifiable in early written records. The multiplicity of settlement areas, each of which could go its own way, means that the historian should be cautious before he decides that any part of the region once occupied only a peripheral status in the general picture. Everything depends on what the historian is looking at in particular times in the past. For example, one still knows very little of the early history of the Philippines, but one should not conclude that these islands remained on the fringe of early Southeast Asia. Their inhabitants did not perceive their map in such a way. They are more likely to have looked outward to what is the Vietnamese coast today or to southern China for the more distant world that mattered to them. Every centre was a centre in its own right as far as its inhabitants were concerned, and it was surrounded by its own group of neighbours. The ancient pattern of scattered and isolated settlements at the beginning of the Christian era would seem to suggest little prospect that the settlements would generate more extensive contact between themselves. The tempo of communication was probably slow even though linguists have been able to delineate major and overarching language families. The languages of the archipelago can be conveniently defined as belonging to the “Austronesian” language family. The language map of mainland Southeast Asia is much more complicated. In early times, the Mon-Khmer, or “Austroasiatic”, family of languages stretched from Burma to northern Vietnam and southern China. The Tai and Burman languages were wedges thrust into the MonKhmer language zone. But the reality

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everywhere in Southeast Asia is likely to have been that the major language families were represented by numerous local and isolated speech variations. Only in later times did some variations take on the characteristics of neighbouring speeches, a development that gradually led to a more widely used standardized speech. Linguistic similarities were not in themselves cultural bridges. When, therefore, we enquire how these scattered settlements were able to reduce their isolation, we have to consider other cultural features with greater possibilities for creating more extensive relationships within the region. There are, in fact, several such features, though we must bear in mind that not all societies can be attributed with identical features. Exceptions can always be found. Moreover, similar cultural features did not in themselves guarantee that extensive relationships would develop across localities as a matter of course, even if their inhabitants came to recognize that they had something in common. One well-represented feature of social organization within the lowlands in the region today is what anthropologists refer to as “cognatic kinship”,9 and we can suppose that this feature was present throughout historical times. In simple terms, the expression means that descent is reckoned equally through males and females and that both males and females are able to enjoy equal inheritance rights.10 The comparable status of the sexes in Southeast Asia may explain why an Indonesian art historian has noted the unisex appearance of gods and goddesses in Javanese iconography, whereas sexual differences are unambiguously portrayed in Indian iconography.11 A notable feature of cognatic kinship is the downgrading of the importance of lineage based on claims to status through descent from a particular male or female. This does not mean that early settlements were egalitarian societies; prehistoric graves

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with sumptuary goods and status symbols reveal hierarchical distinctions evolving from before the beginning of the Christian era. Moreover, the principle of cognatic kinship by no means implies that kinship ties are unimportant. The contrary is the case. Kinship ties are the idiom of social organization in the region and part of its history. For example, when the Khmers founded or endowed religious cult centres, their commemorative inscriptions mention a variety of male and female kinship relationships over several generations. Nevertheless, the forebears, members of the devotees’ kin (kula), are not presented as a lineage. Certain forebears are signalled out for their personal accomplishments, but the focus of the inscriptions is always on those who are performing and commemorating their own acts of devotion. One inscription explicitly excludes the devotee’s parents from enjoying the fruits of his devotion.12 The relative unimportance of lineage means that we have to look elsewhere for cultural factors which promote leadership and initiative beyond a particular locality, and I suggest that leadership in interpersonal relations was associated with what anthropologists sometimes refer to in other parts of the world as the phenomenon of “big men”. Here is a cultural trait in early Southeast Asia that seems to offer a helpful perspective for understanding much of what lay behind intra-regional relations in later times. The leadership of “big men”, or, to use the term I prefer, “men of prowess”, would depend on their being attributed with an abnormal amount of personal and innate “soul stuff”, which explained and distinguished their performance from that of others in their generation and especially among their own kinsmen. In the Southeast Asian languages, the terms for “soul stuff” vary from society to society, and the belief is always associated with other beliefs. The distinctions between “soul stuff” and

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the associated beliefs are so precise and essential that they can be defined only in the language of each society.13 Nevertheless, a person’s spiritual identity and capacity for leadership were established when his fellows could recognize his superior endowment and knew that being close to him was to their advantage not only because his entourage could expect to enjoy material rewards but also, I believe, because their own spiritual substance, for everyone possessed it in some measure, would participate in his, thereby leading to rapport and personal satisfaction. We are dealing with the led as well as the leaders. Difficulties are bound to arise in studying continuities in early Southeast Asian experiences when one thinks of “states”, as I have done for too long.14 Even prehistorians, when they are correcting earlier misapprehensions about what happened during the several millennia before the beginning of the Christian era, may tend to reinforce earlier dogma about the appearance of “states” during protohistory. Prehistorians are interested in “incipient state formation and political centralization” prior to Indian influence, but, while they can now show that Indian influence did not move into a vacuum when it brought a “state” like Funan into being,15 they still cannot rid themselves of an awareness of discontinuity between prehistory and protohistory. The reason is that they take “Funan” as their model of the first fullyfledged state and attribute to it such features as “the ruler’s strategy of monumental self-validation” and “time-tested Indian strategies of temple-founding, inscription-raising, and support for brahmanical royal cults”.16 A state, according to this line of thought which owes much to Van Leur’s ideas in the 1930s, must be distinguished from anything else in prehistory. The effect is that a new lease of life is given to the significance of Indian influence.

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I suggest that a gap persists between prehistory and protohistory represented by “Funan” because different terminologies are used when discussing each period. An outline of “incipient state formation” depends on such Western terms as “fairly extensive trade relations”, wet-rice, iron technology, and “probably increasing population density and political centralization in some of the alluvial plains of the mainland”. 17 These terms, taken by themselves, signify economic developments that would be accompanied by the appearance of more complex political systems. Nevertheless, prehistorians have to deny prehistory the achievement of “statehood” by indigenous processes because of what they believe is known of the fully-fledged “state of Funan”. The elaboration of the features of a “Funanese” typology, however, depends on an altogether different set of signifiers that owe their origin to Chinese documents and are therefore influenced by Chinese preconceptions of a “state”. The Chinese supposed, for example, that any state should be associated with rules of dynastic succession and be described by fixed boundaries. No such polity existed anywhere in earlier Southeast Asian history except, as we shall see below, in Vietnam. Yet the Chinese were unable to conceptualize “Funan” as being anything other than a “state”, albeit an unstable one, and, because of this Chinese perspective, “Funan” has become the earliest Southeast Asian example of what sociologists refer to as a “patrimonial bureaucracy”, a model that does not seem to fit the prehistoric evidence.18 The two sets of signifiers — Western and Chinese — have precise meaning only in cultural contexts outside Southeast Asia, and the result of linguistic confusion is that the passage of the region from prehistory to protohistory reads in language that is bound

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to give the impression that the Southeast Asian peoples could graduate to statehood only with the assistance of Indian influence. The same reading may even lead scholars to postulate a lag in the process of state formation in some parts of the region, exemplified by the “impermanence” of certain polities,19 or to assume that particular geographical circumstances influenced the pace of the graduation to statehood. In other words, the criteria for incipient and fully-fledged states are established by an arbitrary vocabulary drawn from an archaeology with an economic bias and from Chinese conventions transferred to a part of the world which was virtually unknown to them. The result is that one is in danger of looking for what could never be there in either prehistoric or proto-historic times. If, however, we think simply of “political systems” — a neutral expression — the way is open for considering other cultural phenomena such as religious and social behaviour that can be expected to affect political and economic activities in both prehistory and protohistory. No evidence at present exists for supposing that unprecedented religious and social changes were under way in the protohistoric period that sharply distinguish it from late prehistory. For example, there is no evidence to suppose that a chief’s small-scale entourage in late prehistory was different in kind from the large-scale entourages of the historical period that supplied rulers with practical means of exercising political influence. In both periods, services are likely to have been rewarded with gifts of honour, posts of responsibility, and produce from the land.20 All these gifts would be valued because the recipients knew that they participated in the donor’s spiritual authority. The territorial scale of a political system is certainly not the correct measurement for describing and defining it. Instead, we should think of sets of socially-definable

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loyalties that could be mobilized for common enterprises. This was the case in protohistoric times, and it would be surprising if these loyalties did not have their origin in prehistory. In late Balinese prehistory, for example, persons were buried according to their rank on earth,21 which indicates some kind of hierarchy, with one person in the neighbourhood perceived as the point of reference for distinguishing ranks. This prehistoric background may be reflected in a Sanskrit inscription from western Java in the fifth or sixth century. The inscription has been translated as referring to a ruler’s “allies”,22 but the term used is bhakta (“worshippers” or “princes devoted [to him]”). Khmer chiefs in the seventh century also frequently referred to themselves as bhaktas and venerated their overlord because of his spiritual relationship with Siva which brought spiritual rewards to those who served him. The Javanese inscription may refer to a chief’s entourage with “prehistoric” features but described in the Sanskrit language. The peoples of protohistoric Southeast Asia retained, I suggest, much more than vestiges of earlier behaviour, though their behaviour would not have been identical in every locality. But their cultures are unlikely to be entirely illuminated by artifacts recovered from graves or by Chinese evidence of commercial exchanges in the protohistoric period. Tools and trade represent only fractions of a social system. I have dwelt on definitions partly because I believe that the time is now promising for a re-examination of the passage of Southeast Asia from prehistory to protohistory in terms of continuities rather than of discontinuities. But I am especially anxious to indicate the origins of the early political systems that furnish the appropriate background to later tendencies in Southeast Asian intra-regional relations.

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NOTES 1. For recent surveys of current prehistoric research, see I.W. Mabbett, “The ‘Indianization’ of Southeast Asia: Reflections on Prehistoric Sources”, Journal of Southeast Asian Studies (hereafter cited as JSEAS) 8, no. 1 (1977): 1–14; the “Introduction” in R.B. Smith and W. Watson, eds. Early South East Asia. Essays in Archaeology, History and Historical Geography (hereafter cited as Early South East Asia), pp. 3–14; Donn Bayard, “The Roots of Indochinese Civilisation”, Pacific Affairs 51, no. ˜ Phuc Long, “Les nouvelles recherches archéologiques au Vietnam ...”, 1 (1980): 89–114; Nguyên Arts Asiatiques, Numéro special, 31 (1975); Jeremy H.C.S. Davidson, “Archaeology in Northern Viet-Nam since 1954”, in Early South East Asia, pp. 98–124; and Hà Van Tân, “Nouvelles recherches préhistoriques et protohistoriques au Vietnam”, Bulletin de I’École Francaise d’Extrême-Orient (hereafter cited as BEFEO) 68 (1980): 113–54. 2. See Donn Bayard, op. cit., p. 105, for an evaluation of the evidence of rice-cultivation techniques. 3. 1 am grateful to Srisakra Vallibhotama for this information. 4. Claude Jacques, “ ‘Funan’. ‘Zhenla.’ The Reality concealed by these Chinese Views of Indochina”, in Early South East Asia, p. 378; O.W. Wolters, “North-western Cambodia in the seventh century”, Bulletin of the School of Oriental and African Studies (hereafter cited as BSOAS) 37, no. 2 (1974): 378– 79; and “Khmer ‘Hinduism’ in the Seventh Century”, in Early South East Asia, p. 429. 5. Donn Bayard, op. cit., p. 92. Recent excavations at Ban Chiang in northeastern Thailand have suggested a movement of people into the alluvial plains in the millennium after the transition to wet-rice cultiva tion at Ban Chiang; ibid., p. 105. 6. J.G. de Casparis, Indonesian Palaeography. A History of Writing in Indonesia from the beginning to c. A.D. 1500, p. 72. 7. Martin F. Hatch, “Lagu, Laras, Layang. Rethinking melody in Javanese music”, pp. 38–50. Old Javanese inscriptions show that those who called themselves “Maharaja” retained the words “Raka of ...” in their titles to indicate their home territory; see F.H. van Naerssen, The Economic and Administrative History of Early Indonesia, pp. 46–55. 8. Wolters, “North-western Cambodia in the seventh century”, p. 358. 9. This generalization does not include important groups such as the Chams and Minangkabau. I am referring, for example, to the Burmans, Thai, Khmers Malays, Javanese, and Tagalogs. I follow Keesing’s definition of “cognatic” as meaning: (a) a mode of descent reckoning where all descendants of an apical ancestor/ancestress through any combinations of male or female links are included; (b) bilateral kinship, where kinship is traced to relations through both father and mother. See Roger M. Keesing, Kin Groups and Social Structure, chapter 6 and the glossary. Sometimes examples are found of nuclear families and neolocal residence. The Sui-shu, referring to Cambodia in about AD 600 states: “When a man’s marriage ceremonies are completed, he takes a share of his parents’ property and leaves them in order to live elsewhere”. See O.W. Wolters, “Khmer ‘Hinduism’ ...” p. 430. Excavations in Bali indicate burials of nuclear families; see R.P. Soejono, “The Significance of the Excavation at Gilimanuk (Bali)”, in Early South East Asia, p 195. 10. The nuclear family was the typical family in the Lê legal code, and both husbands and wives enjoyed property rights, see Insun Yu, “Law and family in seventeenth and eighteenth century Vietnam”. The Chinese census statistics in Vietnam during the early centuries of the Christian era purport to reveal an increase in the number of households rather than in the total population, and one would expect this evidence in a society practising bilateral kinship. I am grateful to Keith Taylor for the information. 11. I owe this observation to Satyawati Suleiman. For a discussion of female property rights and the appearance of women in negotiations with royal representatives, see J.G. de Casparis, “Pour une histoire sociale de l’ancienne Java principalement au Xème s”, Archipel 21 (1981): 147. 12. A. Barth and A. Bergaigne, Inscriptions sanscrites du Cambodge et Champa (hereafter cited as ISCC), p. 20, v. 34.

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13. Anthropological studies about “soul stuff” in a regional context do not seem available at the present time. Indeed, James Boon remarks in respect of Indonesia that “the ultimate comparativist accomplish ment would be to plot the various soul-power terms — semangat, roh, and so on — against each other across Indonesian and Malay societies”; see James A. Boon, The Anthropological Romance of Bali 1597–1972, p. 240, n. 7. See Appendix A: Miscellaneous notes on “soul stuff” and “prowess”. 14. Virginia Matheson, writing about the inhabitants of the Riau-Lingga archipelago as they are described in the Tuhfat al-Nafis, addresses this matter of terminology: “.... I can find in the Tuhfat no evidence for the existence of the state as a concept, an abstract ideal above and beyond the ruler, which was to be sustained and protected. What does seem to have existed was a complex system of personal loyalties, which it was in the ruler’s interest to maintain”: see Virginia Matheson, “Concepts of state in the Tuhfal al-Nafis [The Precious Gift]” in Pre-Colonial State Systems in Southeast Asia, p. 21. 15. Donn Bayard, op. cit, p. 106. 16. Bennet Bronson, “The Late Prehistory and Early History of Central Thailand with special reference to Chansen,” in Early South East Asia, p. 316. 17. Donn Bayard, op. cit., p. 106. 18. Ibid., p. 107. Karl Hutterer, studying how far the lowland societies of the Philippines had reached urban and state formation on the eve of the Spanish intervention, observes that “there is no evidence whatsoever for the formation of bureaucratic structure that would have been interjected between the chief and the daily affairs of politics, commerce and religion, as is usually found in state societies”; see Karl L. Hutterer, “Prehistoric Trade and the Evolution of Philippine Societies: a Reconsideration”, Economic and Social Interaction in Southeast Asia: Perspectives from Prehistory, History, and Ethnology, p. 191. 19. See for example, B. Bronson, “Exchange at the Upstream and Downstream Ends: Notes Toward a Functional Model of the coastal State in Southeast Asia”, Economic and Social Interaction in Southeast Asia, p. 51; and Bennet Bronson and Jan Wisseman, “Palembang as Srivijaya: The lateness of early cities in southern Southeast Asia”, Asian Perspectives 19, no. 2 (1978): 234. 20. Van Naerssen suggests that the origin of the Javanese raka can be explained in ecological terms. The raka was responsible for the equitable distribution of water over a number of agrarian communities (wanua), and he therefore had the right to dispose of the produce and labour of his subjects; see F.H. van Naerssen, The Economic and Administrative History of Early Indonesia, pp. 37– 38. 21. R.P. Soejono, op. cit, p. 198. 22. B. Ch. Chhabra, Expansion of Indo-Aryan Culture, p. 94.

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John Bastin and Harry J. Benda

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POST-COLONIAL SOUTHEAST ASIA

JOHN BASTIN and HARRY J. BENDA

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nly twenty-odd years have elapsed since Japan’s sudden surrender to the Allied powers dramatically inaugurated the most recent chapter in Southeast Asian history. The decolonization process has, historically speaking, barely begun, and it is therefore difficult to know what on the swiftly changing scene is ephemeral and what destined to perdure. In such countries as Burma, Indonesia, and Vietnam, postwar changes have, moreover, borne many of the hallmarks of political and incipient social revolutions; and these almost certainly have not yet run their full course. What has up to now emerged may, then, be no more than sur face phenomena shrouding hidden factors and forces that may still emerge. Postwar developments in Southeast Asia are, however, only one facet of the new power relationships in Asia as a whole, just as the area’s incorporation into the Atlantic state system had been part of a larger historical process. The rise of the West in Asia had culminated in the subjugation of the Indian subcontinent by Britain in the late eighteenth century, followed by the virtual

disintegration of the Chinese empire in the second half of the nineteenth. Though the great powers continued to pay lip service to her “territorial integrity,” China ceased to be a truly independent country. Moreover, Japan, at that time Asia’s only modernizing state, had become a partner in the Atlantic system from about the turn of the twentieth century: she owed this spectacular ascendancy to her victories over China in 1894–95 and over Tsarist Russia in 1904–5, as well as to her participation in World War I on the side of the victorious Allies. Japan’s contracting out of the Atlantic system by making war on the Western colonial powers in 1941 and the lightning speed with which she made herself master of the Nampo mark the beginnings of the decolonization process in Southeast Asia. Ironically, this process was immensely accelerated by the collapse of Japan as a world power in 1945. Nippon’s withdrawal from China (large parts of which she had occupied since the 1930s) and from Southeast Asia occurred before either the Western Allies or the Soviet Union could

Excerpted from John Bastin and Harry J. Benda, A History of Modern Southeast Asia: Colonialism, Nationalism, and Decolonization (New Jersey: Prentice-Hall, Inc., 1968), by permission of John Bastin.

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decisively fill the suddenly vacated Asian space. In South Asia, Britain voluntarily liquidated her Indian empire, granting independence to India and Pakistan in 1947 (and shortly thereafter to Burma and Ceylon). Russian power in East Asia only sufficed to install a Communist government in the northern part of Korea, since 1910 a Japanese colony; the Soviets apparently also provided some military aid to the Chinese Communists, for decades embroiled in a civil war with Chiang Kai-shek’s Nationalist government. American intervention protected South Korea, but could not prevent the ejection of Chiang from the Chinese mainland to Taiwan (Formosa) in 1949. The consolidation of Communist rule marked the end of a century’s foreign dominance over China. A decolonized India and Pakistan, a united China freed from alien control, and a prostrated Japan — these provide the larger Asian setting for Southeast Asian history since 1945. In turn, that history all of a sudden shed its parochial limitations. Gone was the confining seclusion, the virtual isolation, which the Westerners had imposed on Southeast Asians in colonial times. Gone, too, was Japanese over-lordship which, for all the internal upheavals it had caused, had after all kept them more tightly insulated from the rest of the world than ever before. Henceforth, Southeast Asian developments, more volatile than ever before, were destined to be increasingly influenced by political events from the outside. At times, indigenous leaders would seek to involve foreign powers in their domestic affairs, but more frequently still intervention would be injected into the region without local prompting. The global confrontation between two, and latterly three, world powers inevitably came to impinge upon the Southeast Asian scene, the area’s internal developments often affecting the course of international affairs.

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Even though Southeast Asia’s history has become increasingly dominated by the emergence of independent nation states, Western power has not been altogether eliminated from Southeast Asia. As a matter of fact, the first postwar decade witnessed Dutch and French attempts at restoring colonial rule in Indonesia and Indochina, albeit with some belated concessions to nationalist aspirations. The Dutch staged two military campaigns, euphemistically labeled “police actions,” against the Indonesian revolutionaries in 1947 and 1948; although they were partly successful militarily, the Dutch finally abandoned these attempts, under considerable international pressure, and transferred sovereignty to Indonesia (with the exception of West New Guinea) in December 1949. French efforts to impose their domination upon the Communist-controlled Viet Minh government of Vietnam led to a shattering military defeat at Dien Bien Phu in 1954, followed by France’s withdrawal, not only from Vietnam but also from her former protectorates of Laos and Cambodia. We already noted that the Philippines received their independence from the United States on July 4, 1946, and that the British relinquished Burma in 1948. In Malaya, however, British power was restored without encountering lasting native (as distinct from Chinese-led, Communist) opposition; even there, however, colonial rule ended with the creation of the independent Federation of Malaya in 1957. This left only Singapore and the northern fringes of Borneo — Sarawak, Sabah, and Brunei — under various kinds of colonial and protectorate ties to Britain, and Western New Guinea (Irian Barat, in Indonesian) under Dutch, Eastern New Guinea and Papua under Australian rule. Singapore and the Bornean territories, with the exception of Brunei, merged with Malaya into a wider Malaysian Federation in 1963, Dutch Irian Barat having been incorporated into Indonesia the year before.

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By the mid-1960s, the Australian-governed territories and the eastern half of the tiny island of Timor — like Goa in India (until the 1960s) and Macao in China, a minuscule but stubborn remnant of Portugal’s erstwhile far-flung Asian realm — were all that survived as colonial dependencies in Southeast Asia. Area-wide national independence did not mean, however, that the Atlantic powers had lost all influence in postwar Southeast Asia. The disappearance of direct French and Dutch military and political control was, indeed, unique, for Britain not only restrained the use of her naval base in Singapore, but independent Malaya, and later Malaysia, remained within the Commonwealth, some countries of which, in turn, provided military personnel for the new state’s internal and external defense. The Philippines likewise allowed the continued presence of American ground and naval forces in accordance with a treaty ratified simultaneously with the transfer of sovereignty. Before long, moreover, the United States — a major Pacific power after World War II, with bases spread over a wide arc from Japan, Okinawa, South Korea, Taiwan, to several Pacific islands — moved into the vacuum created by the French withdrawal from Indochina. Laos and South Vietnam — the country had been temporarily divided by an international agreement in 1954 — thus remained within the Western orbit. At the same time, Soviet and Chinese support was injected into North Vietnam, though on a far less massive scale. America’s deepening military involvement in mainland Southeast Asia also brought Thailand, the area’s only independent state throughout modern history, into a military alliance with the United States with ever larger contingents of American military and other personnel stationed on her soil. Military involvement to one side, Western

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economic interests regained a strong position in several parts of Southeast Asia. Thus tin and rubber companies, most of them British, as well as many other enterprises returned in full strength to postwar Malaya, while American business was granted far-reaching privileges in the Philippines. French entrepreneurs continued to play an important role in the Cambodian and, on a diminishing scale, in the South Vietnamese economy after 1954. Thailand in fact granted wider facilities to foreign, notably American, economic interests than they had enjoyed before the war. Economic nationalism, it is true, placed increasing restrictions on the foreigners’ economic activities; most governments now levied taxes on aliens and some made the operation of foreign-owned enterprises conditional on their employment of indigenous executive personnel. While such measures undeniably restrict the activities of outside investors, the Western economic superstructure created during the colonial era continued to function in these new nation states. In those countries, however, where decolonization assumed a revolutionary momentum — Burma, North Vietnam, and Indonesia — most European economic interests were liquidated in the course of the first postwar decade. North Vietnam, like all Communist polities, nationalized all foreign capitalist concerns outright. In Indonesia the process passed through several stages, affecting Dutch concerns in the first place, followed by British ones in the early 1960s; though these measures practically eliminated Western holdings, some firms, especially American oil and rubber companies, survived the general onslaught. Nationalizations came to a halt — whether temporary or more permanent remains to be seen — when Indonesian politics took a sharp turn in late 1965. By contrast, a succession of Burmese governments took

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over all foreign-owned enterprises, including British concerns as well as Communist Chinese banks. The temptation may be strong to discern a causal relationship between military and economic power. Some might argue that the West’s continued economic interests demand a similarly continuing military presence. Others might even insist that the retention of economic predominance is one of the real, “neocolonialist” motives for the deployment of Western military might in Southeast Asia. This kind of interpretation, dear to Marxists of all hues, should not be dismissed out of hand: what exactly the interplay between economic interest groups and policy makers in the leading Western countries with a stake in Southeast Asia is, is

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very hard to know. But it is highly unlikely that such private pressures as are doubtless brought to bear on Western governments are given as great, let alone greater, weight than are economic and above all political and strategic considerations of a higher — i.e., national or even international — order. The very limited size of Western investments in Southeast Asia as a whole makes it unlikely that private and corporate interests are allowed a decisive voice in the formulation of foreign policies affecting Western economic enterprise primarily in the this part of the world. But be that as it may, a good case for the internal context of the decolonization process can be made for viewing the fate of the different countries.

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Peter Lyon

3.

POST-WAR REGIONAL CO-OPERATION

PETER LYON

I

f there were a verb ‘to regionalize’ then a dispassionate student of regionalism in Southeast Asia might conjugate it thus: past, imperfect; present, indicative; future, indefinite. Regionalism in and/or for Southeast Asia has passed through three stages since 1945 and is still in the third stage. The first phase, which lasted from the end of the Second World War until the second half of the 1950s, was shaped and characterized mostly by the dominance of the United States and Britain in deciding what of regional associations in and for Southeast Asia there should be. Within Southeast Asia in these years Malaya (and the Borneo territories) and Singapore remained British colonies, thus cordoned off from conducting an independent diplomacy of their own; Vietnam was convulsed by war; Cambodia and Laos were still French colonies until 1954; Burma looked westwards to India or even further to Britain and the United States rather than to Southeast Asia, and relations with the ancient enemy Thailand were quietly cordial

though in foreign affairs the Thai leaders were mostly preoccupied with the United States in these years; the Philippines was for all practical purposes a camp-follower of the United States despite rhetorical proclamations in favour of Asian regionalism from 1946 onwards; Indonesia seemed uninterested and uninvolved in Southeast Asia as such — for Sukarno, Bandung and Afro-Asian stages probably seemed more exciting and promising. These were the years which saw the inception of ECAFE and the Colombo Plan — both worthy in their different ways, but each in their formative years institutionally weak and very reliant on British and American backing. Then, in September 1954, SEATO was formally launched, avowedly a Southeast Asian treaty organization, but with only two full members from Southeast Asia. In these years, then, Southeast Asian initiatives in the matter of creating new regional associations, or in working the few existing ones, were either non-existent, negligible, or merely rhetorical.

Reprinted in abridged form from Peter Lyon, “ASEAN and the Future of Regionalism”, in New Directions in the International Relations of Southeast Asia: The Great Powers and Southeast Asia, edited by Lau Teik Soon (Singapore: Singapore University Press, 1973), pp. 156–64, by permission of the author and the publisher.

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The second phase, from the late 1950s until the mid-1960s, as well as witnessing the continuance of ECAFE and the Colombo Plan very much as before,1 also saw the first significant stirrings of Southeast Asian initiatives in regionalist matters which then led on to some abortive, or to individually undramatic but cumulatively quite important, attempts to create institutionalized cooperation. Two rather different sets of innovation should be distinguished. At the level of what might loosely be termed ‘high polities’ two schemes were launched — ASA and Maphilindo (three, if one adds ASPAC). Both were not to live beyond infancy, though for quite different reasons. A useful account, and — in a sense — an epitaph, on these two experiments was provided in Bernard K. Gordon’s book.2 The second trend, which was to be more durable and probably more significant than the superficially more eye-catching ASA and Maphilindo, was almost completely missed even by Bernard Gordon as well as by myself.3 This less-than-luminous trend was made by the well-nigh simultaneous launching of a considerable number of

functional regional organizations — not only the ADB, which both Bernard Gordon and I noted, or even APO (that little favourite with many Americans), but also AIEDP, AIDC, AIT, AIEPA (see Glossary). Another significant sign of early gusts that began to make the next prevailing wind was the initiative of Japan in bringing into being not only — or least — the ADB but also MCEDSEA and SEAMEO. A third phase, of which the present is a part, was formally inaugurated by the inception of ASEAN in August 1967 (though it is arguable, by stressing Japan’s role, that the inception of ADB two years earlier was more significant). The most striking and important thing about the launching of ASEAN was Indonesia’s active membership in it from the start, symbolizing an end to Indonesia’s Confrontation campaign and to her previous indifference to practical regionalism in Southeast Asia. Indeed, Indonesia’s participation is a basic precondition of any really important large-scale regionalist enterprise, given that about half the total population of Southeast Asia live in Indonesia.

NOTES 1.

2.

3.

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For a detailed account of ECAFE until 1955 see David R. Wightman, Toward Economic Cooperation in Asia: the United Nations Economic Commission for Asia and the Far East (New Haven: Yale University Press, 1963); and L.P. Singh, The Politics of Economic Cooperation in Asia: a Study of Asian International Organizations (Columbia: University of Missouri Press, 1966). Dr Singh’s book on the character and functioning of some inter-governmental associations in Asia was mostly about ECAFE and the Colombo Plan. It was indicative of his general view that his last chapter (also labelled ‘Part 4 — The Current Situation’) was called ‘Obstacles to Regional Economic Cooperation and Integration in Asia’, and he asserted that Asia was lagging behind all other continents, including Africa, in regional economic co-operation. Bernard Gordon is a well-known enthusiastic academic advocate of regionalism in Southeast Asia. See his book The Dimensions of Conflict in Southeast Asia. (New Jersey: Prentice-Hall, 1966), see especially pp. 22–40 and chapters 5 and 6. Peter Lyon, War and Peace in Southeast Asia (London: Oxford University Press for the Royal Institute of International Affairs. 1969), see especially pp. 154–8 for ASA, which is mistakenly entitled when cited in full, and pp. 195–8 on Maphilindo.

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Yoshiyuki Hagiwara

4.

THE FORMATION OF ASEAN

YOSHIYUKI HAGIWARA

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n 1967, the continually-escalating war in Vietnam, together with China’s “Great Proletarian Cultural Revolution,” dominated the consciousness of Asia. U.S. military involvement in Vietnam had been accelerated since her air-bombing of North Vietnam in February 1965 and she made use of military bases in Japan, the Philippines, and Thailand. Japan had maintained its mutual security pact with the United States since 1952 and the Philippines and Thailand had been members of SEATO since 1954. Because of these relations, the three governments supported U.S. military involvement throughout the Vietnam war. In April 1966, the Japanese government initiated the formation of the Ministerial Conference for Economic Development of Southeast Asia,1 and in June, the Korean government started the Asian and Pacific Council (ASPAC).2 The former is a regional economic cooperation group under Japanese leadership which will partly substitute its aid for U.S. economic aid to Southeast Asia. ASPAC, in the final com-

munique of the Seoul meeting, was to be for “Greater co-operation and solidarity among the free Asian and Pacific countries in their efforts to safeguard their national independence against communist aggression or infiltration, and to develop their national economies.” ASPAC’s purpose was to organize the “free” countries in the region to form a “second front” for U.S. military action in Vietnam. In 1966, in China, the Great Proletarian Cultural Revolution began in August and huge mass movements were continued throughout 1967. This revolution was initiated by Mao T’se-tung to revitalize the revolutionary spirits of the masses particularly in opposition to the Vietnam war.3 In such a situation, Malaysia, the Philippines, and Thailand maintained common interests in ASA and ASPAC in 1967. In February 1967, Sukarno invested full power in Suharto and a new military regime based on anti-communism was established in Indonesia. Since independence in 1965, the PAP government of Singapore had been

Reprinted in abridged form from “Formation and Development of the Association of Southeast Asian Nations”, The Developing Economies XI, no. 4 (December 1973), pp. 443–65, by permission of the author and the Institute of Developing Economies.

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confronted with the “hit-and-run ‘Parliament of the Streets’ tactics of the procommunist Barisan Sosialis”.4 These two governments proclaimed a non-aligned foreign policy in principle but because of the anti-communist regime, they could have common interests with ASA governments. What were the common interests at that time? First, the fear of communist influence internally and internationally, secondly the expectation of economic aid from the United States, the United Kingdom, and Japan, and thirdly the hope of revitalizing regional cooperation. Thus, in August 1967, five governments agreed to form ASEAN as a regional cooperation group, replacing the moribund ASA and the immobile MAPHILINDO. The Bangkok Declaration said that the objectives of ASEAN were “to accelerate the economic growth, social progress and cultural development in the region through joint endeavour and partnership in order to strengthen the foundation for a prosperous and equal community of South-East Asian nations; to promote regional peace and stability. ...” In spite of this hope, before celebrating its first birthday in August 1968, ASEAN was faced with gloomy prospects. First, a squabble over the possession of Sabah between the Philippines and Malaysia occurred again and secondly, the execution of two Indonesian marines by Singapore government received a strong reaction from Indonesian nationalists. But, these two cases were fortunately held in line and ASEAN survived maintaining its original purpose of cooperation. In November 1968, Nixon was elected U.S. president and in July 1969 he proposed a withdrawal of the U.S. military presence in Asia after the end of the Vietnam war. He also suggested (in the Guam Doctrine)5 that the Asian countries take the initiative in creating a defence organization of their own. Besides this U.S. policy, the British

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Labor government declared in 1968 Britain’s east of Suez military withdrawal which would last until 1971. Responding to these policies, in June 1969 the Soviet Union suggested the creation of “a system of collective security in Asia.” In China, the Great Proletarian Cultural Revolution had diminished by 1969 and she began to reconstruct her international relation. And, also, the military clash between China and the Soviet Union took place from June to August of the same year. With these events in Asia in the background, ASEAN governments agreed to begin a seven-day free visa system for ASEAN members by the end of 1968. In May 1969, they decided to set up several committees in respective capitals: a committee on food production and supply in Jakarta; on civil air transport in Singapore; on communication, air traffic services, and meteorology in Kuala Lumpur; on shipping in Bangkok; and on commerce and industry in Manila. This meant that ASEAN countries followed a rather steady path of cooperation. In March 1970, Sihanouk was expelled from his post as the head of Cambodia, and U.S. forces marched in to Cambodia to help the new regime of Lon Nol. Responding to the U.S. action, China organized an anti-U.S. front in Indochina, composed of the Pathet Lao, North Vietnam, Vietcong, and Sihanouk supporters. Also, China accused the United States of imperialism and the Japanese of militarism in Asia and was able to improve her relations with the Soviet Union. In this situation, the fourth meeting of foreign ministers of ASEAN was put off until March 1971 in Manila. At this conference, President Marcos proposed the formation of a common market and a payment union for economic cooperation. Just after the conference, in April 1971, the U.S. pingpong team visited China and in July, Nixon announced that his visit to

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China would take place before May 1972. In May 1971, at the Sixth Ministerial Conference for Economic Development of Southeast Asia in Kuala Lumpur, Tun Razak presented a strategy to promote peace and prosperity which would neutralize the region, and be guaranteed by the United States, the Soviet Union, and China. At the October 1972 U.N. General Assembly Meeting, China’s United Nations membership was approved replacing Taiwan as the rightful member. Among ASEAN countries, Malaysia and Singapore supported the Albanian proposal, the Philippines opposed, Indonesia and Thailand abstained from voting. In November 1971, at the fifth meeting of foreign ministers of ASEAN at Kuala Lumpur, an agreement in principle for Razak’s plan was secured and a “declaration of peace and neutrality” of Southeast Asia was drawn up. Malaysia and Singapore formed the ANZUK defence force with United Kingdom, Australia, and New Zealand, which began in effect from November 1, 1971. Thailand and the Philippines kept U.S. military bases in their countries and Indonesia received military aid from the United States. In February 1972, Nixon visited Peking. Japan normalized diplomatic relations with China in September 1972 and U.S. military involvement in Vietnam ended in February 1973. These historical events seemed to thaw the Asian cold war, which had lasted for more than twenty years since the end of

the Second World War. But, basically, the difference between the capitalist and communist regimes exists and a disguised cold war still continues in the region. In April 1973, ASEAN held the sixth meeting of foreign ministers at Bataya, Thailand and it announced five proposals: (1) to deal with the synthetic rubber industry of Japan, (2) to set up a committee for reconstruction of the Indochina region, (3) to set up a central secretariat at Jakarta, (4) to establish the special committee of the central banks, and (5) to have close relations with EC countries. At this conference, the relationship with China and the security problem after the Vietnam war were discussed. But, in the final communique, nothing was mentioned in connection with these serious problems. The different political situations in ASEAN governments made it difficult to form a common stand on these problems. And, in May 1974, the seventh meeting of foreign ministers was held at Jakarta and the possibility of Malaysia’s diplomatic relations with China was discussed. But, the communique of this Meeting referred to nothing that would have to do with China and only declared a strengthening of economic cooperation in the region. But, just after this meeting, on May 20, Malaysia normalized the diplomatic relations with China and Tun Razak made his idea of Southeast Asia’s neutrality, guaranteed by the United States, USSR, and China a reality. It seems to me that ASEAN has entered a new political and economic era in the region.

NOTES 1. 2. 3. 4.

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Participants are Indonesia, Japan, Laos, Malaysia, the Philippines, Singapore, Thailand, and South Vietnam. Participants are Australia, Formosa, Japan, Malaysia, New Zealand, the Philippines, South Korea, South Vietnam, and Thailand. Imagawa, E., and Hama, H. Bunka-daikakumei to Betonamu senso [Great Cultural Revolution and the Vietnam War] (Tokyo: Institute of Developing Economies, 1968). Far Eastern Economic Review. 1968 Yearbook, p. 291.

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This doctrine was interpreted to mean a decrease in U.S. military forces in Asia to make Asian peoples fight each other [Hayashi, N. “Ninon gunkokushugi fukkatsu no keizai-teki kiso” (The economic basis for the revival of the Japanese militarism), Gendai to shisho, October 1970, p. 280]. The South-Vietnamese government announced that around seventy thousand (about 80 per cent Vietcong) soldiers were killed last year, one year after the Paris Armistice of January 1973 [Mainichi shimbun, March 16, 1974].

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5.

Muthiah Alagappa

INSTITUTIONAL FRAMEWORK Recommendations for Change

MUTHIAH ALAGAPPA

T

he gradual and piecemeal development of the Asean institutional framework and the emphasis on the consensus method for decision-making clearly reflects the cautious approach of the member governments to regional co-operation, which has so far been mainly political. In terms of structure and process, the preference has been for a loose framework with negotiations characterising activities at all levels. The loose framework and the consensus method have been posited by some practitioners and observers as positive attributes because of their inherent potential to prevent confrontation and development of intra-associational groups or factions. The loose framework, although making for ambiguity and inefficiency, provides opportunities for ‘face saving’ which is considered vital for Asean solidarity and cohesion. The numerous bilateral meetings, especially among the Asean heads of state, are viewed as providing the necessary flexibility to allow discussion of sensitive issues outside the formal framework without undermining

Asean harmony. The disparate nature of national governments in the region and the strength of nationalist forces in member countries are also deemed to favour a decentralised Asean machinery. The thrust of this approach is that a well-delineated and endowed institutional framework with authoritative procedures is not in harmony with the Asean spirit. Caution should therefore be exercised in advocating changes to strengthen the Asean machinery. It has, however, also been argued by others that the present Asean machinery and modus operandi suffers a number of shortcomings which must be resolved if Asean cooperation is not to be hampered. The short-comings identified include the following: •

Lack of an integrated decision-making structure. Apart from providing political direction, the Asean summit characterised by a high degree of protocol and symbolism, has no specific role in the management of Asean co-operation. Consequently the AMM and AEMM

Reprinted in abridged form from Muthiah Alagappa, “Asean Institutional Framework and Modus Operandi: Recommendations for Change”, in ASEAN at the Crossroads: Obstacles, Options and Opportunities in Economic Cooperation, edited by Noordin Sopiee, Chew Lay See, Lim Siang Jin (Kuala Lumpur: Institute of Strategic and International Studies, 1987), pp. 183–230, by permission of the author and the publisher.

Institutional Framework: Recommendations for Change

•

•

•

have emerged as the two key organs of Asean; but unfortunately the vertical line of responsibility that has evolved has dichotomised the decision-making structure creating problems of coordination that seem to erode and debilitate the entire machiner y. This situation is further aggravated by the emergence of other parallel meetings among several other categories of Asean ministers. (For details of these problems of co-ordination see C P F Luhulima’s paper on ‘Asean institutions and modus operandi: Looking back and looking forward’). Application of the consensus method to all issues and levels. While the consensus method certainly has its merits and is perhaps the only acceptable method at the highest levels and on major policy issues, it is also a fact that the application of this method to all levels and issues has considerably reduced the effectiveness of intra-Asean co-operation even in areas where agreement has been reached at policy level. The need for consensus has also prevented the association from co-operating in areas which may have been beneficial to a substantial number (though not all) of its members. The principle of rotation, so heavily emphasised in Asean, has resulted in a machinery that is cumbersome, inefficient and lacking in continuity and expertise. In particular, this has had a debilitating effect on the development and efficiency of the Asean Secretariat. The rotation system relies heavily on the system of national secretariats and creates an Asean network in which the Asean Secretariat is an ineffective outpost as opposed to being the focal point. The Asean structure reflects the dominant emphasis on national interests and national representation. There is no provision for representation of the

23

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•

Asean ‘community interest’. This lopsided emphasis on national representation and national gain partly accounts for the very slow development in intra-Asean co-operation. The homebased staff system adopted in staffing the Asean secretariat is a reflection of the emphasis on national representation and one of the reasons underlying the ineffectiveness of the Asean Secretariat. The Asean system as a whole suffers from institutional and procedural deficiencies. It also lacks the staff to carry out policy research and advisory functions for the various decision-making bodies; monitoring and implementation functions in relation to accepted policies; and the servicing function for the numerous meetings held annually. For example, the permanent committees which are the main work organs of Asean do not have full-time professional technical staff to identify projects, evaluate proposals, and interact with regional and international bodies. The system whereby the host country provides the interim technical secreariats works against the requirements of continuity and the development of expertise. In many cases, the ITSs have become essentially administrative coordinators. Excepting the Asean Secretariat and the national secretariats, all other Asean organs (so vital to the advancement of regional co-operation) function only periodically. The AMM and AEMM meet on the average twice a year, the Standing Committee six times a year, and the permanent committees and subcommittees once a year. Although there is in all cases provision for convening special meetings, the format of periodic meetings with minimal or almost no activity in between meetings is hardly a suitable way to advance regional cooperation. The frequent changes in

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personalities and the system of committees and periodic meetings make for cumbersome and lengthy procedures and thus it often takes a number of years to process major programmes. The system has created much disillusionment especially in the private sector. The private sector has been assigned an important role in intra-Asean economic co-operation especially in industry. The private sector may take up to 40 per cent equity in the Asean Industrial Projects (AIPs), it has the initiative to identify and formulate Asean Industrial Complementation (AIC) packages and is assigned the lead role in the Asean Industrial Joint Venture (AIJV) scheme which requires participation of only two member countries. Despite the importance assigned to the private sector, the latter is not allowed to play a formal role in the planning and implementation of Asean projects with which it is involved. While the AseanCCI can make inputs to the AEMM, attendance is by invitation. The situation is unsatisfactor y at the level of the working group where the relationship is informal. Very often the private sector is not consulted on important issues, thus resulting in failure of projects or schemes. For example, the AIC guidelines drawn up without private sector participation have been described as inflexible and impractical by Asean businessmen. The Asean-CCI is also not integrated into official Asean dialogue relations with the dialogue partners, except with the US where the Asean-US Business Council is represented. Asean relies almost entirely on a policy regime and does not have a legal regime. Consequently, the rule of the bureaucrat and not the rule of law governs decision-making and also the implementation phase. Asean does not have a charter. It operates on the basis

of the 1967 Bangkok Declaration and the 1976 Declaration of Asean Concord. The only treaty is the Treaty of Amity and Co-operation in Southeast Asia. Adoption of a charter is posited as running counter to the consensus principle and likely to introduce tension and rigidity into the Asean system, thereby undermining harmony. The Treaty of Amity and Co-operation has provision for a High Council to enable pacific settlement of intra-associational political disputes but this has remained a dead letter. In the area of trade, Article 14 of the Agreement on Asean Preferential Trading Arrangements (PTAs) provides for a system of consultations to resolve disputes. It includes a bilateral complaints procedure, referral to the Committee on Trade and Tourism (COTT) and finally, a suspension of concessions if the dispute cannot be resolved satisfactorily. Up to now there have been relatively few disputes and these have been resolved through bilateral negotiations. No case has been referred to COTT. Generally Asean countries are sensitive and reluctant to submit issues for adjudication. Therefore, even the very limited efforts to institute mechanisms for conflict resolution have not been implemented.

BASIS FOR CHANGE Institutional reform is no panacea nor substitute for the lack of political will or deficiencies in policies and programmes for regional cooperation, especially in the economic sector. It must, however, be noted that institutional deficiencies can hamper co-operation and shortcomings, if any, must therefore be rectified. It is also possible to view the structure and process of the Asean machinery as a manifestation of the level of commitment of member countries to

Institutional Framework: Recommendations for Change

regional co-operation. A decision to strengthen the machinery can therefore reflect an increasing level of commitment to regional co-operation. Given the hypersensitivity of Asean states towards any form of supra-nationalism and even strong central institutions, the basis for recommending change shifts from what is logically required and effective to what is feasible and acceptable. Recommendations for change in the structure and process of Asean should therefore take due cognizance of the following: •

•

The institutional framework must correspond to the objectives and functions of Asean and, more importantly, keep in step with the prevailing commitment and mood of the member states. At the same time the framework must have an in-built capacity and flexibility to allow for the efficient conduct of the association’s business and also provide for future development including a higher level of co-operation. It should be noted here that nearly all the present heads of government in Asean have the requisite national standing to authorise and oversee a higher level of intra-Asean cooperation and a correspondingly strong institutional framework. The next generation of leaders may not command such undisputed authority or may take considerable time to acquire such standing. The present period therefore appears opportune to embark on a relatively higher level of co-operation and also to develop a relatively strong institutional framework. Recommendations for change should not attempt drastic surgery but build on the existing system wherever possible. In this connection, it should be noted that the key institutions of a framework for regional co-operation are already in place. What is required, therefore, is stream lining of the machinery and

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•

•

process, reconstitution of committees, and refinement of the terms of reference of the various organs to further advance regional co-operation. Asean is and will for the foreseeable future continue to be a relatively loose intergovernmental organisation with the primary purpose of strengthening member states as national entities. There is no aspiration towards any form of supranationalism (political or economic integration) although there is now an indication that Asean may be willing to embark on a higher level of economic co-operation. Regional cooperation through Asean is therefore a means and not an end in itself. Cooperation, be it political or economic, will be furthered only when it serves the national interests of all states (or stated alternatively, when it does not damage the interests of any member). As the dominant concern will continue to be the national interests of member states, the effectiveness of Asean as an institution will therefore be a function of the support of its member states. It is therefore imperative that the institutional framework of Asean provides for the active participation of the national political and administrative elite in the structure and process of the association. The association qua regional organisation is unlikely to develop any significant political authority of its own. Political direction and major policy objectives will continue to be decided by national elites who must be represented in all key decisionmaking organs and the consensus method must continue to govern all major policy decisions. This emphasis on national interest and national representation should, however, be balanced to a significant degree by representation of the collective interests and perspectives of

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the Asean ‘community’. This will facilitate, where possible, an upgrading of the common interest as opposed to merely working on the lowest common denominator at all times. The national elite, however objective they may try to be, will be influenced by national perspectives. Consequently development of an impartial component (the seventh force?) within the structure of Asean to the maximum extent possible has obvious merits. The secretary-general and the Asean Secretariat appear most suited to undertake this promotional function. In addition to their present functions they can act as the exponents of the collective Asean interest in all intra-Asean fora. The authority and process for initiation of programmes and projects; research, study and planning; decision-taking; and implementation and monitoring should be clearly defined. The Asean institutional framework must have the necessar y capacity and expertise to effectively operationalise these various stages. While decision-making and implementation will continue to be the responsibility of the national elite and the member countries respectively, the Asean Secretariat and the permanent committees should be made responsible and provided with the capacity to initiate and study programmes before the decision-taking stage and subsequently to monitor and report on the implementation phase. Method of decision-making is crucial to the effectiveness of any organisation. The consensus or unanimity method ensures the essential interests of all members are taken into consideration. Given the nature of Asean, it is important this method is continued for all major policy (substantive and procedural) issues especially at the political levels of the Asean heads of government

•

•

•

and ministerial meetings. Even at the political level and certainly below this level, there is a need to provide for additional methods of decision-making that can be employed for certain categories of issues. However, the system must be characterised by sufficient flexibility and, above all, guided by the Asean spirit of harmony. A higher level of intra-Asean cooperation in the economic field (especially a more liberal approach to trade liberalisation, creation of an internal market and movement of services and factors of production across national boundaries) would inevitably increase the number of trade-related disputes among member states (both in the public and private sectors). This is not uncommon to regional organisations but their resolution through bilateral bureaucratic negotiations as is the current Asean practice may not be practical. It is necessary for Asean to develop a more efficient framework for resolution of differences/disputes among member states which may arise from the implementation of accepted policies. An important facet of Asean cooperation is its effort to influence the global and regional political and economic environment. This function will become even more significant, especially in the economic field, both in the dialogue relations with major trading partners and in international economic fora and organisations. To facilitate this, the machinery for conduct of Asean’s external relations has to be streamlined and strengthened. The private sector must be viewed as an important component of Asean economic co-operation: Without private sector participation, economic cooperation especially industrial cooperation will not make headway. Every

Institutional Framework: Recommendations for Change

effort must be made to allow the private sector to participate in the planning and implementation of Asean economic programmes. Similarly the private sector

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should also invite the public sector to participate in its deliberations and this interaction must take place both at regional and national levels.

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6.

THE STRUCTURE OF DECISION-MAKING

ZAKARIA HAJI AHMAD

T

he national bureaucrats who work on ASEAN affairs might appropriately be called the “decision-makers” of the regional organization, for it is they who carry out the day-to-day chores — formulation of policy and viewpoints, attendance and deliberation at meetings, negotiations and discussions, and implementation of decisions. Primarily, these decision-makers are the staff of the ASEAN National Secretariat (ANS) in each of the member states’ Ministry of Foreign Affairs (MFA). According to Nishikawa, after 1976 the ANS had been changed to the “Office of the DirectorGeneral, ASEAN (name of member country)”,1 although he observed that “these offices continue their previous functions and work effectively to complement the work of the ASEAN Secretariat in Jakarta”.2 However, reference to the ANS was constantly made by respondents interviewed in the course of this study. Even in the Philippines, where the Ministry of Foreign Affairs was reorganized in late 1982, with the “ASEAN National Coordinating Commission” being renamed “Office of ASEAN

Affairs”, this will “not affect the ASEAN desk”.3 ASEAN work is usually conducted through negotiations at ministerial level, and within the Standing Committee (which is formed in the country where the Foreign Ministers’ Meeting is held) and the “permanent” committees (of which there are nine). 4 However, it is the ANS that “coordinates” each country’s position at ASEAN deliberations. Outside each MFA, decision-makers dealing with ASEAN come basically from “technical” agencies such as the departments or ministries handling economic development and planning, trade and industry, transport, communications, health, forestry, science and technology, energy, agriculture, and primary industries. Usually, these “secondary level” officials deal with matters handled by the specific ASEAN committees. (In some cases, however, some ANS officials also deal with specific technical matters.) In all the three countries studied, ASEAN matters are also attended to by some of the most senior MFA officials, although most of

Reprinted in abridged form from Zakaria Haji Ahmad, “The World of ASEAN Decision-Makers: A Study of Bureaucratic Elite Perceptions in Malaysia, the Philippines and Singapore”, Contemporary Southeast Asia 8, no. 3 (December 1986), pp. 192–212, by permission of the author and the Institute of Southeast Asian Studies.

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the work is done by the national secretariat. The MFA’s advice is sought on all matters relevant to ASEAN, indicating the primary influence and position of the MFA’s bureaucrats. However, although it is possible to picture concentric circles of ASEAN decisionmakers, with MFA top officials at the core surrounded by ANS officials as a primary circle and technical officials as the outer ring, the locus of authority remains blurred. During ASEAN meetings, this blurring may occur because of the nature of a memberstate’s governmental system — for example, competition or rivalry between ministers can hinder the decision ANS officials can make or convey without clearance from the highest authority of that country. The administrative style of a particular country has some relevance as well, as will be seen below. The conceptual distinction between primary and secondary agencies appears most valid in the Malaysian and Singaporean cases. In the Philippine case, however, it has been observed that there has been a steady erosion of the MFA’s role and influence in foreign policy, including ASEAN matters, as a result of a heightened sense of the importance of economic parameters in external relations and the advent of “development diplomacy”.5 The role of the Philippine MFA may, therefore, be subject to contending rivalry from other agencies, especially the National Economic Development Agency (NEDA), a situation that seems amplified by the view of one Filipino respondent that “economic planning officials had much influence on questions relating to regional cooperation in as much as it related to economic matters”. In this case, then, the MFA’s role as a primary locus of decision-making may be shared by other agencies and subject to the nature of interagency relations.6 However, according to the Filipino respondents, the MFA’s role was still important in an overall sense although it was also clear that policies of an economic

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nature were more within the sphere of NEDA. Indeed, one respondent described the MFA’s role as important in the “political aspects” of ASEAN, and that there was “no inter-agency struggle because of the close relationship between NEDA and the MFA”. Although the MFAs in all three countries usually have the “final say”, in a number of instances the agency that is designated as the co-ordinating body for a particular agenda attempts to “take the lead”. One MFA respondent who dealt with “technical” matters asserted that although 80 per cent of ASEAN business concerned economic issues and the other 20 per cent political, the latter was “glamourized” by the press. This is significant not only in terms of the perception, but also because it again raises the question of the exact locus of authority and decision-making within the agencies dealing with ASEAN affairs. It is apparent that the machinery for ASEAN decision-making has become increasingly complex: so much so that there is an ongoing attempt at reorganizing ASEAN procedures. In several instances, certain problems have become so big that an individual ASEAN country is simply assigned to deal with it. In other areas, one country has been allowed to chair a committee, rather than rotate the chairmanship. Decision-making resides in committees in which all ASEAN members are represented, but the work of these committees is slow and tedious, so verbal consensus is often achieved prior to the actual working out of details. Although there are already five committees established under the aegis of the economic ministers, it is felt that a sixth — on energy — should be set up. Decisions made by the committee are then affirmed by the respective ministers and standing committees. That agreement can be reached almost informally indicates an air of ease in ASEAN decision-making. If certain national circumstances render it difficult to pinpoint the exact locus of

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authority, it was also revealed by a senior ASEAN Secretariat official that, for the grouping itself, the relative importance of the foreign and economics ministers remains to be established. It is thus unclear whether the deliberations of the meetings of the five (later six) foreign ministers or of their economic counterparts holds greater weight.7 The “ASEAN officials” of the respective MFAs represent their countries’ interests at ASEAN deliberations but the platform, as it were, on which they interact is governed by what may be called “codes of behaviour”. Essentially, these “codes” have been set by the Bangkok Declaration of 1967, the ASEAN Concord and the Treaty of Amity and Cooperation as well as supplementary agreements. Interestingly, however, such a revelation came only from one source — a Malaysian respondent. This might mean that such codes of behaviour are assumed to be obvious, or it could reflect the fact that Malaysian decision-makers operate in what they understand as a “formal” context, whereas other respondents presumably did not feel so inclined. In a related sense, Singaporean respondents had also a notion of the “formal” nature of organizations, and in identifying problems faced by ASEAN one noted that there were “serious problems in administrative matters such as budgeting”. He opined that Malaysian and Singaporean administrative styles “exercised more control” over such matters whereas the Filipino and Indonesian approaches were “rather loose”. Malaysian and Singaporean respondents apparently thought that such problems had to be dealt with before any expansion of ASEAN could be undertaken. The views and opinions of these decisionmakers underscore the structure of decision-making on ASEAN affairs in their respective countries. As one Malaysian respondent put it, decision-making in

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Malaysia is “tilted in favour of bureaucrats”, a style that corresponds with the heavy influence of the bureaucracy in what Esman called “an administrative state”.8 This was not, however, the impression gained from Singaporean respondents, indicating more direct control by political ministers over bureaucratic decision-making. In the Philippines, control over bureaucrats would seem to be subject to at least seven major groups,9 although respondents who were “secondary” officials indicated a more direct concern by ministers (who are largely economists) over issues of economic co-operation. Indeed, Manila has established a ministerial and technical committee on ASEAN economic co-operation, chaired by the Prime Minister. Nonetheless, it is apparent even in the Philippines that the views and advice of its bureaucrats are heavily relied upon. Members of each country’s ANS attend ASEAN meetings, having prepared briefs according to their respective national viewpoints. Given that each national position on any particular issue would have to be vetted by the higher echelons of each country’s MFA, it was not clear from the views obtained whether the ANS staff’s views were always readily accepted or were sometimes altered. But the impression gained was that the ANS views often had some weight. In this regard, the “style of administration” in each particular country is probably important. The Malaysian and Filipino respondents were more “open” in their discussion of viewpoints, whereas the Singaporeans were rather reluctant. This could mean that the “vetting” procedure is more rigorous in the Singaporean situation but much less so in the Malaysian and Philippine contexts. The degree of control in each situation also depended on the seniority of the ANS official concerned. The more senior the official, the less rigorous the vetting. For example, in the early years of ASEAN,

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Singapore’s ANS was a “one-man show” and the span of decision-making was small; indeed at one time the ANS DirectorGeneral was the most senior MFA official. Given also the priority now accorded to ASEAN, it seems likely that officers assigned to an ANS will have a fair degree of seniority: this was certainly the case for all the respondents interviewed. Because of the small span of authority, ASEAN officials are in very close communication with their bureaucratic superiors and political masters. The degree of control was, therefore, a question of not only the extent of seniority but also of the very compact nature of organization of ASEAN activities in each country. The ASEAN bureaucratic decisionmaker as such occupied a critical place in each member state’s decisions on ASEANrelated issues. It may be presumed that each ASEAN decision-maker acts and makes decisions according to what he perceives to be the best interests of his country. It appears, from one source, that such a predisposition also exists amongst the ASEAN officials nominated to conduct ASEAN’s affairs on behalf of ASEAN. According to the regulations, such an official “cannot participate in politics” but can “facilitate matters” in his or her own country. The impression gained from the self-assuredness of the respondents is that although they represent their respective countries, their style is individual, not national. Thus, while each decisionmaker is an individual who sees his country’s interests as tied in to ASEAN, no decisionmaker acts purely in the interests of ASEAN. The representation of one’s national interest(s) is an important component of each individual’s self-awareness of his or her own role in the regional organization. Generally, respondents affirmed this role of maximizing their own national interests in ASEAN’s deliberations, but rationalized this as a necessary step — not doing so would be

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“harmful” to one’s own country, and in any event such maximization of national interest was not seen as damaging to the regional organization. In more “technical” areas, it was admitted that competition among ASEAN member states was necessary, but that at the same time joint efforts were being made to minimize the effects of this on regional cooperation. Decision-making is being structured in terms of collaboration, not cooperation. An example of this relates to an ongoing attempt to establish a joint ASEAN shipping service through equity participation, a proposal being mooted by the Federation of ASEAN Shippers’ Councils to the Federation of ASEAN Shipowners’ Associations.10 Interestingly, this proposal is being proposed as an alternative to the Far East Freight Conference (FEFC), whose rates are considered too competitive for the individual, nascent shipping lines of ASEAN. If national interest is regarded as an important component of the decisionmaker’s stances, are there frictions in the process of ASEAN decision-making? This is an issue that cannot be resolved or answered on the basis of the available interview evidence. Different national interests led to different nuances but there emerged a perception that “openness” is important. One source stated that no suspicions existed in the decision-making corridors of ASEAN but that one “could tell what another was driving at”. It is also pertinent that there is a view that the leaders of ASEAN prefer not to allow bilateral issues within the organization to emerge as stumbling blocks in discussions. Perhaps, indeed, there is a notion that certain problems are best swept under the carpet, a style that might conceivably be regarded as non-Western or even indigenously Southeast Asian. Nonetheless, the question of national interest is probably a central factor in the

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process of ASEAN decision-making. Sometimes the notion is that, as bureaucrats, these decision-makers perform only their assigned tasks and nothing more. Style of course is important. One view classified the Filipinos as “liberals” who acted more like the “private sector” of their own country. They thus pushed for free trade just as the private sector would. But other nationals saw the issue differently, and analysed it cautiously. This had to do with “national style” as well — the inaccuracy of statistics (except for Malaysia and Singapore) was viewed as a national element that sometimes made

discussion a lot more difficult. If an issue became too difficult to negotiate at meetings, it was pushed on to be deliberated by the respective ministers; such deliberations did not involve bureaucrats, who were only informed of the outcomes later. This also implied that ASEAN decisionmakers are generally more “rigid”, perhaps even pushing their national interests further than necessary. Such rigidity can be explained by a view that, notwithstanding a prevailing spirit of “give and take”, ASEAN should not violate the national interests held sacrosanct by its members.

NOTES *

1. 2. 3. 4. 5. 6. 7.

8. 9. 10.

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This paper was originally prepared for the ASEAN Economic Research Unit Project, “An Inquiry into the Political Factors in Regional Integration: A Study of ASEAN”. As the research was conducted prior to the inclusion of Brunei in ASEAN in 1984, interview citations refer to the original five member states of ASEAN. Jun Nishikawa, ASEAN and the United Nations System (New York: UNITAR, 1983), p. 14. Ibid. New Straits Times, 23 December 1982. Nishikawa, op. cit, pp. 12–14. Richard Kessler, ‘“Development Diplomacy’: The Role of the MFA in the Philippines”, Philippine Journal of Public Administration 24, no. 1 (January 1980): 26–46. On inter-agency relations, see ibid. The analysis by Nishikawa, op. cit., pp. 12–13, does not clarify this issue. His chart of the organizational structure of ASEAN on p. 13 equates the standing of the two groups of ministers, and his statements that “the highest policy-making body of ASEAN is the Meeting of Foreign Ministers” and that “the meeting of ASEAN Economic Ministers is a supreme decision-making body in the field of economic cooperation”, on p. 12, are contradictory. M.J. Esman, Administration and Development in Malaysia (Ithaca: Cornell University Press, 1972). Kessler, op. cit., p. 32. Both these organizations are private or non-governmental ASEAN bodies. However, their activities are closely monitored by the respective ASEAN governments.

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The Association of Southeast Asian Nations: Challenges and Responses

7.

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THE ASSOCIATION OF SOUTHEAST ASIAN NATIONS Challenges and Responses M. C. ABAD, Jr.

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8.

ASEAN INSTITUTION BUILDING

CHIN KIN WAH

TOWARDS THE PRESENT INSTITUTIONAL CONFIGURATION The institutional structure of Asean in the third transition beginning from 1992 reflects a process of incremental modification of a structure largely traceable to the Bali summit and the selective inputting of recommendations from the subsequent task forces on institutional reform. Significantly, it was the fourth Asean summit held in Singapore in January 1992, that provided the political watershed for the endorsement of institutional changes relating to the summit meetings, the economic committees and the Asean Secretariat. The declared objective of the Singapore summit to accelerate economic cooperation, in particular, the establishment of the Asean Free Trade Area (AFTA) through the Common Effective Preferential Tariff (CEPT) Scheme did have an important bearing on the decision to selectively strengthen the Asean machinery including the central Secretariat.

Since the fourth Asean summit, the Asean Heads of Government meetings (the highest decision-making body in Asean today) have been regularised — with the formal summit taking place once every three years on a rotational basis and with annually rotating informal summits in between. Below this structure is the AMM whose establishment goes back to the founding of Asean, and which as indicated previously, is the ‘receptacle’ of the political sovereignties of the regional association. The second Asean summit held in Kuala Lumpur in 1977 did agree that the AMM could include other relevant ministers as and when necessary. Since then, the AEM began to meet annually and separately. In time, ministers of specific sectors of economic cooperation (such as Energy, Agriculture, and Forestry) as well as non-economic ministers (of Health, Environment, Labour, Social Welfare, Education, Science and Technology, Information and Justice/Law) also convened their own meetings. More re-

Reprinted in abridged form from Chin Kin Wah, “ASEAN Institution Building”, in ASEAN Towards 2020: Strategic Goals and Future Directions, edited by Stephen Leong (Kuala Lumpur: Institute of Strategic and International Studies, Malaysia, and London: ASEAN Academic Press, 1998), pp. 153–69, by permission of the author and the publishers.

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cently the Asean Ministers of Transport too began to meet formally.1 While there is coordination between meetings of the other ministers and the AMM, each of the ministerial blocs could also report directly to the Heads of Government. In the absence of a Council of Ministers, there is a Joint Ministerial Meeting (JMM) established since the 1987 Manila Summit, to facilitate crosssectorial coordination between the AEM and AMM. The JMM however meets as and when necessary (under joint AMM and AEM chairmanship) although they usually meet prior to the Heads of Government meetings. The different phases of institutional renovation has generally left untouched the political standing of the ASC which is the acknowledged policy arm and organ of coordination of Asean between the AMMs. Since the 1992 Singapore summit, the five economic committees (namely COFAF, COFAB, COIME, COTAC and COTT) have been dissolved and their work and activities as well as those of their subsidiary bodies and sub-committees taken over by the Senior Economic Officials Meeting (SEOM) which is required to convene at least four times a year and which reports directly to the AEM. However the non-economic committees, all of 1978 vintage namely the Committee on Science and Technology (COST), the Committee on Social Development (COSD) and the Committee on Culture and Information (COCI) remain and continue to report to the ASC and relevant meetings of Ministers. Besides these committees, other meetings of senior officials have been progressively regularised over the years. They now range over a wide area from the Environment (Asean Senior Officials on the Environment or ASOEN), Drug Matters (Asean Senior Officials on Drug Matters or ASOD), Civil Service Matters (Asean Conference on Civil Service Matters or ACCSM), Energy (Senior Officials Meeting on Energy or SOME) and Transport (Senior Transport Officials

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Meeting or STOM). To facilitate intersectorial coordination at the officials level between SOM, SEOM and the Asean-DGs, the 1987 Manila Summit established the Joint Consultative Meeting (JCM) which also includes the Asean Secretary-General who reports the results of the JCM to the AMM and AEM.2 Reflecting the expansion of Asean’s dialogue partnerships with third countries over the years is the growing number of Asean Committees in Third Countries. These committees comprising the heads of Asean missions in the host country conduct consultative meetings with the host government concerned and report to the ASC. At the Fifth Summit, India was elevated from Sectorial Dialogue Partner to full Dialogue Partner status3 while China and Russia were elevated from Consultative Partner to full Dialogue Partner status at the 29th AMM Post Ministerial Meeting (PMC) in July 1996. The other Dialogue Partners are Australia, Canada, the European Community, Japan, South Korea, New Zealand, the United States and the UNDP.4 The PMC is the annual consultative meeting (held back-to-back with the AMM) between Asean Foreign Ministers and the Foreign Ministers of the Dialogue countries. In its review of Asean’s external relations, the Singapore Summit acknowledged that “as part of an increasingly interdependent world, (Asean) should intensify cooperative relationships with its Dialogue Partners”. In this regard “Asean should strengthen existing dialogue mechanisms and develop new ones where necessary for the enhancement of economic relations with these countries, especially Asean’s major economic partners”.5

ASEAN SECRETARIAT An important outcome of the Singapore summit for institution building has been the strengthening of the Asean Secretariat

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and the enhancement of the status of its Secretary-General. The Secretariat now has an expanded, openly recruited staff which is considerably more than the pre-1992 complement of 14 nationally seconded staff. According to Asean Secretary-General Dato’ Ajit Singh, the switch to open recruitment for the 24 available positions following the January 1992 Singapore summit attracted over 7,000 applications from the Asean region.6 Since 1992, the professional staff has risen by 25% to 32 in 1997. The Asean Secretariat is headed by the Secretary-General, whose team now includes two Deputy Secretaries-General whose appointments are rotated alphabetically amongst member-countries. Below them are presently, 5 Bureau Directors overseeing general affairs (aided by 2 Assistant Directors), economic cooperation (with 4 Assistant Directors), functional cooperation (with 4 Assistant Directors), Asean Cooperation and Dialogue Relations (with 3 Assistant Directors), and the AFTA Bureau (with 2 Assistant Directors). The AFTA Bureau has been established to support the Secretariat’s function of assisting in the implementation of the AFTA.7 The number of Assistant Directors has increased from 10 in 1994 to 16 in 1997. Quite clearly, the work load of the Asean Secretariat has considerably increased since the dissolution of the five sectorial economic committees and the transfer of the functions of their interim technical secretariats to the Asean Secretariat which has been given an enhanced role to initiate, advise, coordinate and implement Asean activities. The Secretary-General himself has been re-designated as the Secretary-General of Asean (not just of the Secretariat as previously) and given ministerial (as opposed to the previous ambassadorial) status. His appointment, on merit, is now for a renewable five-year term. Although in effect means that an incumbent could offer

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himself or herself for ‘re-election’, as Dato’ Ajit Singh explained, when he made himself available for another 5-year term in July 1997, the decision would be based on consensus and consultation amongst the foreign ministers and not through voting.8 According to Dato’ Ajit, the Indonesian Foreign Minister, Ali Alatas was given the task at the 1996 AMM (when Alatas was serving as chairman of the ASC) to sound out his Asean counterparts officially and in private, as to who they supported for the post,9 which was being contested by Philippine Under-Secretary for Foreign Affairs Rodolfo Severino as a nominee of his government. In the event, Severino received more support from the Asean Foreign Ministers. It would seem that despite the amended provisions governing the term of the Secretary-General, 10 years is a long wait for any of the other governments that would rather have its own nominee fill the position. We can see that the process of Asean institution building while reflecting a gradualistic and adaptive approach, has nevertheless been a necessary response to the changing needs and mission of the regional association. It can be said that Asean today is one of the most extensively institutionalised regional associations although that in itself is not necessarily an indicator of organisational efficiency or effectiveness or the depth of a regional community spirit. Indeed the new comers to the regional grouping (Vietnam, and subsequently Laos and Myanmar and eventually even Cambodia) are admittedly awed by the sheer number of official meetings (numbering 280 in 1995 and well reflected in the alphabet soup of committee acronyms) which take place annually both in and outside Asean. The question of institution building as such, is one that needs to be addressed regularly as Asean itself evolves. Indeed, Malaysia’s Foreign Minister, Dato’ Seri

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Abdullah Ahmad Badawi, in his keynote address to the 7th Southeast Asia Forum in

March 1996, identified institution building as one of the five challenges facing Asean.10

NOTES 1. Their first formal meeting was held in Bali in March 1996. They have since agreed to meet twice a year on a rotational basis. 2. Information obtained from the Asean Secretariat’s webpage (http://www.aseansec.org), 12 June 1997 and Asean Update, Vol. 2/96, March–April 1996, p. 16. The ASEANWEB was officially launched at the JMM of the Fifth Asean Summit in December 1995. 3. A Sectorial Partner engages only in a partial dialogue with Asean over a limited area of cooperation. For example, Pakistan which has been a Sectorial Partner since March 1993 engages in a dialogue with Asean on trade, industry, the environment and investment. 4. In October 1996, Asean met for the first time with the United Nations Development Programme (UNDP) since 1977 when the UNDP was given dialogue partner status. This meeting which was held in Kuala Lumpur, was attended by delegates from Asean countries, representatives from UNDP New York and from UNDP Country Offices based in Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Thailand and Vietnam. (Asean Update, Vol. 4/96, July–October 1996, p. 8). 5. “Singapore Declaration of 1992,” in Asean: An Overview, Jakarta: Asean Secretariat, 1995, p. 73. 6. Frank Ching, “Asean’s Formula for Success”, Far Eastern Economic Review, 21 August 1997, p. 36. 7. The previous Bureau for Economic Research has been reconstituted with a more focused AFTA role (and designated as the AFTA Bureau) while a new Bureau covering Asean Cooperation and Relations with Dialogue Countries has now been established. 8. The Star, 21 July 1997. 9. New Straits Times, 22 July 1997. 10. The other challenges being managing integration, preservation of Asean’s identity, sustaining the integrity of the ‘Asean way’ and retaining the initiative in mega-regional consultative and cooperative processes.

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9.

ASEAN DURING THE CRISIS

HADI SOESASTRO

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here appears to be a serious gap in perceptions between ASEAN officials and the public in and outside ASEAN on the efforts made by that institution to overcome the economic crisis that has affected all its members, albeit in varying degrees. Indonesia, Thailand and Malaysia have been hit hardest; Singapore and the Philippines to a much lesser extent. Yet, a prolonged and deep crisis in the severely affected regional economies will also pull down the growth rates in Singapore and the Philippines as has been evident since the beginning of 1998. Even countries such as Vietnam and Laos that are relatively more insulated are also affected by the economic slowdown in the region. Since the regional impact of the crisis is so pronounced, it would be logical to expect ASEAN to be in the forefront of regional and international responses to the crisis. In the public’s view this is one of the most important reasons for having ASEAN and for promoting ASEAN economic co-operation.

INITIATIVES IN THE FINANCIAL REALM As if guided by some kind of premonition, the ASEAN finance ministers held their first ever meeting on 1 March 1997 in Phuket, Thailand to promote ASEAN co-operation in the area of finance. The ministers were quite up-beat about the continuing favourable outlook for the region for the rest of the year. They expected their countries’ exports to improve, the levels of FDI flows to be healthy and domestic demand to be strong. They also believed that the international environment would remain supportive. At the same time they recognized the value of developing a mechanism for consultations amongst them. Little did they know that in the coming months some of them would have to deal extensively with the International Monetary Fund. In fact, the ministers had placed on their agenda an exchange of views with its Managing Director, Michel Camdessus, to discuss global and regional economic

Reprinted in abridged form from Hadi Soesastro, “ASEAN during the Crisis”, in Southeast Asia’s Economic Crisis: Origins, Lessons, and the Way Forward, edited by H. W. Arndt and Hal Hill (Singapore: Institute of Southeast Asian Studies, 1999), pp. 158–69, by permission of the author and the publisher.

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developments and avenues for enhancing financial co-operation. Michel Camdessus shared the optimism of the ASEAN finance ministers that “the economic fundamentals for ASEAN’s continued sustainable growth remain strong.” This first meeting in March 1997 produced a Ministerial Understanding on ASEAN Co-operation in Finance. It provided a framework to enhance cooperation and facilitation in several areas of finance within the existing institutional arrangement. ASEAN Finance Ministers’ Meetings (AFMM) were to be conducted regularly and assisted by the ASEAN Senior Finance Officials’ meeting (ASFOM). The activities were to include exchanging views on macroeconomic policies, improving transparency of policies, regulations and rules affecting the financial sector, promoting ASEAN as an efficient and attractive financial and investment region, promoting public-private sector linkages in the area of finance, and developing ASEAN human resource in the area of finance. The Joint Press Communiqué of this first meeting emphasized three particular issues: the importance of strengthening the supervisory and regulatory framework of the banking sector; the need to liberalize the financial services sector further in a gradual fashion, including through the WTO; and the utility of the ASEAN Swap Arrangement in view of the dramatic changes in the global financial environment. When the crisis hit, it was clear that the affected countries had to resort to the IMF, unless they wanted to resolve the problem on their own as has been Malaysia’s policy. ASEAN was not in a position to do anything. The ASEAN Swap Arrangement was far from adequate. An informal proposal from Japan for the establishment of an Asian Fund was shot down by Washington because of concerns that such a regional fund would not apply conditionalities as stringently as the IMF. In fact the finance ministers, in

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their Joint Statement of December 1997, urged the affected countries to undertake strong adjustment measures, including those that will be undertaken in conjunction with the IMF financing arrangement. Perhaps in anticipation of the upcoming APEC meeting in Vancouver (Canada), Finance and Central Bank Deputies from a number of APEC economies met in Manila and formulated a New Framework for Enhanced Asian Regional Co-operation, known as the Manila Framework Agreement. This framework was subsequently adopted by the APEC leaders. One of its core principles is the establishment of a regional surveillance mechanism to complement the global surveillance of the IMF. Other initiatives include economic and technical cooperation in the financial area (or “financial ecotech”), measures to strengthen the IMF’s capacity to respond to financial crises, and development of co-operative financing arrangements to supplement the resources of the IMF and other international financial institutions. On 1 December 1997 a Special ASEAN Finance Ministers’ Meeting took place in Kuala Lumpur to discuss the causes of the crisis and the policy responses, but the ministers did not come up with any ASEAN financing arrangement to assist affected members. They viewed the existing ASEAN Swap Arrangement as a quick response mechanism, and since it is due to lapse in August 1999, they agreed to renew it. No discussions appear to have taken place on why this arrangement had not been used during the early stages of the crisis before affected countries invited the IMF to come in. No other concrete initiatives were taken. The idea of a regional fund had disappeared. Instead, ASEAN supported strengthening of the IMF. Greater attention appears to have been given to problems of globalization, which the ministers regard as one of the main

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causes of the crisis. As stated in the Joint Ministerial Statement, the enhancement of a country’s ability to face the challenges of globalization would require a comprehensive package of policies. This would comprise sound macroeconomic policies as well as policies to enhance the stability and strength of the financial system, promote flexible exchange rates, provide marketbased incentives to improve the allocation of capital, and improve information dissemination and corporate governance. Indeed, it seems that the ministers identified all the right and important things that individual members should do to overcome the crisis. The lesson they drew from the crisis stressed the importance of internal factors rather than external influences. Yet, as an institution ASEAN cannot force its members to adopt such a policy package, but the finance ministers have begun to toy with the idea of cooperative efforts to redefine the criteria for sound policies. This would be an important first step in the direction of developing a regional surveillance process. All this suggests that the finance ministers focus on each individual country’s ability to face the challenges of globalization. They did not propose a “closing in”, and in their joint statement in December they recommended that ASEAN should not reduce its commitment to financial liberalization. The views of the finance ministers on the crisis and the necessary efforts to resolve it may not be the same as those of the leaders. This was clearly the case in Malaysia, and had led to the serious split in leadership, and subsequently the political crisis in Kuala Lumpur. The comments by the Philippine President, Estrada, on the way Prime Minister Mahathir handled the affair have been met with anger by the Malaysian leadership and public. There are concerns that such open comments on the internal developments of an ASEAN member by another member

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could weaken the cohesion of ASEAN. Others feel that a “mature” ASEAN must allow this to take place without adversely affecting ASEAN co-operation. Internal political developments in member countries are perhaps still too sensitive a matter for ASEAN to deal with. This may also apply to national economic policies of member economies. Yet, the crisis has opened up a window of opportunity for the region to become more open to collective monitoring and review. The ASEAN finance ministers seem to be a few steps ahead of their other colleagues on this matter. Until this is turned into practice, however, it may be too early to pass judgement. Finance ministers were of the view that to a large extent efforts to improve the transparency of financial markets must be undertaken on a global basis. Their view is that the IMF, together with other international financial institutions, should develop a global framework to collect, analyse and disseminate information on developments in the financial area, and thereby improve the transparency, efficiency, and stability of the international financial and currency markets. Parallel to this, the IMF was urged to conduct an indepth analysis of the structure of global financial markets and short-term capital flows. Severino (1998b) thought that ASEAN itself should make a collective contribution to the intellectual content of the new global financial architecture. At the opening of the thirty-first AMM, President Estrada of the Philippines urged ASEAN to take the intellectual leadership in shaping a new architecture of the international financial system, as “otherwise others will once again shape our destiny for us”. This is an important suggestion but ASEAN is not organized to do this. In the past, the ASEAN officialdom had created advisory or “wisemen” groups to examine specific issues, such as the reform of ASEAN and ASEAN’s future directions. Perhaps ASEAN could set

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up a study commission of prominent ASEAN individuals and analysts to undertake this task. In their call for international support, the finance ministers at their second meeting in Jakarta in February 1998 urged the international community to recognize the structural and financial reforms undertaken by ASEAN countries and to respond to these initiatives. They called for greater flexibility of conditionalities attached to the IMF support programmes and urged the IMF to accelerate the implementation of those programmes. They asked international financial institutions to take full account of the need to protect the poor in devising their support programmes. They also urged the IMF and other multilateral institutions to examine the possibility of subjecting the operations of hedge funds to full disclosure, and greater transparency in their operations. They asked the G7 countries to open up their markets further to products from ASEAN. They specifically expressed their appreciation for China’s decision not to devalue the RMB. The most concrete step taken by the finance ministers concerned the regional surveillance mechanism within ASEAN. Their view is that the contagion and systemic risks facing the region make it necessary for ASEAN to develop such a mechanism. The ministers have not been specific about what kind of surveillance to develop, but there have been suggestions to add new elements to the traditional scope of surveillance — fiscal balances, monetary aggregates, current account deficits, etc. An ASEAN Central Bank Forum was established in early November 1997. Its purpose is to evaluate the potential economic and financial risks of member countries, highlighting policy options and implications, and encouraging early action to minimize such risks. The Central Bank Forum will develop the criteria for surveillance. According to the suggestion of

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the finance ministers, an ASEAN Select Committee comprising members of the ASEAN Central Bank Forum and Finance Officials would form the core of the mutual surveillance. The finance ministers also decided to set up a Permanent Secretariat to facilitate this initiative, with the assistance of the Asian Development Bank. The various initiatives of the ASEAN finance ministers, including the establishment of a Select Committee to develop the regional surveillance mechanism, were fully endorsed by the ASEAN heads of state/ government during the second Informal Summit in Kuala Lumpur on 15 December 1997. At the Second AFMM in Jakarta on 28 February 1998, the decision was made to immediately establish the ASEAN surveillance mechanism “within the general framework of the IMF with the assistance of the Asian Development Bank”. It is not clear what the role of the IMF would be in this regional surveillance process. It should be in the IMF’s interest to make this regional surveillance mechanism a part of its global surveillance mechanism. Indeed, the ASEAN process can be viewed as an initiative to that end. To be able to do so effectively, the process may have to include Japan and China because of their significant role in the Asian financial scheme. Yet, it appears that in promoting this regional surveillance mechanism the ASEAN members desire to have a regular exchange amongst themselves, at least initially (ADB Institute 1998). An ASEAN exercise and involvement of countries from outside the sub-region can be reconciled within ASEAN’s strategy of “concentric circles of cooperation” (Soesastro 1995). By the time the thirty-first ASEAN Ministerial Meeting took place in Manila on 24–25 June 1998, almost five months after the decision was made to move ahead with regional surveillance, the mechanism had not taken off. When the thirtieth ASEAN Economic Ministers’ Meeting (AEM) was

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held in the Philippines on 7–8 October 1998, the initiative was still only on paper. Both the AMM and the AEM endorsed it. It is important to note the AEM’s view that the ASEAN Surveillance Process is aimed at preventing future crises and “will be based on a peer review process”. It also aims at “monitoring developments in ASEAN member countries and in the international economy that could affect individual ASEAN economies and the region”. Beyond this, it proposes that the process should aim at “providing recommendations on possible actions that could be taken at the country and/or regional level”. The surveillance process has not materialized yet, but when and if it can successfully implement its tasks as described by the AEM, it will transform ASEAN into a different association from what it is now.

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The ASEAN finance ministers have been emphasizing the importance of improving the domestic policies and governance of members. Their response is also characterized by a strong commitment to maintain the openness of the ASEAN regional economies and to continue with financial liberalization. It accommodates the IMF’s dominant role in organizing a multilateral effort to assist affected countries. However, the fact that the AFMM vehicle is new may explain the slow implementation of its initiatives. Perhaps the AFMM’s contribution is more in its systemic influence on ASEAN’s future organizing principles rather than in concrete measures to help recapitalize the affected economies. On the latter, it has decided to rely on the international community, perhaps realizing its own limited capabilities.

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10.

THE “ASEAN WAY”

DAVID CAPIE and PAUL EVANS

A

central characteristic of the “ASEAN way” has been its cautious attitude towards formal institutionalization. 1 Singapore’s Foreign Minister S. Jayakumar has called this ASEAN’s predilection for “organizational minimalism”. 2 Robert Scalapino has described it as a process of “soft regionalism” or “soft dialogue”3 while Alastair Iain Johnston uses the term “thin institutionalization”.4 In essence, all these labels suggest that ASEAN is a different regional institution from those that have appeared in Europe since World War II.5 Its member states do not seek to create a political union nor does the institution have any supranational authority. Rather, ASEAN is an example of “sovereignty-enhancing regionalism” where most decision-making powers continue to reside in the various national capitals. ASEAN’s institutional resources reflect its preference for informality. Compared with an entity such as the European Union (EU), ASEAN has only a modest bureaucratic apparatus, although its Jakarta-based Secretariat has expanded its role in recent

years. 6 Both the ARF and APEC have followed ASEAN’s example. The ARF has no permanent professional staff or Secretariat, and the APEC Secretariat in Singapore is small.7 The preference for informality is also reflected in the labels used to describe these institutions. Since the establishment of the ARF in 1994, ASEAN representatives have been careful to describe it as a “dialogue forum” rather than the apparently more formal-sounding “multilateral security mechanism”.8 A similar preference for less formal language has affected the ARF’s inter-sessional process. At the second ARF meeting in 1995, it was agreed to establish inter-sessional working groups. However, China objected to the use of the term working groups and opposed an openended timetable because “this smacked of thicker institutionalization”.9 The meeting eventually compromised and designated the groups as inter-sessional support groups (ISGs) and inter-sessional support meetings (ISMs). Many of the same arguments have taken place about institutionalization within APEC. APEC has been referred to as a

Excerpted from David Capie and Paul Evans, The Asia-Pacific Security Lexicon (Singapore: Institute of Southeast Asian Studies, 2002), by permission of the authors and the publisher.

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“consultative mechanism” to clearly distinguish it from an “economic community”, a term that has obvious European connotations. A 1993 Australian proposal to use “community” in the APEC context was met with consternation by APEC’s Asian members.10 In 1994, APEC’s advisory Eminent Persons Group (EPG) recommended “the progressive development of a community of Asia Pacific economies with free and open trade and investment”. According to the EPG, “community” was not meant to imply complete economic integration or even a customs union, but “simply to connote a like-minded group that aims to remove barriers to economic exchange among its members in the interests of all”.11 The preference of the “ASEAN way” for informality can also be seen in the Association’s use of consultative processes such as “habits of dialogue” and nonbinding commitments rather than legalistic formulae and codified rules.12 According to Khong Yuen Foong, “ASEAN officials have contrasted their approach to [those] that emphasize legal contracts, formal declarations, majoritarian rules, and confrontational negotiating tactics.”13 Likewise, neither APEC nor the ARF has adopted formal dispute settlement mechanisms. APEC proponents explicitly rejected calls for the establishment of a regional dispute settlement mechanism. They did not see a need for “highly legalistic” procedures such as those of the World Trade Organization (WTO) or General Agreement on Tariffs and Trade (GATT). Instead APEC’s Bogor Declaration only calls for the creation of “a voluntary, consultative dispute mediation service”. 14 Similarly, for the ARF, the objective of conflict resolution has had a mixed reception. The ASEAN Concept Paper, presented at the second ARF meeting in 1995, initially proposed a three-stage approach to future security co-operation: beginning with confidence-building, then

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preventive diplomacy, and finally conflict resolution. However, after some discussion the term conflict resolution was changed to “elaboration of approaches to conflicts”, apparently because China found conflict resolution “too formal a category” and opposed any such role for the ARF, at least in the immediate future.15 While this is a rather striking example of antipathy for legalistic approaches, Acharya notes that China’s position would not be inconsistent with ASEAN’s own approach to intra-mural conflicts which is “better described as one of conflict avoidance than conflict resolution”.16 The importance of personal relations and élite diplomacy between ASEAN leaders is another manifestation of this preference for informality. A founding father of ASEAN, Ali Moertopo, has said intra-ASEAN consultations are often successful because its leaders are friends who “know one another so well”.17 Likewise, ASEAN leaders prefer what Tun Abdul Razak called “sports shirt diplomacy” over Western “business shirt diplomacy”.18 This implies that discussions over dinner or on the golf course are more likely to be effective than sitting down to debate a policy in a meeting. Some analysts have noted, however, that the importance of personal relations has declined as a new generation of ASEAN leaders has come to power.19 Despite that, bilateral meetings, especially face-to-face meetings between leaders remain important in building trust. ASEAN uses the Bahasa expression empat mata (literally meaning “four eyes”) to refer to direct one-on-one meetings between leaders, which take place preferably without agendas or interpreters.20 Advocates of the “ASEAN way” also stress the importance of patience. Malaysian Prime Minister Mahathir Mohamad has described the first task of any dialogue process as “the tedious business of getting to know one another”. 21 Many Asian participants laud the very existence of the

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ARF, and emphasize that in dialogue “the process is as important as any eventual agreement”. 22 In an institutional setting such as the ARF, the “ASEAN way” seeks to build a “level of comfort” amongst participants before embarking on ambitious initiatives. The 1995 ARF Chairman’s Statement declared that “the ARF process shall move at a pace comfortable to all participants”.23 An ASEAN Concept Paper discussed at the same meeting described this pace as not “too fast for those who want to go slow and not too slow for those who want to go fast”.24 In practice, this means that any contentious issues likely to provoke confrontation or open disagreement are dropped from the agenda. Some Asian leaders have referred to the need for multilateral institutions to “mature” before robust dialogue can take place.25 The need for patience has been recognized by some nonAsian participants as well. One regional defence official has said of the ARF, “[t]he rate of progress will try the patience of some, but the speed of the train becomes irrelevant if some of the carriages are left behind.”26 While proponents of the “ASEAN way” are uncomfortable with rapid and formalistic approaches to institution-building, and assert that “process is more important than structures”, this discomfort should not be exaggerated. Although Asia-Pacific institutions usually have small bureaucracies by European standards, the number of track one officials meetings and working groups co-ordinated by ASEAN, APEC, ASEM (AsiaEurope Meeting), and the ARF is considerable. ASEAN itself organizes close to 300 officials meetings annually. APEC has ten formal working groups, covering issues from investment to trade promotion. ARF inter-sessional meetings have also become commonplace. Since 1999, ARF delegations have been expanded, allowing defence officials to meet with their counterparts over a working lunch at ARF meetings. In

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addition, the past few years has seen the emergence of a burgeoning stream of intraEast Asian multilateralism, including several meetings of the ASEAN Plus Three,27 a process which is becoming more regular and formalized. 28 Richard Higgott has noted that the region’s senior officials and ministers now meet regularly and in a systematic way. He argues that while there is a tendency in the Asia-Pacific to highlight the modesty of institutional arrangements when compared with Europe, “the development of APEC … compares favourably with the early phases of institutional cooperation in other parts of the world, including Europe in the immediate post World War II era.”29 Another element of the “ASEAN way” is the principle of inclusivity: bringing both like-minded and non-like-minded participants into dialogue. As early as the 1991 ASEAN Ministerial Meeting, it was envisaged that non-like-minded states, such as the Soviet Union, China, North Korea, and Vietnam, should be included in any future regional security dialogue.30 Inclusivity also underpinned ASEAN’s policy of constructive engagement with the State Law and Order Restoration Council (SLORC) regime in Myanmar (Burma) before it was admitted to the Association in July 1997.31 Inclusiveness is an important foundation of APEC’s embrace of non-discriminatory open regionalism (see the entry on “Open Regionalism”) and some scholars have used the term to describe ASEAN’s own model of regionalism. 32 However, despite the preference of the “ASEAN way” for engaging non-like-minded actors, inclusivity has its limits: for example, neither Taiwan nor Pakistan is a member of the ARF, and India, a member of the ARF, has not been accepted into APEC.33 Similarly, Australia, New Zealand, India, and Pakistan were excluded from the inaugural ASEM meeting held in Bangkok in 1996.34 Generally, track two groupings such as the Council for

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Security Co-operation in the Asia Pacific (CSCAP), tend to be more inclusive than their track one counterparts. A third and perhaps the most important element of the “ASEAN way” is its particular use of consensus. Some accounts trace the origins of ASEAN’s deeply-rooted preference for consensus to Javanese village culture, in particular to its twin notions of musyawarah and mufakat.35 Herb Faith has described musyawarah as a “psychological disposition on the part of the members to give due regard to the larger interests”.36 It is a process of discussion and consultation, which at the village level meant the leader should not act arbitrarily or impose his will, but rather “should make gentle suggestions of the path the community should follow, being careful always to consult all other participants fully and to take their views and feelings into consideration before delivering his synthesis conclusions”.37 According to former Indonesian Foreign Minister Subandrio, negotiations in the musyawarah spirit take place “not as between opponents but between friends and brothers”. 38 Mufakat is the consensus reached through the process of musyawarah. In theory, musyawarah goes on for as long as is needed for mufakat to be achieved. Michael Haas has argued that this process eschews what he calls “Anglo-European” tendencies like “power plays, trade-offs, and deals that produce temporary compromises”.39 J. N. Mak says the process tries to create an “amalgamation of the most acceptable views of each and every member”40 and Jorgensen-Dahl says it is based on the belief that a “feeling of goodwill based on feelings of brotherhood and kinship may serve the same purpose as oil on rough sea”.41 It is important to note that ASEAN’s approach to consensus should not be confused with unanimity. Former Indonesian Foreign Minister Ali Alatas described it as finding a way of “moving forward by

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establishing what seems to have broad support”.42 Noordin Sopiee has said it means “agreeing to disagree without being disagreeable”. 43 Where there is “broad” support for a specific measure, the objections of a dissenting participant can sometimes be discounted, provided the proposal does not threaten that member’s most basic interests. This habit is sometimes also referred to as “flexible consensus” (see the relevant entry) or “Ten minus X”.44 The need for flexibility has led one scholar to argue that ambiguity is the “handmaiden of consensus”.45 According to Michael Antolik, ASEAN often uses ambiguous language that allows “participants to reach common standards, and subsequently, to hold their own interpretation of so-called common stands”.46 Critics have described this approach to consensus-building as “accommodation on the basis of the minimum common denominator”.47 Within institutions such as the ARF, the consensus approach to decision-making gives the key role to the Chair, as it is the one who determines when consensus has or has not been reached. It is, therefore, especially important that the Chair is regarded by all the participants as a legitimate figure.48 The final element of the “ASEAN way”, and one which has received considerable attention, is the norm of non-interference in the internal affairs of member states. As relatively young and predominantly postcolonial states, ASEAN’s members have always placed a great deal of importance on the preservation of their sovereignty. The principle of non-intervention is enshrined in all ASEAN’s key documents, including the 1967 Bangkok Declaration, the 1976 Treaty of Amity and Co-operation (TAC), and the 1976 Declaration of ASEAN Concord. In the wake of the regional economic crisis in 1997–99, the environmental problem known as the “haze”, and violence in Cambodia and Indonesia, there were numerous calls for ASEAN to revisit its

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fundamental norms. Some said it should abandon key aspects of the “ASEAN way”, particularly the norm of non-interference and the preference for thin institutionalization (for a more detailed discussion of these calls, see the entry on “Constructive Intervention”). One scholar predicted that ASEAN’s failure to act collectively in the face of the economic crisis spelled the end for the “ASEAN way”.49 Another noted that “the ‘Asian way’ of consensus-based

diplomacy has suffered greatly — in coherence and prestige — from the financial crisis.” 50 However, while the economic crisis did provoke heated discussion within ASEAN about its procedural norms, a debate that is still ongoing, the “ASEAN way” as it has traditionally been understood has been largely reaffirmed, at least for the time being, at Ministerial Meetings held in Manila, Singapore, and Bangkok.51

NOTES 1. Acharya describes this as a preference for the avoidance of ‘“excessive institutionalization”, see Amitav Acharya, “Ideas, Identity, and Institution-Building: From the ASEAN Way to the Asia-Pacific Way?”, Pacific Review 10, no. 3 (1997): 319–46, 328–30. 2. Quoted in Lee Kim Chew, “Don’t Discard Fundamentals”, Straits Times, 25 July 1998. 3. Cited in Diane Stone, “Networks, Second Track Diplomacy and Regional Cooperation: The Role of Southeast Asian Think Tanks”, Paper presented at the 38th Annual Meeting of the International Studies Association, Toronto, Canada, 16–22 March 1997, p. 20. 4. Alastair Iain Johnston, “The Myth of the ASEAN Way? Explaining the Evolution of the ASEAN Regional Forum”, in Imperfect Unions: Security Institutions Over Time and Space, by Helga Haftendorn, Robert O. Keohane, and Celeste A. Wallander (New York: Oxford University Press, 1999), pp. 287– 324, 299. 5. Liao Shaolian, “ASEAN Model in International Economic Cooperation”, in One Southeast Asia in a New Regional and International Setting, edited by Hadi Soesastro (Jakarta: Centre for Strategic and International Studies, 1997), pp. 83–92. 6. More information about the ASEAN Secretariat can be found on its website at . 7. Michael Richardson, “Asian Security Forum Gains Support”, International Herald Tribune, 31 July 2000. 8. See, for example, Singapore Defence Minister Yeo Ning Hong quoted in “The Jane’s Interview”, Jane’s Defence Weekly, 19 February 1994, p. 52, cited in Acharya, “Ideas, Identity, and InstitutionBuilding”, pp. 333–34. 9. Johnston, “The Myth of the ASEAN Way?”, p. 311 10. Roslan Ali, “Indonesia: APEC Community Will Be Different from EC — Evans”, Business Times (Malaysia), 10 August 1993. In the article, Australian Foreign Minister Gareth Evans is quoted as saying, “There is no reason why we cannot in our regional village, use the word community to mean what we want it to mean. We can push ahead with building our economic community according to our patterns, our models and our language.” He went on to say, “Community is already embryonically in practice in the every day processes of APEC and is emerging in the ASEAN Post-Ministerial Conference (PMC) process. That means a community built in the APEC way, the ASEAN dialogue way, founded on the evolutionary recognition of mutual benefits and interests, open dialogue, consensus-building, and loose but effective arrangements.” 11. Second Report of the Eminent Persons Group, Achieving the APEC Vision: Free and Open Trade in the Asia Pacific (Singapore: APEC Secretariat, 1994). 12. Acharya, “Ideas, Identity and Institution-Building”, pp. 334–35; Kusuma Snitwongse, “Thirty Years of ASEAN: Achievements through Political Cooperation”, Pacific Review 11, no. 2 (1998): 184.

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13. Khong Yuen Foong, “ASEAN’s Collective Identity: Sources, Shifts, and Security Consequences”, Paper presented at the 94th Annual Meeting of the American Political Science Association, Boston, 3–6 September 1998, p. 10. 14. Third Report of the Eminent Persons Group, Implementing the APEC Vision (Singapore: APEC Secretariat, 1995), p. 12. 15. Acharya, “Ideas, Identity and Institution-Building”, p. 335. China remains insistent on this wording. An ASEAN Draft on Concept and Principles of Preventive Diplomacy presented at an ARF track two meeting held in Singapore in April 2000, contained a sentence which referred to “elaboration of approaches to conflict resolution”. China asked for the word resolution to be deleted, saying “the Chinese side always believes it is crucially important to strictly follow the consensus reached by the ARF ministers”. For more details on these papers, see the entry on “Preventive Diplomacy”. 16. Ibid. 17. Quoted in Michael Antolik, ASEAN and the Diplomacy of Accommodation (New York: East Gate Books, 1990), p. 95. 18. Quoted in Michael Haas, “The Asian Way to Peace”, Pacific Community, No. 4 (1973), p. 504. 19. Jusuf Wanandi, “ASEAN’s Future at Stake”, Straits Times, 9 August 2000. 20. Antolik, ASEAN and Diplomacy of Accommodation, p. 90. 21. Quoted in Jusuf Wanandi, “Pacific Economic Coooperation: An Indonesian View”, Asian Survey 23, no. 2 (December 1983): 1272. 22. Jose T. Almonte, “Ensuring Security the ‘ASEAN Way’”, Survival 39, no. 4 (Winter 1997–98): 80– 92, 81. 23. ASEAN Regional Forum, Chairman’s Statement, 1995, p. 2 24. “ASEAN Regional Forum: A Concept Paper”, para. 21, reproduced in Desmond Ball and Pauline Kerr, Presumptive Engagement: Australia’s Asia-Pacific Security Policy in the 1990s (St Leonards, NSW: Allen & Unwin, 1996), Appendix 2. 25. Asian Wall Street Journal, 24 June 1994, pp. 1, 6. 26. Former New Zealand Secretary of Defence Gerald Hensley, “Asia-Pacific Security: A Balance Sheet”, Speech given by the New Zealand Secretary of Defence in Honolulu, 27 July 1995 (author’s copy). 27. ASEAN Plus Three is made up of the ten ASEAN member states plus China, Japan, and South Korea. Foreign ministers from these states held their first meeting in July 2000. See Edward Tang, “’ASEAN Plus Three’ Move Closer”, Straits Times, 27 July 2000. 28. Kamarulzaman Salleh, “Enhancing Multilateral Ties”, New Straits Times, 24 July 2000, p. 22. 29. Richard Higgott, “Free Trade and Open Regionalism: Towards an Asian International Trade Strategy?”, Paper presented at the Conference on “Europe in the Asia Pacific”, Bali, Indonesia, 28–31 May 1996, p. 27. 30. Explanatory text for the 1991 ASEAN Ministerial Meeting, cited in Stewart Henderson, “Canada and Asia Pacific Security: The North Pacific Cooperative Security Dialogue: Recent Trends”, NPCSD Working Paper No. 1, York University, Toronto, 1992, p. 12. 31. The SLORC was re-named the State Peace and Development Council (SPDC) on 15 November 1997; see Jose Manuel Tesoro and Dominic Faulder, “Changing of the Guard: SLORC Fixes Its Name — and Purges Some Faces”, Asiaweek, 24 November 1997; “A SLORC by Any Other Name”, Washington Post, 6 March 1998, p. A24. 32. Mohammed Ariff, “Open Regionalism à la ASEAN”, Journal of Asian Economics 5, no. 1 (1994): 99– 117. 33. “‘Lack of Consensus’ Keeps Pakistan out of ARF”, Hindu, 26 July 2000. 34. David Lague, “Evans Plays Down Our ASEAN Snub”, Sydney Morning Herald, 1 August 1995; “As Europe Meets Asia”, Economist, 2 March 1996, pp. 16–17; Phar Kim Beng, “Why Australia Still Left out of East Asia”, Straits Times, 27 July 2000.

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35. Arnafin Jorgensen-Dahl, Regional Organization and Order in Southeast Asia (London: Macmillan, 1982), p. 166. 36. Herb Faith, The Decline of Constitutional Democracy in Indonesia (Ithaca: Cornell University Press, 1962), p. 100, note 58. 37. Ibid., p. 40. 38. Cited in Jorgensen-Dahl, Regional Organization, p. 166. 39. Michael Haas, “Asian Culture and International Relations”, in Culture and International Relations, edited by Jongsuk Chay (New York: Praeger, 1990), p. 179. 40. J. N. Mak, “The ASEAN Process (‘Way’) of Multilateral Cooperation and Cooperative Security: The Road to a Regional Arms Register?”, Paper presented at the MIMA-SIPRI Workshop on “ASEAN Arms Register: Developing Transparency”, Kuala Lumpur, 2–3 October 1995, p. 5. 41. Jorgensen-Dahl, Regional Organization, p. 167. 42. Straits Times, 13 November 1994, p. 17, cited in Acharya, “Ideas, Identity, and Institution-Building”, p. 331. Emphasis added. 43. Michael Richardson, “Alliance Prefers Informal Consensus”, Globe and Mail (Toronto), 7 June 1997, p. A19. 44. Snitwongse, “Thirty Years of ASEAN”, p. 191. Generally, it is accepted that the “Ten minus X” formula applies to economic issues, such as aspects of ASEAN’s liberalization agenda, but does not apply to political or security issues. 45. Antolik, ASEAN and Diplomacy of Accommodation, p. 157. 46. Ibid. 47. Ernst B. Haas, “International Integration: The European and the Universal Process”, in International Political Communities: An Anthology (New York: Doubleday, 1966), p. 95, cited in Jorgensen-Dahl, Regional Organization, p. 168. See also, Snitwongse’s comment about “‘meat grinder wisdom’ based on the lowest common denominator”, in “Thirty Years of ASEAN”, p. 184. 48. Johnston, “The Myth of the ASEAN Way?”, p. 299. 49. For example, see Kay Möller, “Cambodia and Burma: The ASEAN Way Ends Here”, Asian Survey XXXVIII, no. 12 (December 1998): 1087–104. 50. Amitav Acharya, “A Concert of Asia?”, Survival 41, no. 3 (Autumn 1999): 84–101, 84. 51. For a summary of these developments, see Jurgen Haacke, “The Principles of Non-Interference and Quiet Diplomacy in the International Politics of the Association of Southeast Asian Nations (ASEAN) in the Late 1990s: What is Really Changing?”, Paper presented at the Fortieth Meeting of the International Studies Association, Washington, D.C., 16–20 February 1999. See also, Robin Ramcharan, “ASEAN and Non-Interference: A Principle Maintained”, Contemporary Southeast Asia 22, no. 1 (April 2000): 60–88.

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11.

ASEAN AND NON-INTERFERENCE

ROBIN RAMCHARAN

ASEAN AND THE PRINCIPLE OF NON-INTERFERENCE The principle of non-interference is pervasive in ASEAN documents. The founding Bangkok Declaration of 1967 indicated a desire for regional co-operation in the spirit of equality and partnership and for regional peace and stability through respect for the principles of the U.N. Charter. The Zone of Peace, Freedom and Neutrality (ZOPFAN) Declaration of 1971 recognized the right of every state, large or small, to lead its national existence free from outside interference in its internal affairs as this interference would adversely affect its freedom, independence, and integrity, and declared that the neutralization of Southeast Asia is a desirable objective. Article 2 of the Treaty of Amity and Co-operation, adopted at ASEAN’s first Heads of Government Summit in 1976, enshrined a number of principles governing ASEAN states, among which are: 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; and non-interference in the internal affairs of another. Article 11 stipulates further that member states shall endeavour to strengthen their respective national resilience in their political, economic, sociocultural, as well as security fields in conformity with their respective aspirations, free from external interference as well as internal subversive activities in order to preserve national identities. The strong attachment to this principle must be understood against the background of several facts: the history of colonial intervention in Southeast Asia; great power military intervention during the Cold War; and the emergence of post-colonial nationstates in Southeast Asia, whose interstate disputes (many of which are territorial in nature) were compounded by internal problems (communist subversion, secessionism and communal strife) which had no

Reprinted in abridged form from Robin Ramcharan, “ASEAN and Non-Interference: A Principle Maintained”, Contemporary Southeast Asia 22, no. 1 (April 2000): 60–88, by permission of the author and the Institute of Southeast Asian Studies.

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regard for territorial frontiers. It served ASEAN well as it helped to establish a semblance of a security community, hailed by the late 1980s and early 1990s as the most successful to emerge from the Third World. Consensus decision-making, quiet diplomacy and confidence-building measures, and strict adherence to the principle of non-interference, have contributed to the ASEAN success story, or what Michael Leifer has called a diplomatic community.1 The aftermath of the Cambodian conflict (and the end of the threat from communist Vietnam) was a crucial impetus to ASEAN solidarity that members sought to build on the reigning peace to ensure the continued economic growth they had enjoyed for over two decades. A common security concern — perceived Chinese hegemonic ambitions in East Asia — increased the urgency of achieving and consolidating complete regionalism. This concern, the uncertainty over the emerging balance of power in the region, and a desire not to be sidelined by other regional organizations (such as a U.S.-favoured Asia-Pacific Economic Cooperation, or APEC) prompted ASEAN leaders to place security explicitly on the ASEAN agenda in the Singapore Declaration of 1992. Member states championed ASEAN’s own annual PostMinisterial Conference (PMC) — which is held immediately after the annual ASEAN Ministerial Meeting (AMM) with ASEAN’s Dialogue Partners (Australia, Canada, China, the European Union, India, Japan, South Korea, New Zealand, Russia, and the United States) — as the forum for the management of an evolving security architecture in the Asia-Pacific. The resulting norm-driven ASEAN Regional Forum (ARF)2 was decided upon in 1993 and held its first meeting in Bangkok in 1994. Though the ARF has been criticized as an imperfect solution to the region’s security problems, it has the merit of including all of the world’s great powers. Moreover, it has

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successfully engaged Vietnam, ASEAN’s former foe, in a security dialogue not only with the ASEAN states but also with Vietnam’s ancient rival, China. Vietnam became a member of ASEAN in July 1995. The expansion of ASEAN membership to encompass the ten states of geographical Southeast Asia was seen as a key means towards achieving the objective of regional peace and security. Moreover, the successful economies of some countries in ASEAN — Singapore, Thailand, Malaysia and Indonesia — had reached a phase where accumulated capital could usefully be invested in neighbouring countries to take advantage of the cheaper labour as well as to foster hitherto non-existent economic co-operation.

NON-INTERFERENCE UNDER STRAIN Myanmar It was the prospect of expansion of membership to include Myanmar (Burma) that caused much concern and posed a challenge to the principle of noninterference. Heavy pressure was exerted on ASEAN by international human rights groups and the Western powers not to grant any legitimacy to the then State Law and Order Restoration Council (subsequently renamed the State Peace and Development Council or SPDC), which refuses to recognize the overwhelming victory of Aung San Suu Kyi’s National League for Democracy in the national elections of 1990. Instead, the military junta placed the daughter of Aung San, Burma’s illustrious independence leader, under house arrest. Despite pressure from the United States and the European Union to restrict economic relations with Myanmar, ASEAN leaders, at the 1991 ASEAN Ministerial Meeting, chose a policy of constructive engagement with Myanmar. The hope was that Myanmar’s

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internal human rights situation would improve so that membership in ASEAN might proceed smoothly. Moreover, Thailand hoped for a resolution to the nagging security problem along its border with Myanmar. The tatmadaw (Myanmar armed forces) regularly crosses the Thai border in pursuit of opponents to the SPDC. The expulsion of the Karen National Union (KNU) from their headquarters in Manerplaw in 1995 added to the pressure as thousands of refugees came flooding across the border. The refugees conduct incursions into Myanmar, provoking responses in kind from the tatmadaw. In the first half of 1998, some forty tatmadaw incursions occurred. As Carlyle Thayer has noted, constructive engagement was a complete failure and by 1996 the human rights situation was abysmal, the year being judged to be the worst for state abuses.3 Nevertheless, the sanctity of the principle of non-interference was preserved by ASEAN, which decided in favour of membership for Laos and Myanmar in July 1997. Cambodia In sharp contrast, membership for Cambodia was postponed at the same time as a result of internal political turmoil in that country. Second Prime Minister Hun Sen initiated a violent process of leadership change in Cambodia in early July 1997, putting an end to the coalition government which had resulted from U.N.-administered elections in 1993. The ouster of Prince Norodom Ranariddh threatened to destroy ASEAN’s success of the 1980s and early 1990s. Prince Ranariddh and opposition leader Sam Rainsy were forced into exile. ASEAN’s reaction to the coup was to express deep regret, to suspend Cambodia’s admission, to demand an immediate ceasefire, and to call upon Hun Sen and Prince Ranariddh to resolve their differences peacefully while respecting the 1991

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Agreement on a Comprehensive Political Settlement to the Cambodian conflict. A special meeting of ASEAN foreign ministers on 10 July 1997 concluded with a declaration which reaffirmed the principle of non-interference, but offered the Association’s good offices to the Cambodian parties. Foreign Minister Ung Huot indicated to the Association that Cambodia would appreciate such efforts and paved the way for the ASEAN troika — the Philippines, Indonesia and Thailand — to attempt to broker a deal with the Hun Sen government. Thai Foreign Minister Prachuab Chaiyasarn was appointed the main interlocutor for Prince Ranariddh, and Indonesian Foreign Minister Ali Alatas was designated Hun Sen’s chief interlocutor. However, Hun Sen was highly suspicious and un-cooperative. Contrary to the stipulations of Ung Huot, he accused ASEAN of inter fering in Cambodia’s internal affairs at the troika’s first meeting on 19 July 1997. Hun Sen backed down after the Association made it clear that ASEAN had survived without Cambodian membership for thirty years. Ali Alatas sought a written invitation by Hun Sen for follow-up meetings with the troika. At a subsequent meeting, the key issues raised were: the continued hostilities between loyalists of Ranariddh and Hun Sen, the organization of free and fair elections, and the restoration of a coalition government. As Jurgen Haacke has noted, despite having prevailed over Hun Sen, ASEAN was politically damaged by the encounter. The immediate task for ASEAN was to reconcile its renewed overt involvement in Cambodia’s domestic political process with its principle of non-interference. 4 Intervention by the Japanese Government led to an agreement and the exiled leaders returned to contest internationally observed elections. 5 Hun Sen’s incumbent and arguably better organized Cambodian People’s Party (CPP) won the majority of

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seats, though not enough to form a government in its own right under the constitution. Despite allegations of fraud, ASEAN was inclined to accept the election results because of the high voter turn-out, secrecy of the ballot box, and the generally fair counting.6 The Haze The trans-frontier effects of environmental disaster in Indonesia — the “haze” — has also tested the principle of noninterference. The “haze” has been the result of the burning of wide areas of land by Indonesian agricultural-industrialists to create plantations for pulpwood, oil palm and rice. Satellite evidence has shown that most of the fires were started on large landholdings and plantations which were run by large conglomerates, many with international and regional investors, and not small-scale indigenous farmers as the Indonesian Government had stated.7 Simon Tay, a nominated member of Singapore’s Parliament, lays the blame for the fires squarely on the failure of the Indonesian system to enforce its own laws and regulations, and to manage its resources so as to pursue sustainable development.8 For Tay, the “ASEAN way” which prescribes non-intervention in the internal affairs of Indonesia is a misconceived notion, for the haze is not an internal matter and international law holds that a state is responsible for trans-boundary harm that results from activities on its territory, or is carried out by the state or within its control. In 1997, the haze blanketed Indonesia, Singapore, Brunei, Malaysia, parts of Thailand, and the southern Philippines. Indonesian officials took a nonchalant approach to the problem initially, seeing it as a domestic and not a regional matter, Jakarta being exempted from the effects. The scope for action by those responsible for environmental matters, who may have

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recognized the urgency of the problem, appeared to have been circumscribed by ties between Indonesia’s leadership and entrenched business interests.9 The haze generated concern not only for environmental and health reasons, but also for its economic impact in the form of a significant drop in tourism revenue. Described as one of the world’s worst environmental disasters, between 800,000 and 4.5 million hectares of forests and bush were burnt in the 1997 fires, and another 395,000 hectares of forest and ground cover were destroyed in 1998. The economic damage in log and timber destruction was estimated at US$912 million. Some US$1.4 billion was lost in increased health care costs and foregone receipts in tourism.10 For trade and tourism-oriented Singapore, the World Wildlife Fund for Nature estimates that the haze in 1997 caused US$8.8 million in short-term damage to health. Singapore’s tourism was set back by US$8.4 million. Changi Airport and Singapore-based airlines lost some US$6.9 million in revenue.11 Furthermore, the corporate standing of ASEAN was damaged as it proved incapable of dealing with the problem effectively. As Simon Tay has noted: The fires have implications for regional and inter-regional politics too. The ability of ASEAN to react to the fires, or their inability do so, will test the working relationship between the member states and affect the grouping’s credibility in the eyes of others. Given the global implications of the fires to biodiversity and global warming, the ability and commitment of the international community and of international institutions is also tested.12

Since its first foray into environmental issues in 1978, ASEAN has made moderate progress. The undertakings to date have been geared towards co-operation between national institutions, rather than the creation or strengthening of any regional

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institution as a central hub for policymaking or implementation. After a haze in 1994, ASEAN environment ministers agreed on a Co-operation Plan on Trans-boundary Pollution in June 1995 to deal with atmospheric and other forms of transboundary pollution. Efforts were to be made at the national and regional levels. At the national level, each country undertook to establish focal points and enhance national capabilities to deal with forest fires. Countries agreed to share knowledge and technology on the prevention and mitigation of forest fires. While the Cooperation Plan has the merit of recognizing the region as a single eco-system and the common interest in reducing or avoiding a recurrence of the haze, its failure was in its implementation, or lack of it. The 1997 fires pointed to the lack of follow-up. ASEAN Environment Ministers agreed in December 1997 to a Regional Haze Action Plan which aimed to prevent land and forest fires, to establish operational mechanisms to monitor fires, and to strengthen regional fire-fighting capabilities. The primary emphasis has continued to be on national plans and capabilities. However, a procedure

was established for pooling of resources for regional fire-fighting efforts. A review of the Plan in April 1998 resulted in two Subregional Fire-fighting Arrangements for Kalimantan and for the Sumatra and Riau provinces in Indonesia. Doubts prevailed, however, over the ability of ASEAN as an organization to make up for the deficiencies of the Indonesian national system. This was primarily due to the ASEAN norm of noninterference in the domestic affairs of member states and the dominant role that Indonesia plays in the grouping.13 For Tay, non-interference cannot be maintained as an icon in the face of ecological disaster that knows no boundaries.14 The Singapore Government, which had previously complained about the problem of haze from Indonesia, raised the issue in the time-honoured ASEAN way, through quiet diplomacy with Jakarta. President Soeharto took the unprecedented step of apologizing for the haze and instructed his bureaucracy to co-operate with his ASEAN partners in combating the forest fires. Singapore offered to provide technical assistance with a view to gathering relevant meteorological information, including satellite imagery.

NOTES 1. M. Leifer, “ASEAN as a Model of a Security Community?” ASEAN in a Changed Regional and Political Economy, edited by H. Soesastro (Jakarta: CSIS, 1994), pp. 129–42. On the ASEAN “security community”, see also Leszek Buszynski, “ASEAN Security Dilemmas,” Survival 34, no. 4 (Winter 1992–93): 90–107; and Shaun Narine, “ASEAN and the Management of Regional Security,” Pacific Affairs 71, no. 2 (Winter 1992–93): 195–214. 2. See Robin Ramcharan, “ASEAN Regional Forum: A Pitfall in Pacific Asia’s Security”, World Affairs (New Delhi, Fall 1999). For a theoretical perspective on the ARF, see Sorpong Peou, The ASEAN Regional Forum and Post-Cold War IR Theories: A Case For Constructive Realism? Working Paper (Singapore: ISEAS, 1999) 3. Carlyle Thayer, “ASEAN: From Constructive Engagement to Flexible Intervention,” Harvard Asia Pacific Review (Spring 1999). http://www.pol.adfa.edu/resources/asean.html 4. Jurgen Haacke, “Flexible Engagement: On the Significance, Origins and Prospects of a Spurned Policy Proposal ”, International Politics and Security Issues No. 3, ISEAS Working Papers (Singapore: ISEAS, 1999), p. 12. 5. Thayer, op. cit., pp. 3–4. 6. Ibid., p. 3.

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7. 8. 9. 10. 11.

Simon Tay, “What Should Be Done About the Haze?” Indonesian Quarterly 26, no. 2 (1998): 99–117. Ibid., p. 102. Haacke, op. cit., p. 13. Ibid., p. 101. World Wildlife Fund, quoted in Address by H.E. Rodolfo Severino, Secretary-General of ASEAN, “Regionalism: The Stakes for Southeast Asia,” at the Institute of Defence and Strategic Studies (IDSS), Singapore, 24 May 1999. http://www.asean.or.id. 12. Ibid., p. 100. 13. Tay, op. cit., p. 110. 14. Ibid., p. 112.

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12.

ASEAN An Image Problem

GREG SHERIDAN

T

here is no way of getting around it and little point in being excessively diplomatic about it. This has been one of the most difficult, if not downright unsuccessful, years for the Association of Southeast Asian Nations (ASEAN) since the triumph of communism in Indochina in 1975, if not since the founding of ASEAN itself in 1967. The regional economic crisis, the political breakdown and fighting in Cambodia, the failure of Cambodia’s attempt to join ASEAN, Western reaction to Myanmar’s membership of ASEAN, and the smoke-haze phenomenon which literally shrouded much of the region in gloom in the latter part of 1997, all combined to make this an annus horribilis par excellence (to mix up my European languages). But undoubtedly the most significant event in the region in 1997 was the regional currency crisis. This really moved through three distinct stages, starting as a currency crisis, evolving quickly into a stock market crisis, and then becoming a banking crisis. It

started as a currency crisis in Thailand. The baht was overvalued and pegged to an appreciating U.S. dollar. Thai interest rates were higher than American interest rates so, assuming the tied currency to be safe from radical depreciation, an irresistible temptation was provided to borrow in American dollars and lend and invest in Thai baht to take advantage of the differential interest rates. A vast property bubble was thus built up as much of the investment went into unproductive property as the real motivation for the investment was speculation spurred by differential interest rates in the face of a tied currency. But the appreciating dollar, combined with an earlier Chinese devaluation, affected Thai competitiveness badly. Thus there was a double effect in blowing out the current account deficit and ultimately encouraging speculation against the baht. Although the Thai economy traditionally has been well managed, this particular challenge was not well managed. The Thai economic author-

Reprinted in abridged form from Greg Sheridan, “ASEAN: An Image Problem”, in Southeast Asian Affairs 1998 (Singapore: Institute of Southeast Asian Studies, 1998), pp. 37–44, by permission of the publisher.

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ities undermined their own credibility by insisting that there was no problem and they would never devalue. Ultimately they had to cut the tie to the American dollar and move to a floating exchange rate in the midst of a crisis, the worst possible way to undertake these probably necessary and long-term beneficial reforms. The currency crisis inevitably led to a stock market crisis as companies tried to recover money to pay dollar debts and as international investors got spooked by the sudden depreciation. This of course then led to a banking crisis as companies found themselves unable to cope with dollar debts which had suddenly doubled in baht value seemingly overnight, while collateral of property and stocks had lost much of its value. Because the Southeast Asian economies most affected — Thailand, Indonesia, the Philippines and Malaysia — trade in such similar goods, once one currency had experienced such a massive depreciation it was impossible that the other currencies would not also need to devalue if for no other reason than to stop a major competitor achieving such a decisive competitiveness advantage. Certainly a lot of currency speculators thought so and thus immense pressure came on, one currency after another. Thus, the result was a fullblown Southeast Asian regional currency, stock market, and banking crisis. Now, the thing about banking crises is that the world is familiar with them. One knows a lot about them and a lot about how to deal with them. But they are a nasty species of financial crisis. Their solution involves a great deal of corporate and political pain. It is possible for an economy to experience a currency plunge, and even a stock market plunge, without the real economy suffering too much. But a banking crisis is a nasty, nasty business. The real economy is always involved.

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Once again the crisis was greatly exacerbated by sentiment. Southeast Asia sent out mixed messages. Some leaders spoke of the crisis as a spur to necessary reform. Others blamed the perfidy of international money dealers. The policy response seemed equally confused. Everyone committed themselves to basically sound macroeconomic policy and financial sector reform. But big ticket infrastructure projects of high exhibitionist value and dubious economic return were off and on and off again. Banks’ licences were cancelled but the proprietors re-surfaced to run other banks. On the whole the region responded with market-friendly, pro-reform policies but there was sufficient rhetorical and policy confusion to ensure that the signals to the outside world were mixed. The currencies went substantially below their real values. Having overboomed Southeast Asian emerging markets for so long, the international markets swung the other way, wildly exaggerating the correction. Some of the region’s banks were shown to be in a mess with bad loans but other loans which were perfectly reasonable at one exchange rate became unserviceable when the currency in question lost half its value. All through the region there was an argument between the orthodox free marketeers and the economic nationalists, the marketeers favouring market friendly reform and the economic nationalists favouring a heavier hand for government and high-profile prestige projects. On the whole the economic crisis strengthened the hand of the marketeers but this was not always the way it looked to outsiders. Ironically, perhaps, the region did have a legitimate complaint with the rescue packages of the International Monetary Fund (IMF), but one which it was difficult to make publicly without seeming to undermine commitment to their overall

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reform agenda. The parts of the IMF packages which called for financial sector reform were entirely sensible. But their fiscal strictures were overdone and likely to exacerbate any regional tendencies towards recession. Of course an enormous amount of complete nonsense was talked about the crisis in the West — that it showed the failure of the Asian growth model, as if there ever were anything such as a single Asian growth model. It was argued that it validated the Krugman thesis that East Asian economic growth resembled old-style Soviet economic growth and had been based on factor accumulation and not productivity increase — perspiration not inspiration — and was always destined to fail as Soviet growth had failed. Yet Krugman himself sensibly argued that the crisis of 1997 did not represent the vindication of his thesis. Given the widely diverging levels of economic development of the Southeast Asian nations affected (not to mention South Korea and Japan) it would have been expected, if the Krugman thesis were true, that the limits to their growth would emerge gradually and at different times for each economy. The thesis could not be of explanatory value if the slowdowns were simultaneous. Nonetheless the nonsense spoken and written in the West about the regional crisis had the effect of worsening it. The most relevant question for Southeast Asia should not have been, however, who was to blame, but rather the question which Lenin said was the only question that ever mattered — what is to be done. In one highly specific and demanding way the crisis does call into question one of the values, perhaps one of the Asian values, which some in the region have thought central to its success, that is, the unity and prestige of state power and the value of consensus. One refers specifically to the financial system and the need for external,

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disinterested, institutionally independent checks and balances as part of an effective supervisory system for regional banking systems. This perhaps applies even more strongly to South Korea than to Southeast Asia. It is clear that if a nation is going to take maximum advantage of the global economy (and attract the kind of foreign investment that has been essential to Southeast Asia’s growth), it will need to provide for the genuine independence of the formation and disposition of capital. That is, banks will not be able to lend to preferred clients, whether they be politically preferred or the agents of state-sponsored industry policy, on any different criteria, or any less transparently, from the ways in which they tend to all other customers. This is the central reform which the banking crisis requires and it is an extremely difficult reform because it will upset many regional political arrangements. This is a real and deep challenge for Southeast Asia. It is not being forced on the region in a political sense but international investors have the right to go where they please and they will go where there are effective banking systems. And the region now has competitor regions, especially Latin America but also China and South Asia. Despite the travails of 1997, it did provide Southeast Asia with the potential for a new spurt of economic growth, social development, and overall political success. The devalued currencies will make the region more competitive in the short and long terms. The crisis should be a spur for much financial sector reform. But ASEAN will need to take control much more consciously of the message, the image it projects of itself to the international community. In the information age the international community is both sophisticated, difficult to fool, and chronically inattentive, its attention drawn more by episodes of discomfort than solid periods of stability.

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Nonetheless, bemoaning the nature of the global environment is like bemoaning the weather: it is comforting but unproductive. Southeast Asia faces acute challenges emerging out of 1997. They are challenges of economic and political management. They certainly have a cultural dimension

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and that is possibly the most difficult element of all. They are new challenges yet they are born, in the long run, of ASEAN’s success. There were reverses in 1997. But the worst reverse would be if no one came to regard a reverse for ASEAN as a big surprise.

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13.

INTRAMURAL CHALLENGES TO THE “ASEAN WAY”

JÜRGEN HAACKE

THE ‘ASEAN WAY’: SAVED BY AL GORE? At the pre-APEC Business Summit organized in Kuala Lumpur in November 1998 the American Vice-President repeated the standard argument that democracy is the key foundation of prosperity because investors put their money and their faith in democracy. Implicitly, Al Gore also contended, however, that anti-government protests in Malaysia, which he seemed to endorse, were occurring because the Malaysian government had been unable — by virtue of its authoritarian nature — to end the economic suffering of the Malaysian people. Littered as it was with pinpricks directed at Dr Mahathir’s government, Al Gore’s speech was received with outrage, even fury, by Malaysian leaders. For example, then Foreign Minister Datuk Seri Abdullah Badawi accused the US administration of attempting to incite Malaysians to riot in order to topple the government. Al Gore aroused not merely the anger of those

whom he clearly meant to offend, however. He inadvertently also sparked off a nationalist reaction among many of those Malaysians who had hitherto essentially remained part of the country’s silent majority in the context of the struggle by advocates of reformasi against the Mahathir camp (Devan 1998). And more significantly still for our purposes, Al Gore’s speech also induced ASEAN leaders to again rally around the ‘ASEAN way’. There are at least three reasons why this should have happened. First, the US Vice-President overstepped an important psychological benchmark set by ASEAN leaders to distinguish acceptable from unacceptable behaviour by an outside power toward one of their members. Even ASEAN leaders critical of Dr Mahathir agreed that Al Gore’s remarks had demonstrated (again) a measure of disrespect on the part of the US as regards the political and cultural sensitivities of an

Reprinted in abridged form from Jürgen Haacke, “The Concept of Flexible Engagement and the Practice of Enhanced Interaction: Intramural Challenges to the ‘ASEAN Way’ ”, Pacific Review 12, no. 4 (1999): 581– 611, by permission of the author and Taylor and Francis Limited .

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ASEAN member government. Second, Gore’s speech highlighted not only the continued emphasis on democracy promotion as a key element of American foreign policy, but also conveyed the impression that the United States remained interested in exporting to Southeast Asia a particular model of liberal democracy. This interest is to some extent at odds with the focus on good governance within the region. Third, the Vice-President could be interpreted as having issued a warning that unless regional governments allowed for political change and greater openness, there was a distinct possibility that international (American) investors would turn their backs on crisis-stricken East Asia. The substance and the circumstances of the Gore speech suggested that the particular form of enhanced interaction practised by members was beginning to affect the way in which external powers interacted with ASEAN members. Beyond the issue of respect, Al Gore’s remarks appear to have given rise to concerns that enhanced interaction, if in breach of the principle of quiet diplomacy, might greatly increase ASEAN members’ insecurity and terminate ASEAN’s quest for recognition as a major player in regional international society. Consequently, what was at least an implicit consensus emerged whereby public expressions of enhanced interaction should at least temporarily be put on hold by member states. The sense of urgency to stop ASEAN’s slide into political irrelevance and poor standing in international society was only reinforced by the imminence of the Association’s Sixth Summit in Hanoi in December 1998. As chairman of the ASEAN Standing Committee it was incumbent upon Singapore to forge a consensus on what ASEAN should do to offset increasingly widespread perceptions of ASEAN corporate decline and ineffectiveness. In order to restore ASEAN ‘credibility’, Singapore advocated that ASEAN leaders demonstrate

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their united resolve to address some of the root causes for the financial and economic crisis. In practical terms, Singapore argued that ASEAN countries should press ahead with the liberalization of trade and the opening up of their economies to international investments. Singapore also strongly supported the idea of greater ASEAN transparency in relation to its members’ economic and financial data. At the same time, however, its leaders remained interested in reaffirming ASEAN ‘basics’. Looking at the agreements that ASEAN leaders concluded at the Sixth Summit in Hanoi, it is clear that ASEAN members broadly endorsed Singapore’s dual strategy, even if that strategy was partially undermined by noticeable intramural divisions over the timing of Cambodia’s admission to ASEAN.

THE HANOI SUMMIT As regards ASEAN’s commitment to economic openness the heads of state and government announced a number of socalled ‘bold measures’ to stimulate shortterm investment and to accelerate the implementation of the ASEAN Free Trade Area. Also approved was the Hanoi Plan of Action (HPA), which outlines how ASEAN intends to approach realizing in the fiveyear period from 1999–2004 the goals the Association set out in the ASEAN Vision 2020. Significantly, the HPA, by making reference to the Treaty of Amity and Cooperation (TAC), again stresses the core features of ASEAN’s basic code of intramural conduct, including the principle of non-interference. One might assume that this reference to the TAC is in fact also one to the ‘ASEAN way’, not least because there is no mention about enhanced interaction in the text of the HPA. In consequence, the HPA can also be understood as an implicit reaffirmation of principles

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such as quiet diplomacy in the context of ASEAN’s ambiguous practice of noninterference.1 The reaffirmation of the continued salience of the ‘ASEAN way’ notwithstanding, the decision taken by ASEAN leaders to allow for greater transparency and regional involvement in economic and financial matters illustrates their acceptance of further processes of enhanced interaction. Indeed, following on from the Manila Framework Agreement, whose constituency exceeds the Association’s membership, ASEAN Finance Ministers had in October 1998 endorsed a peer review and information exchange in areas such as interest and exchange rates as well as capital flows (Tassell 1998). In practice, this should mean that ASEAN Finance Ministers are now called upon to highlight economic risks in the economies of fellow ASEAN states, to recommend policy responses, and to encourage early action in relation to these points. Significantly, however, it is understood that this form of enhanced interaction will not involve public recriminations. Interestingly, the Hanoi Plan of Action also commits ASEAN to formulate draft rules of procedure for the operations of the High Council as originally envisaged in the TAC. This might be interpreted as a renewed attempt to finally pave the way toward collective intramural conflict settlement, previously something to ASEAN like a red rag to a bull. However, the careful wording in place suggests that in contrast to intramural debates about macroeconomic indicators, involvement by the Association in bilateral disputes among members is not imminent. CONCLUSION AND OUTLOOK This article has demonstrated that the consequences of enhanced interaction, as practised vis-à-vis Malaysia after former

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Deputy Prime Minister Anwar Ibrahim saw his immediate political future cut short in dramatic circumstances, confirmed the validity of the arguments proffered by ASEAN governments that had been opposed to flexible engagement. In the event, it seems that only by speculating about and de facto threatening the unravelling of ASEAN as a diplomatic and partial security community did the Mahathir government over time succeed in putting a temporary stop to the sustained breaches of the ‘ASEAN way’ by some of Kuala Lumpur’s neighbours. This raises questions about how shortlived the reprieve for the ‘ASEAN way’ and ASEAN itself might be. While one should expect more and more issues to become issues for enhanced interaction, there are probably still limits to the extent of involvement that ASEAN countries will seek to have in the affairs of their ASEAN neighbours. For instance, ASEAN governments may resist extending frank exchanges about key economic indicators to more sensitive discussion relating to the political economy of member states, however difficult it may be to decouple the two. Similarly, ASEAN countries have yet to express a desire to become involved in the internal affairs of Indonesia, such as over the question of East Timor. The key question is whether enhanced interaction, when it is practised, will be compatible with other aspects of the ‘ASEAN way’, which, as we saw, includes the principles of restraint and responsibility and as such the principle of quiet diplomacy. The steps taken by President Estrada not to antagonize Malaysia when receiving privately Dr Wan Azizah in Manila in April 1999 indicated that future versions of enhanced interaction might be executed more cautiously than past ones. This would also seem to be the preference of Surin Pitsuwan (1998), who argued that ‘while we are willing to extend our moral support to

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the people who love freedom and democracy everywhere, we will be active champion of only our own’. In the face of strong domestic pressures or economic interests there may of course also be renewed support for more robust versions of enhanced interaction. However, after the experience of the second half of 1998 ASEAN states are probably now more likely not to ignore principles such as quiet diplomacy even when under pressure to demonstrate their credibility in dealing with so-called pariah regimes and particularly when dealing with other issues that have the potential to disrupt bilateral or intramural relations. This does not mean the end of enhanced interaction, however. What precise form enhanced interaction is going to take will depend to a significant extent on the development of the political situation in Indonesia, a long-time proponent of the ‘ASEAN way’ under President Suharto and Foreign Minister Ali Alatas. Various types of challenges to the ‘ASEAN way’ might

emanate from Indonesia, for instance, if the future leadership was stable and reformist in nature. Indonesia might pose a lesser challenge to the ‘ASEAN way’, however, if domestic political events take a different turn. In this context, we should note that Dewi Fortuna Anwar, currently foreign policy adviser to President Habibie, recently broached the idea of ‘a real and effective crisis-management center’, with the Organisation of Security and Cooperation in Europe as a possible model (quoted in Richardson 1999). If realized, the workings of such a centre would probably entail a significant departure from the ‘ASEAN way’. Whether these or other challenges to the ‘ASEAN way’ currently still in diverse political pipelines can succeed will in part depend on whether such proposals prove acceptable to those governments that have so far opposed flexible engagement and more strident forms of enhanced interaction. Observers of ASEAN are in for interesting times.

NOTE 1.

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As regards the external dimension of the ‘ASEAN way’, ASEAN has pledged to win respect for the TAC as a ‘code of conduct governing the relations between Southeast Asia and those outside the region’. In order to succeed in this particular task, ASEAN members have also pledged to ratify the Second Protocol of the Treaty of Amity and Cooperation, which allows non-ASEAN members (principally the Dialogue Partners) to accede to the TAC. The Hanoi Action Plan mentions further objectives associated with expanding the ‘ASEAN way’ to the wider East Asian region. Among these are the promotion of the Zone of Peace, Freedom, and Neutrality and the recognition of the Southeast Asia Nuclear Weapons Free Zone by the nuclear powers. ASEAN also reaffirms its title to be the driving force of the ASEAN Regional Forum.

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14.

STRATEGIC CENTRALITY Indonesia’s Changing Role in ASEAN

ANTHONY L. SMITH

SOFT AUTHORITARIAN ROLE MODEL Indonesia’s future domestic political configuration will have another effect on ASEAN. The Asian financial crisis has revealed a good deal of governmentbusiness collusion and this has undermined the theory of “authoritarian advantage” whereby non-democratic governments have greater power to mobilize resources. The obvious counter point to the “authoritarian advantage” thesis is that authoritarian governments contain no checks and balances on high level corruption. Jusuf Wanandi has argued that the “Korean Model”, which involved strong central government direction of economic development, has resulted in economic stagnation in the case of the Philippines and Indonesia.1 Indonesia’s experiment with soft authoritarianism under Soeharto’s New Order has ultimately been the cause of regional instability with uncertainty now hanging over Indonesia’s future. The political and economic crisis has meant an end to the role that Indonesia played as mentor

to a number of other Asian states. In the past, Indonesia was a soft authoritarian role model for Myanmar and Vietnam, which sought to engage in market reforms without political change, but this is no longer the case. Furthermore, not only has Indonesia’s current circumstances lost “prestige” for the New Order, but the new leaders may have differing political perspectives to Soeharto. While it is far too early to pronounce Indonesia as a fully fledged liberal democracy, the transitional Habibie administration shifted Indonesia further away from the soft authoritarian camp. There were, however, mixed expressions from the ASEAN member-states. The Thai Foreign Minister, Surin Pitsuwan, has stated, “The elections are a good development for Indonesia and the entire region.”2 But Thailand’s open enthusiasm for Indonesia’s June elections was in contrast to the silence or reservations of other members. Malaysia’s Prime Minister, Mahathir Mohammad, has expressed some doubts about what it means

Excerpted from Anthony L. Smith, Strategic Centrality: Indonesia’s Changing Role in ASEAN (Singapore: Institute of Southeast Asian Studies, 2000), by permission of the author and the publisher.

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for Indonesia: “Democratic elections at the best of times are very destabilizing. It is even more destabilizing when it is conducted at a time when there is economic and political turmoil.”3 One possible future scenario pits Indonesia, the Philippines and Thailand against the other countries that do not espouse liberal democracy and ultimately a polarization of ASEAN into two ideological camps. Habibie took the “flexible engagement” idea firmly on board — much to the annoyance of some other members (perhaps he went further then the Thais imagined). The current Indonesian ruling élite support the further integration of ASEAN and the incorporation of “human security” into the ASEAN framework. Indonesia, under Wahid, once it has regained its international confidence, may well begin to support the creation of a more integrated ASEAN. Wahid’s predecessor, Habibie, did, on occasion, call for a common currency and an ASEAN Parliament along the lines of the European Parliament4 — the latter strikes at the heart of “non-interference” as a parliament by its very nature would have to make comment on a host of issues. While both suggestions are far from feasible projects, they do point to a willingness to consider greater functionalism within ASEAN. A number of Indonesian officials consider that in the future Indonesia will push for more institutionalization of ASEAN. This marks a real seachange in Indonesia’s future role. Under Soeharto, positive integration measures were stymied and held up. Habibie and Wahid have demonstrated that they wish to see a policy shift, illustratively the new interest in AFTA and AFTA-plus. However, with Indonesia’s reduced capacity this change still resides at the level of rhetoric and so far lacks real substance. ASEAN stands in the valley of decision between a status quo grouping where

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sovereignty rests with the governments of member states and a more ambitious grouping that promotes social and economic integration from an active secretariat. Clearly ASEAN is not ready for the second path, and Indonesia is in no position to support such an alteration. THE GROWTH OF INSTITUTIONS AND CIVIL SOCIETY The increasing concentration of power in the hands of the political executive during Soeharto’s New Order regime has been well documented.5 This led to the run-down of civil society, which created one of the preconditions for the political and economic crisis of 1998. In terms of foreign policy, increasingly foreign affairs was determined and run by a small number of the political élite, and the role of leading generals in this regard is well known. In Soeharto’s time, foreign policy was completely dominated by the executive, and parliament functioned as a “rubber stamping” institution. The decline of Soeharto has allowed the bureaucracy as a whole to consider the role of an independent civil service, which will also be accountable to a far more robust parliament. In any event, this is a role that may well be forced onto the bureaucracy, including the Ministry of Foreign Affairs, as it may need to serve ministers from different political parties in the future. The new Minister for Foreign Affairs, Alwi Shihab, an Islamic scholar, is firstly, from outside the former ruling party, and secondly, inexperienced in his new role. The Ministry of Foreign Affairs will need to provide nonpartisan technical advice and support to the their new chief executive. The Ministry of Foreign Affairs will have to have greater professionalism in order to cope with the vastly different environment in which they now operate. Potentially, the Ministry will have greater influence over the conduct

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of foreign affairs, and also convey more effectively the reactions of the international community to domestic affairs. It is widely known, for example, that the Ministry of Foreign Affairs has consistently sought a political solution to the ongoing problems in East Timor. During Soeharto’s time, such suggestions fell on deaf ears as the military continued to veto anything other than a fully integrated East Timor. If Indonesia’s shift towards democracy remains in the long-term, civil society will also be strengthened, which will place further constraints on Indonesia’s international outlook and dealings with ASEAN. As N. Ganesan points out, most ASEAN states have, in the past, been authoritarian regimes not constrained by public opinion to a great degree.6 Foreign policy tends to be dominated by the élite in all nation states, but democracies find greater pressures from the general public, increasingly over human rights issues. Already in Thailand and the Philippines, the significant growth of NGOs and other pressure groups have reinforced élite resolve in both countries to place greater emphasis on “human security” issues in neighbouring states. Thus it becomes more and more difficult for democracies to resist demands from the general public for action over atrocities, particularly in neighbouring or nearby states (for example, concern in Thailand over events in Myanmar).7 In the same fashion, this process could occur within Indonesia as a product of its greater politicization. Already opposition groups, NGOs, media sources and the general public are far stronger in their ability to voice their views.

INDONESIA AS A UNITARY STATE? A suggested scenario for the future is the break-up of Indonesia. Such an outcome

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should be treated with caution, although comparisons to Yugoslavia abound (where, presumably, Soeharto becomes the Asian equivalent of Tito, who held together an arbitrary state by fair means or foul). On the available evidence there is no reason to speculate that any of the ethnic groups or provinces (with the exception of East Timor) will have the will or the strength to push their claims to independence. If this unlikely scenario were to occur, it may well effect Indonesia’s role in ASEAN, depending on how far the state broke up. It is important to remember that in spite of diminished capacity, Indonesia still sees itself as a rightful regional leader in the first instance and global player in the second. A break-up of Indonesia could well alter that view in the same way that the break-up of the Soviet Union has forced the main successor state, Russia, to reduce its role in international affairs — as painful as that process has been. Since the fall of Soeharto there have been greater calls for independence and/or ethnic violence on the outer edges of the Republic of Indonesia — namely Aceh, Ambon, Irian Jaya and Kalimantan. To what extent these tensions are a reaction to Soeharto’s authoritarianism, which may have become married to real or perceived notions of exploitation from the centre, are a real threat to state unity, remains to be seen. The “heartland” regions of Indonesia are showing no sign of succession and therefore any calls for independence are likely to be confined to the fringes of the archipelago. 8 Furthermore, no country in the region wants to see an unstable Indonesia that may implode and/or explode with serious implications that range from a substantial refugee crisis to the creation of a large number of aid dependent states in maritime Southeast Asia. It does also appear that some, particularly in Aceh, have taken great heart

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from events surrounding East Timor’s independence (perhaps many Acehnese do not realize that the international community view East Timor as a very different case and support for their cause will not be readily forthcoming). In terms of keeping independence movements at bay, ASEAN’s support for the Indonesian centre will be invaluable. A case in point is the role that Malaysia could play in the troubles in Aceh given Malaysia’s historical, ethnic, religious and geographical ties. Potentially Malaysia could play the role of mediator (echoing Indonesia’s role in the Southern Philippines). Furthermore, there are hints in the international media that the Acehnese separatists may have funding sources from sympathetic private citizens in Malaysia. If this proves to be the case, Indonesia would expect Malaysia to discourage this means of support. At the very least, ASEAN norms would suggest that Malaysia will give no encouragement to the independence movement in Aceh as part of ASEAN solidarity. What is a far more likely scenario concerning Indonesia’s future as a unified state, given recent events, is that far greater autonomy will be given to Indonesia’s twenty-six provinces. 9 Such a proposal, which has been on Indonesia’s statute books since 1974, has recently gained political weight as a way of placating regional grievances. If this came to pass it would change the political and economic face of Indonesia as issues of governance, commerce and education would move outside of Jakarta’s control and revitalize the outlying islands. However, this is not likely to affect ASEAN as a group and geographical area beyond the strengthening “growth triangles” and transborder trade. East Timor’s transition to independence will, however, introduce a new player in the region. There were two proposals for East Timor’s future — with the 30 August 1999

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referendum. The first was Special Autonomy whereby only defence, foreign affairs, monetary policy, the final court of appeal, the symbols of state and “strategic resources” (i.e., oil) would reside with Jakarta. In a similar fashion to the autonomy proposals for the then twenty-seven provinces, this option poses no real change for the ASEAN grouping. The second option of independence, an option chosen by the East Timorese, is a more interesting proposition for ASEAN. Independence will mean that East Timor will conduct a separate foreign policy. Indonesia will expect East Timor to toe the line in broad foreign policy terms and “Finlandization” could well be the model for an independent East Timor. East Timor will at least be expected to follow ZOPFAN and not to become a “trojan horse” by aligning closely with extra-regional powers, such as China or the United States.10 Furthermore, East Timor could well be the eleventh member of ASEAN — at least the current Indonesian leadership would sponsor that idea. As an aside, the question remains, would an independent East Timor wish to be a member of ASEAN? Or would it choose to be a member of the South Pacific Forum instead? Clearly it is in East Timor’s interest to join ASEAN as quickly as it is able following formal independence. This concession would be a small one when gaining recognition and ultimately protection of its new statehood. One ASEAN member surely will not invade another. The leadership of the pro-independence movement in East Timor may not necessarily coincide with Jakarta’s views. Jose Ramos-Horta is clearly opposed, stating that an independent East Timor should join the South Pacific Forum instead of ASEAN. Xanana Gusmao is more inclusive, stating that East Timor could serve as a bridge between Southeast Asia and the South Pacific.11

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NOTES 1. Jusuf Wanandi, “Good Governance, Domestic and Regional Stability: Agenda for the Future”, Indonesia Quarterly XXVI, no. 2 (1998): 96. 2. “Indonesia — Democracy Calls — But some don’t want to hear it”, Asia Intelligence Wire, 25 June 1999. 3. Ibid. 4. Interview with Dewi Fortuna Anwar, Senior Advisor to the President, 1998–1999, Jakarta, February 1999. 5. For an excellent account of how this affected a number of institutions and sectors in Indonesian society, see Indonesia: The Challenge of Change, ed. Richard Baker et al. (Singapore: Institute of Southeast Asian Studies, 1999). 6. N. Ganesan, Bilateral Tensions in Post-Cold War ASEAN (Singapore: Institute of Southeast Asian Studies, 1999), p. 50. 7. Joseph Nye points to an increasingly important phenomenon in liberal democratic countries whereby in the information age, democratic and human rights values come to assume an important part of the perceived national interest due to public pressure. This phenomenon helps to explain why interventions have occurred in the last decade that seem to fall outside the material national interest. J. Nye, “Redefining the National Interest”, Foreign Affairs, 78, no. 4 (July/August 1999). 8. Zakaria Haji Ahmad and Baladas Ghoshal state: “[Is Indonesia] … experiencing a social breakdown? Such a scenario is remote. Arguably, what is happening in Indonesia is that freedom has begun to take hold in daily life and to break down layer upon layer of distress and cruelty that were inflicted by an authoritarian system. The result is messy, since the new freedom has given rise to a ‘million little mutinies’, the colliding trajectories of countrymen shaking off the old servile mindsets of unquestioned submission and conformity to the regime in power.’ Zakaria Haji Ahmad and Baladas Ghoshal, “The political future of ASEAN after the Asian crisis”, International Affairs, 75, no. 4 (1999): 774. 9. Excluding East Timor, which has now opted for total independence. 10. Interview with Dewi Fortuna Anwar, Senior Advisor to the President, 1998–1999, Jakarta, February 1999. 11. Kavi Chongkittavorn, “Gusmao hopeful on Asean Timor stand”, The Nation, 8 April 1999.

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Section

II

MEMBERSHIP EXPANSION ON A NEW POLITICAL CANVAS

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INTRODUCTION

Sree Kumar

A

SEAN has been, for most of its existence, an association of states focused on countering the threat of being swamped by the travails of Indochina and Myanmar. There was always the view that it was not a security organization, but one built on the political realities of being neighbours in a possibly unstable region. Yet, the initial record points to largely bilateral political relationships underpinned by attempts at regional economic cooperation. The 1990s saw significant changes to the initial arrangement. While the institutional strengthening of the organization took on an added importance, the political realities of the period saw the entry of new members — the Indochina countries, Vietnam, Laos and Cambodia, and Myanmar. The challenges of absorbing states previously considered to be of a different hue were not lost on the older members. Mutual suspicions had to be overcome and acceding to the Bali Treaty by all new members became the cornerstone of acceptance within an enlarged ASEAN. But even more deep-seated concerns were voiced in the wide disparities in levels of development between the old and new members. The fear was that of having a two-tiered ASEAN. The changing ideological penumbra in

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Vietnam and new approaches to coping with the “ASEAN way” allowed it to become more readily involved in the organization. Vietnam’s trade with ASEAN and the rest of world has increased rapidly while investments, however, slowed after the financial crisis. Border issues have been addressed more amicably and in concert with the ASEAN approach to resolving disputes. The overall benefits of membership in ASEAN have been significant — entry into the Asia-Pacific Economic Co-operation (APEC), membership of the World Trade Organization (WTO), and the important role of being in the ASEAN Regional Forum (ARF) for security comfort. Myanmar’s entry into ASEAN has been challenging in several respects. It has added layers of complexity to ASEAN’s relationships with the European Union (EU) and the United States, with ASEAN having had to defend a position of “all or nothing” in the ASEAN-EU meetings. But even more testing has been the internal ASEAN view of not intervening in members’ domestic political workings. A new meaning to silent diplomacy has been added to the lexicon of “ASEAN speak” in understanding ASEAN’s approach to handling Myanmar. There was the fervent hope that a Myanmar

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Introduction

within ASEAN would hasten political change and create a welcoming climate for greater co-operation with the neighbours. But this was not to be. The story of Myanmar’s dalliance with ASEAN continues to be written. Domestic political tides continue to wash the ASEAN shore with no clear prospects of the other members being able to send in a life raft to save the country from itself. Cambodia has been the late entrant. Internal political dissonance and learning to cope with ASEAN have been points of contention, and the transition into membership has been with some drama as it learned how international relations operate in the region. But Cambodia has now found a voice, and in a roundabout fashion — through the Greater Mekong Subregion (GMS). The GMS brings together the four new members of ASEAN, one old member — Thailand — and China. ASEAN itself has lent support to this arrangement by seeking to formalize it by calling it the Mekong Basin Development Cooperation initiative. The GMS seeks to create cross-border economic linkages through trade and investment facilitation, the development of supporting infrastructure, the sharing of water resources, application of new technology to improve communications, and to create markets within the common area. Many of these initiatives have already been commissioned, completed, or are in the process of being constructed. The soft developments such as knowledge transfer and education are more difficult to implement because of the different levels of human capital absorption within the GMS. But these are all important measures for the new members who have to learn to cope with the development challenges existing within their own territory. Many of these programmes require foreign investment or aid from multilateral agencies such as the Asian Development Bank (ADB). Several

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lessons have emerged through this process. These include the ability to work together to overcome national interests, to negotiate with agencies, and to strengthen ties among the bureaucracy. But there are still the vestiges of traditional problems along the border areas within the GMS. There is smuggling, illicit drug production and trafficking, illegal migrant labour, and environmental degradation. In many of the common border areas, the writ of central authorities does not prevail. There is collusion among border authorities away from the roving eye of bureaucrats at the centre. There are tribal loyalties spread over difficult terrain, and there are ethnic groups bent on being the poster children of the NGO world. There may be no simple solution to these problems. But there is hope, and that is being kept alive by well-meaning foreigners from Japan to New Zealand, who have provided funds, training, and knowledge. In the meantime, the lesson for ASEAN remains the knowledge that good fences make good neighbours. ASEAN enlargement has come at a difficult time. A wounded Indonesia has been a loss for the institution, and its role as the critical mass for stability in the region has been weakened somewhat. The expanded membership has to now seek new directions while Indonesia expends energy resolving its own dilemmas. Perhaps in this period of soul searching bilateral resolution of member state issues may become more prominent. If this approach emerges as a pattern then ASEAN’s vision and operating style in the initial years following its formation, which was similar, may be the necessary process that will lead to a common purpose for the expanded membership. So the learning has only begun to convert a two-tier structure to one on a common single-tier platform. If the lessons are to be hastened the “ASEAN way” may have to be reformed.

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Intra-ASEAN Political, Security and Economic Co-operation

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INTRA-ASEAN POLITICAL, SECURITY AND ECONOMIC CO-OPERATION CHAN HENG CHEE

BILATERAL POLITICAL COOPERATION The emergence of ASEAN as a political community in the course of the dramatic maneuvers over Cambodia has tended to overshadow the more substantial progress achieved in bilateral political cooperation among the five partners. Since 1967, assiduous efforts have been directed toward structuring procedures and formalizing processes to resolve contentious issues among themselves. To a large extent, traditional animosities have receded and bilateral difficulties have been contained and resolved by invoking the ASEAN “spirit.” It would not be an exaggeration to say that in the present ASEAN political ambience, it is difficult to conceive of any two or more members resorting to the use of physical force as a means to solve a problem. The most remarkable improvement in relations occurred between Singapore and Malaysia. Since the dark, grim days of separation, the historically difficult relationship has taken a more cordial turn, based increasingly on prag-

matic, functional ties. In 1980, the two governments agreed in principle to set up an intergovernmental committee (IGC), directly responsible to both prime ministers, to increase the level and quality of cooperation between the two countries.1 The aim was also to prevent minor problems from being exaggerated beyond control by adverse publicity and to prevent such issues from reaching the stage of intractability. It is under the Mahathir government, however, that Singapore-Malaysia cooperation moved to a new plane. Recognizing that “an unhappy Singapore can be destabilizing to Malaysia” and that “likewise, discontent in Malaysia can affect Singapore,”2 Mahathir, in his first visit as prime minister, swiftly settled many outstanding bilateral issues with his Singapore counterpart. As a barometer of the newfound trust, Malaysia for the first time allowed Singapore access to training in the Kota Tinggi Jungle Warfare School. Friction between Malaysia and Thailand has perennially erupted over security

Reprinted in abridged form from Chan Heng Chee, “ASEAN: Sub-Regional Resilience”, in Security Interdependence in the Asia Pacific Region, edited by James W. Morley (Lexington, Mass.: D.C. Heath, 1986), pp. 111–43, by permission of the author and Lexington Books.

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cooperation on the Thai-Malaysian border because of the lack of common agreement on who constitutes the common enemy. Thai suspicions that their Malaysian ally is not interested in the suppression of the Muslim separatists operating in the south — indeed, that Malaysia may even be secretly succoring their cause — is matched by Malaysian concern that Thai effort in the containment of communist insurgents is ineffective.3 Occasionally, an open outburst of frustration such as that expressed by leading Thai security personnel — Supreme Commander of the Armed Forces, General Saiyud Kerdphol, Minister of Interior Sitthi Jirarote, and Lt. General Harn Leenanond, Commander of the Fourth Army Region (in the south) — that the Thai-Malaysian General Border Committee meeting in August 1982 was “unsatisfactory” creates the impression of crisis in bilateral relations; but political leaders have been swift to reaffirm close bilateral ties by immediate consultation to iron out differences. In seeking to control subversion in the south, Malaysia and Thailand are fully aware of the interdependence of security efforts. Both countries have agreed to look into the development of the Golok Basin along the common border to underpin security. Although a new start in MalaysianPhilippines cooperation was promised when President Marcos dramatically renounced the Philippine claim to Sabah at the 1977 ASEAN heads of government meeting in Kuala Lumpur, nothing developed from that statement. The Philippines legislature is yet to legalize its president’s offer. In 1981, accusations surfaced that Muslim separatists were allowed to operate from Sabah and that the eastern state of Malaysia was a source of arms flow to the rebels, leading some Philippine assemblymen to argue for a reactivation of the Sabah claim. In reaction, some Sabah pressure was put on the federal government to break diplomatic ties. That the issue did not blow up was due in no

Chan Heng Chee

small part to the efforts of the Malaysian prime minister, Dr. Mahathir, to actively defuse the issue. There is every indication that the Philippine willingness to formalize the renunciation is tied to a Malaysian agreement on a border patrol pact, which would stem the arms flow from Sabah to the Muslim separatists in the Mindanao-Sulu region.4 Although the Sabah claim survives as an irritant in Malaysian-Philippine relations, it does not seem to stand in the way of overall ASEAN cooperation. On the thorny questions of border demarcation and territorial claims — traditionally, issues that hold the greatest potential for conflict between neighbors and that are the most susceptible to military solutions — the ASEAN states appear to have worked out an amicable settlement among themselves. Through the Joint Thailand-Malaysia Land Boundary Committee, Thailand and Malaysia have been establishing the borderline between the two territories. Since the beginning of the joint effort in 1975, 58 percent of the total common border has been demarcated.5 In the case of Indonesia and Malaysia, the two nations signed an agreement in February 1982 whereby Malaysia became the first country to accept Indonesia’s jurisdictional claims under its archipelagic principle. Indonesia, by the same token, agreed to recognize Malaysia’s right to use waters in the Indonesian territorial sea lying between Western and Eastern Malaysia.6 During Mahathir’s visit to Singapore, the two prime ministers agreed that once the boundary line was fixed in the Straits of Johore upon completion of a hydrographic survey presently being undertaken, the line would be adhered to and would not change with the shifting channel. However, Malaysia still has to work out an agreement with the island republic on Pulau Batu Putih in the Singapore Straits. With regard to the Philippine-Indonesian claims, the main point of contention is the island of Palmas,

Intra-ASEAN Political, Security and Economic Co-operation

or Pulau Miangas (the Indonesian name), which is situated where the archipelagic baselines of Indonesia and the Philippines overlap. However, there is no move on either country’s part to force a resolution of the problem at the moment. The Philippines has a dispute with Malaysia over official continental shelf maps that involve the Kalayaan group in the South China Sea, but both sides will rely on negotiation to solve the problem. By contrast, the ASEAN states’ territorial disputes with China and Vietnam over the Spratly Islands have been less peacefully settled. The Philippines has occupied seven islands to forestall counterclaimants,7 and Malaysia dispatched troops to the Layang Layang atoll under cover of a naval exercise in late November 1983. SECURITY COOPERATION Although it was founded as an economic, social, and cultural grouping, ASEAN has been fundamentally exercised by security concerns encompassing threats to the subregional environment as well as threats to the domestic order of member states. Paradoxically, there is hardly any mention of security cooperation in the ASEAN official documents, except in the Declaration of ASEAN Concord, which deals with the subject in one line, prescribing “continuation of co-operation on a non-ASEAN basis between the member states in security matters in accordance with their mutual needs and interests.” That security questions were considered best left outside the ASEAN format indicates ASEAN’s allergy to the formation of a military alliance. Over the past 16 years, however, memberstates have stepped up bilateral security cooperation on a wider scale to meet internal subversion and to strengthen the external defense capabilities of the state. Since the Vietnamese invasion of Kampuchea, bilateral air, land, and naval military exercises have become commonplace: Thailand

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conducts joint air exercises with Indonesia, Singapore, the Philippines, and Malaysia, and also permits Singapore military personnel to train on Thai soil.8 Malaysia and Singapore hold naval exercises in the strategic Straits of Malacca and belong to the Five Power Defense Arrangement. 9 Indonesia and Malaysia cooperate along the Kalimantan border between East Malaysia and Indonesia against Communist insurgents under the auspices of the 1972 General Border Committee, and air exercises are conducted by Singapore and Indonesia. There is greater exchange and coordination of security intelligence, simultaneous strengthening of the armed forces, and moves toward the standardization of arms and the working out of “uniform operating procedures” against the common enemy, all of which point to a possible eventual scenario of resource pooling. Nonetheless, ASEAN’s security cooperation conscientiously stops short of forming a military pact. In September 1982, the Singapore prime minister’s suggestion at the end of a state visit to Jakarta — that the time had come for greater militar y cooperation in ASEAN, leading up to “multi-lateral exercises encompassing all members” — was publicly and vigorously rejected by the older ASEAN partners.10 This decisively stopped speculation that a militar y pact was imminent. ASEAN’s adamant refusal to contemplate a pact arises from the belief that far from enhancing regional security, such an alliance would have a provocative value, hastening counteralliances. In the discussions on the evolution of ASEAN into a security organization, it is often forgotten that the existing framework of ASEAN does not allow for activities in this direction. Should ASEAN reach a stage when a military alliance is considered in order, the alliance would have to be formulated outside the present ASEAN organization, not unlike NATO’s relationship to the EEC.

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ASEAN ECONOMIC COOPERATION In contrast to the close cooperation in the political and security areas, actual progress in economic regionalism is slow, if not disappointing. At Bali, new vistas in trade and industrial development were opened, the former through selective trade liberalization in the Preferential Trade Arrangements (PTA), the latter through ASEAN Industrial Complementation (A1C) projects and ASEAN Industrial Projects (AIP). In addition cooperative programs have been launched in tourism, food and agriculture, mining and energy, transport and communications, and banking and finance. The translation of the aspirations into economic practicalities, however, have been more problematic. At the fifteenth ASEAN economic ministers’ meetings in October 1983, the Thai prime minister, General Prem Tinsulanond, gave a figure of 18,933 items as tariff preferentials.11 Since 1977, the tariff cuts on trading products have been wider and deeper, beginning with 10 percent for most products, and now are generally 20 to 25 percent across the board. This means the PTA are now more than just cosmetic, suggesting that the failure of intra-ASEAN trade to take off is more fundamental. According to the Singapore prime minister, “PTA imports accounted for 1.5% of total ASEAN imports in 1978 and increased to 2% in 1979.”12 ASEAN Industrial Projects have not met with greater success. The idea, adopted from a UN study on ASEAN cooperation, envisaged an ambitious plan for something close to regional import substitution. Each ASEAN state would set up a large industrial plant to meet the region’s need in a designated product. The projects proposed are the ASEAN Urea Project in Indonesia and Malaysia, the ASEAN Rock Salt-Soda Ash Project in Thailand, the Copper Fabrication Project for the Philippines, and the Diesel Engine Project for Singapore. So

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far, only the Indonesian project is close to completion, and Malaysia’s project is about to enter the construction stage. The Philippines has been switching projects and is therefore only at the early stages, and Singapore dropped the project assigned to it. The slow progress in the AIPs has been said to be due to poor project identification, financing problems, and implementation problems. Equally weak is the industrial complementation scheme, which is based on the idea of each member-country producing specific components to produce a single ASEAN product. The major thrust in the automotive industry to produce the ASEAN car, adopted after a lengthy process of refinement and discussion, has been jeopardized if not abandoned in the wake of Malaysia’s plan to build its own car. Even without Malaysia’s problem, industrial complementation has been held back by Singapore’s reluctance to participate. As an island economy whose prosperity is based on free trade and manufacturing, Singapore disagrees with the extension of monopoly rights and protection extended to products manufactured under the complementation scheme. To circumvent the unanimity principle and to absolve itself from the charge of sabotaging AIC projects, Singapore’s prime minister, Lee Kuan Yew, proposed in 1980 that ASEAN consensus should be redefined to include a “5–1” formula; that is, consensus is considered achieved even when one member-state declines participation. The foregoing facts simply highlight the obstacles in the way of economic regionalism and are a reflection of the diverse interests that result from economies at different stages of development and efficiency and with competitive rather than complementary patterns of trade. If ASEAN founders had envisaged the association as a vehicle to buttress the economic base of the subregion through economic cooperation, ASEAN must be judged as less than

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effective. Economic cooperation schemes mounted under the auspices of the treaty have been deferred in one way or another. What seems to be demonstrated is that although different strategic perspectives may not prevent political cooperation nor undermine its vitality, different economic perspectives have been more difficult to overcome. That Indonesia is the largest and yet economically among the weakest in the community is a significant constraining factor in subregional economic endeavor, setting the pace of economic cooperation in ASEAN. But without doubt, ASEAN is a case of successful economic development. ASEAN countries have enjoyed high GDP growth rates, averaging 7.3 percent in the period 1970–80. Singapore’s average GDP growth rate was the highest, at 8.5 percent, with Malaysia managing 7.8 percent, Indonesia 7.6 percent, and Thailand 7.2 percent. Even the Philippines, by far the weakest economy of the five, recorded a 6.3 percent growth rate. And even though the direct contribution of ASEAN economic policies to these rates may be small, it cannot be denied that, as Singapore’s foreign minister, S. Dhanabalan, put it: “ASEAN has created a regional climate that has enabled each of us to get the maximum out of our national economic policies. Thus, our economies

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have grown at a rapid rate.”13 Again, if we go beyond official programs to evaluate the economic significance of ASEAN, there is clear evidence of a trend for local businesses to invest profits in their home countries and within the subregion. Joint ventures between private groups from ASEAN states and ASEAN multinationals have been established, which indicates that the private sector is developing a growing confidence and stake in the subregional system. This would not have occurred if there were a sense of interstate conflict and tension within the subregion — a situation ASEAN has gone out of its way to avoid. The climate of security engendered by cooperative solidarity has also intensified American and Japanese economic interests in the subregion. ASEAN is the fifth largest trading partner of the United States, and direct private American investment increased from U.S.$730 million in the mid1960s to U.S.$4 billion at the end of the 1970s.14 In the case of Japan, imports from ASEAN increased from 10 percent of total Japanese imports in 1965–70 to 15 percent in 1980; on the ASEAN side, a quarter of the subregion’s trade is with Japan. 15 In addition, Japan is the leading investor in the subregion, with Japanese direct foreign investment amounting to $7.021 billion in 1980.16

NOTES 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.

Straits Times, 14 May 1980. Straits Times, 18 November 1981. Bangkok Post, 3 September 1983 and 12 September 1982. V. Selvaratnam, “Malaysia in 1981: A Year of Political Transition,” in Southeast Asian Affairs, 1982 (Singapore: 1SEAS, 1982), p. 271. Bangkok Post, 9 September 1982. Indonesian Observer, 26 February 1982. Far Eastern Economic Review, 13 August 1981. Bangkok Post, 1 January 1981. Asiaweek, 22 October 1982. Ibid. Straits Times, 18 October 1983.

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12. Speech by Prime Minister Lee Kuan Yew at the opening of the fifteenth ASEAN ministerial meeting, 14 June 1982, Singapore. 13. Opening statement by S. Dhanabalan, minister of foreign affairs of Singapore, at the fifteenth ASEAN ministerial meeting, 14 June 1982, Singapore. 14. Straits Times, 6 March 1982. 15. Kiyoshi Abe, “Economic Co-operation among the ASEAN Countries and Japan,” in Security in the ASEAN Region: Proceedings and Papers of an International Symposium (Tokyo: Takushoku University, 1983), p. 85. 16. Sueo Sekiguchi, “Japanese Direct Foreign Investment and ASEAN Economies: A Japanese Perspective,” in Sueo Sekiguchi, ed., ASEAN-Japan Relations: Investment (Singapore: ISEAS, 1983), p. 233.

ASEAN and Indochina: The Dialogue

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ASEAN AND INDOCHINA The Dialogue

CARLYLE THAYER

THE DIALOGUE, 1987–88 The so-called ‘new thinking’ in Soviet Asian policy, enunciated by Gorbachev at Vladivostok in July 1986, has led to a rapid improvement in Sino-Soviet relations. In the short space of 18 months, all three of China’s long-standing obstacles to a normalisation of Sino-Soviet relations were removed. A major turning point in Soviet diplomacy on Kampuchea came in May 1987 when Gorbachev, borrowing from his Afghan model, pressed Hanoi and Phnom Penh to accept ‘national reconciliation’ as the formula for peace in Kampuchea. 1 Later, following Sino-Soviet discussions, Soviet officials nudged their Vietnamese allies into advancing the date for the withdrawal of military forces from Kampuchea. In late 1987 and again during the second half of 1988, in response to these pressures, Vietnam withdrew a considerable number of its troops from Kampuchea. In November

1988, in the highest level of contact in nearly three decades, Qian Qichen, the Chinese foreign minister, visited Moscow and reached agreement to hold a summit meeting between Deng Xiaoping and Gorbachev during the first half of 1989. Indonesia, ASEAN’s interlocutor with Vietnam, was quick to respond to these international developments. In April 1987, citing ‘new movement . . . and government changes’, the Indonesian foreign minister Mochtar ended a two-year hiatus and journeyed to Vietnam. There he reached agreement with Nguyen Co Thach on Vietnam’s participation without preconditions in ‘informal talks’ to be held in Jakarta among the Cambodian parties and ASEAN states. Thailand and Singapore objected and in a special ASEAN meeting convened in August seemingly pulled the rug out from under Mochtar by insisting, among other things, that the CGDK’s six

Reprinted in abridged form from Carlyle Thayer, “ASEAN and Indochina: The Dialogue”, in ASEAN into the 1990s, edited by Alison Broinowski (London: Macmillan, 1990), pp. 138–61, by permission of the author.

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points of March 1986 be the basis of discussions. These differences were overcome later in the year when ASEAN circulated a clarification of its position on the eve of the annual UN vote on the Kampuchean question. ASEAN’s clarification reverted to the original understanding reached between Mochtar and Thach in Ho Chi Minh City. The process of dialogue then began in earnest. In December 1987, Sihanouk and Hun Sen met outside Paris for their first face-to-face meeting. This was followed by a second round of discussions in January. Then followed the first Jakarta Informal Meeting (JIM-1) which convened in July. This was organised as a two-stage affair involving a discussion of internal issues by all four Cambodian parties, followed by a discussion of the international aspects of the conflict by the Cambodian parties, Vietnam, Laos and the six ASEAN states. The Jakarta Informal Meeting set up a working group of senior officials to continue the discussions. The working group met in October and again in January 1989. In between these sessions, the first summit involving Sihanouk, Son Sann (KPNLF) and Hun Sen (PRK) was held in Paris in November. It too set up a working group.2 A second informal meeting, dubbed JIM-2, was held in January 1989. Also, as a result of initiatives pursued by Sihanouk, France has agreed to sound out interested parties on the convocation of an international conference on Kampuchea. In 1985, when Vietnamese propagandists referred to discussions between Vietnam and Indonesia as a ‘dialogue with ASEAN’, Singapore’s foreign minister branded this assertion a ‘lie’. In a literal sense, the minister was correct for at no stage has ASEAN as an organisation met with Vietnam to discuss the Kampuchean question. At present, the ministerial-level discussions held in Indonesia have the status of an ‘informal meeting’. Since 1987, however, a bilateral

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dialogue at ministerial level has developed between Indonesia, ASEAN’s designated interlocutor, and Vietnam. In late 1988 they formed a joint working group of senior officials when then conducted two rounds of detailed discussions on Kampuchea. In parallel with these developments, in 1988, Vietnam also conducted ministerial level discussions with Thailand, Malaysia and the Philippines.

THE FUTURE For much of the past decade, ASEAN has devoted a large measure of its energy towards attaining a political resolution of the Kampuchean conflict. This has led some observers to describe ASEAN as a ‘single issue’ organisation. Indeed, ASEAN has been quite successful in enlisting the support of the international community behind its efforts to apply a variety of diplomatic, political, economic and military pressures on Vietnam to withdraw its forces from Kampuchea. As a consequence, ASEAN officials have developed a close-knit pattern of consultation and co-ordination regionally, in the United Nations and in other international fora. This had led to an enhanced image internationally. Despite differences between Thailand and Indonesia, ASEAN has maintained its unity and cohesion on the Kampuchean question. Now that the process of dialogue is underway, ASEAN has begun to turn its attention to the political endgame and the future of its relations with the three states of Indochina. In the immediate future, ASEAN, will have to devote still more of its diplomatic and political energies towards securing a durable peace in Kampuchea. This means, first and foremost, not letting the peace process become bogged down or stalemated. Also, ASEAN will have to move from

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‘informal talks’ to a more formal conference setting, yet retain some influence over the peace process. Thirdly, ASEAN will have to make a considerable effort to secure the strongest possible international guarantees with respect to the three problem areas highlighted at JIM-1: a withdrawal of Vietnamese forces under international observation and control; the cessation of all foreign military assistance to the Kampuchean parties; and the nonreturn of the genocidal policies of the ‘Pol Pot clique’. Trends are already emerging which point to the future direction of relations between ASEAN and the three states of Indochina. Firstly, political dialogue on the Kampuchean question will most likely turn to a discussion of other regional security issues. It appears likely that an international conference convened to guarantee a Kampuchean settlement will either discuss wider regional security issues or set the stage for a series of regional meetings on such issues. There have been several suggestions about the arrangement for such discussions, including regular consulations between the foreign ministers of ASEAN and the Indochinese states, an expanded ASEAN, or the formation of a new regional organisation. Among the possible issues to be discussed are the following: repatriation of refugees, outstanding territorial claims, treaties of nonaggression, the removal of foreign military bases, the establishment of a zone of peace, freedom and neutrality, and the creation of a nuclear weapon free zone. As the conflict in Kampuchea moves in the direction of a political settlement, economic and other links between individual ASEAN countries and the three states of Indochina are likely to grow. In 1987 Indonesia and Vietnam inaugurated a series of bilateral meetings to discuss possibilities of joint ventures and other forms of co-

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operation. Thailand’s Prime Minister, Chatichai Choonhavan, has announced that once the Kampuchean conflict is resolved he would like to turn Indochina from a battlefield into a market place. After a late 1988 visit to Hanoi, the head of the National Defence and Security Committee of the Philippines’ House of Representatives declared his support for expanded contacts with Vietnam. MAS, Malaysia’s airline, Thai International and Philippine Airlines have all negotiated landing rights in Vietnam in recent years. ASEAN’s future commercial contacts are likely to focus on Ho Chi Minh City and involve private joint ventures. The process of dialogue has set the climate for an improvement of relations between Laos and Thailand. Here too commercial links can be expected to grow. In 1988, following Vietnam’s lead, Laos also adopted a new liberal foreign investment code. It now remains for Thailand to lift restrictions on trade in so-called ‘strategic goods’ and open more points of contact along their common border. The development of ASEAN’s relations with Kampuchea must await a peace settlement. Once that is attained, ASEAN can be expected to play a major role in encouraging a massive international rehabilitation and assistance programme for that country. ASEAN’s ability to contribute financially or materially is quite limited and ASEAN’s efforts are likely to be directed at highly specific technical aid projects and in human resource development. Commercial links, which are presently conducted in a low-key fashion with private businessmen in Singapore or through Thai black marketeers, can be expected to grow as they come under central government regulation and control. The main component of ASEAN– Kampuchean relations is likely to take the form of political and diplomatic support for a post-settlement government headed by Sihanouk.

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NOTES 1. 2.

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Coincidentally, Sihanouk announced he was taking a year’s leave of absence as president of the CGDK thus freeing him to engage unofficial discussions with officials of the PRK. To further complicate matters, two other working groups have been set up, the first involving China and the Soviet Union, the second, Indonesia and Vietnam.

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CHALLENGES FOR SOCIETY AND POLITICS

CAROLINA G. HERNANDEZ

THE DEFINING ENVIRONMENT OF THE CHALLENGES TO ASEAN The enlargement of the Association of Southeast Asian Nations (ASEAN) to include all the ten Southeast Asian countries in 1999 caused a number of concerns among analysts and observers of ASEAN affairs. Among their concerns are the implications of enlargement for the solidarity, cohesion, and effectiveness of the Association, given its challenging decisionmaking process based on consensus, and the other elements of the code of conduct known as the “ASEAN way” that enabled its members to work together in the past. Its non-communist orientation within the environment of the Cold War was diluted with enlargement to include the communist nations that were their antagonists during the Cambodian conflict in the 1980s. Fairly economically well off, the old ASEAN members joined relatively poorer neighbours in Southeast Asia, creating a two-tier ASEAN, one rich and one poor. Thus, an

ASEAN divide consisting of the six old members — Brunei, Indonesia, Malaysia, the Philippines, Singapore, and Thailand (ASEAN-6) — and the four new members — Cambodia, Laos, Myanmar, and Vietnam (CLMV) — arose. This economic divide also exists within each of the ten countries where, with few exceptions, serious social inequalities persist. The different historical experiences, geographical and strategic realities of the members, together with contemporary challenges combine to pose difficulties in developing a common foreign and security policy that would enable them to meet present challenges in international relations and global politics. These have implications for regional co-operation, particularly in the security, political, and even social fields. For instance, while all ten countries have stable and beneficial relations with Japan, territorial disputes in the South China Sea between four of the ASEAN members with China and Taiwan have posed difficulties in

Reprinted in abridged form from Carolina G. Hernandez, “Challenges for Society and Politics”, in Reinventing ASEAN, edited by Simon S. C. Tay, Jesus P. Estanislao, and Hadi Soesastro (Singapore: Institute of Southeast Asian Studies, 2001), pp. 103–20, by permission of the author and the publisher.

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these members’ bilateral relations with Beijing, particularly in the cases of the Philippines and Vietnam. Close ties with the United States among the ASEAN-6 are not shared by the new members, particularly Myanmar and Vietnam. It is not yet clear at this time how the terrorist attacks against the United States on 11 September 2001 would impact on ASEAN cohesion in regard to the response of individual states to the U.S. call for a global coalition against international terrorism. As a close U.S. ally, the Philippines gave its full commitment of support to Washington, including the use of its facilities in the military bases formerly used by U.S. forces in Clark and Subic Bay and the sending of troops as part of the coalition, if necessary. Indonesia, Malaysia, and Singaproe have standing agreements that allow port calls by U.S. forces, with Singapore permitting the stationing of U.S. troops on its soil. Indonesia and the Philippines are likely to face domestic opposition to co-operation with the United States. Such opposition has already surfaced in Manila, while in Jakarta the country’s ulama have already called for an Islamic jihad should the global coalition attack the Taliban in Afghanistan. Moreover, traditional ties between the former Soviet Union and Vietnam and Laos are also not shared by the rest. Finally, Cambodian and Myanmar ties with China are unique to these two countries within ASEAN. The concept of an ASEAN divide, however, lies beyond these divergences in the levels of economic development, historical, geographic, and strategic realities, and contemporary challenges facing the ten Southeast Asian states. Faultlines also exist in other dimensions, including the variety of political regimes and ideologies and the issue of domestic political stability, as well as the levels of social development among them. Since these dimensions lie in the domestic realm, it can be argued that these are not ASEAN concerns. However, they

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create political and social challenges for ASEAN in the sense that they represent causes of an ASEAN divide that could pose obstacles to closer regional collaboration on political, economic, and social issues as ASEAN moves into its next thirty years of existence. Moreover, it may be argued that domestic challenges in the political and social dimensions that are not effectively addressed by individual members are likely to affect ASEAN as a whole. This is because the security of ASEAN encompasses political stability, economic prosperity, social cohesion, and external defence where the domestic, regional, and global levels interact with one another. Hence, domestic, political, and social challenges are likely to become ASEAN challenges. The cases of Indonesia and Myanmar are illustrative in this regard. Domestic challenges in both the political and social dimensions face both countries. These have impacts on ASEAN as a whole for different reasons. Indonesia, because of its size and international weight, can engender confidence in ASEAN if it manages its problems successfully. If it should unravel, the implications for ASEAN and the wider region would be serious. It could spell the end of ASEAN that in the meanwhile has been adjusting to a weakened Indonesia by trying to find a temporary informal leader. Thailand and the Philippines have tried to take the slack on some issues, Singapore in others. However, the absence of a strong Indonesian influence is felt in both the ASEAN Regional Forum (ARF) and in the Asia-Pacific Economic Co-operation (APEC) forum where the Kuala Lumpur Summit did not arrest the slide in APEC’s progress since the Manila and Subic meetings. In the case of Myanmar, its internal political and social problems have already impacted on ASEAN’s external relations with its dialogue partners from the West, particularly the European Union (EU).

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ASEAN’s political dialogue with the EU stalled when Myanmar was admitted as a full member of the Association. Fortunately, it resumed when Myanmar’s State Peace and Development Council (SPDC) began to show signs of softening its hard-line approach to the opposition National League for Democracy (NLD), initially through the release of some members of the opposition. Mediation by the United Nations, through Secretary-General Kofi Annan’s special representative, has also led to informal talks between the two sides. On 12 December 2000, ASEAN and the EU met in Vientiane, effectively resuming the stalled political dialogue between them. However, the spillover of Myanmar’s domestic political and social problems into Thailand has caused a souring of bilateral

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relations. This has also caused a stir within ASEAN, particularly when Thailand came up with an initiative intended to respond to the issue of transborder impacts of Myanmar’s domestic problems. At the Thirty-First ASEAN Ministerial Meeting (AMM) in Manila in July 1998, it sought the agreement of other members to relax the principle of non-intervention in another’s domestic affairs in the form of “flexible engagement”. As Bangkok obtained only Manila’s support, ASEAN settled for “enhanced interaction”. This initiative is not likely to die as ASEAN moves to address the ASEAN divide and to realize the broad and comprehensive goals of its Vision 2020. These challenging tasks will require some form of flexible engagement for their success.

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18.

EXPECTATIONS AND EXPERIENCES OF THE NEW MEMBERS A Vietnamese Perspective

NGUYEN PHUONG BINH and LUAN THUY DUONG

EXPECTATIONS: ATTRACTIONS OF THE “ASEAN WAY” In 1995, Vietnam, owing to the changing international and regional political climate, was able to join ASEAN as a full member. This was a considerable achievement, given the political and security concerns between the original ASEAN members and Vietnam during the 1970s and 1980s over the question of Cambodia and other related issues. The end of the conflict in Vietnam, and of the Cold War, removed some of the barriers to co-operation. The essential factor for Vietnam’s membership into ASEAN, however, stemmed from the policy of reform or renovation (doi moi) that the Vietnamese Communist Party announced in 1986. It was this policy that led Vietnam to approach ASEAN with increasing interest from the mid-1980s. The Vietnamese Government recognized that the course of reform in the country needed, first and foremost, a favourable

external environment, with peaceful and friendly relations with its neighbouring countries. It had observed the experiences and practices of the different ASEAN member states in dealing with each other. It was thought that these ASEAN experiences and processes could help ensure that Vietnam, upon joining, would enjoy the same favourable conditions. As many scholars from both within and outside ASEAN have observed, it is an organization for co-operation, especially in the political field. Differences in political and social preferences did not prevent member countries from promoting good neighbourliness and forging an open regionalism, which serves the need for peace, stability, and development of its members. The success of ASEAN in this regard lies in the fact that the organization has found ways to manage and diffuse territorial disputes among its members by encouraging the parties concerned to use

Reprinted in abridged form from Nguyen Phuong Binh and Luan Thuy Duong, “Expectations and Experiences of the New Members: A Vietnamese Perspective”, in Reinventing ASEAN, edited by Simon S. C. Tay, Jesus P. Estanislao, and Hadi Soesastro (Singapore: Institute of Southeast Asian Studies, 2001), pp. 185– 205, by permission of the authors and the publisher.

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peaceful means of settlement. Since 1967, no intra-ASEAN disputes have turned into military conflicts. The “ASEAN way” for dealing with inter-state relations among its members was anchored in the Treaty of Amity and Co-operation in Southeast Asia (also known as the Bali Treaty, or TAC) signed in 1976. This is primarily a nonaggression pact which sets out the principles for ASEAN inter-state relations and emphasizes respect for independence and territorial integrity, non-interference in domestic affairs, refraining from the use of force, and seeking the peaceful settlement of conflicts between countries that are parties to the agreement. Thus, when Vietnam expressed its desire to become a member of ASEAN, the same political and security principles were expected to apply to future relations between Vietnam and the ASEAN countries. In this way, the TAC would become a code of conduct, guiding relations between all countries in Southeast Asia, including the new members. This code of conduct had already proved to be effective in softening disputes between individual member states. There had also been some signs that the ASEAN member states had resolved some of these disputes by transforming potential conflicts into cooperation. Vietnam has been negotiating with a few ASEAN countries on the demarcation of borders, continental shelves, and overlapping sea zones, as well as fishing and other issues. Some issues have been satisfactorily settled while prospects for resolving others are promising. The “ASEAN way” was once again highlighted in the resolution of disputes in the South China Sea, where a number of states, both in ASEAN and outside the group, have overlapping claims to territory. ASEAN’s Declaration on the South China Sea of 1992 called on all parties concerned “to exercise restraint and resolve all sovereignty and jurisdictional issues pertaining

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to the South China Sea by peaceful means; to explore the possibility of cooperation there on safety of maritime navigation and communication, etc.; to apply the principles of the Bali Treaty as the basis for establishing a code of international conduct in the South China Sea; to subscribe to this declaration”. As far as ASEAN member states involved in the disputes are concerned, the Declaration serves as a guide for their policies, principles, and measures to resolve disputes over islands in the South China Sea. At least, the disputes over the Spratlys do not represent an obstacle to improving relations between Vietnam, Malaysia, Brunei, and the Philippines. Nor do they become a hindrance to co-operation and a source of possible military conflicts between the ASEAN member states. In this regard, the ASEAN Declaration and other efforts have been significant reference points in this continuing controversy. In this context, by acceding to the Bali Treaty and later joining ASEAN, the new members have entered a second phase of reconciliation. They, therefore, should not have to worry and spend much on defence expenditures to maintain their borders. This fact alone contributes greatly to the new course of reform in Vietnam. More resources can be focused on the development of its economy and human welfare. Other new members can be expected to benefit similarly. For Vietnam, the importance of relations with ASEAN has been attached to the creation of an environment of peace and security at a time when there is a greater need following the end of the Cold War.1 With ASEAN membership, Vietnam expects that it would have more capacity to deal with conflicts within ASEAN. When actual or potential conflicts between and among Vietnam and other ASEAN member states arise, they will likely be dealt with on an intra-ASEAN basis, leaving no possibility for outside powers to intervene, as they did in

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the past. This also gives ASEAN the ability to take on a greater role in the broader region of the Asia-Pacific and in global affairs. The expectations of new members in joining ASEAN also had an economic dimension. The new members recognized that ASEAN could also be an organization for economic co-operation — as promised in its original vision. By the 1990s, economic reforms in Vietnam had created favourable conditions for other, more advanced ASEAN member states to trade and invest in the country. Other forms of economic cooperation were also possible, and beneficial to Vietnam’s development. Trade and investment by other ASEAN member states have played an important role in Vietnam’s economy in the past decade. Even before Vietnam formally joined ASEAN, with improving relations, ASEAN member states helped Vietnam to find new markets and investments to replace the traditional markets and economic partners — the former Soviet Union and Eastern Europe — that had diminished in the post-Cold War period. More generally, the experiences in economic development of the ASEAN member states, both positive and negative, were felt to be potentially relevant to the situation of Vietnam. Vietnamese officials recognized that ASEAN member states had started from a similarly low starting point as Vietnam, and had made credible gains in their development. Many Vietnamese officials referred positively to the significance of the country’s entry into ASEAN. Then Foreign Minister Nguyen Manh Cam said: “ASEAN represents another channel for us to integrate into the region and allow us to join the process of globalization”.2 The statement is an example of the sentiment of many Vietnamese officials; a driving force behind the decision was the necessity to open the economy and attract foreign direct investment, which

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could be possible only if normal and friendly relations prevailed. One could also detect a genuine feeling of admiration for the economic successes of the other ASEAN member states, and a sincere desire to learn from their experiences. This was reflected, among other things, in the following statement of Foreign Minister Nguyen Manh Cam on his visit to Malaysia: “... the experience of development from other ASEAN member countries, ... your successes and failures will help our country to shorten the course of development”, and “joining ASEAN is also the opportunity for us to push forward the reform process”.3 A third driving force in Vietnam’s desire to join ASEAN was the group’s standing in the wider Asia-Pacific region and the world. Vietnam noted that, since 1977, ASEAN had increasingly established partnerships with major countries outside the region, including the United States, Japan, China, Russia, India, and other states. In these relations, ASEAN had been able to moderate and co-ordinate with these countries, at a positive level, on major policy issues concerning the security of Southeast Asia. Since 1992, ASEAN had begun to discuss security issues at various fora, including the annual ASEAN Ministerial Meeting (AMM), Post-Ministerial Conference (PMC), and the ASEAN Regional Forum (ARF). The ARF so far represents the only multilateral forum for the regional states and major powers of the world to discuss security issues in the Asia-Pacific where they are committed to the peace, stability, and development of the region. Vietnam’s officials and thinkers recognized and were attracted by these achievements of ASEAN in reaching out beyond the region. It was, therefore, the expectation that good ASEAN–Vietnam relations would facilitate the development

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Expectations and Experiences of the New Members: A Vietnamese Perspective

of better relations between Vietnam and others in the region beyond ASEAN. Improved relations between Vietnam and other ASEAN member states could, among other things, help to bring about normalized and improved relations between Vietnam and the United States. Vietnam’s relations with Japan and China could also benefit. In these ways, closer and better relations with ASEAN could help Vietnam form and carry out a more balanced foreign policy. On its part, Vietnam drew closer to ASEAN’s founding members for the first time. Since Vietnam moved towards ASEAN membership, the government has given to its relations with ASEAN member states a priority that had previously been enjoyed only by its immediate neighbours — Laos, Cambodia, and China. All these countries were now seen as belonging to the category of close neighbours with whom friendship must be cultivated as an important aspect of the diversification of Vietnam’s foreign relations. This new geopolitical approach represents an advance in the foreign policy thinking of Vietnam. It shows that the improved Vietnam–ASEAN relationship has led to a broader context for Vietnam’s long-term foreign relations. Notably, in cultivating better relations with ASEAN, Vietnam did not have to sacrifice any of its relationships with external countries. Instead, becoming an ASEAN member helped the country to develop and improve its relations with other countries in its effort to become a friend of all nations in the world community. In addition, Vietnam and some ASEAN member states shared common views in terms of democracy and human rights, especially in the pre-crisis period. This helped them to find a common position to face the challenges of interference posed by the West. Therefore, Vietnam has looked for

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support from other ASEAN member states for the maintenance of its political and social stability. In sum, there has been consensus in Vietnam that as long as doi moi continues, the role of ASEAN will be strategically important. Vietnam has expected that membership in ASEAN would help the country to ensure favourable external conditions for further economic and political reforms, enhance its geopolitical stance and that of Southeast Asia, in dealing with other countries outside the region, including the major powers of the world. It was also expected that membership would render prospects for better bilateral and multilateral co-operation between Vietnam and the rest of the world, and help it to forge a new sense of regional belonging and identity. Other new members have expressed similar expectations of ASEAN membership. In 1997, Cambodia’s then First Prime Minister Ung Huot suggested that, “Cambodia’s security will be enhanced by joining ASEAN, a dynamic group progressive enough to meet as equals and not tamper in each other’s affairs, and at the same time strong enough to stand together as a group and meet foreign powers on equal terms, not divided and subject to their influence”. In economic terms, he said that “we seek ASEAN’s support, its business knowledge, and its guidance and assistance to help us grow where we are still weak”. He also believed that “the inclusion in the AFTA [ASEAN Free Trade Area] could make Cambodia take off into newly industrialized status”.4 The tremendous strides taken by the original ASEAN member states in politics and economics led the new member states to expect that they too would benefit greatly from membership in ASEAN. Yet, more importantly, all the new members of ASEAN expected that they could actively contribute

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in return. They did not join the Association as weak links or charity cases, but as countries that possessed the energy to grow, the deep desire for peace and stability, and the ability to strategically link Southeast Asia to the rest of the world. GAINING FROM MEMBERSHIP: LESSONS FROM EXPERIENCE The expectations of new members about the benefits of being in ASEAN ran high in the run-up to membership. Have the actual experiences met those expectations? For Vietnam, ASEAN has proved to be even more important after it joined the organization in 1995. Membership has helped to further boost the sense of good neighbourliness and political co-operation between Vietnam and the other ASEAN countries, thus enhancing the country’s security. The relationship between Vietnam and Thailand is a good example of the benefits. Relations between the two countries had not always been smooth, owing to the Vietnam War and the question of Cambodia. Nevertheless, soon after Vietnam joined ASEAN in 1995, the two countries resolved their overlapping claims to areas in the Gulf of Thailand, as well as the longstanding issue of Vietnamese citizens living in Thailand. Co-operation between the two countries has extended to many fields, including politics, commerce, science and technology, culture, education, public health, tourism, defence, and security. Twoway trade grew from just US$0.1 million in 1986 to US$759 million in 1996 and to US$1.2 billion in 2000. Thailand now ranks second among ASEAN investors and eleventh among foreign investors in Vietnam, with some ninety-six investment projects capitalized at US$1.1 billion.5 This example of Thai–Vietnam relations is not an isolated one. Many agreements have been concluded as steps towards

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pacifying and solving disputes over overlapping claims to sea zones, notably those between Vietnam and Malaysia. The aggregate effects of political and security co-operation undertaken by Vietnam with other member states within the ASEAN framework contribute greatly to the betterment of the external environment. For the first time in its contemporary history, Vietnam is less worried about security concerning its geographical borders. Accordingly, expenditures on national defence can be decreased while more resources can be allocated to the development of its economy and combating poverty, which has been considered “the biggest threat” for Vietnam.6 Indeed, closer political co-operation with ASEAN has directly helped Vietnam’s economic development. Trade and investment from the member states to Vietnam continuously increased from the time it became a member until the Asian crisis of 1997. The member states have accounted for large shares of Vietnam’s trade, and AFTA has intensified this relationship. The numbers bear this out. Trade between Vietnam and the rest of ASEAN accounts for about 30 per cent of Vietnam’s total foreign trade volume, a 37.9 per cent increase from 1990 to 1996. The value of two-way trade between Vietnam and other ASEAN member states has doubled since it began reducing tariffs, with the aim of joining AFTA. This reached US$7.1 billion in 2000. Import-export turnover with the other ASEAN member states accounted for 23.7 per cent of the country’s total trade turnover, with the export value reaching US$2.6 billion. This represents an increase of 2.3 times during the years 1996–2001.7 Concurrent with the progress of the ASEAN Investment Area (AIA), the ASEAN member states have also contributed about 30 per cent of total foreign investment in Vietnam.8 Business transactions with the other

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ASEAN member states have also served Vietnam well, in indirect ways. Coming out of the state of economic isolation and opening its economy to the rest of the world in the mid-1980s, Vietnam lacked a grasp of the principles and practices needed to manage a market economy. Interactions with ASEAN, including joining AFTA, have therefore served as a form of on-the-job training for Vietnam to better understand and effectively operate in a new economic setting. Moreover, Vietnam’s participation in AFTA requires the country to enact further market-oriented reforms and to develop its human resources to facilitate effective cooperation with its ASEAN partners. In this regard, ASEAN represents another channel for Vietnam to integrate into the wider region and to participate in the process of globalization. ASEAN’s backing of Vietnam to join the Asia-Pacific Economic Co-operation (APEC) enabled it to be admitted as a member in 1998. ASEAN’s support for Vietnam’s membership in the World Trade Organization (WTO) has also been crucial. Above all, Vietnam’s participation in AFTA was a necessary step in preparation for its participation in these broader organizations. The same support for Laos, Myanmar, and Cambodia for membership in APEC and the WTO has also been given by ASEAN. It is noteworthy that the more Vietnam integrates into the rest of the world, the more it has to accelerate the reforms at home, thus making doi moi an irreversible process. Joining ASEAN, indeed, has been a two-pronged process: on the one hand, it bears evidence of a new strategy for economic development and foreign policy in Vietnam; and on the other hand, it has been the catalyst for further reforms. More broadly, similarities between Vietnam and some ASEAN member states in the philosophy of governance, and historical and cultural legacies have contributed to make the ASEAN experience more

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attractive and more easily absorbed by Vietnam. The geographical proximity has benefited Vietnam by reducing the costs of transactions and enhancing the developmental wave from ASEAN. Vietnam has gained fruitful assistance with capital, science and technology, and experience of economic management from the older ASEAN member states. Accordingly, great importance has been attached to the “ASEAN factor” in the cause of renovation and reforms in Vietnam, and strong determination has also been attached to the process of fully integrating into ASEAN. Similar outlooks and experiences can be noted among the other new members. Cambodia’s Minister of Economy and Finance, Keat Chhon, has said that to effectively participate in ASEAN, the new members must address a number of specific challenges. The Cambodian minister emphasized that they must strengthen human resources and skills; continue to liberalize their economies; develop and manage their natural resources in a sustainable manner; improve the accountability of the decision-making process; and improve communication and co-ordination among governmental institutions. Effective participation in ASEAN requires close cooperation among ministries to ensure that consistent and comprehensive policies towards ASEAN are provided. Institutional and legal reforms are also vital parts of this process.9 In the broader context of external relations, the ASEAN experience in dealing with actors outside the region has also been appreciated by Vietnam and other new members. By initiating the establishment of the ARF and by acting as the “primary driving force”, ASEAN has been able to ensure the continued commitments by external powers to peace, stability, and predictability of the Asia-Pacific as a whole, and Southeast Asia in particular. Through this forum, ASEAN, as a group of small and

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medium states, has had a voice to be heard and a role to play in a new process of power distribution in the region. Southeast Asia, therefore, can enjoy a relatively stable and predictable strategic environment compared with other regions of the world since the end of the Cold War. Membership in ASEAN has particularly helped to ease relations between Vietnam and the major powers in the Asia-Pacific region. These actors see developments in Vietnam–ASEAN relations as evidence of a new commitment to peace, stability, and prosperity on the part of Vietnam. In response, they have become more willing to assist Vietnam in its efforts at renovation. Backed by ASEAN, Vietnam can be in a better position to conduct its foreign policy, now aimed at diversifying and multilateralizing external relations, while preserving its national independence and identity. It was no surprise, for example, that Vietnam’s admission into ASEAN almost coincided with the normalization of diplomatic relations between Vietnam and the United States. In this context, the economic and developmental expectations of the newer ASEAN members, while important, were not as primary as the long-term political and strategic expectations. In Vietnam’s case, both sets of expectations in joining ASEAN were initially met. Tremendous changes, however, have taken place in the wake of the regional crisis that began in July 1997 and swept through the ASEAN member states. IMPACTS OF THE ASIAN CRISIS Although the crisis began in the more developed member states of ASEAN, the new and less developed members were also affected. The negative impacts on Vietnam came in two ways. The first impact was that many ASEAN members became unable to

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continue their commitment to the economic development of Vietnam, whether through intergovernmental assistance or the commercial endeavours of their private sector companies. In trying to deal with the crisis, the ASEAN member states have had to pay more attention to their domestic priorities. Consequently, an inward-looking tendency has become stronger than the sense of community among most ASEAN member states. In the process of integrating into ASEAN, the new member states had expected much assistance from ASEAN as an organization, as well as from the founding and more developed member states. With the crisis, however, the ability of the organization and its founding members to give assistance has been limited. The Filipino academic and think-tank leader, Dr Carolina G. Hernandez, has observed that “the crisis demands the payment of more attention to domestic problems by affected countries. Indonesia, Malaysia, the Philippines, and Thailand will be forced to look inward to manage the impacts of the crisis on their societies”.10 This has directly reduced the commitment to the economic development of Vietnam. For example, Singapore’s biggest investment project in Vietnam for 1998, worth US$780 million, has been postponed. At the same time, dozens of Thai, Indonesian, and Malaysian companies have pulled out or scaled down their business in Vietnam.11 Moreover, ASEAN member states have focused their resources on “self-help” programmes, rather than collective programmes aimed at addressing the crisis.12 As a result, there has been doubt whether ASEAN is able to agree to and implement collective programmes of assistance. The second impact in the wake of the crisis is that economic transactions between Vietnam and other ASEAN member states have been less effective. The structure of

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trade between Vietnam and the other ASEAN member states has not been in favour of Vietnam. While trade with ASEAN amounted to about 30 per cent of Vietnam’s total trade, exports from Vietnam only accounted for 0.025 per cent of total ASEAN exports to the rest of the world.13 Under the impact of the crisis, Vietnam’s exports faced more disadvantages of competition, as they became more expensive in comparison with those of other ASEAN member states. In addition, lowered prices from these states put many Vietnamese domestic producers out of business. Nevertheless, Vietnam does not hold other ASEAN member states responsible for igniting the crisis or for making Vietnam a subsequent “victim”. Many problems have arisen in the Vietnamese economy under reform. The challenges for doi moi in Vietnam already existed before the crisis. Foreign direct investments (FDI) flowing into Vietnam had in fact been declining in the years shortly before the crisis and after. This was not so much because of the crisis. The falling FDI flows were mainly due to investment conditions in Vietnam itself. Infrastructure, laws, and management mechanisms in favour of foreign investments are needed. In this context, the crisis has consolidated the view in Vietnam that the country must accelerate its doi moi policy. Yet, the lesson has also been that policies must take into account the specific conditions of the country. Efforts must be made to learn from the experiences of its neighbours, as this will allow Vietnam to have a less alarmist perspective of the crisis. It is also Vietnam’s belief that ASEAN will overcome the crisis, recover, and prosper again. As such, Vietnam can benefit from the next development wave of ASEAN — provided its internal reforms proceed. Vietnam, although affected by the crisis, has not taken a diminished view of ASEAN.

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There are, however, concerns over the role of ASEAN in the future, especially with regard to the strategic and political ramifications that the crisis has brought about.14 It seems that the crisis has brought ASEAN to a new stage in which state leaders do not seem to stay in power for long, unlike their predecessors. This has several implications for ASEAN. Firstly, as many have argued, ASEAN during the past three decades had developed into a “club” of statesmen who, through personal interactions, made inter-state relations in ASEAN more friendly and stable. In fact, inter-state relations in ASEAN have been very much dependent on these high-level interactions. The new leaders in ASEAN, however, will need time to understand and accommodate each other and build up relations to a similar level. With greater political instability, the terms of office of leaders in some ASEAN member states have been shortened, making them more preoccupied with domestic politics and thus less devoted to regional affairs. As a result, solidarity among the ASEAN leaders may be affected. Secondly, leaders in some ASEAN member states are now subjected to greater public scrutiny and criticism. This means that pressures exerted on them by other circles and interest groups in society will increase. As a result, the new members are watching recent developments in these founding ASEAN member states closely in order to fully appreciate them and predict their political and social implications. Many Vietnamese scholars share a concern that the political and social ramifications in several member states of ASEAN would pose a challenge to ASEAN’s cohesion. This concern stems from the argument that the tendency to look inward would lead to different sets of priorities, and thus widen the gaps in development levels within ASEAN, making consensus more

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difficult, slowing down the process of decision-making, and as a result, eroding ASEAN solidarity. During the financial crisis, ASEAN still enlarged its membership and adopted unanimously many bold measures to deal with the crisis, at both dimensions, individual and collective. In addition, some founding ASEAN members, after emerging

from the worst of the crisis, have initiated programmes aimed at bridging the gap in development levels between the old and new members of ASEAN. Accordingly, Vietnam and the other new members have grounds to expect more effective cooperation and closer integration in ASEAN, and benefit from the wider role of ASEAN in the Asia-Pacific region.

NOTES 1. See Nguyen Phuong Binh and Hoang Anh Tuan, Vietnam’s Integration into ASEAN (Hanoi: National Political Publishing House, 1997), p. 12. 2. Nguyen Manh Cam, Speech at the 31st AMM, Manila, 24 July 1998. 3. Documents of Department, Asia II, Ministry of Foreign Affairs, Vietnam, 1995. 4. Ung Huot, Keynote address at the Cambodia-ASEAN Forum on “ASEAN at 30: Achievements and Lessons for Tomorrow”, Phnom Penh, 8 August 1997. 5. Phuong Ha, “Vietnam–Thailand relations look forward”, People’s News Paper, 5 August 2001, p. 5. 6. See Nguyen Vu Tung, “An initial analysis of Vietnam’s concept of security”, in Conceptualizing AsiaPacific Security, edited by Mohamed Jawhar Hassan and Thangam Ramnath (Malaysia: Institute for Strategic and International Studies, 1996). 7. “A workshop to promote regional understanding of the Common Effective Preferential Tariff (CEPT)”, Vietnam News Agency, Daily Bulletin, 31 March 2001, p. 1. 8. According to Vietnam’s Ministry for Planning and Investment, until June 1998, total registered capital of foreign direct investments (FDI) in Vietnam amounted to US$32,725.21 million, out of which US$10,029.45 million was from the ASEAN countries. 9. Keat Chhon, Closing remarks at the Cambodia-ASEAN Forum on “ASEAN at 30: Achievements and Lessons for Tomorrow”, Phnom Penh, 8 August 1997. 10. Carolina G. Hernandez, “The future role of ASEAN: A view from an ASEAN ISIS member”, Paper presented at the Workshop on East Asia at Crossroad: Challenges for ASEAN, Institute for International Relations, Hanoi, 24–25 September 1998. 11. New Hanoi Daily, 28 October 1998, reported that twenty-six investment projects by Thailand have been withdrawn because of financial difficulties. 12. See Luan Thuy Duong, “ASEAN 10: Challenges ahead and responses”, Beyond the Crisis: Challenges and Opportunities (Malaysia: Institute for Strategic and International Studies, 1999), Vol. 1, p. 254. 13. Journal of Vietnam Foreign Trade, March 1998. 14. See Bui Thanh Son, “Impacts of the Present Crisis to Vietnam”, Paper presented at the ASEAN ISIS Heads Bali Retreat, Bali, Indonesia, 30–31 August 1998.

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BETWEEN CHINA AND ASEAN The Dialectics of Recent Vietnamese Foreign Policy DAVID WURFEL

THE CHINA POLICY OF VIETNAM IN ASEAN There was, of course, some opposition to Vietnam’s membership in ASEAN, especially by Thailand, because of a fear that Hanoi was all too eager to use ASEAN as a club against China. One Vietnamese scholar/ official recognized in 1994 that “in the short period after joining, it would be difficult for Vietnam to take the lead or put forward its own initiative on security issues as Hanoi needs to learn the mechanism of ASEAN co-operation, and for their part, some ASEAN members might not want to see Vietnam do so”.1 Thus for the first year Vietnam did indeed maintain a low profile. Staff was being trained in English, and in the structures and processes of ASEAN. At the same time, as we shall see, Vietnamese participants in ASEAN seemed to be learning a great deal as well about its political dynamics.

Meanwhile, Vietnam needed to deal with its mammoth neighbour one on one, which was the way China preferred. On the surface it appeared that relations were improving. Rail links were re-established in early 1996, while in June Premier Li Peng attended the Eighth Vietnam Communist Party Congress in Hanoi, the highest-ranked Chinese leader to do so in more than thirty years. Ten rounds of negotiations on border disputes were held, but without any agreements. As Foreign Minister Nguyen Manh Cam said in an interview, “We strive to accelerate all existing ties with China. These ties have created benefits for both countries… Some issues, however, still remain unsolved …”.2 In any case, trade in 1996 reached US$l billion. Military exchanges continued with a group of Chinese officers, including the commander of the PLA Navy Air Force, visiting Vietnam — as well as Malaysia and Singapore — in late February 1997.3 In

Reprinted in abridged form from David Wurfel, “Between China and ASEAN: The Dialectics of Recent Vietnamese Foreign Policy”, in Vietnamese Foreign Policy in Transition, edited by Carlyle A. Thayer and Ramses Amer (Singapore: Institute of Southeast Asian Studies, 1999), pp. 148–69, by permission of the author and the publisher.

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April a Vietnamese military delegation was received in Beijing by the Chinese Defence Minister, who in his welcome speech said, “The two countries share a common belief and common goals, and both are faced with the challenge of securing peace and development”. 4 There seemed to be some attempt to sustain ideological ties. Other aspects of the relationship were entirely devoid of ideological overtones. To counter a similar tactic used earlier by China, in April 1996 Vietnam awarded a contract for oil exploration in the South China Sea to Conoco — in an area also claimed by China — which China protested. But no drilling has been undertaken. Less than a year later China undertook bolder steps, commencing exploratory drilling on the Vietnamese continental shelf less than sixty-five nautical miles from Vietnam’s coast, in an area not covered by claims of any other ASEAN members (and thus designed to antagonize them less). This was despite an October 1993 agreement between the two powers, which said that “while negotiating to settle the [territorial] issues, the two sides shall not conduct activities that may further complicate the disputes”. 5 The oil rig began drilling, according to Vietnamese authorities, on 7 March. Vietnam unsuccessfully tried quiet diplomacy before going public with its protest nearly two weeks later. An unnamed official in Hanoi used uncharacteristically strong words: “This action has added another example that the Chinese expansionist policy has remained unchanged”.6 The diplomatic note handed to the Chinese ambassador merely said: “This act of violation runs counter to the good trend in which bilateral relations of friendship and cooperation are developing”. 7 Vietnam insisted that China withdraw the rig and discuss the disputed maritime claims. On 7 April it was announced that the rig had been withdrawn; discussions on the claims began in

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Beijing two days later. The Vietnamese press, however, barely mentioned this apparent diplomatic victory. There was a reason for their reticence; they had boldly played the ASEAN card and wanted to avoid antagonizing China further by gloating over their success. This marked a new stage in Sino-Vietnamese, and in ASEAN-Vietnamese relations.

VIETNAM AND ASEAN Vietnam’s remarkable diplomatic coup in March 1997 was built on the cultivation of relations with key ASEAN members for some time before that. To review those relationships is a necessary prelude to understanding the events of March.

Indonesia Indonesia had long been Vietnam’s best friend among the non-communist states in Southeast Asia. Indonesia had recognized the Provisional Revolutionary Government of South Vietnam before 1975 and became the crucial liaison between Vietnam and ASEAN in preparation for a settlement of the Cambodian crisis. Indonesia shared Vietnam’s fear of China, even though it had no claims in the South China Sea that were threatened by China — until a careful reading of Beijing’s 1992 legislation. Despite some degree of regime affinity with China, Indonesia was sympathetic with Vietnam’s position.

Singapore Singapore was a major trading partner and source of investment for Vietnam. Lee Kuan Yew had even been invited several times to Hanoi as a senior adviser. Despite somewhat different views of China, Singapore still could appreciate Vietnam’s situation.

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Malaysia Malaysia’s foreign policy has been determined in the last decade largely by Prime Minister Mahathir Mohamad’s personal views, which have shifted. While in the early 1990s he was still talking about his concern for the long term threat of China, recently he has been saying there was nothing to fear from either Japan or China. The Chinese have been supportive of the prime minister’s proposal for an East Asian Economic Group. Relations with Vietnam had been particularly rocky in the period of the boat people.

Thailand Thailand had traditionally been an enemy of Vietnam, particularly on matters concerning Cambodia. Until Premier Chatichai took office, Thailand led the hard-line faction in ASEAN on negotiations for a Cambodian settlement, even joining an alliance with China, receiving Chinese military assistance and allowing transport of supplies from China across Thai territory to the Khmer Rouge. After Vietnam’s withdrawal from Cambodia, the Thai began to look at economic opportunities (without abandoning military links with China, which were profitable for the Thai high command). More than US$1 billion was invested in Vietnam (much less than in China), and trade expanded greatly — some illegally transiting Cambodia. Thai-Vietnamese relations improved further after Vietnam joined ASEAN. Prime Minister Chavalit Yongchaiyudh’s March 1997 state visit to Hanoi — one of several high-level exchanges — was described by the Bangkok press “as a part of Thailand’s quest to be treated seriously by Hanoi as an economic partner”.8 That visit also had to deal with serious conflict, derived from overlapping claims to 14,000 square kilometres of the Gulf of Thailand. The

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Vietnamese had arrested hundreds of Thai fishermen whom they claimed were illegally in Vietnamese waters. Prospects of oil intensified the conflict. In January the Thai Cabinet, on Chavalit’s initiative, had unilaterally declared an extension of the Thai continental shelf, over the protest of neighbouring countries. (Perhaps the Thais had learned some techniques from the Chinese.) In fact, the King was so concerned about the impact of this move on relations with Thailand’s neighbours that he summoned the Premier to an audience to discuss the matter.9 The March trip by Chavalit to Hanoi could not resolve this problem, but the two sides agreed that “if agreement cannot be reached, then a joint committee will be established”.10 By April they were talking about joint naval patrols in the disputed area.11 The constructive approach to bilateral issues was especially impressive for two countries which were traditional enemies and had such different feelings about China. When Prime Minister Chavalit visited China in early April, he was greeted by the Chinese defence minister with the plea: “China is hopeful that Thailand will help create understanding with neighbouring countries”, which probably meant help against the buildup of antipathy towards China within ASEAN. Chavalit responded with effusive praise for China’s support of the Thai military, which had just been offered additional Chinese aid. Professor Kusuma Snitwongse of Chulalongkorn University, an experienced observer of Thai foreign policy, commented: “Thailand wants a lead role in ASEAN, and Thailand can act as a bridge to China” — which was denied by foreign ministry officials wary of upsetting ASEAN partners.12 Philippines The Philippines, which had been one of only two Southeast Asian members of the

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South-East Asian Treaty Organization (SEATO) that had sent troops to help South Vietnam during the Vietnam War and which had had a virulent streak of anticommunism in domestic politics but warmed to China during the Aquino presidency, seemed an unlikely ally for Vietnam. The close relations that have, in fact, developed are a tribute to the potency of a common perception of threat. Even before the completion of the United Nations Transitional Authority in Cambodia (UNTAC) mission in Cambodia, Vo Van Kiet visited the Philippines in 1992. He and President Aquino “expressed their commitment to the peaceful settlement of the Spratlys dispute”.13 In 1993 the Vietnamese foreign ministry showed special favours to the Philippines as it was expanding its embassy. There was already an awareness of common problems with China. The Philippines strongly supported Vietnam’s admission to ASEAN even before Vietnam officially applied for membership. In March 1994 President Ramos went to Hanoi, where he “sought to strengthen the strategic partnership between the Philippines and Vietnam”.14 A Joint Commission for Bilateral Cooperation was created. Co-operation intensified after discovery of the Chinese occupation of Mischief Reef in 1995. The Philippines was quite explicit in stating its disappointment with the level of ASEAN support at the time of this incident, and obviously an ASEAN that included Vietnam would have a somewhat different outlook. Vietnam President Le Duc Anh visited Manila later in 1995. In April 1996 Vietnam and the Philippines signed a Memorandum of Understanding on Joint Oceanographic and Marine Scientific Research in the South China Sea. Said Ambassador Rosalinda Tirona, “The example set by the Philippines and Vietnam through this initiative is concrete evidence that despite conflicting territorial claims,

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states can still cooperate”.15 Was China listening? The first research project undertaken was in the vicinity of Mischief Reef. In January 1997 the commander of the Vietnam People’s Navy visited the Philippines to meet the Secretary of National Defense and the Chief of Staff of the Armed Forces, among others. The stage had been well set for the way in which the Philippines would react to incidents involving China in 1997. Multilateral approaches On 20 March at the same time that Vietnam went public in its protest against the Chinese oil rig, the deputy foreign minister, Vu Khoan, quietly called together the ASEAN ambassadors to explain Hanoi’s position, an event unprecedented in the history of ASEAN.16 Basically Vietnam was trying to convince other ASEAN members that “if China behaves this way to Vietnam, it could behave the same way towards [them]”.17 The restraint practised by Vietnam within ASEAN up to this point had apparently been helpful. ASEAN diplomats were swayed. A senior ASEAN official noted: “We don’t recognize any Chinese rights to Vietnam’s continental shelf, nor do we recognize the right of the Chinese to do what they did. Now we’re all in this together”.18 While the Vietnamese tactic may have been helpful in regard to the oil rig, at the same time, China was playing host to a conference on regional security under the auspices of ARF, where it mounted a strident attack on U.S. military presence in the region. And at that conference China refused a request to sign the 1992 Manila Declaration on the South China Sea, which pledged the signatories to use only peaceful means to settle their disputes. There, Beijing had not yet gotten the message from ASEAN. If ASEAN protests in confidential diplomatic notes did indeed cause the

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Chinese to withdraw their oil rig shortly after this conference closed, as Vietnamese officials now suggest,19 then some notes must have been quite forceful, for it appears that only the Philippines released a critical public statement. Foreign Affairs Under-secretary Rodolfo Severino said that his government “is very much concerned over China’s reported oil exploration on the Vietnamese continental shelf”.20 On the other hand, when asked to comment on a Chinese oil rig in waters claimed by Vietnam, Thai Premier Chavalit carefully said that “both China and Vietnam are friends of Thailand”.21 A more important indicator of the accomplishments of Vietnam’s strategy was the outcome of the annual China-ASEAN dialogue in mid-April held at the Chinese mountain resort of Huangshan. There issues in the South China Sea were raised forcefully, and for the first time China agreed to talk about the ASEAN member’s claims in a multilateral setting. Beijing also offered to negotiate a code of conduct governing ties with ASEAN.22 At the same time, to mollify China, and in their own interests, Vietnam and Indonesia praised China for fending off a vote on human rights pushed by the West in the United Nations. All agreed that “certain Western powers” were trying to drive a wedge between China and ASEAN — just as China was trying to do to U.S.-ASEAN relations. Then soon after this somewhat conciliatory conference behaviour, the Chinese again moved assertively in the South China Sea. At the end of April, Chinese vessels appeared near an islet claimed by the Philippines, which quickly deployed air force jets in the area. 23 In addition to making a diplomatic protest to China the presidential palace informed other ASEAN members of the events.24 Within a few days the vessels did withdraw. The Chinese had first said that navy ships involved were doing “marine survey measurements”, but later

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contended that they were fishing boats approaching the shoal as part of “youth non-government organization” activities!25 Later research revealed that the ships, belonging to the State Oceanic Administration, carried an international group of short wave radio hams, including both Americans and Japanese, who wanted to broadcast from a new and exotic call sign — which just happened to be designated as “Chinese territory”.26 To re-emphasize their position, the Philippine Navy arrested Chinese fishermen in the vicinity, part of the Philippine Economic Zone, a few weeks later — even though international experts now say that the Chinese territorial claim to the islet, far north of the Spratlys, was probably valid. Nevertheless, this followed a pattern of inconsistency between diplomatic words and seaborne action. Filipino statements regarding what ASEAN should do have been the most open, and blunt, of any from ASEAN members. Said General Arnulfo Acedero, Armed Forces Chief of Staff, in Bangkok, “China is asserting itself too much … It is about time we put China in its proper place” through diplomatic means.27 Defense Secretary Renato de Villa put it more cautiously: ASEAN members should allot more time “to take stock of the real situation in the area, with the end in view of enhancing the strength of its defenses, if necessary”. Foreign Secretary Domingo Siazon also raised the question of ASEAN involvement with Japan, and the foreign ministry in Tokyo agreed to raise the question of armed Chinese vessels in disputed water of the South China Sea at the ARF meeting in Kuala Lumpur on 27 July 1997.28 There is no prospect that ARF would discuss enhancing the strength of ASEAN defences. ASEAN is not a military alliance. Nevertheless, de Villa’s comment is interesting because it brings to the fore the question of bilateral military co-operation

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between ASEAN members, which is already taking place. To a degree one could hardly have expected two years ago, Vietnam itself is involved in this process. Said a leading foreign ministry official, “Integration in South East Asia is the wave of the future … [It] has both economic and political, i.e. security, aspects. Vietnam has exchanged military delegations with ASEAN countries and joined in military exercises. This helps to maintain Vietnam’s security, since Vietnam cannot fight alone”.29 Vietnam, however, has a problem with confidence building measures (CBMs), the rubric under which so much military dialogue takes place. For it requires transparency, the release of information on

military budgets and weapons acquisitions. Said a leading Vietnamese diplomat, “Vietnam is not accustomed to such procedures. If it means revealing secret information, it is very difficult. But it must be done. Even Russia will report to the UN the weapons it has sold to Vietnam”.30 In fact, a Russian scholar/general has already reported that Vietnam was one of the top six purchasers of Russian arms in 1995.31 Still, among older Party leaders, and, of course, the military, greater transparency is seen as having limited feasibility.32 Thus Vietnam’s military co-ordination with ASEAN will also be limited. This would seem to imply a fairly low priority for such activity.

NOTES 1. Hoang Anh Tuan, “Vietnam’s Membership in ASEAN: Economic, Political and Security Implications”, Contemporary Southeast Asia 16, no. 3 (December 1994): 267. 2. Saigon Giai Phong, 5 April 1997 in FBIS-EAS-97-105. 3. Xinhua, Beijing, 27 February 1997 in FBIS-CHI-97-039. 4. Xinhua, Beijing, 9 April 1997. 5. Agence France-Presse (AFP), 31 March 1997, in FBIS-EAS-97-090. 6. Vietnam Investment Review, 31 March 1997, in FBIS-EAS-97-093. 7. Michael Vatikiotis, Far Eastern Economic Review, 3 April 1997, p. 15. 8. The Nation (Bangkok), 26 March 1997, in FBIS-EAS-97-058. 9. Naeo Na, 31 January 1997, in FBIS-EAS-97-026. 10. Bangkok Business Day, 1 April 1997. 11. Bangkok Post, 26 April 1997, in FBIS-EAS-97-116. 12. Michael Vatikiotis, Far Eastern Economic Review, 17 April 1997, p. 20. 13. Quoted in Donald Zagoria, “Joining ASEAN”, in Vietnam Joins the World, edited by James W. Morley and Masashi Nishihara (New York: M.E. Sharpe, 1997), p. 167. 14. Statement by the Philippines Embassy, Hanoi, 12 July 1996. 15. Vietnam-Southeast Asia Today (Hanoi), July 1996, p. 10. 16. Bangkok Post, 21 March 1997, in FBIS-EAS-97-079. 17. Michael Vatikiotis, Far Eastern Economic Review, 3 April 1997, p. 14. 18. Ibid. 19. Interviews with the author, Hanoi, April 1997. 20. Business World, 31 March 1997, in FBIS-EAS-97-090. 21. Quoted in Far Eastern Economic Review, 17 April 1997, p. 20. 22. Michael Vatikiotis, Far Eastern Economic Review, 8 May 1997, p. 15. 23. AFP, 30 April, 3 May 1997 in FBIS-EAS-97-120, FBIS-CHI-97-123. 24. International Herald Tribune, 30 April 1997. 25. AFP, 10 May 1997, in FBIS-EAS-97-130. 26. Andrew Sherry and Rogoberto Tiglao, Far Eastern Economic Review, 12 June 1997, pp. 17–21.

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20.

VIETNAM AND ITS NEIGHBOURS The Border Dispute Dimension

RAMSES AMER

VIETNAM’S ATTITUDE TOWARDS BORDER DISPUTES AND REGIONAL STABILITY IN SOUTHEAST ASIA From the above analysis of Vietnam’s border disputes with its neighbours, it is evident that Hanoi is pursuing a fairly consistent policy on how to settle them. Vietnam favours formal negotiations, stressing the fact that the border disputes must be handled through peaceful measures and that the concerned countries must refrain from the use of force. Vietnam has not expressed any preference for negotiations involving more than two countries to deal with border disputes; all negotiations currently under way are bilateral. This implies that the multilateral disputes, that is, overlapping claims by Vietnam and at least two other claimants, are not subject to formal negotiations. The multilateral dispute over the whole or parts of the Spratly archipelago currently involves Vietnam, Brunei, China, Malaysia, the Philippines, and Taiwan, and it is potentially the most dangerous conflict

from a regional perspective. However, the overlapping claims in other areas of the South China Sea also present potential dangers to regional stability. The joint development agreements between Malaysia and Vietnam as well as between Thailand and Vietnam show that Vietnam is amenable to such arrangements pending the achievement of a proper delimitation of the disputed areas. Thus, Hanoi would not oppose such schemes in other bilateral territorial disputes in sea areas. Why then have such joint development schemes not been agreed upon in the following bilateral disputes: Vietnam– Cambodia, Vietnam–China, and Vietnam– Indonesia? The relatively recent military conflicts between Vietnam and Cambodia as well as between Vietnam and China could probably explain the more cautious approach when it comes to engaging in joint development projects in disputed areas because of the residual feelings of uncertainty pertaining to the counterpart’s

Reprinted in abridged form from Ramses Amer, “Vietnam and Its Neighbours: The Border Dispute Dimension”, Contemporary Southeast Asia 17, no. 3 (1995): 298–318, by permission of the author and the Institute of Southeast Asian Studies.

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long-term intentions. Another explanatory factor could be that Vietnam has both land and sea border conflicts with Cambodia and China and this could contribute to making joint development schemes a less attractive option. In other words, the land border disputes with Cambodia and China do not hold the potential for rewarding joint ventures because of the lack of raw materials in these areas. Furthermore, the land border disputes are primarily related to the issue of the proper demarcation of borders on which the involved parties basically agree, and the disputed areas are minor, at least in terms of land areas. With regard to the border dispute between Vietnam and Indonesia, the above factors are not relevant since there has been no military conflict between the two countries and the border dispute involves only sea areas. In fact, Indonesia has enjoyed comparatively better relations with Vietnam than any other member-state of ASEAN since the 1960s. Judging from Vietnam’s willingness to engage in joint development schemes with Malaysia and Thailand, respectively, the opposition or reluctance to enter into such schemes in the case of Indonesia and Vietnam probably stems from the Indonesian side. If attention is turned to the wider regional dimensions of Vietnam’s policy on border disputes, the first question to ask is what effect Vietnam’s accession to membership of ASEAN, on 28 July 1995,1 will have on the handling of its border conflicts. Vietnam’s membership will most certainly make the disputes with its fellow ASEAN members more manageable but it will not necessarily make their formal resolution more likely. After all, ASEAN has been successful in ensuring that disputes between its members have not evolved into open military conflicts, but several border disputes still remain unresolved twenty-eight years after the creation of ASEAN. Some examples of such conflicts are, first, those

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between Indonesia and Malaysia with overlapping sovereignty claims over the two smaller islands — Sipadan and Ligitan — off the east coast of the large island of Borneo, and over sea areas in the same region, and secondly, those between Malaysia and the Philippines relating to overlapping sovereignty claims to part of the Spratly archipelago and areas in the Sulu sea. Furthermore, there is a lingering Filipino sovereignty claim to the East Malaysian State of Sabah.2 With regard to multilateral disputes, the ASEAN countries have not been able to formulate a full-fledged policy on how to resolve the disputed issues in the South China Sea. Nevertheless, the ASEAN Declaration of July 1992 provides some basic principles for the management of the disputes. In essence, the Declaration calls for the peaceful settlement of the contending Spratlys claims, without resorting to force, and it also calls upon the concerned parties to exercise restraint so as to create a positive climate for the eventual resolution of the conflict situation. 3 The ASEAN position looks very much like a compromise formulated in such a way as to accommodate the three ASEAN members with a direct stake in the conflict, that is, Brunei, Malaysia and the Philippines. In other words, as long as some ASEAN members are involved in the Spratly conflict ASEAN, as an organization, will not be in a position to take a more active role in mediating a settlement of the whole conflict involving also claimants who are not ASEAN members. What then could be said about Vietnam’s attitude towards border disputes and its implications for the stability of the region in general, and for ASEAN in particular. Since Vietnam is advocating that all its border disputes be settled peacefully through negotiations, its attitude contributes to maintaining stability in the region. Vietnam is also pursuing a policy of active diplomatic

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contacts with its neighbours with the goal of improving and strengthening bilateral relations in general and in order to handle the disputed issues with the different neighbouring countries. This policy contributes to enhancing the stability of the region from a more general perspective. In 1992, Vietnam acceded to the Treaty of Amity and Co-operation in Southeast Asia (TAC).4 It is a member of the ASEAN Regional Forum which held its first meeting in 1994.5 From 1993, Vietnam also actively sought to gain membership of ASEAN.6 This suggests Vietnam’s desire to become more formally involved in the ongoing process of integration in Southeast Asia and in the process of multilateral confidence-building and dialogue in the wider Asia-Pacific region. From this perspective, it can be argued that Vietnam contributes to the process towards enhanced regional stability. Its membership of ASEAN will strengthen the organization’s overall policy of promoting regional integration and co-operation and is likely to increase the respect for fundamental

principles of interstate behaviour enshrined in the TAC, such as noninterference in the internal affairs of other states and the peaceful settlement of inter-state conflicts. However, with regard to the Spratlys, Vietnam’s membership cannot be expected to change the position of ASEAN towards the enunciation of a more formal policy. The process of compromise in establishing a common policy will not be easier when having to take into consideration the strategic interests of yet another ASEAN member with sovereignty claims over the Spratlys. However, since Vietnam has continuously been supporting the current ASEAN position with regard to the Spratlys, as can be seen from Vietnam’s expressed support for the July 1992 ASEAN Declaration on the South China Sea,7 it can be expected that its recent accession to membership will not alter the ASEAN position but rather give it additional clout in the ongoing process of dialogue relating to that conflict and others in the South China Sea.

NOTES 1. 2.

3. 4.

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British Broadcasting Corporation, Summary of World Broadcasts, Part Three, Far East/2369/S2/ 1, 31 July 1995 (hereafter cited as BBC/FE). For more details pertaining to Malaysia’s territorial disputes with other ASEAN members, see Mark J. Valencia, Malaysia and the Law of the Sea: The Foreign Policy Issues, The Options and Their Implications (Kuala Lumpur: Institute of Strategic and International Studies Malaysia, 1991), pp. 19–90. The ASEAN Declaration on the South China Sea has been reproduced in Foreign Relations Journal 8, no. 1 (March 1993): 136. BBC/FE/1450/A2/3, 4 August 1992; and Straits Times (Singapore), 23 July 1992, p. 15. The TAC was signed by the ASEAN members in Denpasar, Bali, on 24 February 1976 (see M. Rajendran, ASEAN’s Foreign Relations. The Shift to Collective Action (Kuala Lumpur: Arenabuku Sdn. Bhd, 1985), pp. 275–78. The fundamental principles of the TAC are listed in Article 1 and read as follows: a) Mutual respect for the independence, sovereignty, equality, territorial integrity and national identity of all nations; b) The right of every State to lead its national existence free from external interference, subversion or coercion; c) Non-interference in the internal affairs of one another; d) Settlement of differences or disputes by peaceful means; e) Renunciation of the threat or use of force; and f) Effective co-operation among themselves (as listed in ibid., p. 275).

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6.

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For more details on the process leading up to the creation of the ASEAN Regional Forum, see Michael Antolik, “The ASEAN Regional Forum: The Spirit of Constructive Engagement”, Contemporary Southeast Asia 16, no. 2 (September 1994): 117–136. See, for example, BBC/FE/1762/A/-2, 9 August 1993; BBC/FE/1887/B/3-4, 4 January 1994; BBC/ FE/1984/B/6-7, 29 April 1994; BBC/FE/1986/B/3, 2 May 1994; BBC/FE/2049/B/3, 16 July 1994; BBC/FE/2059/B/3, 28 July 1994; BBC/FE/2200/B/2, 13 January 1995; BBC/FE/2233/B/7-8, 21 February 1995; BBC/FE/2236/B/4, 24 February 1995; and, BBC/FE/2319/B/4, 2 June 1995. In early April 1995 it was announced that the Vietnamese Government had established an ASEAN Secretariat (BBC/FE/2270/B/3, 5 April 1995). In 1994 an ASEAN Department had been created within the Ministry of Foreign Affairs (author’s interview with Mr Do Ngoc Son, Director, ASEAN Department, Ministry of Foreign Affairs, Hanoi, on 30 November 1994). Vietnam’s support for the ASEAN Declaration was emphasized by Mr Do Ngoc Son, Director, ASEAN Department, Ministry of Foreign Affairs, in an interview in Hanoi on 30 November 1994. For other examples, see BBC/FE/1478/C1/7-8, 5 September 1992; BBC/FE/1538/A/1-2, 4 November 1992; BBC/FE/2030/B/4-5, 24 June 1994; BBC/FE/2260/B/2, 24 March 1995; and, BBC/FE/2272/B/3-4, 7 April 1995. On 22 March 1995, in connection with the increased tension between China and the Philippines around the Spratly archipelago, Vietnam officially stated its support for a statement made by the Foreign Ministers of the ASEAN members on 18 March which expressed concern over the developments in the South China Sea, in particular relating to Mischief Reef, and urged the claimants to all or parts of the Spratly archipelago to abide by the spirit of the July 1992 ASEAN Declaration (BBC/FE/2260/B/2, 24 March 1995).

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ASEAN ENLARGEMENT AND MYANMAR

TIN MAUNG MAUNG THAN and MYA THAN

POLITICAL IMPLICATIONS During the months of July and August 1997, the government-owned newspapers carried a series of boxed inserts entitled “Facts about ASEAN” to highlight Myanmar’s admission to the regional grouping. One 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”.1 On the other hand, critics of the ruling State Peace and Development Council (SPDC, formerly known as the State Law and Order Restoration Council or SLORC) maintained that by joining ASEAN, Myanmar’s military junta hoped to gain legitimacy at home and abroad.2 To some, it was seen as a calculated move by the SPDC to counter Western sanctions, criticisms, and condemnations

spearheaded by the United States Government, as well as various pro-opposition lobbies and the so-called government-inexile in the form of the National Coalition Government of the Union of Burma (NCGUB). 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 addressing the appeal of ASEAN to Myanmar, 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[s] 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” (Nation, 16 December 1995). The political implications of Myanmar’s entry into ASEAN may be identified in three

Reprinted in abridged form from Tin Maung Maung Than and Mya Than, “ASEAN Enlargement and Myanmar”, in ASEAN Enlargement: Impacts and Implications, edited by Mya Than and Carolyn L. Gates (Singapore: Institute of Southeast Asian Studies, 2001), pp. 249–61, by permission of the authors and the publisher.

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areas: ASEAN’s relations with the West; ASEAN organizational matters and intraASEAN relations; and Myanmar’s domestic political development. From the very beginning, Myanmar’s ruling SPDC was ostracized by the Western powers, while the regional states and ASEAN have co-operated with Myanmar in its efforts to end its economic and political isolation. The United States and its European allies persistently accused the SPDC of human rights violations and suppression of democratic activists, and sought punitive measures to advance their vision of democracy. On the other hand, the ASEAN states constructively engaged Myanmar in the belief that a 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 had never been clearer than when the U.S. Government imposed sanctions, and together with its European allies tried to block Myanmar’s early entry into ASEAN. However, 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” which 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 U.S. censure effort. The U.S. sanction came at a time when selected purchase laws and bans on companies doing business with Myanmar by states such as

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California and Massachusetts, as well as cities like New York, had become the bane of both the United States and foreign companies. The European Union (EU) had withdrawn the community’s generalized system of preferences (GSP) benefits from Myanmar’s industries, and also imposed a ban on junta members and senior military and government officials from obtaining visas.3 Such tensions between Myanmar and the United States, as well as the EU, suggest that discrimination against Myanmar because of its relations with ASEAN would go against the grain of the grouping’s stand on non-discriminatory treatment of its members. One example of a potential conflict is the current controversy over Myanmar’s participation in the bloc-to-bloc meetings between ASEAN and the EU, and Myanmar’s membership in the Asia– Europe Meeting (ASEM) process. The confrontational stage with regard to the former was set with the EU’s statement on 26 June 1997, which stated: 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 in late 1997 that Myanmar would not be invited to attend the forthcoming second ASEM in London, elicited strong reactions from some ASEAN leaders. In particular, Prime Minister Dr Mahathir Mohamad of Malaysia gave a “warning of a possible ASEAN boycott of the gathering” if the latter’s members are discriminated against.4 In preparatory negotiations for the annual ASEAN-EU Joint Co-operation

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Council (JCC) meeting in Bangkok, scheduled for November 1997, the EU demanded that Myanmar’s attendance be downgraded to that of a “passive presence”. This condition was unacceptable to ASEAN, which insisted on the granting of full observer status for Myanmar. The EU maintained that the 1980 agreement, which established the JCC, was not a “bloc-to-bloc” accord, and a non-signatory like Myanmar could not be accommodated. The impasse led to the postponement of the meeting and resulted in, what was described by EU diplomats as, a “chilly” relationship between the two blocs.5 Meanwhile, Myanmar officially applied, in December 1997, to join ASEM (a top-level forum composed of fifteen EU member countries, seven ASEAN member states, China, Japan, and South Korea, which held its first meeting in March 1996 in Bangkok, with a wider membership than the ASEANEU co-operative process). However, at the March 1998 meeting of senior ASEAN officials, held in the Philippines, it was announced that ASEM had a moratorium on new participants, and the countries would be participating individually and not as a group. This effectively ruled out Myanmar’s participation in the second ASEM in London in April 1999.6 On 26 October 1998, the EU General Affairs Council issued a press release stating that it had decided to extend and strengthen “the EU Common Position through a widening of the visa ban by explicitly including transit visas under the current ban and its extension to cover Burmese [Myanmar] authorities in the tourism sector”. It also concluded that “although Burma [Myanmar] has become a member of ASEAN, the EU cannot agree to Burmese [Myanmar’s] accession to the … Agreement”. Nevertheless, “it [the EU] has decided to accept a Burmese [Myanmar] presence under special conditions, to be

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agreed upon at the next meeting of the Joint Committee”, despite the EU contention that the foregoing “is without prejudice to Burmese [Myanmar] representation at future meetings held under” the ASEAN-EU Agreement “which will need to be decided in the light of the [domestic political] situation in Burma [Myanmar].”7 On its part, ASEAN apparently agreed to an arrangement whereby the Myanmar delegates would attend as observers and not participate on issues involving inter-group co-operation. This ASEAN concession, together with a consensus to display only the ASEAN and EU flags and not the country flags, seemed to have paved the way for a re-scheduled meeting at Bangkok on 25 January 1999. However, a few days before the Bangkok meeting of senior officials, the EU introduced a new condition, stipulating that Myanmar and Laos be identified by plaques as “new members”. This move, which appeared to have been an afterthought, designed to appease anti-Myanmar elements in the European Parliament that was in session, proved to be unacceptable to ASEAN and Myanmar. This led to the second postponement of the JCC meeting (according to Thai Foreign Ministry deputy spokesperson Kiti Wasinondh) because “the two sides cannot find a resolution on the meeting formality”.8 Despite this setback, the German ambassador to Thailand (Germany was then holding the six-months rotating presidency of the EU from the beginning of 1999) reiterated the importance attached by the EU to the ASEAN-EU relationship. Both he and the Thais (who co-ordinated the ASEAN side) expressed the hope that the ASEAN-EU Ministerial Meeting (of foreign ministers or AEMM) in Berlin, scheduled for 30 March 1999 would still take place.9 However, it was not to be. As pointed out by an editorial in the Singapore Straits Times (1 February 1999), the problem

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in essence has been “not about seating arrangements for Myanmar” but the EU’s perception of “the lack of progress to break the [domestic] political stalemate, the harassment of pro-democracy activists, and the poor human rights record in Myanmar”. Despite the Myanmar Foreign Minister’s expressed willingness to “discuss any matter which the European side may wish to address”, the EU refused to relax the standing visa ban on Myanmar officials that would allow them to attend the Berlin AEMM. Moreover, in early February 1999, Britain joined Denmark, Sweden, and Norway in refusing to allow Myanmar’s attendance at the Berlin meeting. This affront was anathema to Myanmar; and Myanmar’s Foreign Minister U Win Aung was reported to have retorted that “our mentality is not to succumb to any pressure. If there is pressure put upon us, we become more resistant” to it.10 Towards the end of February, ASEAN officials, meeting in Singapore, came up with an agreed position that “all the foreign ministers of ASEAN must be present” at the AEMM. 11 Subsequently, no compromise was reached and the cancellation of the AEMM was announced on 16 March by both sides. Even then, there were eleventh-hour efforts to salvage the interaction, with the EU proposing a meeting between a “troika” representing the EU and ASEAN without Myanmar. This was also unacceptable to the ASEAN side which stood firm on its principle of equal treatment for its members.12 There was, however, a positive footnote to this sorry tale when it was announced in Berlin at the conclusion of the ASEM foreign ministers meeting (that went on as scheduled despite the cancellation of the back-to-back AEMM) that the twice-postponed JCC meeting would take place in May 1999 based on the format that was agreed upon in October 1998 before the EU introduced the ill-fated

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“new members” identification proposal for Myanmar and Laos.13 Since November 1997, despite affirmations by both sides that the ASEAN-EU dialogue process was and still is extremely important for the two groupings, it appears that it has been held hostage to Myanmar’s domestic political problems, as perceived by the more ardent advocates of human rights and democracy among EU member states. The ASEAN states, faced with the Asian economic crisis, would do well to have stronger economic and technological ties with Europe. On the other hand, Europe will be better off if it can enhance its relationship with ASEAN whose potential for absorbing innovative investments and providing markets for Europe remains, notwithstanding the economic crisis. As for Myanmar, it has everything to gain in terms of international standing and economic growth if it could manage to convince the EU that its efforts in economic and political restructuring are in the right direction and moving at a satisfactory pace. 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. As such, the impasse appears to persist, but the hope is that in the long run, as Myanmar’s membership of the regional grouping matures, there would be convergence between ASEAN and its Western partners over the Myanmar issue. ASEAN, though not highly institutionalized as in the case of the EU, has its unique modus operandi known as the “ASEAN Way”. This has been characterized by informal interaction, quiet diplomacy, nonbinding agreements, consensus-based decision-making, and non-interference in the internal affairs of member states.14 As

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such, the mindset of Myanmar “will not make things easier” for ASEAN’s smooth integration.15 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.16

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 an operational procedure is likely to be comparable to those of the older ASEAN members. Moreover, Myanmar’s bilateral relations with all the 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. Furthermore, as both are members of the same regional grouping, they may be able to resolve this problem amicably. ASEAN membership will probably strengthen Myanmar’s bilateral relationships with other member countries through the diffusion of the ASEAN spirit, first among the ruling élites and then trickling down to the polities. On the other hand, there are suggestions to change the manner of engaging Myanmar, as the latter becomes a fullfledged member of the grouping. The desire to deepen and extend the “constructive engagement” concept by introducing a proactive element of a more comprehensive “constructive intervention”

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was mooted by several regional thinkers, including Malaysia’s (former) Deputy Prime Minister Anwar Ibrahim.17 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 among its members by introducing changes that are not undergirded by consensus and practicality. As for the implications on Myanmar’s domestic political issues, the country’s political temperature has been lowered by government conciliatory gestures towards the opposition National League for Democracy (NLD) and its leader Daw Aung San Suu Kyi.18 Though cynics have commented that the SPDC was introducing cosmetic changes and restoring some rights, which should have been granted in the first place, one cannot deny that these are positive signs.19 Although the Myanmar authorities would most probably deny that such acts were the result 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”. 20 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 SPDC and its political opponents.

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NOTES 1. See the highlighted box, “Facts about ASEAN-8”, in New Light of Myanmar, 7 August 1997, p. 7. 2. See, for example, the comment by Professor James Guyot on the Voice of America (VOA) background report dated 7 July 1997 (Burmanet posting of 8 July 1997 on the Internet). 3. See Myanview (January 1997), p. 7; and EIU, Country Report Myanmar (Burma) (3rd quarter 1997), p. 21. 4. See “Its Our Party”, Far Eastern Economic Review, 25 September 1997. 5. See Nation, 15 December 1997. 6. See Nation, 22 March 1998. 7. Press release No. 12274/98, dated 26 October 1998, of the Council (General Affairs) at Luxembourg; Internet posting on soc.culture.burma (28 October 1998). 8. Bangkok Post, 23 January 1999; see also, ibid., 21 January 1999. 9. See, for example, Nation, 26 January 1999; and Bangkok Post, 28 January 1999. 10. Reuters’ interview with Myanmar’s Foreign Minister U Win Aung (Singapore, 19 February 1999), Internet edition. See also, Nation, 6 and 9 February 1999. 11. Business Times (Singapore), 26 February 1999. 12. Nation, 15 March 1999. 13. Straits Times, 31 March 1999. 14. Personal communications with ASEAN scholars and officials from member states. 15. See “Retooling ASEAN”, Asiaweek, 27 June 1997, p. 14. 16. See Noordin Sopiee, “Fulfilling Dream of Regional Unity”, New Straits Times, 6 June 1997. 17. See, for example, “The word is ‘constructive intervention’”, Straits Times, 15 July 1997; and Jusuf Wanandi, “Partners Should Nudge Burma”, International Herald Tribune, 5 June 1997. 18. The government allowed the NLD to hold a congress at the premises of Daw Aung San Suu Kyi on 27–28 September and allowed her to travel to the suburbs of Yangon to address a party grouping. These were unprecedented moves, given that the government had prevented similar gatherings in the past two years, and restricted the movement of Daw Aung San Suu Kyi as well. 19. For critical comments, see “Myanmar: A Glimmer of Hope?”, The Economist, 4 October 1997, p. 33– 34; and Kavi Chongkittavorn, “Slorc under pressure to repay Asean’s faith”, Nation, 30 September 1997, p. 4. Even Daw Aung San Suu Kyi herself has acknowledged the government gestures and thanked the authorities, expressing hope that “one day, the present authorities and members of the” NLD “will work hand in hand for the good of the country” (English translation of the transcript of Daw Aung San Suu Kyi’s speech at the closing ceremony of the Ninth NLD Party Congress, on 29 September 1997). 20. See “Signs of thaw in Myanmar”, Straits Times, 13 October 1997, p. 38.

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22.

THE ASEAN TROIKA ON CAMBODIA

JUANITO P. JARASA

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he five founding fathers of ASEAN (namely the Foreign Ministers of Indonesia, Malaysia, the Philippines, Singapore and Thailand), in issuing the ASEAN Declaration in Bangkok in August 1967, envisioned it to encompass all ten countries of Southeast Asia under one sub-regional organisation. Brunei became the sixth member of ASEAN in 1984, while Vietnam joined the Association in 1995. The ASEAN Heads of Government in 1995 decided to admit Cambodia, Laos and Myanmar simultaneously to fulfill the vision of having an ASEAN 10. The formal admission ceremony for the three was set to take place during the ASEAN Ministerial Meeting in Kuala Lumpur in July 1997. However, the ASEAN plan was shattered by the events of 5 and 6 July 1997 in Phnom Penh. Forces loyal to Second Prime Minister Hun Sen fought the armed men of First Prime Minister Prince Norodom Ranariddh, resulting in the deposition from power of the Prince. The Malaysian Chairman of

the ASEAN Standing Committee issued on 8 July a statement on behalf of ASEAN, expressing dismay over the turn of events in Cambodia and calling on the two Prime Ministers to resolve their differences peacefully. On 10 July, a special meeting of the ASEAN Foreign Ministers was convened in Kuala Lumpur where in it was decided ‘to delay the admission of Cambodia into ASEAN until a later date’. The meeting also agreed that the admission of Laos and Myanmar would proceed as scheduled and that ‘the ASEAN countries stand ready to contribute their efforts to the peaceful resolution of the situation in Cambodia’. The window of opportunity for ASEAN came on 23 July. Mr Ung Huot, the Foreign Minister of Cambodia, was allowed to represent his country at the ASEAN Ministerial Meeting in Kuala Lumpur, since Cambodia had the status of Observer. At the informal dinner of the ASEAN Foreign Ministers on that date, Mr Ung Huot was asked to confirm the statement attributed to

Reprinted in abridged form from Juanito P. Jarasa, “The ASEAN Troika on Cambodia: A Philippine Perspective”, in The Next Stage: Preventive Diplomacy and Security Co-operation in the Asia-Pacific Region, edited by Desmond Ball and Amitav Acharya (Canberra: Strategic Defence and Studies Centre, Research School of Pacific and Asian Studies, Australian National University, 1999), pp. 209–14, by permission of the author and the publisher.

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him which he made before leaving Phnom Penh that morning. The statement said Cambodia remained committed to join ASEAN and that Cambodia acknowledged that ASEAN had a role to play in its peace process. Aside from confirming this statement, Mr Ung Huot was also asked whether the statement reflected the position of Mr Hun Sen and the Royal Cambodian Government. On 25 July, the Cabinet of Mr Hun Sen issued a clarification stating that ‘Cambodia welcomes the role of ASEAN in contributing to stability and peace in Cambodia on the basis of respect for national independence and sovereignty, through preventing foreign interference into the internal affairs of Cambodia’. This was followed by a letter from Mr Ung Huot, dated 29 July 1997, to Philippine Secretary of Foreign Affairs Domingo L. Siazon, Jr., stating: I have the pleasure to reconfirm to Your Excellency that Cambodia welcomes ASEAN’s role in helping to restore political stability in the country’. It will be seen from these two documents that ASEAN had been given a legitimate and tacit mandate to play a role in the Cambodian situation. ASEAN, for its part, decided to create the ASEAN Troika to keep ASEAN engaged in its efforts to contribute to the restoration of political stability in Cambodia. The Troika was to be composed of the Foreign Ministers of the Philippines, Indonesia and Thailand. The Philippines was acknowledged as the Chairman since it was at that time the new Chairman of the ASEAN Standing Committee (ASC). Indonesia was in the Troika because of its prominent role in the Paris Peace Accords on Cambodia in 1991. Thailand was also included because of its geographical propinquity to Cambodia and due to the presence of Prince Rannariddh and other Cambodian political exiles in Thailand. Thereafter, the Troika set in motion a sort

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of shuttle diplomacy that enabled it to talk individually with all the principal characters which animated the Cambodian situation. The Troika had meetings with King Norodom Sihanouk in Beijing and in Siem Reap, with Mr Hun Sen in Phnom Penh and New York, and with Prince Ranariddh and Mr Ung Huot separately in New York. The other ASEAN Foreign Ministers were informed accordingly of these meetings. The ASEAN Ambassadors in Phnom Penh and the Philippine Ambassador in Bangkok were also brought into the process. They served as useful conduits to both Mr Hun Sen and Mr Ung Huot. Thai Prime Minister Chuan Leekpai and Philippine President Fidel V. Ramos also played significant roles in the process. Prince Ranariddh was received by President Ramos in August 1997, much to the chagrin of Mr Hun Sen. The Troika conveyed ASEAN’s positions on various issues concerning Cambodia to the principal Cambodian interlocutors. ASEAN put emphasis on the holding of free, fair, and credible elections in Cambodia and offered its technical cooperation in facilitating these elections. ASEAN also wanted to see the participation of all political forces in the election so that the election would be credible. But ASEAN was startled when Mr Hun Sen, while addressing a workshop on good governance on 13 January 1998, stated that ASEAN should not interfere with the internal affairs of Cambodia and that the ASEAN countries should not advise Cambodia since they are not ‘teachers of democracy’. Secretary Siazon sent his Undersecretary for Policy to Phnom Penh to seek clarification from the conflicting Cambodian parties of the desirability of continuing ASEAN’s role in Cambodia. Somehow ruffled feelings were appeased or soothed. Soon after, the ASEAN governments received pro forma letters signed by both Mr Ung Huot and Mr Hun Sen inviting

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them to send electoral observers for the 26 July 1998 general elections in Cambodia. All nine members of ASEAN responded. The ASEAN election observers were part of

the Joint International Observer Group which declared that Cambodia had held an election that had reflected in a credible way the political will of the Cambodian people.

NOTE This paper was prepared for the CSCAP Working Group on CSBMs, Workshop on Preventive Diplomacy, Bangkok, Thailand, 28 February–2 March 1999.

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THE GREATER MEKONG SUBREGION An ASEAN Issue

KAO KIM HOURN and SISOWATH D. CHANTO

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n general, ASEAN’s economic processes are in place. The challenging task is to develop a sustainable and reliable programme for delivering development, in addition to improving capital and credit transfers to the developing members. Apart from border issues, and sporadic security hot flashes along the borders, the stability of the region depends heavily on its capacity to enhance development for its people. This needs the improvement of both “hard” and “soft” capital. Physical infrastructure is needed, but the challenge of improving human resources is also very real. Creating a viable delivery mechanism is something that the ASEAN member states must commit to, especially for human resource development. To enhance the prospects of the GMS, human resource development is not a luxury but a necessity. The plans for regional social and economic integration cannot otherwise become reality. The arguments for closing income and development gaps between the developing

and developed members in ASEAN are manifold. The relevant economic issues include the allocation of foreign direct investments (FDI), the availability of commercial and government credit to businesses, the transfer of skills, the transfer of technology, and the laws regarding investment and tariffs. Additionally, legal frameworks for transregional extradition treaties, the enforcement of civil and criminal law, and the protection of intellectual property and copyright must be on the agenda. Even more broadly, social issues like the spread of HIV/AIDS require technical skills to administer and manage. Yet when there is discussion of the needs of the GMS, the focus is often on the physical aspects, or “hardware” of development. Ravaged by wars, and severed by closed market systems and the Cold War, the GMS countries were largely marginalized in the world economy. The 1997 Asian economic crisis added another burden to the rebuilding process.

Reprinted in abridged form from Kao Kim Hourn and Sisowath D. Chanto, “The Greater Mekong Subregion: An ASEAN Issue”, in Reinventing ASEAN, edited by Simon S. C. Tay, Jesus P. Estanislao, and Hadi Soesastro (Singapore: Institute of Southeast Asian Studies, 2001), pp. 163–82, by permission of the publisher.

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Many promises have been made and are waiting to be met. Many of the plans, moreover, should be run by private sector entities. How can governments and intergovernmental institutions help? The ADB is playing a very active role in administering technical assistance, in addition to soliciting potential investors to invest in the GMS. The two go handin-hand. As one commentator, Council Secretary of the Singapore Institute of International Affairs, Dr Eric Teo, has suggested, economic development should be inherently embedded in human resource development in order to enhance the capacity for development. The GMS member states must tune their mindsets accordingly. They must establish a public– private partnership (PPP) to involve the private sector.1 There are other co-operation initiatives in the Mekong Basin too. For example, the ASEAN Economic Ministers (AEM), and the Ministry of International Trade and Industry (MITI) of Japan met on 4–5 July 2000, and created a working group to implement the following work programme:2 •

•

•

To eradicate poverty and to reduce the gap in development between the West and East Corridor (WEC); To utilize the comparative advantages of the WEC areas in terms of labour and natural resource; To enhance economic liberalization and facilitation of cultural interaction, and to strengthen economic integration among the ASEAN member countries, and between ASEAN and other countries outside the region.

In trade facilitation, the GMS countries have taken the following measures: 1. Border trade facilitation, including customs co-operation; 2. In customs matters, mutual recognition

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arrangements, standardization of customs procedures and forms, and customs co-operation in ASEAN and APEC. In investment, the GMS countries are focusing on: 1. Promotion: How to promote the GMS as an investment region? Can a GMS trade fair or investment promotion exhibition be held back-to-back with some major ASEAN economic meetings? 2. Deregulation: How to promote an “even playing field” so that GMS countries do not undercut one another in offering excessive investment incentives? How can it build on what ASEAN is doing in the AIA? 3. Co-operation: GMS co-operation also includes activities in the areas of tourism, environment, energy, and human resource development. In addition to these broader concerns regarding the development of the GMS, and the appropriate focus on human development and economic liberalization, emphasis is being given to infrastructure and “hardware” development in four main areas: (1) transport; (2) energy; (3) telecommunications; and (4) tourism.

TRANSPORTATION Transportation is highly significant to the GMS. It connects people and also serves economic interests, by facilitating the flow of goods, capital, and people. Industrial goods can move across borders more easily. Labour markets can be expanded to provide more diversity of skills, and people-to-people relations can also be improved as tourism, or visiting friends and families across the borders, would be facilitated. Improving transportation also promotes endeavour and exchange in different fields of knowledge.

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Through funding from the ASEAN-China Co-operation Fund, the improved transport system in the GMS is expected to be operational by 2004. This will link the GMS to the increasingly important market in China, especially its western and southern provinces. This can enlarge the bilateral trade in goods, as well as enhance tourism.3 ENERGY With regard to the energy sector, there is little evidence that ASEAN is initiating the construction of major power plants in the GMS countries. Partly because of the financial crisis, the prospect of building a GMS-ASEAN power plant has yet to be discussed, or recommended by the AMBDC. On the other hand, the ADB has completed the 210MW Theun Hinboun Hydropower Project. It is the first public– private joint venture in the Lao PDR, which has enabled it to increase revenues by selling hydropower to neighbouring countries, particularly the long-term agreement with Thailand for the use of electricity. Another Lao PDR-based energy project has been the recently completed Nam Leuk Hydropower Project, which is now exporting power to Thailand. Moreover, the GMS Electric Power Forum, with the participation of the World Bank, is reviewing the opportunities for creating a subregional power grid and power pooling system.4 Private corporations too have taken initiatives in commercializing natural resources in the region and then converting them into industrial and domestic energy. The Marubeni Corporation is working with Myanmar in the natural gas and copper smelting projects. For instance, the Yadana natural gas project, one of Southeast Asia’s largest, is a joint development venture among Total, Unocal Thai Oil, Myanmar Oils and Gas, and Marubeni, and exports natural gas by pipeline to Thailand to fuel

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electric power there. Plans are also under way to use natural gas domestically in Myanmar to generate electricity and to produce fertilizers.5 TELECOMMUNICATIONS The telecommunication projects have been complicated largely by the lack of funding. The AMBDC has not released any concrete initiatives to improve the WEC telecommunications plans. In comparison, the ADB has started a regional co-operation initiative in telecommunications in partnership with the private sector. The technical assistance projects are helping to create a reliable, high-quality, low-cost telecommunications service linking the six GMS countries. A framework plan has been agreed upon, and feasibility studies completed for several proposed telecommunications links. The implementation of Phase 1 for a “backbone” transmission network for the GMS is under preparation.6 The private sector is active in the telecommunications sector. However, each country has been left to decide for itself on the development and priority of this sector. Perhaps the Hanoi Plan of Action (HPA) agreed upon by ASEAN can be made to complement the GMS Programme since the components and objectives of the two development packages are similar in wanting to close development disparity, and both initiatives are driven by foreign direct investments. The ASEAN Information Infrastructure (AII), which essentially forges agreements among member countries on the design, standardization, interconnection, and interoperability of information have not yet found its way to GMS development. The information technology (IT) and telecommunications sectors are still waiting for concrete initiatives from ASEAN. The ADB and other international institutions and donors, including Japan, are

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shying away from investing in the GMS telecommunications sector partly because of the financial crisis and the weakness of the AII. However, the GMS can benefit and will likely gain investor confidence as the ASEAN Plus Three process grows stronger. The transfer of technology from the ASEAN Plus Three process would strengthen the AII and give it a boost of confidence.

TOURISM In the area of tourism, the ADB has financed or co-financed six technical agreements for the GMS countries. These cover a range of topics and activities, including the promotion of the subregion as a tourist destination; training the trainers in the basic skills of tourism; training resource managers in conservation and tourism; a Mekong/ Lancan River tourism planning study; village-based tourism projects; and a NorthSouth tourism corridor project. A seventh project, the Mekong River Tourism Infrastructure Development, is being processed. The GMS Tourism Working Group has partnered the private sector in establishing the Mekong Tourism Forum, which meets annually. The GMS countries have also established the Agency for Co-ordinating Mekong Tourism Activities, located in the Tourism Authority of Thailand, Bangkok. The success of GMS-ASEAN development depends on the role and capacity of the people to support the system. Clearly, capacity is essential as the availability of skilled labour would boost investor confidence. The ASEAN economies have been FDI-driven, and it is important that capacity enhancement should be a priority in the development agenda. The region’s human resource development is inadequate because of the lack of education and access to market information for creating knowledge-based workers. Today’s workers

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need both skills and creativity. Skilled and creative workers are the building blocks for harnessing internal resources and are the cornerstone in building an ASEAN community. Education is important for capacity-building, and the utility that can be derived from innovation depends on the prevailing level of education. The paramount goal of education is to empower people by giving them the tools and capacities to engage in globalization, such as taking advantage of the increasingly important role of information technology and market information. Equity and access to education remain the prevailing issues among the ASEAN member states, particularly those in the GMS. Degrees of difficulty and disparity, however, exist. The education systems in Cambodia, Lao PDR, and Myanmar have all been affected by internal conflicts. As a result, knowledge-based workers are nearly non-existent. Other countries, including even relatively developed Malaysia, also experience significant disparities between the urban and rural populations in terms of their access, and the quality of education that they receive. Thailand, too, is looking to find a new education paradigm to solve social problems, such as environmental destruction and crimes. All these countries realize that education is essential for harnessing internal resources. Development areas such as the GMS face similar challenges in making education the building block for creating economic development. This means that the GMS member countries would have to establish vocational institutions to support GMS development. There is a need for more vocational institutions such as the Greater Mekong Subregion Academic and Research Network (GMSARN). 7 This is essentially not an academic institution but one that provides relevant skills training related to the GMS Programme.

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An alternative consideration is to implement the HPA strategies for GMS human resource development. The needs of the GMS overlap with the HPA’s human resource development components. However, the HPA’s programme for human resource development may not be fully compatible, as it emphasizes universal education, rather than more technical and vocational skills. Therefore, to harness its internal resources, ASEAN should focus on two critical components in its strategy to tap external resources: people and markets. ASEAN has to strengthen human resource development as a confidence-building measure. The GMS development process should also involve all stakeholders, especially those in the subregion itself and in ASEAN. In this context, the AMBDC should focus on substantive as well as economic strategies. Against this background, the following criteria are important for harnessing external resources. 1. Empowerment: Empowering people in many aspects would enable them to make informed decisions in the process of market development. Moreover, it would enable them to participate in the market system, and provide all participants “fair and equal opportunities” to access the market economy. Empowering people with tools to make independent market and investment decisions is the essence of a market economy.

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2. Ethnic minorities: What is their role and contribution to economic development? The ethnic minorities are important because they often form the majority in parts of the GMS, even if not in the country as a whole. Moreover, ethnic tensions and separatist movements, such as those in the south of the Philippines and some Indonesian provinces, demonstrate the interconnection between economic development and ethnic and racial co-existence. If there are tensions and problems, these would only delay progress, and add to the social cost of development. 3. Education: The GMS states can effectively harness and materialize the economic opportunities in the global economy if the majority of their peoples possess the tools to engage in the market economy. The correlation is economic access, equity, increase in income, and growth, which is based on the capacity of a nation to meet the supply and demand of the international market. The issue of education should be a regional concern. 4. ICT: Most of the ASEAN member states and especially those in the GMS lag behind the worldwide movement in information and communication technology (ICT). This deprives them of the means for instant access to market information. Thus, they will not be able to benefit from the acceleration that e-commerce brings to markets.

NOTES 1.

2.

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Eric Teo, “The Second Annual GMS-ASEAN Conference on Development and Good Governance in the Greater Mekong Subregion” (Paper presented at a conference held at the Cambodian Institute for Co-operation and Peace, Phnom Penh, Cambodia, 2000). Eric Teo Chu Cheow is Council Secretary of the Singapore Institute of International Affairs. ASEAN Secretariat Information Paper, Second Ministerial Meeting on the AMBDC, Hanoi, 4–5 July 2000.

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4. 5. 6. 7.

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Kao Kim Hourn and Sisowath D. Chanto Gu Xaison, “On The Development of Co-operation Between South China and GMS: Building a Transportation Network of ‘1 Vertical and 2 Horizontal’ ” (Paper presented at a conference held at the Cambodian Institute for Co-operation and Peace, Phnom Penh, Cambodia, 1–2 November 2000). ADB, “Economic Co-operation in the Greater Mekong Subregion” (Manila, October 2000). Iwao Toriumi, “Towards Vision 2020: Japan Asian Consultation Conference on the Hanoi Plan of Action”, Nara, Japan, 26–28 March 2000. ADB, “Economic Co-operation in the Greater Mekong Subregion” (Manila, October 2000). The GMSARN is not associated with ASEAN or any of its affiliations. The GMSARN is a research network composed of regional universities that have been promoting GMS development through research, teaching, and other activities.

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THE SECURITY CHALLENGES IN THE GMS

SUCHIT BUNBONGKARN

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he Greater Mekong Sub-region (GMS) comprises the Lao PDR, Cambodia, Vietnam and Myanmar, which are the new members of ASEAN, and Thailand, an original member of ASEAN and the Yunnan Province of China. These countries share the Mekong River which is the world’s 12th longest river. The river has not been fully utilized for the development of the subregion. During the Cold War period, ideological conflicts, wars, and armed insurrections within and among the countries in the sub-region prevented them from working together for the economic wellbeing of their people, peace and security. Now that the Cold War is over, the GMS countries are yet to come up with cooperative efforts to develop the area. Thailand declared ten years ago a policy of changing the area of Indochina, which made up Cambodia, Vietnam and Laos, from the battlefield to a market place. Thailand was supposed to assume its role in

leading the development of the war-torn countries of Laos, Cambodia and Vietnam. Now, Thailand has sunk deeply in economic crisis and because of this, it has to deemphasize this development role. If the GMS could be economically and politically developed, it would enhance peace, security and prosperity in the ASEAN region substantially. However, there remains a host of problems that the sub-region is facing, which have serious implications on regional security. Peace and stability in the region cannot be secured and strengthened unless these problems are taken care of properly and effectively. The first problem is smuggling across the borders of the countries in the sub-region, especially between Thailand and Laos, Thailand and Cambodia, and Thailand and Myanmar. At the moment, the scope and magnitude of the smuggling activities are not a serious threat to regional security, but it has the potential for developing

Reprinted in abridged form from Suchit Bunbongkarn, “The Security Challenges in the Greater Mekong Subregion”, in The Greater Mekong Subregion and ASEAN: From Backwaters to Headwaters, edited by Kao Kim Hourn and Jeffrey A. Kaplan (Phnom Penh: Cambodian Institute for Cooperation and Peace, 2000), pp. 143–46, by permission of the author and the publisher.

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distrust among those who share borders, armed conflict and other illicit activities along borders that could affect regional security. The second problem is associated with illicit drugs. This problem is a serious threat to regional security because the GMS has been known for its illicit drug production and trafficking. The number of drugusers has increased considerably in the sub-region. Despite active suppression by the Thai government authorities, the illicit drug problem is still a serious challenge to national security as the use of the illicit synthetic drugs is increasing, particularly, among teenagers, urban and rural workers, truck drivers, and workers in entertainment and sex-related industries. Suppression is difficult partly because production sites are often found in the ethnic minorities’ mountainous area inside the Myanmar territory close to the Thai border, the areas beyond the control of the governments of Thailand and Myanmar. The use of illicit drugs can proliferate more easily in some of the GMS countries where law enforcement is known to be weak and the people are not well informed about their deadly consequences. The third challenge is illegal migrant labor. Labor movements in the GMS countries have increased substantially in recent years, from the “poor” countries to their relatively “rich” neighbors. In Thailand, it is estimated that there are about 700,000 to a million illegal migrant workers from Myanmar, and to a lesser extent from Laos and Cambodia. Thai political leaders and government officials have expressed their concern about this issue, that it may affect national security and bilateral relations with its neighboring countries. Thailand is in a unique position as it is both an exporter as well as an importer of legal and illegal migrant workers. Most illegal migrant workers from Thailand are women and work as prostitutes or in other sex-

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related industries. As a recipient country, Thailand’s private sector welcomes illegal migrant labor since they are cheap and less demanding. However, the problem is that they are uncontrolled and undocumented. Like in other countries in the ASEAN region, a number of illegal migrant workers have been responsible for serious crimes, and authorities often found it difficult to trace them. The fourth problem is associated with environmental degradation. One of the key problems connected with security implications is deforestation. It is estimated that in 1990 alone, the ASEAN region lost about 2,600,000 hectares of forest land (Euarukskul 1998, 259). The deforestation has caused soil erosion and fertility loss that has resulted in water shortages and floods. Unfortunately, Thailand is an outstanding example of this. Most of the countries in the region have adopted measures to preserve their forest land by partial or full prohibition of domestic logging. This prompted illegal logging and moving logging operations countries that still have large forest areas. The depletion of the forest in Thailand has led to an increase in logging both legal and illegal by Thai companies in Myanmar, Laos and Cambodia. This has created deforestation and other consequences including armed conflicts along the borders between government officers and illegal poachers or between poachers themselves. The fifth challenge is the increasing disparity in political development. The democracy in Cambodia is very fragile and largely depends on personality. Vietnam is governed by a one-party system, and Myanmar is still under military rule. Thailand is perhaps more advanced in democratization but the efficiency of the democratic government remains doubtful. Most of the CMS countries are still vul-

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nerable in many respects, especially in politics. The possibility for political instability remains high. The national resilience of the GMS countries is essential for regional security, but this should not be at the expense of one another. Finally, the last challenge is a conflict of interest. National interest continues to play a serious role in formulating national security policy of the GMS countries, and national interest often conflict with that of another state. Sporadic armed clashes along the Myanmar-Thai border reflect that the two countries continue to think in terms of their national interests. Despite the impact

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of globalization (which emphasizes borderlessness) and regional cooperation under ASEAN, nationalism still runs high. This is true for all the countries in the subregion. Commitment to regionalism seems to be limited, mostly to elitist groups only. The economic crisis has only strengthened nationalist sentiment. Distrust among the countries in the sub-region continues to prevail. Differences in the policies of Thailand and Myanmar over ethic minority refugees or between Thailand and Laos over the Thai Mekong River Patrol unit demonstrate the distrust and the emphasis on national interest.

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25.

THE GMS CO-OPERATION WITHIN THE ASEAN CONTEXT

KAVI CHONGKITTAVORN

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uring the Cold War period, the Mekong River was formally referred to as a dividing line between the communists and the non-communists in the continental Southeast Asia. On one side, it was the lower riparian countries of Vietnam, Laos and Cambodia and on the other side, Thailand, which stood alone by itself. At the time, China and Myanmar, the upper riparian states, were considered remote to be part of the overall scheme of things, both were still isolated from the rest of the world. Cooperation among the lower riparian countries of Laos, Vietnam, Cambodia and Thailand had its ups and downs, depending on the political pulse of the day. The end of the Vietnam War, the withdrawal of Vietnamese troops from Cambodia and the resolution of the Vietnam-China conflict, among others, have led to more economic interaction. In the post-Cold War, the Mekong River has

acquired a new meaning. It is now being labeled as the river that unites all the riparian countries both at lower and upper sections. Unlike the exclusive nature of the past, now the Mekong River has an inclusive character. China and Myanmar have been brought into the Mekong mainstream cooperation. At the ASEAN Summit in December 1995, Singapore’s Prime Minister Goh Chok Tong announced that a plan, based on a Malaysian idea, for an ASEAN coordinated Mekong Basin Development Cooperation (MBDC) initiative that would link for the first time the non-Mekong and Mekong members of ASEAN together. Two ambiguous plans were proposed — the EastWest Corridor (EWC) in the Mekong Basin and the Trans-Asian railways. These huge projects came at the time when the ASEAN countries recognized the importance of development in the GMS region and its

Reprinted in abridged form from Kavi Chongkittavorn, “The Greater Mekong Subregion: Working Together with ASEAN”, in The Greater Mekong Subregion and ASEAN: From Backwaters to Headwaters, edited by Kao Kim Hourn and Jeffrey A. Kaplan (Phnom Penh: Cambodian Institute for Cooperation and Peace, 2000), pp. 25– 32, by permission of the author and the publisher.

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massive potential. The Asian Development Bank (ADB) also drew up many plans to develop the GMS, focusing on the construction of a road and transport network through the region and expansion of energy generation by harnessing the hydroelectric potential of the Mekong River. At the ASEAN Summit in Kuala Lumpur in December 1997, the ASEAN leaders for the first time agreed to intensify and expand sub-regional cooperation in existing and new sub-regional growth areas. Their intention was later contained in the ASEAN Vision 2020, which the ASEAN Institutes of Strategic and International Studies (ASEAN-ISIS) played an important role in giving unbiased inputs into the policy channel. A year later, when the ASEAN foreign ministers met in Manila in July, they reiterated the need to expedite the implementation of the identified programmes and projects. Up until now, the GMS countries are able to focus on projects that they consider feasible and would benefit them the most. For instance, Vietnam, Laos and Thailand work hard to realize the East-West Corridor because both Thailand and Laos want to have the shortest possible exit way to the South China Sea. Two projects related to the East-West Corridor have made satisfactory progress — the construction of the second Mekong Bridge in Mudaharn in the northeastern part of Thailand and the road network. The second bridge and road networks are part of the so-called East-West Corridor Transport Project (EWCTP) linking northeastern Thailand to northwestern Cambodia, central and lower Laos to central Vietnam. Funding has come from the Overseas Economic Cooperation Fund (OECF), ADB and the assistance from the Japan International Cooperation Agency (JICA). To ensure that ASEAN is firmly embedded in the Mekong development effort, Vietnam has recently proposed that the grouping should formulate a new

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cooperative framework for comprehensive development to assist the peoples living along the East-West Corridor. Top on the agenda would be the eradication of poverty and measures to reduce the gap between the rich and poor countries in the GMS. ASEAN has recently set up an Eminent Persons Group (EPG) on ASEAN Vision 2020 comprising ten men from the member countries. At its first meeting in Singapore last month, the future of the GMS and the role of ASEAN were raised. They will meet again in Bangkok next month to put together the ideas of the EPG, who will submit a report to the ASEAN leaders at the next year’s summit in Singapore.

THE FUTURE OF THE GMS To promote the Greater Mekong Subregion, the ASEAN member countries, even though they are non-Mekong members, need to sacrifice and provide seed funds to implement the Mekong projects, apart from the foreign donors. It can be done in a form of a fixed contribution on a yearly basis or a certain percentage based on the calculation of gross national product. An Mekong-ASEAN Fund (MAP), like the ASEAN Fund, could be set up to highlight efforts to help implements future projects related to the GMS and the importance ASEAN has placed on developing the Mekong region. Without assistance from within the organization, it will be more difficult for ASEAN to develop the GMS and fit it into the broad ASEAN Vision. Foreign donors have their own preferences including planning and consultancy. One of the most useful ideas is the ongoing work of The Mekong Institute, which is based at the Khon Kaen University (KKU). It was initiated by New Zealand three years ago as the first sub-region-based study center for the development of leadership and management skills of people

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living in the six riparian countries. The institute has already trained hundreds of senior and middle-level government officials and managers. Because of its success, the institute is planning to turn itself into a region-wide

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and autonomous body in the future to provide further training in sustainable development, transition economics and management reform. Thailand has approached Vietnam to become one of the founding members.

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IMPACT OF ASEAN ENLARGEMENT ON GMS COUNTRIES

MYA THAN and GEORGE ABONYI

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ut of the six participating countries in the GMS, Thailand is an original member of ASEAN, while Vietnam, Laos, Myanmar and Cambodia are new members. This section will look at the implications and impact of new members joining ASEAN/ AFTA (ASEAN Free Trade Area) on the GMS, especially co-operation in infrastructure development and finance. Politically, there is peace and stability in the subregion where there was none for many years. Hence, a source of conflict among the participating countries in the past can become a source of co-operation. There is also likely to be better confidencebuilding among the participating countries together with improved dispute resolution. This will enhance the development of all the participating countries and GMS cooperation. As far as economic implications are concerned, generally speaking, members of any regional free trade area can potentially enjoy (1) more trade and investment links

within the region; (2) increased attractiveness to foreign direct investment (FDI) from outside the region; (3) more secure access to the greater market of the region; (4) improved resource allocation from specialization according to comparative advantage and economies of scale in an enlarged regional market; (5) enhanced industrialization prospects of small and medium-scale enterprises; and (6) especially for less developed members, spillover effects and infant industry learning effects with improved quality control, design, and marketing, and thus improved competitiveness in the world market, among others. The existing ASEAN-6 members can benefit from an enlarged ASEAN-10 consumer market by about 38 per cent in terms of population. The promotion of freer trade in the region means the creation of an environment with greater competition among the firms, and this will lead to increased efficiency, which will benefit all participating members.

Reprinted in abridged form from Mya Than and George Abonyi, “The Greater Mekong Subregion: Cooperation in Infrastructure and Finance”, in ASEAN Enlargement: Impacts and Implications, edited by Mya Than and Carolyn L. Gates (Singapore: Institute of Southeast Asian Studies, 2001), pp. 128–63, by permission of Mya Than and the publisher.

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Moreover, more exports of labourintensive products from the less developed member countries to more developed members are expected because of the tariff reduction. On the other hand, more imports of capital-intensive products from the ASEAN-6 to the new member countries may also be increased. Furthermore, the lower cost of labour-intensive products may deflate inflation in the existing members of ASEAN. Owing to the lower costs of production, and if “national treatment” is confined to intra-subregional investments, more FDI originating from the ASEAN-6 is expected to flow into Cambodia, Laos, Myanmar, and Vietnam (CLMV countries). This can lead to greater economic cooperation among the ASEAN-10. As far as the CLMV countries are concerned, it will be easier for them to sell agricultural products to the ASEAN-6 as tariff rates and non-tariff barriers will be reduced under the Common Effective Preferential Tariff (CEPT) scheme. However, more imports of manufactured goods from the ASEAN-6 can also be expected in the CLMV countries. This means that the CLMV can anticipate greater trade competition, particularly in manufactures, from the ASEAN-6. As new members of AFTA, these countries will have to accelerate economic reform, and tariff and non-tariff barriers must be reduced. As a result, crossborder smuggling will gradually decline. As one of the objectives of AFTA is to create a unified market to attract FDI, multinational corporations will be encouraged to invest more in the region by taking advantage of low tariffs and an enlarged market. Moreover, it is likely that ASEAN’s reputation as a good investment area will spread to the new members. ASEAN can also provide the new members with capital, technology, expertise and linkages to the global economy. These factors will encourage foreign investors from inside and

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outside ASEAN to invest more in the CLMV countries, which in turn, will spill over to the GMS. Another way of assessing the likely impact of the ASEAN Free Trade Area on future trade performance and welfare of the ASEAN-10 countries is to examine whether trade creation effects will outweigh trade diversion effects, or vice versa. According to Viner (1950), a regional trading agreement (RTA) such as a free trade area (FTA), or a customs union can confer net benefits to its members if trade creation effects outweigh trade diversion effects. For the ASEAN-6, whose trade has been conducted overwhelmingly with countries outside the region, substantial trade diversion is expected. However, as the ASEAN members have been reducing tariffs in not only intraASEAN but also extra-ASEAN trade, and AFTA’s objective is to increase the trade welfare of ASEAN without affecting its trade with the world, the scenario of trade diversion effects outweighing trade creation effects is unlikely in the long run. In the case of the CLMV, their trade with the ASEAN-6 has been growing without affecting their trade with the world; and trade creation is expected to supersede trade diversion. Thus, there could be more trade creation than diversion in the GMS, as a result of the CLMV countries joining ASEAN/AFTA. China is the only country in the grouping which is not a member of ASEAN. The GMS is the only formal economic link that China has with ASEAN, although it borders two of the ten ASEAN nations and is a Dialogue Partner of ASEAN. Thus, China is institutionally and physically plugged into ASEAN for trade and investment enhancement. Hence, more economic and political co-operation can be expected from China. All in all, as trade and investment links in and outside ASEAN increase, more

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international and intra-regional cooperation in infrastructure and finance is expected in the GMS. However, it is important to note that there are conditions for the CLMV countries of the GMS to enjoy benefits from the ASEAN enlargement. First, these new member countries must have industries that possess comparative advantage — for example, industries processing agricultural products. Secondly, state-owned-enterprises (SOEs) in these countries must increase their efficiency in order to take advantage of the new opportunities. The new members will also need to improve the quality of human resources and initiate qualified and less corrupt bureaucratic systems. Fourthly, they need to establish a strong legal framework and regulations to attract FDI. These should be accompanied by adequate infrastructure. Finally, it is essential for new members to enhance production and exports. The East Asian crisis has hit the riparian countries to some extent. They have suffered from devaluation effects and declining trade, caused especially by the Thai economic crisis. There is also a sharp decline in demand for their exports, decrease in tourist arrivals, and fall in technical assistance from the more developed ASEAN countries. Moreover, FDI inflows into the new member countries from the Mekong Subregion are slowing down; and many projects are being postponed indefinitely. A few examples of the postponement of GMS infrastructure projects can be cited. Laos granted a concession to a Thai company to renovate a 250 km road between Huaisai and Boten in Laos to link with the Muang La-Chiang Rung-Kunming road on a build-operate-transfer (BOT) basis. Construction was carried out on only a small section of the road because of a shortage of funds resulting from the financial crisis in

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Thailand. Myanmar experienced a similar problem. The renovation of the 164 km road between Tachilek and Kengtung was not implemented because of the financial crisis in Thailand. Although Myanmar received a loan of 300 million baht from Thailand, the Thai firm, to which the concession was granted by Myanmar in 1997 on a BOT basis, stopped renovation work because that amount was no longer sufficient to complete the project (because of the depreciation of the Thai baht). Furthermore, the renovation of the road linking Kengtung, Talua, and Xishuangbanna was not started at all. Another important issue is whether the GMS co-operation arrangement will be overtaken by ASEAN. Stensholt (1996, pp. 145–146) has suggested, “The overriding future relationship is likely to be encompassed in ASEAN. It is possible to argue that Mekong cooperation or indeed the Mekong subregion is merely a passing phase or fad to be totally replaced or engulfed by the wider ASEAN”. However, the other growth triangles in Southeast Asia suggest that this is not the case. This is because investment in growth triangles will not be at the expense of the other areas of ASEAN, but will eventually generate benefits which will spill over elsewhere in ASEAN. As for the growth triangles’ relationship with larger groupings and the free trade area, both AFTA and APEC would enshrine an overall environment where there were low barriers to trade and more opportunities for investment cooperation (Baldwin 1997, p. 78).

Furthermore, the subgroupings are a product of geographical proximity, historical links, and economic complementarity, with the aim of developing infrastructure to enhance trade and investment opportunities.

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27.

NEIGHBOURHOOD WATCH AND THE EAST TIMOR/ACEH CRISES

KHOO HOW SAN

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ndonesia is clearly a linchpin in the ASEAN neighbourhood watch grid. Its geopolitical importance to regional states and to the major powers stems from the location of several key straits — transit passages and choke points — within its waters. It is a littoral state, together with Malaysia and Singapore, of the Malacca Strait. During the latter part of the Soekarno era (1945–66), the neighbourhood was rendered unstable because the Indonesian leader chose to meet the challenge from domestic political forces by invoking ultra-nationalism, an anti-Western foreign policy, and eventually a campaign of Confrontation against the newly formed Malaysia. In contrast, during the Soeharto era (1966-98), Indonesia — the world’s most populous Muslim country — became a stabilizing factor in the neighbourhood. In a recent interview, Singapore Senior Minister

Lee Kuan Yew, when asked to comment on how important a stable Indonesia was to the stability of the whole region, said: “Indonesia was a great stabilizer and encouraged investments throughout the region because President Soeharto concentrated on economic development and that created the climate of confidence for the whole region.”1 The fall of Soeharto in May 1998 amidst the Asian economic crisis and growing domestic challenges to the institutions of authority, including the armed forces, led to a leadership vacuum and a spiral of unrest throughout the 13,000-island archipelago. In terms of the ASEAN dynamic, suddenly, this “great stabilizer” of the past three decades was deeply wounded, and the ability of ASEAN to function effectively as a neighbourhood watch group was being tested severely. Economic prosperity is, of

Reprinted in abridged form from Khoo How San, “ASEAN as a ‘Neighbourhood Watch Group’ ”, Contemporary Southeast Asia 22, no. 2 (2000): 279–301, by permission of the author and the Institute of Southeast Asian Studies.

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course, a key ingredient in political stability. Moreover, “post-Soekarno” Indonesia under Soeharto provided a leadership of sorts to the grouping and, more importantly, was able to keep in check tensions within the Indonesian polity. However, renewed separatist activism in several parts of Indonesia became alarming only after President Habibie had decided in May 1999 to allow East Timor to have a United Nations-supervised referendum which offered the option of either autonomy or independence. By then, other ASEAN leaders were visibly alarmed, and their fears seemed justified by the killing rampage by anti-independence militia that followed the referendum. But while the East Timor crisis was significant in clearly exposing ASEAN’s vulnerability as a collective institution, it need not have represented a threat to Indonesia’s unity if only it had been more carefully managed. Domestic and international opinion then was that East Timor had never been Indonesia’s sovereign territory, unlike the other provinces. But Jakarta’s unwillingness to rein in the military-backed militias led to international demands for external intervention. Faced with a fait accompli, Jakarta relented and allowed the Australianled International Force East Timor (INTERFET) to restore order and stability. A further deterioration in Indonesia’s role as a “great stabilizer” within ASEAN cannot be ruled out, given the clamour within Aceh for independence. Importantly, it has finally prompted “positive” corporate interference by ASEAN (“positive” in the sense that it was welcomed by Indonesia) in support of the neighbourhood watch objective of regional political stabilization. This “positive” interference was initiated by Singapore Prime Minister Goh Chok Tong at the third informal ASEAN plus Three summit in Manila, in November 1999. Goh had wanted the ASEAN foreign ministers

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to issue a statement in support of Indonesia’s territorial integrity. Although what eventuated was a single paragraph in the statement issued by President Estrada as summit chairman, the message was conveyed to would-be separatists in the ASEAN region that there was likely to be no support from the ASEAN-10 or China, Japan and South Korea, regardless of, say, pressure from the West (which would not be forthcoming in any event). On the other hand, the paragraph only sanctioned “peaceful and conciliatory means” to resolve the dispute, thus signalling that violations of human rights by the central authority would be held to account by the international community.2 Yet another paragraph, the initiative of Thailand, created an ASEAN troika at the ministerial level “in order that ASEAN could address more effectively and co-operate more closely on issues affecting peace and stability of the region”.3 These initiatives remain to be tested. But with the two paragraphs in the 1999 summit statement reaffirming ASEAN members’ stance on territorial integrity (while accepting that East Timor is preparing for statehood under United Nations supervision) and attempting to put in place a crisismanagement mechanism, ASEAN has sought to reassert its primary role as a neighbourhood watch group. At the same time, by winning the endorsement of the “plus Three” initiative, the summit statement may also be seen as a corporate act of solidarity by ASEAN members on behalf of a fellow member under threat of internal instability. Although the Indonesian crisis initially left ASEAN paralyzed, the grouping seems to have since renewed efforts to forge a new sense of purpose and unity. The other challenge for ASEAN is, of course, to stay the course for its developmental objective and to cooperate collectively on financial reforms.

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NOTES 1. 2. 3.

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Interview with Los Angeles Times, reprinted in Business Times (Singapore), 8 December 1999, headlined “New dimensions to the rise of the Asian century”. Straits Times, 28, 29 and 30 November 1999. Straits Times, 29 November 1999; ASEAN Summit Chairman’s Statement, BBC Worldwide Monitoring, 1 December 1999.

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Introduction

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Section

III

SOCIETY, CULTURE AND RELIGION: INGREDIENTS FOR A NEW TAPESTRY

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INTRODUCTION

Sharon Siddique

F

rom its inception, social development has always been a feature of the ASEAN agenda. ASEAN’s social development programmes have covered such areas as health, women, children and youth, and education. Through the 1970s, 1980s, and 1990s, the programmes were managed by the ASEAN Committee on Social Development (COSD). COSD activities were perceived mainly as enabling programmes, supporting ASEAN member states’ rapid economic transformation, and promoting the political and social stability necessary for regional development. In the aftermath of the Asian economic crisis of the late 1990s, social development was given added priority. This new status was reflected in a significant structural change within the ASEAN Secretariat. In July 2001, COSD was dissolved and replaced by the Senior Officials Meeting on Social Welfare and Development (SOMSWD). The SOMSWD is mandated to cover social welfare, children, population, and family matters. Former COSD subsidiary bodies on labour, youth, and health development have been elevated to Senior Officials Meetings, each reporting to their respective ministers. New ASEAN bodies on education, women, and disaster management have also been formed.

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The critical question is, does this represent the beginning of a shift away from a predominant state-centred approach to social development, to a more peoplecentred approach? Three critical factors have affected this recent evolution. First, the understanding that the process of globalization is complex and multi-faceted. Second, the end of the bipolar world, with the tensions inherent in the emergence of one dominant socio-political paradigm. Third, the realization that profound impact of the information technology revolution must be carefully managed. The 1997 Asian economic crisis brought home the fact that globalization also has its negative side, particularly when managing such complex processes as manpower training, migration, and information technology. And, most importantly, these issues are transnational — they impact on everyone, everywhere. Thus the globalization process emphasizes the awareness that nation-state borders are becoming more porous, and that these larger forces impact on people across these borders. Globalization can be seen in increased migration — both legal and illegal, within member states, among ASEAN member

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Introduction

states, and between ASEAN member states and both the developed and developing worlds. It is the scale of migration that is new. Cumulatively, it has accelerated the need to view issues as both transnational and people-oriented. The process of globalization has also called into question the dominant development paradigms of the 1970s and 1980s, in which “development” was perceived as led by economics, with social, political, and security models as supportive or disruptive of the process. Paradoxically, with the end of the Cold War, security issues appear to have gained in prominence. The concept of human security thrusts social development squarely into the centre stage of state-driven security concerns. This issue is dealt with in Section V. From the development perspective, the major issue to have emerged in the debate about human security is the applicability of a universal definition of human rights. This is because in the unipolar world of the early twenty-first century, the dominant development paradigm is unquestionably that of the West (and in particular, the United States). Concepts of democratization and “basic human rights” are power fully influenced by Western interpretations. Who determines social development policies? What is the relationship between the enforcement of universal human rights and a communitarian, state-centric model of non-interference? In Southeast Asia, there is a general acknowledgement that a U.S. presence is necessary for regional stability. However, there is also an acceptance that basic human rights should be viewed contextually, in terms of Asian, or Southeast Asian cultural worlds. For ASEAN, human rights issues were highlighted during the expansion process, when Vietnam, Laos, Cambodia, and particularly Myanmar, became full ASEAN members. The issue of human rights also links directly into concepts of human

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resource development. Commonly in Muslim societies, for example, there is much debate on the rights of women in a society, the organization of family life, and social (and workplace) interaction. Even though the arena has shifted from development to security, the concept of “people power” as the policy driver remains intertwined with social agendas. This shift began with the proliferation and co-optation of Track Two organizations into the ASEAN decision-making process. They essentially provide alternative policy creation and feedback channels. Many of the most vocal and influential Track Two bodies are security think-tanks. However, other cultural, religious, and artistic NGOs are increasingly participating in the process of building an “ASEAN community”. The first ASEAN People’s Assembly was convened in Batam, Indonesia in November 2000, with some 300 representatives from ASEAN NGOs, and grass roots attending. Through its e-ASEAN strategy, ASEAN has recognized the need to harness the power of the information technology revolution. Given the fact that ASEAN’s population is young, and the Internet penetration rate in ASEAN member states is rising rapidly, betting on technology appears to be a prudent policy. Certainly the involvement of ASEAN’s people will continue — both electronically and face-to-face. At the moment, evolving new development paradigms, and expanding the concept of security, are being explored in parallel. This process will raise many questions. For example, are we broadening our focus on security at the expense of our conceptualization of development? Or should we rather be broadening our understanding of development to underpin our concept of security? It is certain that the discussion on what sort of ASEAN community will evolve, and what type of social development agenda should be ASEAN-driven, is just beginning.

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MANAGING MOBILIZATION AND MIGRATION OF SOUTHEAST ASIA’S POPULATION GRAEME HUGO

INTRODUCTION In the 30 years since the founding of ASEAN, the demography of Southeast Asia has changed profoundly in many ways. Fertility and mortality levels have fallen dramatically, urbanisation has continued at a rapid pace, ageing has become a significant issue and family structure and functioning have been transformed. Yet one of the most striking changes in the population has been the huge increase in personal mobility of Southeast Asians as both a cause and consequence of the economic, social, political and demographic changes which have swept across the region. This has profoundly influenced the lives of many residents. Within the countries of the region there have been increases not only in the extent to which permanent redistribution of population is occurring but also in the scale, complexity and significance of nonpermanent migrations (e.g. see Hugo, 1997). Large-scale rural to urban migration

has contributed to the urban population of the region which more than trebled from 30 to 113.3 million over the period of ASEAN’s existence while the rural population increased by only a third from 204.7 to 320.2 million (United Nations, 1997). In the present chapter however, the focus of attention is upon population movement out of and into countries within the region which has increased in scale and significance at a rate even greater than that of mobility within the ASEAN countries over the last three decades. No region in the world has been more profoundly influenced by the upsurge in international migration which has accompanied, and been part of, accelerating globalisation trends in the last two decades than Southeast Asia. For many Southeast Asians, the labour markets within which they routinely search for work, and the destinations they consider moving to, overlap national boundaries both within

Reprinted in abridged form from Graeme Hugo, “Managing Mobilisation and Migration of Southeast Asia’s Population”, in Development and Challenge: Southeast Asia in the New Millennium, edited by Wong Tai-Chee and Mohan Singh (Singapore: Times Academic Press, 1999), pp. 171–214, by permission of the author and the publisher.

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and beyond the region. Whereas three decades ago this only applied to a small, mostly male, well-educated elite in the region, international migration is now within the calculus of choice of millions of people in the region regardless of education, skill level, gender, nationality and ethnicity. The resultant complexity is well illustrated in Malaysia which has in excess of two million workers from overseas not only from its ASEAN neighbours of Indonesia, the Philippines, Thailand, Myanmar and Cambodia, but also from Bangladesh and from more developed countries (MDCs) like Australia. Yet Malaysia too is a significant supplier of labour to nearby Singapore and also Taiwan and Japan and a source of permanent settlers to Australia. The extension of Southeast Asian labour markets beyond national boundaries is partly a function of growing economic and demographic disparities between the ASEAN nations and the shrinking friction of distance in the region facilitated by more affordable international travel and rapid dissemination of information between nations. However, increasingly this movement is being enhanced and facilitated by two elements which, while influenced by economic and political forces, largely operate outside of them. First, substantial communities of foreigners have grown in several labour-short countries of the region and these are providing the anchors of social networks in labour-surplus nations along which even larger numbers of new migrants are travelling secure in the knowledge that their already established relatives and friends at the destination will ease their entry into the destination labour market and society generally. Second, an international migration industry has mushroomed in the Southeast Asian region made up of a complex interrelated myriad of

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recruiters, agents, travel providers, lawyers, labour suppliers, employers and government labour and immigration bureaucracies. These groups operate both within and outside legal immigration, emigration and labour regulations to initiate, encourage and facilitate movement of people and especially labour between countries in the region. The proliferating social networks and immigration industry will ensure the continued expansion of international migration in the region regardless of economic and political change. The exponential escalation of international movement of people within the region has elicited a substantial response from governments in both the countries receiving migrants from overseas and those sending them. Governments have sought increasingly to influence, control and regulate the scale and composition of the flow of migrants and migrant workers, the recruitment process, the training of migrant workers, the conditions under which the migrants work, the remittances they send back and their return and readjustment to life at the place of origin. Nevertheless a great deal, probably more than half, of international migration influencing the region occurs outside of the official regulations and structures either through the clandestine entry of migrant workers, people entering without work visas but subsequently obtaining a job or through overstaying visitors. Attempts by governments of the region to intervene to influence international labour migration are increasing, yet policies and programmes are being formulated largely in a vacuum of knowledge about what the impacts and implications of existing international labour migration actually are upon the origin and destination countries, the migrant workers and their families.

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29.

MEDIA IN SOUTHEAST ASIA

RUSSELL HENG HIANG-KHNG

WHY 1980 AND AFTER? Reviewing all the available literature on media in Southeast Asia risks cramming too much (both in quantity and diversity of topics) into the limited confines of a book chapter. It is likely to produce a long list of broad categories, too summarily treated to be of any analytical value.1 Thus, scaling the exercise down to more manageable proportions would be sensible and, in that regard, dealing only with what has been published after 1980 dovetails with the theme of “transition”. Beginning in the 1980s, the region saw the start of several major new trends that continue to shape political-economic-social reality till today. They are: 1. Increased forces of democratization 2. Revising of old economic strategies 3. Significant socio-cultural changes in tandem with 1. and 2. 4. The challenges of information technology.

The 1980s saw the beginnings of a democratization trend in the region. The more dramatic manifestations of this trend were “people power” uprisings in Manila (which were successful) and in Myanmar (which were aborted). In the 1990s, people power again forced the demise of unpopular regimes in Thailand and Indonesia. Even politically-placid Singapore experienced a gradual but discernible process of democratization with a changing of the guards in the top leadership in the 1980s and, with that, some relaxation of political control. At the same time, in Vietnam and Laos, authoritarian Communist governments introduced liberal reform programmes. In the 1990s, Cambodia turned from a one-party socialist state to a multi-party democracy, an outcome brought about through international negotiations. Every country in the region can sense that its political status quo cannot remain as it is, although some regimes may be putting on a front of having their power-sharing formula right.

Reprinted in abridged form from Russell Heng Hiang-Khng, “Media in Southeast Asia: A Literature Review of Post-1980 Developments”, in Media Fortunes, Changing Times: ASEAN States in Transition, edited by Russell Heng Hiang-Khng (Singapore: Institute of Southeast Asian Studies, 2002), pp. 1–25, by permission of the author and the publisher.

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The changes were not just in politics. Another major trend beginning in the 1980s was economic transformation. The countries — Vietnam, Laos, Cambodia and Myanmar — turned from socialist state planning to capitalist market economics. At the same time, the non-socialist countries implemented aggressive economic development programmes, the results of which are still pending. Meanwhile, all these developments have produced great socio-cultural changes. The middle class expanded and sought more political participation. At a more visible level, consumerism grew, hastening the impact of globalization through the import of goods and lifestyles. A greater demand for more space in private lives gave birth to a new form of culture politics. Coinciding with all of these is a revolution in information technology that began in the 1980s. The aggregate of these forces has produced situations which differ from the concerns of the region in the 1970s and earlier. As such, a review of literature dealing only with post-1980 is not out of place, particularly as the chosen theme for this collection of papers is the phenomenon of transition in the member states of the Association of Southeast Asian Nations (ASEAN).

SOME DISTRIBUTIVE FEATURES The physical statistics of the literature show that writings on the media have grown exponentially. The titles produced from 1980 to 1989 more than triple from 36 to 118 in the period 1990–2001 (see list of references at the end of this chapter). There is an unevenness in how the literature is distributed across the countries of the region. An overwhelming proportion of the literature is about media in the five founding members of ASEAN: Indonesia, Malaysia, Philippines, Singapore and Thai-

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land. Of the 126 titles which are countryspecific studies, only six were about new ASEAN members — Cambodia, Myanmar and Vietnam. No titles were found for Laos or Brunei. The reason for this disproportion is partly a legacy of the past and partly the dearth of resources available to the new ASEAN members to generate or attract media research. But this paucity of research is also a result of the political difficulties involved in putting media under scrutiny in these places (with the exception of Cambodia in the 1990s). As a result, such a skewed corpus of works makes it difficult to generalize about media literature in the region.

CONCLUSION Media research has been focussed on the role of media in the four transitional trends that have swept through the region in the last two decades, dwelling more on some than on others. As a whole, the sum of the literature gives a strong impression that the media of a country is very much defined by the political regime under which it operates (some of the works that are most definite in this regard are Gonzalez 1988; Sussman 1990; Grigg 1991; Lau 1992; Allott 1994; Hill 1994; Palmos 1995; and Seow 1998). This is inevitable given that all of the media in the region have gone through (and many are still going through) experiences of political hegemony over the media. This may have driven some of the evident preoccupations that characterize intellectual discourse on the media. For example, is a free press a help or a hindrance to national development? Is the media a hapless victim of state authoritarianism, or is there a collusive relationship between them? Are the views of media consumers entirely vulnerable to state-managed propaganda? Should there be a kind of jour-

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nalism that stands distinct and separate from the common Western practice of media serving as a check on state power? The most frequent intellectual approach is to write descriptive–analytical narratives which are usually empirically rich but not given to extensive theorizing. Works which are theoretically-engaged are rare, for example Juanillo Jr. and Scherer 1993; Librero 1993; Schaffer 1998; Wang 2000; and Merrill 2000. As such, readers of this literature would come away with a fairly detailed picture of media development and its key issues over the years, but the sum of these many parts has not coalesced into any coherent theoretical model. All that has been written of the various transitional trends in the region points to a common implication. The state is no longer

the sole player in media management, and even in places where state power is still extensive, the state is losing some of its previous dominance in the shaping of the media agenda. Contending with the state is the ascendancy of market forces. An IT juggernaut is going to obliterate old ways of controlling the flow of information. Civil society is going to step up its role of engaging the media, a process that may be more disruptive than the old state–media tension. In looking at these issues, there may be a tendency to continue to be guided by old assumptions about the liberating influence of market, technology and civil society. But the sum of the literature also warns that enough changes have taken place to warrant a reconfiguration, but not rejection, of these assumptions.

NOTE 1.

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This review covers only books and journal articles written in the English language. Newspaper articles on media developments are not included because the volume involved is too vast and scattered to collate. Media-related literature in the various languages of Southeast Asia is also omitted because of the lack of linguistic facility to read all of them. Even with the modest objective of reviewing only English-language academic publications, a comprehensive coverage cannot be assured. Countries in the region also publish in English but their products do not always find their way into major international indices and databases.

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30.

THE ROLE OF EDUCATION IN ASEAN ECONOMIC GROWTH

GAVIN JONES

RECENT TRENDS IN ASEAN EDUCATION Now that Vietnam, Laos, Myanmar and Cambodia have been accepted as members of ASEAN, generalisations about ASEAN are much more difficult to make, and this is no less true of education than of economic growth or political matters. The original ASEAN five countries and Brunei have all achieved something approaching universal primary education,1 and in this, they have been greatly assisted by sharp declines in fertility rates, which have led to actual declines in numbers in primary school ages in Singapore since the late 1960s, in Thailand since the early 1980s and recently, to a levelling off of such numbers in Indonesia. In Vietnam, the literacy level was raised by massive literacy campaigns in the late 1940s and 1950s, but universal primary school enrolment is still not attained: only 85 percent of primary school-aged children could be accommodated in schools, and fewer than 50 percent of pupils entering

primary school completed it (Kinh, 1991). Although something approaching universal primary education is aimed for by the year 2000, this will be seriously hampered by qualitative deficiencies throughout the system: outmoded textbooks; poorly trained and poorly paid teachers, most of whom have to “moonlight” to make ends meet; physical facilities and teaching aids which, according to one observer, are “miserably poor” (Hac, 1991:37). Laos lags seriously in primary education. The net enrolment rate at the primary school ages of 6–10 was officially estimated to be 73 percent, up from 63 percent five years earlier.2 The target is to reach 80 percent in the year 2000. But the net enrolment rate does not tell the whole story. A recent study showed that 46 percent of primary school students are overaged (World Bank, 1995); repetition rates are estimated at 30 percent; and probably only 30 percent of children complete primary school. Despite these continuing severe shortcomings in primary education in some

Reprinted in abridged form from Gavin Jones, “The Role of Education in ASEAN Economic Growth: Past and Future”, in Development and Challenge: Southeast Asia in the New Millennium, edited by Wong Tai-Chee and Mohan Singh (Singapore: Times Academic Press, 1999), pp. 215–38, by permission of the author and the publisher.

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countries, in general, the emphasis in the ASEAN region has shifted to secondary and higher education. Great progress has also been made at these levels (see Table 1). In 1970, Thailand and Indonesia lagged noticeably behind other Southeast Asian countries in secondary education, but they have made considerable progress since then, albeit following quite different trajectories of expansion. In Indonesia, progress over the 1970s and early 1980s was steady, but it slowed during the 1980s, culminating in an actual decline in secondary school enrolments in the late 1980s (Oey-Gardiner, 1997), a decline which flew in the face of official government policy. Far higher costs of education at the secondary than at the primary level meant that poverty was probably the main factor. Secondary enrolments began to pick up again in the last few years, before the economic crisis broke out in 1997, with the

introduction of (theoretically) compulsory secondary schooling and intensified efforts to increase transition rates from primary to secondary school. Thailand’s gross secondary enrolment ratio of about 29 percent was the lowest among the ASEAN5 in 1990, but educational authorities made great efforts to increase the transition rate from primary to secondary education, with remarkable success, raising this rate from about 50 percent in 1990 to 85 percent in 1995 (Sussangkarn, 1995:244). Opening lower secondary school classes in primary schools helped, as did parents’ growing realisation that secondary education is essential for obtaining good jobs in the modern sector. In both Indonesia and Thailand, the growth of the secondary educated population is proving to be one of the major trends of the 1990s. According to long-term planning projections in Indonesia, over the

TABLE 1: Enrolment in Secondary and Higher Education as Percentage of Age Group in Southeast and East Asia Secondary 1970 1992 Southeast Asia Indonesia Philippines Thailand Malaysia Singapore Vietnam Myanmar Lao PDR East Asia and Australia China Korea, Republic of Australia

Higher 1980

1992

16 46 17 34 46 n.a. 21 3

38 74 33 58 72 33 n.a. 22

4 28 13 4 8 2 5 1

10 28 19 7 n.a. 2 n.a. 1

24 42 82

51 90 82

1 16 25

2 42 40

NOTE: Secondary school age range depends on national definitions. It is most commonly considered to be 12–17 years. The age range for higher education is taken to be 20–24. SOURCE: World Bank, World Development Report, 1995, Table 28.

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20-year period between 1990–2010, the number of working-age population with completed lower secondary education will increase fourfold from 29 million to 120 million, and those with upper secondary education will increase fivefold from 15 million to 71 million (Oey-Gardiner & Gardiner, 1997). In countries such as the Philippines and Malaysia, the rise will be less dramatic because enrolment ratios in secondary education are already quite high. According to the figures in Table 1, Vietnam and Laos have made considerable progress in secondary education, although the figure reported for Lao PDR appears to be distinctly too high.3 In Vietnam, the gross enrolment rate at lower secondary school appears to be about 47 percent and at upper secondary level 17 percent.4 It is claimed (Hac, 1991:68) that the network of lower secondary schools has spread to include every village. While this may be an exaggeration, there were 1,880 such schools in 1989–90. It would be unwise to conclude from the above discussion that all is well with education in the ASEAN tigers, or that educational developments in these countries over the past two decades have been well fitted to the needs of their growing economies. Thailand and Indonesia are cases in point. Sussangkarn had long been stressing the shortage of middle-level manpower in Thailand and the failure of the Thai education system to expand rapidly enough at the lower secondary level (Sussangkarn & Chalamwong, 1989). Khoman (1993) made the same point, as did Gavin W. Jones (1993) and Warr (1997:19). The rapid rise in transition rates from primary to secondary school during the 1990s has come too late to enable Thailand to enter the 21st century with enough middle-level manpower to meet the needs of a rapidly industrialising economy. Indeed, it is projected that as far ahead as

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2010, 62 percent of the labour force will still have only primary school education. In Indonesia, despite the much-vaunted attainment of universal primary school education around 1990, to this day there remains a substantial drop-out rate and at least 10 percent of the children do not complete primary education, not to mention the very low quality of primary education offered in many schools (Jones et al., 1998). Therefore, in turning its attention to lower secondary education with the announcement of the policy of extending the period of compulsory education to nine years, the Indonesian government must continue to keep in mind that the primary education task is not yet completed; both completion of the level and quality of the education offered remain serious concerns (World Bank, 1997). At the secondary level, evidence of an actual decline in enrolment ratios at the lower secondary level in the late 1980s and early 1990s signals some problems for the policy of making education at this level compulsory. The available evidence, particularly in the poorest provinces, indicates that poverty is a major reason for the inability of children to continue at this level of schooling (Jones et al., 1998). In terms of higher educational developments, Table 2 shows that tertiary enrolments in Southeast Asia have increased 13-fold since I960, which somewhat surprisingly is only slightly faster than the increase in Australia (11-fold). The growth multiple is biased in two partly offsetting ways. First, the Southeast Asian figure would be higher if students from the region doing their tertiary studies overseas were included; overseas study is a particularly important component of the tertiary education structure in Singapore and Malaysia. Second, the figures for Thailand and Indonesia are, in a sense, exaggerated by the inclusion of very large enrolments in

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TABLE 2: Students Currently Enrolled in Tertiary Institutions in Southeast Asia: 1960, 1981 and 1991 1960

1981

1991

Indonesia Malaysia Philippines Singapore Thailand

44,802 2,698 271,791 8,171 45,548

565,501 67,368 1,335,889 24,393 911,166 1

1,885,038 133,479 1,656,815 60,373 1,088,1201

Total ASEAN5

373,010

2,904,317

4,823,825

n.a. n.a. 13,600 16,051

n.a. n.a. 165,000 114,701

1,299 4,921 195,333 205,652

402,661

3,184,018

5,231,030

n.a.

0

7,839

Brunei Laos2 Myanmar2 Vietnam2 Total ASEAN Cambodia

NOTES: Notes in this table refer to students enrolled in all institutions, both public and private, at the third level of education; universities and equivalent degree granting institutions, teacher-training colleges, technical colleges, etc. As far as possible both fulltime and part-time students are included. 1. Includes open admissions to Ramkamhaeng University and Sukhothaithammathirat (Open University). 2. Vietnam, Laos and Myanmar have become member states of ASEAN since 1991. SOURCES: Statistical Yearbooks, UNESCO, Paris, various years. Yearbook of Statistics, Department of Statistics, Singapore, various years.

open universities, where the annual graduation rate is extremely low. The quality of tertiary institutions in Singapore is probably the highest in the region; in Malaysia and Thailand, it is reasonably good and improving; and in the Philippines, it is highly variable. Indonesia, Vietnam and Myanmar are on a lower plane, and university education in Cambodia and Laos is still embryonic. A little more attention to Indonesia, as a middle range country of Southeast Asia in terms of the quality of its higher education, may be in order. While there has undoubtedly been improvement in the quality of various aspects of Indonesian higher education, serious deficiencies remain. There seems to be widespread recognition

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from those closely involved with Indonesian higher education that the rapid expansion of secondary and tertiary places has made quality improvement very difficult to achieve.5 The level of training of staff in institutions of higher education, the budgets devoted to paying them and supporting them, the reward structures in place, which give little recognition to high quality research, and the limitations on freedom of expression combine to inhibit the improvement in the quality of higher education (Hill, 1991; Hull, 1994). The conclusion seems inescapable that, although graduate education has been expanding in Indonesia, in most cases, Indonesian students remain disadvantaged in terms of what tertiary education should offer if they

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pursue Masters and doctorate degrees domestically rather than travelling overseas to do so. The Philippines faces a somewhat different set of problems, although the problems of low salaries and budgets and poor reward structures mirror those in Indonesia. Philippine tertiary educational establishments include some of the best in ASEAN as well as some very low quality institutions. The Philippines’ very high enrolment rate in tertiary institutions is achieved largely through a system of private institutions, which account for 83 percent of tertiary-level enrolments, far higher than in other Southeast Asian countries (Pernia, 1991:141–43). As noted earlier, it is difficult to generalise about education in a region as large and diverse as ASEAN, where there is an enormous range in style and quality. The Asian countries whose educational achievements are nowadays usually discussed with some awe in the West are Japan, Korea, Taiwan and Singapore. Of these, only Singapore is in ASEAN. These countries share a Confucianist tradition and all but Singapore have had a long period of Japanese educational influence. As the East Asian countries, including Singapore, have moved into the higher-technology end of manufacturing and into a more serviceoriented economy, the content, style and quality of tertiary education have become increasingly important. “The strength of their educational system, with its emphasis on discipline, facts and learning by rote, may also be its weakness” (Economist, 21 September 1996), by stifling creativity and inventiveness. “Manufacturing, with its emphasis on systems and teamwork, rewards the kind of disciplines and fact-filled students (they produce). But what about the more creative service industries in which Asian countries currently lag behind America — like software design or entertainment?” (ibid.).

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Nevertheless, the fact remains that children in such countries perform better than Western children as measured by test scores. (A recent international study of student ability in mathematics and science rated Singapore, Korea, Japan and Hong Kong above Australia, even though Australia ranked among the top of the Western nations (Lokan et al., 1996:Chapter 2)). Ethnic Chinese and other East Asians also appear to outperform the general population in countries where they have settled. In the United States, “the success of AsianAmericans in gaining admission to the elite universities like Harvard and the University of California has been so marked that it has provoked rows about discrimination against Asians, as the universities attempt to maintain an ethnic balance among their students” (Economist, 21 September 1996:29). Over the past five years, about 40 percent of the top 100 places in the New South Wales Higher School Certificate examination have gone to students with an Asian ethnicity, mainly ethnic Chinese but also Vietnamese, Indians and others. This is far higher than their proportion in the final year high school population. Debate rages about the superior performance of East Asians, both in their homelands and in countries such as the United States and Australia (see, for example, Stevenson & Stigler, 1992). The explanation appears to be partly cultural, having to do with the seriousness with which the educational task is approached in Chinese, Vietnamese and other East Asian traditions, and partly structural. Children in East Asian countries have to work harder, with more days in the school year and more hours in the school day. Educational objectives are kept to a minimum. Teachers enjoy considerable respect and prestige, far more than in Australia. Examinations dominate the lives of the young, and if they fall behind, they are sent to cramming schools or given private tuition. All this may

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not be much fun for the children, but it achieves results. But to what extent are these “East Asian” educational traits also characteristic of Southeast Asian countries? The East Asian traits are quintessentially those of Japan, Korea and Taiwan. Singapore is arguably

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very similar, and in the cities of Malaysia and Thailand, the pressure on students to perform is also very strong. But in Indonesia and the Philippines, the East Asian intensity of educational effort is hardly in evidence, except among the sub-group attending the top private schools.

NOTES 1.

2. 3. 4. 5.

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Official statistics, particularly when expressed in terms of gross enrolment ratios (i.e. primary school enrolments related to numbers in the notional age groups from which primary school children should be drawn) generally suggest complete enrolment. This is not always the case when net enrolment ratios are used, which allow for over-age enrolments. In any case, enrolment data are frequently suspect. Data on grade to grade progression within primary schools indicates that a substantial proportion of children do not complete primary school in a country such as Indonesia, particularly in more isolated rural areas. See Jones and Raharjo, 1995, Chapter 8. These data were supplied to the author by the Vice-Minister for Education of Laos at a briefing in August 1996. Briefings in Vientiane in August 1996 indicated that the net enrolment rate at the lower secondary level is 15 per cent and at upper secondary level only 2 per cent. These calculations were based on dividing the enrolment numbers reported in Dinh (1991), Table 1, by the numbers at the relevant ages from the 1989 Population Census. An Indonesian report in the mid-1980s stated that the quality of the typical upper secondary graduate continued to decline to a level that was probably equivalent to lower secondary education before the beginning of rapid expansion of secondary education (IEES, 1986:77).

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CLIMBING UP THE TECHNOLOGICAL LADDER

GOH CHOR BOON

TECHNOLOGICAL DEPENDENCY AND UPGRADING IN ASEAN Simply stated, the dependency theory maintains that growth and development in the developing countries (the “periphery”) is hampered by structural dependence on the advanced, industrialised countries (the “core”), although the degree of such constraints varies widely. The dependency theory was made popular during the 1970s by the pessimistic views of Gunder Frank (1967) and Samir Amin (1973), both of whom asserted the virtual impossibility of take-off development in the peripheral Third World because of the exploitative ways in which capitalist industrialised core countries developed by “underdeveloping” the Third World. In a later work and in response to the emergence of newly industrialising countries, Frank (1983:323– 46) argues that the popular strategy of export-led growth adopted by these countries did not create genuine development because it was largely dependent on the flow

of international capitalism and foreign technology. Some proponents, while claiming that peripheral capitalist development is possible, are “hard” or “rigid” on the concept of technological dependence. As stated by Cardoso and Faletto (1979), “[b]asically the dependence situation is maintained because, in addition to the already stated factors of direct control by the multinationals and dependence on the external markets, the industrial sector develops in an incomplete form”. Cardoso argues that “dependent-associated” development of the Third World countries was not merely constrained by the structure of unequal exchange imposed by the advanced countries; their growth paths were also determined by their domestic circumstances, such as the low levels of indigenous technological capabilities. Writing some 25 years later and when the world economy is becoming more competitive, more global, and increasingly

Reprinted in abridged form from Goh Chor Boon, “Climbing up the Technological Ladder: Some Issues and Problems in ASEAN”, in Development and Challenge: Southeast Asia in the New Millennium, edited by Wong Tai-Chee and Mohan Singh (Singapore: Times Academic Press, 1999), pp. 99–126, by permission of the author and the publisher.

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controlled by information and communication technology, Cardoso and his colleagues (Carnoy et al., 1993) reaffirm the dependency position of many Third World countries. But they now face “a crueller phenomenon: either the South (or a portion of it) enters the democratictechnological-scientific race, invests heavily in R&D, and endures the ‘information economy’ metamorphosis, or it becomes unimportant, unexploited and unexploitable”. They further state that even for those former Third World countries, such as the Asian NIEs, India, China and Chile, which have been incorporated in the global economy, there is an urgent task to introduce changes. These changes include an appropriate industrial policy, an educational policy to upgrade human resources and to integrate the masses into contemporary culture, a science and technology policy capable of producing a technological leap forward in information technology, new materials and new modes of organisation, and social reforms to produce an “atmosphere of freedom which is conducive to organisational and technological innovation” (Carnoy et al., 1993:156). Hence, under certain circumstances, “dependent development” in Third World countries was possible. A similar view on technological dependency was expressed by a historian of technological change, Nathan Rosenberg. He maintained that, because they lack “organised domestic capital goods sector”, developing countries generally do not possess the indigenous capabilities to make capital-saving innovations (Rosenberg, 1976:146–47). Thus, they have to import their capital goods — at the expense of not being able to develop their own technological base of skills, knowledge and infrastructure which are the key elements for further technical progress. In the late 1970s, the dependency perspective came under criticism largely due to a changing relationship between global

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capitalism and Third World economic development. By the mid-1970s, it was evident that a number of East Asian countries were experiencing a process of “late industrialisation”. Beginning with Japan in the 1950s, Hong Kong in the 1960s, and South Korea, Taiwan and Singapore in the 1970s and 1980s, and possibly Malaysia, Thailand, and Indonesia today, these countries confirmed that successful capitalist accumulation and growth, albeit slow, of indigenous technological effort in innovation and research and development was possible in “the periphery”. More importantly, the dynamic role of the state, especially in the Asian NIEs, in promoting industrialisation and technological change exposed the structural determinism of the dependency theory as its fundamental flaw. In the wake of this development, a somewhat “softer” view of technological dependence became popular. Consequently, research interest on the “late industrialisation” of the Asian NIEs shifted from issues relating to the costs and benefits of technology transfer to the ways in which these countries adapted and mastered imported technology. In the process, theoretical considerations of the relationship between technological progress and economic development in the Third World gravitated towards explanations of why some nations, like the Asian NIEs, were able to catch up and leapfrog technologically while the majority of the Third World countries is still struggling to achieve industrial and economic success. Unlike the technological structures of Taiwan and South Korea (which are now gaining strengths in “high-technology”), countries in ASEAN, including Singapore, have developed competencies in intermediate technologies but with a weak base in fundamental technologies.1 Colonialism in Southeast Asia had failed to create the foundation of an indigenous industrial base. Rapid industrialisation only took place with

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Goh Chor Boon TABLE 1: Science and Technology as a Factor of Competitiveness (ranking among 46 Countries) 1996

1997

ASEAN Singapore Thailand Malaysia Philippines Indonesia

12 44 29 26 40

8 23 25 29 41

East Asian NIEs Taiwan Hong Kong South Korea

17 20 25

10 18 22

SOURCE: World Competitiveness Yearbook, 1997:29

the arrival of foreign manufacturing companies which provided opportunities for local firms to acquire established assembly and production technologies. As shown in Table 1, some progress has been made in strengthening science and technology (S&T) as a factor of competitiveness: To leapfrog into large-scale manufacturing of high-tech products and, given time, to become innovators of new products

and processes, the ASEAN countries have adopted S&T policies which, essentially, have three main features: (a) creation of an S&T infrastructure; (b) support for strategic industries; and (c) scientific and technical manpower development. However, at this stage, technology upgrading is still very dependent on the willingness and cooperation of MNCs to transfer and diffuse advance technologies to indigenous firms.

NOTE 1.

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“Fundamental technologies” refer to industries that have developed a high mastery of casting, forging, plastic moulding, pressing and other process technologies; “intermediate technologies” refer to the production and assembly technologies, low-transistor integrated circuits, and other formerly advanced technologies that are commonplace today; “high or advanced technologies” refer to generic and proprietary or prototype technologies which eventually lead to product commercialisation.

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32.

HUMAN RIGHTS AND REGIONAL ORDER

AMITAV ACHARYA

THE POST-COLD WAR HUMAN RIGHTS AGENDA IN ASEAN The ASEAN states consider the rising prominence of human rights in recent years as a direct result of the end of the Cold War. The anti-communist thrust of Western policy, which tolerated blatant human rights abuses by pro-Western Asian governments in the past, is no more. Instead, the promotion of human rights constitutes the core element of the ‘New World Order’. As Lee Kuan Yew, Singapore’s elder statesman, put it in an Asian context: Unfortunately, with the end of the Cold War, U.S. policies toward China, Japan and the countries of East Asia have not been guided by strategic and economic considerations as they used to be. Issues of human rights and democracy have become an obsession with the U.S. media, Congress and the administration.1

The relatively simplistic East-West geopolitical framework of the Cold War period has shifted to a more complex setting in

which North-South conflicts over humanitarian norms have become the major faultline of the international system with direct bearing on the economic, social and political conditions in the developing countries. Some ASEAN policy-makers see the promotion of universal human rights standards by Western countries as a highly selective exercise. Singapore’s Foreign Minister Wong Kan Seng argues that ‘Concern for human rights [in the West] has always been balanced against other national interests’.2 Attesting to ‘hypocrisy’ in the West’s application of its human rights standards, the case of Western concern for Saudi Arabia has been contrasted with Algeria, where the Western governments acquiesced with a military coup which overthrew an elected government with a strongly Islamic orientation.3 The enforcement of human rights standards by the West is therefore seen not only as selective, but also intensely political. Ali Alatas, Indonesia’s Foreign Minister, wondered whether or not the

Reprinted in abridged form from Amitav Acharya, “Human Rights and Regional Order: ASEAN and Human Rights Management in Post-Cold War Southeast Asia”, in Human Rights and International Relations in the AsiaPacific Region, edited by James T. H. Tang (London: Pinter (an imprint of Continuum International Publishing Group), 1995), pp. 167–82, by permission of the author and Continuum International Publishing Group.

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West’s human rights campaign might have been designed to ‘serve as a pretext to wage a political campaign against another country’.4 Malaysia’s Prime Minister Mahathir Mohammed has provided his own answer to this question by casting human rights as an instrument of dependency. Citing the example of Eastern Europe, Mahathir contended that the campaign of human rights and democracy is a prescription for disruption and chaos in weaker countries, a campaign which makes the target ever more dependent on the donor nations of the West. Furthermore, the Western campaign for human rights is regarded as reflective of the power disparities in the international system. As the Malaysian Foreign Minister Ahmed Badawi put it: ‘Attempts to impose the standard of one side on the other... tread upon the sovereignty of nations.’5 As the current Chair of the Non-Aligned Movement, Indonesia also warned: In a world where domination of the strong over the weak and interference between states are still a painful reality, no country or group of countries should arrogate unto itself the role of judge, jury and executioner over other countries on this critical and sensitive issue.6

The characterization of the West’s human rights campaign as being selective and selfseeking is followed by a plea against accepting the definition of human rights in terms of Western values, norms and application procedures. ‘Human rights questions,’ contends Singapore, ‘do not lend themselves to neat general formulas.’7 Instead, as the Thai prime minister argued, implementation of human rights should ‘vary because of differences in socioeconomic and cultural backgrounds’.8 At the Bangkok Regional Preparatory Meeting, ASEAN worked with other like-minded Asian countries (including China) to draft a declaration which stated that human rights

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‘must be considered in the context of a dynamic and evolving process of international norm-setting, bearing in mind the significance of national and regional particularities and various historical, cultural and religious backgrounds’.9 In presenting the ASEAN case, Singapore’s foreign minister referred to differences among the Western countries. He suggested that the definition of human rights has changed over time, having been influenced by centuries of history and culture. Britain, France and the United States had taken over 200 years to evolve into full democracies. Can we therefore expect the citizens of many newly-independent countries of this century to acquire the same rights as those enjoyed by the developed nations when they lack the economic, educational and social pre-conditions to exercise such rights fully?10

What might be called an ASEAN human rights position combines aspects of cultural relativism, communitarianism and developmentalism.11 The cultural relativist viewpoint, for example, was put forward forcefully by the Malaysian Prime Minister Mahathir Mohammed in the following words: We in ASEAN never disputed that democracy for the people and opportunity for the individual to develop his or her own greatest potentials are indeed important principles. We disagree, however, that political systems qualify as democratic only when they measure up to certain particular yardsticks. Similarly, the norms and percepts for the observance of human rights vary from society to society and from one period to another within the same society. Nobody can claim to have the monopoly of wisdom to determine what is right and proper for all countries and peoples.12

Elaborating on the communitarian underpinnings of human rights, Ali Alatas,

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speaking at the Vienna United Nations World Conference on Human Rights, argued that Indonesia and the developing world have to maintain a balance’ between an ‘individualistic approach’ to human rights and the interests of the society as a whole. ‘Without such a balance, the rights of the community as a whole can be denied, which can lead to instability and even anarchy.’ 13 Singapore went further by invoking the Confucian principle of ‘community over self’,14 while ASEAN foreign ministers collectively support Alatas’ idea of ‘balance’ which is necessary not only to ensure ‘freedom, progress and national stability’ within the region, but also to create a political framework ‘through which many individual rights are realized’.15 A communitarian approach to human rights is also essential if the state is to fulfil its developmental objectives. To ensure economic growth, Mahathir maintained, ASEAN states have been correct in placing ‘a high premium on political stability by managing a balance between the rights of the individual and the needs of society as a whole’.16 The multi-ethnic composition of states in Southeast Asia and the sensitive relationship between the dominant and minority ethnic groups adds to the need for governments to emphasize social stability and national security by exercising strict control over media and freedom of speech. The salience of developmental objectives justifies the need for a conception of human rights based on the principle of ‘nonselectivity’, or the notion that political freedom and justiciable rights should not be stressed over the economic and the social. At the Vienna World Conference on Human Rights, Malaysia called for a universal conception of human rights to go beyond political rights, and to establish ‘particularly its linkage with development’.17 The ASEAN position was summarized in a statement issued by ASEAN foreign ministers in Singapore in July 1993:

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human rights are interrelated and indivisible comprising civil, political, economic, social and cultural rights. These rights are of equal importance. They should be addressed in a balanced and integrated manner and protected and promoted with due regard for specific cultural, social, economic and political circumstances . . . the promotion and protection of human rights should not be politicized.18

In championing ‘non-selectivity’, ASEAN states have sought to detract attention from the emphasis placed by the West on the restrictions on political rights within ASEAN. 19 They argued that without fulfilling the basic economic needs of their societies, developing countries cannot ensure the necessary conditions under which the political rights of citizens could be upheld.20 A linkage between human rights and development also provides a convenient and powerful justification for continued authoritarianism. An excessive concern with political liberalization and human rights could subvert developmental objectives of the state. As Lee Kuan Yew argued: ‘The exuberance of democracy leads to undisciplined and disorderly conditions which are inimical to development.’ 21 Although this view is not necessarily shared by other ASEAN leaders (such as President Ramos of the Philippines, who reminded Mr Lee that the authoritarianism of the Marcos era contributed in no small way to the country’s economic ruin), there is a recognition that the Western campaign on human rights could undermine the favourable economic climate for ASEAN. Mahathir in particular sees Western attempts to link economic relations with human rights as a new set of ‘conditionalities and protectionism by other means’, aimed at undermining the economic prosperity and well-being of the East Asian region.22

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In stressing the communitarian and developmental context of human rights, Singapore’s leaders have put forward the notion of ‘good government’. The key element of this notion is ‘wise and honest’ leadership. A ‘good’ government must be efficient and able to deliver on the economic front, but not necessarily political openness. As noted, Lee Kuan Yew believes that the two goals are negatively correlated. The notion of good government, however, incorporates a core group of human rights, such as absence of torture, slavery, arbitrary killings, disappearances or ‘shooting down of innocent demonstrators’.23 Beyond this, human rights, especially those of a political nature, would depend upon the political, economic and societal circumstances of the country. While some common elements in the ASEAN member governments’ attitude towards human rights can be identified, the very idea of a common regionalist ASEAN position remains highly problematic. The definition of what constitutes cultural norms is not uniform between or within ASEAN societies. Singapore’s invoking of Confucian values is not shared by Islamic Malaysia or Catholic Philippines or Buddhist Thailand. Nor do values converge within individual ASEAN states. In multi-ethnic ASEAN states, any attempt by the ruling elite to articulate a ‘national’ position on human rights would, like the notion of ‘national security’ become an ‘ambiguous symbol’. In the words of one critic, ‘attempts to define the community as co-terminus with the state . . . may have less to do with: culture than with political self-interest [of the ruling élite]’.24 Thus, one cannot talk about a national or regional collective cultural/communitarian position on human rights when individual countries cannot overcome inter-ethnic competition within their own territories and when such competition feeds inter-state rivalry within the region (as in the case of Singapore–Malaysia relations).

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The primacy of the political (regime security) over the cultural underpinnings of human rights is evident in the larger Asian context. Governments who emphasize that human rights must relate to culture often highlight only those elements among traditional cultural norms which justify their authoritarian political control and serve the regime’s political and economic agenda. It is interesting that in Asia, governments which had once rejected traditional culture when it conflicted with their modernisation goals (e.g. China’s earlier rejection of Confucianism as a factor behind its economic backwardness) are now invoking it to deflect criticism of their human rights record. While ASEAN governments protest the politicization of human rights by the West, they themselves have indulged in a conscious political exercise to create a common ASEAN position which obscures the remarkable diversity within the grouping in terms of colonial heritage, post-colonial political/ constitutional system, and cultural, social, linguistic and ethnic milieu. This exercise in consensus-building has taken on a formal dimension.25 It is noteworthy that while the first ASEAN summit of the postCold War era, held in Singapore in 1992, was silent on human rights, the 1993 annual ASEAN foreign ministers meeting, also held in Singapore, ‘agreed that ASEAN should coordinate a common approach to human rights and actively participate and contribute to the application, promotion and protection of human rights’. Moreover, the foreign ministers ‘agreed that ASEAN should also consider the establishment of an appropriate regional mechanism on human rights’,26 although the nature and scope of such a mechanism remains to be defined. ASEAN states may find it easy to engage in debates with the West about the meaning and scope of human rights, but to come up with an alternative approach for real-life human rights problems is an entirely

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different exercise with serious implications for ASEAN’s regional managerial ambitions. In this context, ASEAN’s policy of ‘constructive engagement’ towards Myanmar assumes significance, providing both a challenge and an opportunity for the management of regional order. On the one hand, it has strained ASEAN’s political relations with the West and undermined

Western support for ASEAN’s management of regional order when it relates to human rights issues. On the other hand, it has given ASEAN an opportunity to prove that it could provide an alternative approach to human rights management which is more sensitive to regional circumstances and therefore likely to prove more effective in the management of regional order.

NOTES 1. Michael Richardson, ‘For the planners, a time to decide’, International Herald Tribune, 18 November 1993, p. 5. 2. ‘Take pragmatic line on human rights: Kan Seng’, Straits Times, 17 June 1993, p. 1. 3. This point is made by a senior Singapore Foreign Ministry official. See Kishore Mahbubani, ‘The West and the rest’, National Interest (Summer 1992), p. 9. See also Kishore Mahbubani, ‘News areas of Asean reaction: environment, human rights and democracy’, Asean-lSlS Monitor, Issue no. 5 (October–December 1992), p. 13. 4. ‘Alatas: no nation can judge others on human rights’, 16 June 1993, p. 1. 5. Straits Times, 23 July 1991. 6. ‘Alatas: no nation can judge others on human rights’, op. cit. 7. Take pragmatic line on human rights: Kan Seng’, op. cit. 8. Gordon Fairclough, ‘Standing firm’, Far Eastern Economic Review, 15 April 1993, p. 22. 9. ‘Vienna showdown’, Far Eastern Economic Review, 17 June 1993, p. 17. 10. Take pragmatic line on human rights: Kan Seng’, op. cit. 11. See the discussions on these arguments in Chapters 1 to 4. 12. Cited in New Straits Times (Kuala Lumpur), 20 July 1991, p. 1. 13. ‘Alatas: no nation can judge others on human rights’, op. cit. 14. Mahbubani, op. cit., p. 15. Such an emphasis on communitarianism has not escaped criticism. According to one critic: ‘The pre-industrial societies of Asia, as elsewhere, did place community and the obligation to it ahead of individuals and their rights. But this observation does not license a leap to the claim that modern East Asian societies are consequently not suited to the observance of human rights or liberal democracy because of residual Confucianism. This ignores the historical discrediting of Confucianism, the emergence of revolutionary left-wing politics and the development in South Korea, Taiwan, Hong Kong and Singapore of the most un-Confucian practices associated with rapid industrial growth such as corporate conglomerates with 12-hour working days for the executives, the breaking up of community through massive urbanization, the necessity of parliamentarism for legitimacy, government by military élites and the militarization of politics.’ Christopher Tremewan, ‘Human rights in Asia’, Pacific Review, vol. 6, no. 1 (1993), p. 27. 15. Joint Communiqué of the Twenty-Sixth ASEAN Ministerial Meeting, Singapore, 23–4 July 1993, p. 8. 16. International Herald Tribune, 22 July 1991. 17. ‘KL will continue to speak up: foreign minister’, Straits Times, 22 June 1993, p. 8. 18. Joint Communiqué of the Twenty-Sixth ASEAN Ministerial Meeting, op. cit., p. 7. 19. The Environment and Human Rights in International Relations (Jakarta: ASEAN-1S1S, undated), pp. 13–15. 20. See, for example, ‘Take pragmatic line on human rights: Kan Seng’, op. cit. 21. China News (Taipei), 21 November 1992.

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22. Straits Times, 23 July 1991. 23. Mahbubani, op. cit., p. 15. 24. Sidney Jones, ‘Human rights: basic elements of effective protection’, paper prepared for the ASEAN-ISIS Asia Pacific Roundtable, 6–9 June 1993, Kuala Lumpur, Malaysia, p. 4. 25. Critics of cultural relativism have argued that such a position can mask cultural arrogance. Moreover, cultural particularities need not preclude a set of values common to all cultures which would provide the basis for universal standards of behaviour with respect to human rights. See Jack Donnelly, ‘Cultural relativism and universal human rights’, Human Rights Quarterly, vol. 6, no. 4 (1984), pp. 400–2; Christopher Tremewan, ‘Human rights in Asia’, op. cit. p. 23. 26. Joint Communiqué of the Twenty-Sixth ASEAN Ministerial Meeting, op. cit., p. 7. It should be noted that ASEAN governments continue to be suspicious of the idea of setting up a regional human rights watchdog.

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Promoting Human Rights

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PROMOTING HUMAN RIGHTS

SIDNEY JONES

T

he fact remains that two key planks of the ASEAN governments’ position on human rights — non-selectivity and “situational uniqueness” (the need to take cultural, political and economic differences into account) — are mutually exclusive. Non-selectivity, which means that political and civil rights should not be stressed over economic and social rights, can only have meaning as a principle if there is general agreement on the content of both sets of rights. By espousing the importance of non-selectivity, the ASEAN governments implicitly recognise an international standard which one group of countries, in their view, is distorting. But there is no point in complaining about the West’s selectivity if ASEAN is demanding that each country or region be permitted to select which rights to promote according to level of economic development or type of political system. Suggesting that political, cultural and economic differences need to be taken into account in setting new, or applying existing international standards, has its risks. Who

is to be the cultural arbiter? When ASEAN governments stress the importance in Asian culture of communal, collective or commentarian rights as opposed to individual rights, they have to face the fact that their definitions are not shared by many in the ASEAN region, ASEAN governments tend to define the community as co-terminous with the state, which may have less to do with culture than with political self-interest. NGOs in the ASEAN region see their governments not protecting collective rights but too often violating them, particularly with regard to the traditional land and resource rights of indigenous peoples. If the ASEAN countries wish to promote collective rights, how do they resolve conflict or competition between different communities — Indonesia and East Timor; ethnic Chinese and Malays in Malaysia; the T’boli clans and Visayan settlers in Mindanao, for example? It may turn out that an impartial and independent court system offers a better chance for resolution than a vague appeal to “Asian culture.”

Reprinted in abridged form from Sidney Jones, “Promoting Human Rights: The Optimal Way”, in The Making of a Security Community in the Asia-Pacific, edited by Bunn Nagara and K.S. Balakrishnan (Kuala Lumpur: Institute of Strategic and International Studies, Malaysia, 1994), pp. 335–47, by permission of the author and the publisher.

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Then too, any definition of collective rights has to embrace the rights of national and ethnic minorities, and one quickly gets into the quicksand of human rights and nationalism. In Bosnia, the assertion by the Serbs of their collective rights has resulted in some of the worst carnage the world has seen in half a century. The unfortunate truth is that Asian culture, or “situational uniqueness” for that matter, can be used to justify any position that governments of the region wish to take. At the Asian regional meeting on human rights in Bangkok in early April, Japan did not share the ASEAN countries’ rejection of aid conditionality, and it stressed that

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human rights should not be sacrificed to economic development — is it then rejecting its Asian heritage? The Chinese delegate at the Bangkok meeting claimed that Asian culture “has played an important role in maintaining the stability of the state and promoting the steady development of economy and society.” Where was “Asian culture” during the Cultural Revolution? Protection of human rights is simply not possible when every country interprets international standards as it sees fit, whether that country is the US or Singapore. The only solution is to take the international standards that exist, and figure out how best to apply them.

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HUMAN SECURITY IN VIETNAM, LAOS, AND CAMBODIA

PIERRE P. LIZÉE

TOWARDS HUMAN SECURITY IN VIETNAM, LAOS, AND CAMBODIA? What, then, of the development of human security in Cambodia, Vietnam, and Laos? Cambodia is now, at long last, a case for guarded optimism. The logic underlying the organization of elections in the country has the intention to bring about social and political commitment to the construction of the rule of law and representative democracy, which is at the heart of human security. The issue for CSOs in the country, in terms of the growth of human security, is thus the need to give to these efforts a synergy which will allow them to sustain each other over the long term, and also to defeat the resistance they are likely to encounter, either from the force of inertia exercised by weak or non-existent political and administrative structures able to support the movement towards a rightsbased social contract, or from the more active resistance of those who see their power threatened by such a change. The

succession of agendas linked to the construction of human security provides, in that perspective, a framework from which to consider in an integrated fashion the different aspects of the process of transition towards a rights-based political system under way in Cambodia, and a way of measuring, so to speak, what has been done, and what remains to be done, to attain that objective. The human security agenda also shows that, beyond the manifold party politics likely to favour, in the last analysis, Hun Sen and his close associates, the electoral process opens up a space where other groups — NGOs and the like — can attempt to promote a deeper agenda of change and democratization. One of the central components of the strategic agenda entailed by the construction of human security — the creation of spheres of autonomy for the individual from which to consider and critique the role and power of the state — is certainly linked, above all, to elections in the country. The

Reprinted in abridged form from Pierre P. Lizée, “Human Security in Vietnam, Laos, and Cambodia”, Contemporary Southeast Asia 24, no. 3 (2002): 509–527, by permission of the author and the Institute of Southeast Asian Studies.

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mechanics of voting are often presented by NGOs, working in some sort of support capacity in the electoral process, as the opening up of space where individual power can emerge and be leveraged against that of the élites in place. This points to a need for vigilance during the 2003 elections, which has often been affirmed in international and domestic NGO circles. There is another central issue: how should the sense of individual empowerment be sustained between elections through new habits of interaction with the different levels of government in Cambodia? On that basis, there is undoubtedly a case to be made for the development of an infrastructure in Cambodia allowing regional and domestic track-two and trackthree actors to weigh in on post-election politics in the country and attest to the degree to which these politics uphold the ideals of democracy and personal emancipation set forth and monitored by the international community during the elections themselves. The most progressive work at that level has undoubtedly been done so far by the Cambodian Institute for Cooperation and Peace (CICP), under its director, Kao Kim Hourn. The CICP has held seminars involving members of CSOs and government agencies, where issues of international norms of good governance are central. The Institute’s participation in the ASEAN-ISIS network provides a bridge, in that context, between these domestic actors and unofficial regional diplomatic circles devoted to issues of change and security in Southeast Asia.1 The development of this type of infrastructure beyond what is done at the moment would not resolve by itself the issue of a sustained empowerment of the individual, nor would it have the power to force local and national governments to respect the wishes of the electorate. It could provide, however, a continuous examination of these issues beyond electoral periods, and while doing so, it would bring to bear on the

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different levels of government in place in Cambodia both the legitimacy drawn from its ascribing to international standards of human rights and the authority conferred on it by its attempt to represent broad segments of the Cambodian population. The two other focal points of current Cambodian politics — the nature of a possible Khmer Rouge trial and the demobilization process — can also lend themselves to the same logic. Much needs to be done, at both levels, in terms of finding the concrete mechanics through which these processes can translate to a tangible expansion of the rule of law in the daily lives of Cambodians. There again, the engagement of civil society through a structure bringing track-two and track-three actors into contact with national and international circles involved in these two processes — the United Nations, the World Bank and the like — might be beneficial. These different strategies also entail, finally, the need for the proponents of rights-based politics in Cambodia to advance models of politics and security which can explain and justify all the changes they propose, and to support the broad dynamics of social transformation which these changes entail. The human security discourse is helpful here because it identifies, in terms of its intellectual and social agendas, some of the objectives which must be attained in this context. The call for greater democracy and the respect of universal norms of human rights to become an intrinsic part of the future evolution of Cambodia, for instance, is certainly unproblematic, especially in view of the profound political and social realignments that have marked the country in the past few years, and in which civil society is playing an ever larger role. However, one element of the agenda of social transformation linked to the development of human security — the growth of a web of track-two and track-three discourses able to support processes of demo-

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Human Security in Vietnam, Laos, and Cambodia

cratization — still needs to be addressed in Cambodia. Recent experience has in fact been at odds with this objective — for instance, when the Hun Sen government reiterated forcefully in many different contexts its belief in the utmost sovereign right of Cambodia to determine its own destiny. An engagement of the government on this issue by domestic and regional track-two and track-three actors is needed here too. If there is thus in Cambodia an array of processes through which it is possible to promote human security, Vietnam and Laos provide for less opportunity, though they do also offer some entry points in the development of the human security agenda. Vietnam presents, at the moment, a somewhat mixed picture. The arrival of a strong reformer seemingly intent on developing the role of the National Assembly as an organ of discussion and critique in Vietnam, a renewed concern for the welfare of minorities, and, above all, a formidable effort to reduce the role of the state in society in order to allow the expansion of market mechanisms, all augur well for the development in Vietnamese society of spaces for self-determination and power vis-à-vis government and bureaucracy. This is to be contrasted with the difficulty of pushing the current process of economic liberalization towards one of political liberalization, given the resistance of many in VCP circles to the idea, and, at a broader level, the lack of a model of political and economic development able to bridge the need for more political openness in Vietnam and the orthodoxy of one-party rule. This suggests that the opening up of space for rights-based politics in the country — the first component of the human security agenda — can only proceed through an expansion of the space for freedom and rights provided by the policy of economic openness. Continuing to

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strengthen the agencies and the regulatory and legal frameworks which ensure economic freedoms and rights, in other words, might well have as a corollary the enlargement of rights in the political realm, while an immediate focus on political liberalization per se could encounter too much resistance in the upper echelons of the VCP to have much chance of success. This suggests the need for nascent CSOs in Vietnam to engage to a degree the civil society structures endorsed by the state in the hope of finding some outlet for their demands which might be more palatable to government circles. More broadly, track-two and track-three actors involved in Vietnam have to establish some form of consultation between NGOs, international financial institutions present in Vietnam, the government, and others, on the best ways to handle both the political end results of the process of economic transition and the resistance these are likely to encounter in some quarters within the VCP. Defining track-three activity in Vietnam in that context is admittedly somewhat problematic, given the difficulty of delineating a space where civil society is truly independent from the state. The sustained presence of Vietnamese representatives in activities organized by ASEAN-ISIS — for instance, the annual Kuala Lumpur-based Asia-Pacific Roundtable, where issues related to civil society are now being handled with growing finesse — can perhaps provide an entry point for an engagement in Vietnam of regional norms on the development and independence of CSOs. The social component of the human security agenda then has to be efforts to encourage the habit of multilateralism in Vietnam that will allow the country’s integration in regional track-two and trackthree structures and permit this kind of interplay. The intellectual component of this agenda can then be translated in an

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attempt, within that track-two and trackthree infrastructure, to help delineate in a sustained but non-threatening fashion the model of development which would allow Vietnam to chart the future of political liberalization in the country, both in terms of the resistance the process encounters and the pressures that more global norms bring to bear on that process. The prospects for the development of rights-based politics are dimmer in Laos. The sheer poverty of the country has not allowed the type of economic dynamism which provides, in Vietnam, a starting point for political realignments and reform. Moreover, foreign investments have remained low and thus have not created — the way they have in Vietnam — broad demands for the establishment of regulatory and legal frameworks able to protect these investments, and then serve to support political as well as economic rights. There is also in the LPRP at the moment a profound immobilisme which inhibits a decisive movement towards political liberalization even if critiques of the Party are mounting, both from within and without. It is still possible to think, however, that the logic of human security could have some sway in the Lao context. If economic development fails to provide a point of entry in the construction of rights-based politics,

there remains the idea that a fuller involvement of Laos within the regional diplomatic architecture, and certainly through its track-two and track-three dimensions, can provide a mechanism through which LPRP leaders can be quite directly engaged on the issue of regional norms of governance. The Lao component of the ASEAN-ISIS network, the Institute of Foreign Affairs (IFA), is now developing its role at this level. Moreover, there is at the moment in Laos a realization that the country needs to regionalize its economy which, if it has been truncated somewhat by the regional economic downturn of 1997–98, could be tapped in that manner. To a large degree, however, such habits of multilateralism, as well as the institutional and political configurations which can allow them to emerge, still have to be developed in Laos. In turn, this calls for the formulation of models of diplomacy able to bridge both the country’s tradition of close relations to Vietnam with its focus on state-to-state relations and party-to-party relations, and the growing emphasis on track-two and track-three interaction in regional diplomacy. It is likely that at these levels the social and intellectual programme inspired by the pursuit of human security can have its greatest impact.

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See Sue Downie and Damien Kingsbury, “Political Development and the Reemergence of Civil Society in Cambodia”, Contemporary Southeast Asia 23, no. 1 (April 2001): 43–64, which makes explicit reference to the work of the CICP in that context.

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Role of Nonstate Actors in Building an ASEAN Community

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ROLE OF NONSTATE ACTORS IN BUILDING AN ASEAN COMMUNITY

MAKITO NODA

NGO NETWORKS The activities of ASEAN-ISIS have contributed significantly to the formation of a sense of community among the policy elites and intellectual leaders in the region by establishing reliable channels of communication and, thus, enhancing mutual confidence. The organization has worked to socialize new members toward eventual participation in the ASEAN-10. At least one condition for an effective regional community seems to be fulfilled. For countries in the South, including the ASEAN members, however, a sense of community among the elites in the different countries does not guarantee cohesion of the group. In developing countries, where the gaps between the elites and the masses are wide, a regional community also requires grass-roots interactions. The networking capability of NGOs has been extremely effective in promoting a more grass-roots sense of community, especially

among the developing countries. Therefore, it is relevant to examine whether NGOs actually help to underpin a regional community on the grass-roots level in ASEAN. Because of a focus on issues that is more East Asian or Asian as opposed to Southeast Asian, the scope of NGO networks and collaborations among NGOs has been more Asia-wide or, sometimes, Asia Pacific-wide. Yamamoto, in his integrative 15-country study Emerging Civil Society in the Asia Pacific Community, writes that “there clearly has been an emergence of a number of associations, networks, and other forms of interactions among NGOs in Asia Pacific in recent years” (1995, 19). NGOs in various ASEAN members report a similar trend. The Singaporean report, for example, observes that “the increasing trends towards economic regionalization in Asia Pacific . . . have led to the necessity of NGOs working at the regional level in order to effectively

Reprinted in abridged form from Makito Noda, “Role of Nonstate Actors in Building an ASEAN Community”, in Road to ASEAN-10: Japanese Perspectives on Economic Integration, edited by Sekiguchi Sueo and Noda Makito (Tokyo: Japan Center for International Exchange, and Singapore: Institute of Southeast Asian Studies, 1999), pp. 167–94, by permission of the author and the Japan Center for International Exchange.

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address these [environmental and social problems that are transnational in nature] problems” (219). Likewise, the Philippines report states that “global issues such as human rights, the environment, women, migration and refugees, the spread of AIDS, and population growth all pose major challenges to the Asia Pacific region. Widespread concern has induced the formation of linkages of like-minded NGOs across national boundaries in Asia Pacific” (202). And the Thai report concludes that “nongovernmental organizations in Asia... have joined hands to work together” and that “the role of NGOs in countries in Asia and the Pacific cannot be denied. Networks of NGOs have been established across national borders” (261, 268). Some of the more outstanding NGOs involved in regional networking include the following:1 •

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People’s Plan for the 21st Century was established in 1988 to “counterpose a people-based, people-centered vision of an alternative Asian future to regional economic, political, and cultural integration” by linking the largely autonomous activities of grassroots and citizens’ movements throughout the Asia Pacific region. CODE-NGO is the largest coalition of major-development NGO networks in the Philippines, forging linkages with development NGOs in other developing countries in Asia and in sub-Saharan Africa. The Centre for the Development of Human Resources and Rural Asia (CENDHRRA) was established in 1974 to develop linkages and networks among NGOs in Asia. The organization gave birth to the South East Asia Development of Human Resources and Rural Areas Forum (SEADHRRA), a solid regional network among national

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chapters of CENDHRRA in East Asian countries (Indonesia, Japan, Malaysia, the Philippines, South Korea, and Thailand). The Asian NGO Coalition for Agrarian Reform and Rural Development (ANGOC) was founded in 1979 as a regional association of 23 development NGOs and NGO networks from eight countries: Bangladesh, India, Indonesia, Malaysia, Pakistan, the Philippines, Sri Lanka, and Thailand. The coalition facilitates people-centered development in the region by promoting South-South and North-South dialogue through training and research programs. The Asian Alliance of Appropriate Technology Practitioners, Inc. (APPROTECH ASIA), is a network committed to the development of appropriate technology and its promotion for grass-roots communities. Member organizations come from Bangladesh, India, Indonesia, Malaysia, Pakistan, the Philippines, Thailand, Singapore, and Sri Lanka. The Southeast Asian NGO Consortium for Sustainable Development (SEACON) was founded in 1989 to promote regionwide people’s participation and social reform in ensuring sustainable development approaches. The consortium includes regional networks and representatives of NGOs from Indonesia, Malaysia, the Philippines, and Thailand. The Asia Pacific People’s Environment Network, founded in 1983, holds regional seminars on the environment and development for NGOs throughout Asia. The Asian-South Pacific Bureau of Adult Education (ASPBAE) was founded in 1964 in Sydney to promote people empowerment through education with the membership of more than 15

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Role of Nonstate Actors in Building an ASEAN Community

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national associations and institutions and individuals representing more than 35 countries. The South-North Project for Sustainable Development in Asia was founded in 1990 by six Asian organizations — AWARE of India, Project for Ecological Recovery of Thailand, PRRM of the Philippines, PROSHIKA of Bangladesh, SAM of Malaysia, WALHI of Indonesia, and NOVIB of the Netherlands — to research and lobby around the themes of agriculture, forestry, and microecosystems. The Asian Cultural Forum on Development (ACFOD) was founded by an international group of Asian intellectuals in 1976 with the purpose of “bringing the grass roots to the international level.” “Fishermen from Thailand, for example, were sent to Malaysia to learn about cockle cultivation from Malaysian fishermen. ACFOD has helped fishermen from seven countries organize an international network” (Fisher 1996, 36). Member countries include Bangladesh, India, Japan, Malaysia, Nepal, the Philippines, Sri Lanka, and Thailand.

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The Asian Council for People’s Culture sponsors regional meetings, workshops, cultural festivals, slides, posters, and training in building networks. Action for Rational Drugs in Asia (ARDA) promotes essential drugs and education about harmful ones. The Asia Pacific Desertification and Deforestation Control Network enables forestry organizations to communicate with each other using a computer-based information system.

These groups cover all aspects of people’s lives and social engagement in Asia. Judging from the networks’ focal points, it is not difficult to imagine a villager in, say, the Philippines feeling a shared destiny with villagers in Indonesia on the basis of common agricultural and/or environmental problems that are brought to their attention by a regional NGO network. Meanwhile, leaders of the member NGOs in the same network cultivated a community of professional concerns and interests with each other. In this sense, Asian countries, including the ASEAN members, are well endowed with the mechanisms through which to generate a grass-roots sense of community.

NOTE 1.

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This list primarily extracted from three documents: Emerging Civil Society in the Asia-Pacific Community (Yamamoto 1995), International Networking (Fisher 1996), and Civil Society in the AsiaPacific Region (Serrano 1994).

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Ethnicity and Religion in Social Development

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3RD PHASE: The late 1970s to the mid1980s, in which there has been renewed concern not only about external factors, especially vulnerability to foreign economic power, but also about threats to indigenous cultural values. Examining the role of religion through the three phases, it can be observed that: 1. Buddhism in Thailand does not seem to have been affected by the shifts of emphasis through the phases. 2. Minority Chinese and Indian religions were affected in the second phase by the weakening of direct ties with China and India. 3. Christianity was favored through the first phase but weakened as controls and restrictions were imposed upon its external links. 4. Islam was purposefully controlled if not suppressed by colonial powers until well into the first phase, but was widely revived in the second phase, and the revival was largely generated from within each country. There is some current interest in whether the resurgence of Islam in ASEAN since the late 1970s was externally stimulated by West Asian influences. I believe it was generated initially by political factors within each country; for example, by feelings of neglect and discrimination in Thailand and the Philippines and by the perceived threat from migrant communities in Malaysia. But today it is also a cultural and spiritual response to rapid economic change perceived as threatening traditional values. I also believe that the ASEAN grouping has been a moderating check on the excesses of radical and revolutionary Islam. ETHNIC IMPLICATIONS Issues of ethnicity can also be analyzed using the same three phases. If local and territorial ethnic minorities still constitute problems today, they can be managed

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internally. Migrant minorities, however, and notably the Chinese, certainly went through the first phase as threats to the new nation-states (when there was fear of communist subversion) to the second phase in which they became internally manageable problems for each country. This transition was the case even in Malaysia, whose Chinese minority was the largest in the region. The question is: has the third phase (of renewed concern about their external links) been reached now that China has adopted an open-door policy? Are there fresh external pressures on the ASEAN minorities of Chinese descent? And the minority question apart, is China an economic threat? Is there cause for alarm? I would suggest that if there is an economic slowdown — or simply the fear of economic stagnation — then China offers growth opportunities that may provide mutual benefits for both the ASEAN states and China. Moreover, while individual ASEAN countries may be justified in feeling concern, ASEAN as a group need have no fears, partly because ASEAN’s economic development is more advanced than China’s and partly because ASEAN’s ethnic Chinese businessmen seem to prefer to advance their fortunes in their ASEAN homes and with ASEAN’s established partners. All the same, it is worth noting the interesting juxtaposition between ASEAN’s containment of Islam in its radical form and as a political force, and ASEAN’s resistance to the pull of China (for ethnic Chinese) by acting in concert and gaining diplomatic leverage with China. POLITICAL IMPLICATIONS My second main comment is with regard to the political implications of religion and ethnicity. The relationship between religious faith and the power of the modern state seems to vary among countries in ASEAN. For example, in countries that have one

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ETHNICITY AND RELIGION IN SOCIAL DEVELOPMENT

WANG GUNGWU

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slam is ASEAN’s largest religion, though it is not predominant in all six countries. Next are Christianity, Buddhism, and the Chinese religions based on varying mixes of Buddhism, philosophy, and folklore, most notable in Malaysia and Singapore. The noteworthy point is that ASEAN subscribes to religious tolerance, and religion has never been allowed to affect the good relations between its members, in which secular considerations are paramount. Problems of ethnicity in the ASEAN countries (except for Singapore, where migrant peoples form the majority) derive mainly from two sources: firstly, from migrant minorities (mainly urban-based Chinese and Indian), whose problems have nothing directly to do with religion; and secondly, from territorially based minorities, whose religious differences with the majority peoples have led some of them to challenge the authority and legitimacy of the nationstate, as in the case of the Moslem populations of southern Thailand and the southern Philippines.

With this background in mind, and before considering the political implications of religion and ethnicity in ASEAN, some historical observations are in order. HISTORICAL PHASES Recent history in the ASEAN region breaks down broadly into three phases: an external first phase, an internal second phase, and an external third phase, summarized as follows: 1ST PHASE: 1950–65, characterized by reaction against external influence, whether in the form of colonial ideas and institutions or neocolonial interference, and by fear of external subversion, especially communism. 2ND PHASE: 1965 to the late 1970s, which saw a shift of emphasis to issues of internal control, of order, of balancing democracy, and of economic development. During this period, ASEAN countries confidently opened themselves to the world economy.

Reprinted with slight abridgement from Wang Gungwu, The ASEAN Success Story: Social, Economic and Political Dimensions, edited by Linda G. Martin (Hawaii: East-West Center, 1987), pp. 40–43, by permission of the author and the publisher.

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clearly dominant faith (as in Thailand, the Philippines, and Indonesia) there has been a trend toward a secular state that acknowledges the diversity of religious groups whether large or small. Such states play down the political role of religion and encourage religions to provide educational services and to support the spiritual life of citizens. The dominant religion is strong, but it is neither dependent on nor does it seek to control the state. The political implications of ethnicity are bound up in three kinds of rights that apply to the ASEAN states. First, there are traditional rights, which were often taken away by the colonial powers. For different ethnic minorities, they included tributary rights, feudal rights, and special trading-port rights for alien or migrant communities, sometimes accompanied by some kind of extraterritoriality allowing these communities to be governed by their own laws and customs. Such traditional rights evolved over centuries and lasted until the onset of World War II. The second kind of rights are the new citizenship rights of republican or na-

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tionalist states. These are largely legal and political rights and, in theory, are equal and nondiscriminatory. But they are often difficult to implement fairly for minorities, especially in the early stages of nationbuilding. In the period of modernization, most ASEAN states experienced these difficulties. The third kind of rights are minority rights, derived more recently from the abstract philosophical idea of “human rights” as a universal phenomenon. Exponents of such rights have sometimes claimed the necessity of international intervention on their behalf, and the resulting debate has had an effect on the question of ethnicity in multicultural societies in many parts of the world. ASEAN has thus far been successful in projecting an image of growth, security, and confidence. Its existence provides a comparative perspective on ethnic and other rights. Its experience with its members’ social, cultural, and political issues has heightened its sensitivity as a group to wider common issues.

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Asia: Al Qaeda’s New Theatre

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ASIA Al Qaeda’s New Theatre

ROHAN GUNARATNA

“Bin Laden does not exist at the moment. But he dominates everything. He may have gone off our screens. [...] But he is everywhere. [...] That is his greatest achievement.” (Jason Burke, “Evil’s Advocate”, India Today, New Delhi, January 7, 2002, p. 39.)

AL QAEDA’S NETWORK IN THE ASIA-PACIFIC REGION As many as three dozen Middle Eastern, Asian and European terrorist groups trained in the Syrian-controlled Bekaa valley in Lebanon in the 1970s and 1980s. In the early 1990s Afghanistan replaced Lebanon as the major centre of international terrorist training, and by October 2001, forty foreign terrorist groups were operating there. The lack of a far-reaching US policy in Asia led the US to abandon war-ravaged Afghanistan after the mujahidin defeated the Soviet forces. As mentioned previously, instead of working with Pakistan to demobilise Afghan

jihad veterans that had won them the Cold War, the US turned its back on Afghanistan and Pakistan in 1989. By 1993 it was even threatening to designate its erstwhile antiSoviet ally, Pakistan, as a sponsor of terrorism, largely because many former mujahidin had been persuaded by Islamabad to fight the Indian security forces in Kashmir. Successive Pakistani governments used the jihadi training and operational infrastructure on the Pakistan-Afghanistan border to arm, train and finance up to two dozen Kashmiri groups. Although there is no evidence that the Pakistani intelligence establishment directly supported Al Qaeda, they did help its associate Pakistani and Kashmiri groups for the specific purpose of using them as proxy military forces to undermine Indian control of Kashmir. (It has long been customary for South Asia’s intelligence agencies — including India’s RAW — to support terrorist groups for short-term political gain, often compromising long-term security goals.)

Excerpted from Rohan Gunaratna, Inside Al Qaeda: Global Network of Terror (London: C. Hurst & Co. [Publishers] Ltd, 2002), by permission of the author and the publisher.

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Whenever Al Qaeda interacted with a terrorist group or a government, its potent Islamist ideology and the irresistible financial rewards it offered saw them either become fully absorbed into the wider Al Qaeda network or fall within its sphere of influence. It was a only a matter of time therefore before the Taliban began to succumb to Al Qaeda’s broader strategic plan. Within a year of Osama arriving in Afghanistan in May 1996, they too had turned against the West and the government in Kabul was offering a safe haven for terrorists. It was a nexus that would have tragic consequences for the people of Afghanistan. The Asian counterparts of Al Qaeda were not as highly motivated, well trained or well led in the early stages as their Arab allies, but with indoctrination, training and leadership they have improved. At the time of writing, Asian members of Al Qaeda account for one fifth of the organisation’s strength. Their leaders are handpicked,

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mostly educated in the Middle East, speak Arabic, unlike the vast majority of Asian Muslims, and were already of a radical bent. Al Qaeda’s Asian core is handpicked from several hundred jihadi volunteers who fought in Afghanistan, including, inter alia, Central Asian, Chinese, Pakistanis, Bangladeshis, Indonesians, Malaysians, Singaporeans and Filipinos. Since the early 1990s, a few thousand Muslims from Central Asia, China and South and South East Asia either trained in Afghanistan or received incountry training in Al Qaeda or Al Qaedaassociate camps. The latter were mostly in the Philippines, Malaysia and Indonesia, and some of those trained in them later travelled to Afghanistan for advanced instruction. On their return home they did not immediately initiate violent political campaigns; instead Al Qaeda retained them as a strategic reserve for future deployment, even establishing a database of their biographical data for the purpose.

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Islam and Society in Southeast Asia after 11 September

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ISLAM AND SOCIETY IN SOUTHEAST ASIA AFTER 11 SEPTEMBER

BARRY DESKER

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hese regional terrorist networks indicate the dimensions of the new security challenges facing Southeast Asia. The transnational al-Qaeda terrorist network will be the major security threat to governments in the region over the next decade. Because of its regional network, Southeast Asia will remain a major centre of al-Qaeda activity. However, the identification of radical fundamentalist Islam with terrorist activity risks the spread of the perception that Islam is the cause of regional terrorism, especially in states where Muslims are minorities such as Singapore, the Philippines and Thailand. In reality, these radical fundamentalist Islamic terrorists represent the extreme manifestation of Wahhabism. Even for Islamists committed to the need to establish Islamic states, the approaches taken will change over time. They will reposition themselves to take advantage of political opportunities while adjusting to a changing social environment. The objectives and goals of an Islamic state will be redefined. In confronting states intent on retaining their existing identities, the

strategies adopted will vary in the years ahead as they have in the past. Terrorist attacks and violent confrontations, public agitation, private resentments and attempts to infiltrate public spaces will occur. A key role will be played by Muslims from diverse backgrounds that will participate in the public debate. The debate within Indonesia sparked by Liberal Islam demonstrates one response to attempts by the Wahhabis to dominate the Islamic agenda. Its salience arises from the wider support provided by the larger community when such activists have moved to take the stage and debate issues. Similar responses elsewhere in the region will help to ensure that the Wahhabis do not emerge as the dominant voices in the Islamic debate. Our discussion has shown that the debate within the Islamic communities in the region continues. Islam is not a monolithic entity within the region. Its believers stretch from secular modernists sensitive to the multi-religious, multi-cultural fabric of societies in the region, inclusivists aware of the accommodation that Islam had made

Reprinted in abridged form from Barry Desker, “Islam and Society in Southeast Asia after 11 September”, Australian Journal of International Affairs 56, no. 3 (2002): 383–94, by permission of the author and Taylor and Francis Limited .

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with existing beliefs when it penetrated the region, to revivalists seeking a return to an Islamic Golden Age and terrorists intent on overthrowing existing regimes and creating a new Muslim state linking all the territories in the region with Muslim majorities. From the perspective of regional order, the inaction of the Indonesian Government despite concrete evidence has undermined existing trends in regional security cooperation. While proponents of ASEAN previously highlighted ASEAN’s evolution into a security community1 recent developments draw attention to the risks of more open borders resulting from ASEAN arrangements to encourage increased intraregional communications, tourism and trade. It is a reminder that the creation and maintenance of a security community is dependent on the recognition by participating states that they need to cooperate when it is a neighbouring state that is threatened. The frictions among ASEAN states following the arrests of radical Islamic terrorists highlights the decline in ASEAN’s cohesion following the expansion of ASEAN to include all ten Southeast Asian states in the 1990’s, the onset of the regional financial and economic crisis and the downfall of the Soeharto regime in Indonesia. Ironically, it was during this period that radical Islamists committed themselves to establishing an Islamic state unifying the Muslim majority territories of

Indonesia, Malaysia, Brunei, southern Philippines and southern Thailand. While Singapore does not have a Muslim majority, the JI activists planning terrorist attacks in Singapore concluded that its existence at the heart of Southeast Asia required Singapore’s incorporation into Darul Islamiyah Nusantara. Even as the original members of ASEAN wrestled with the doctrines of non-intervention and non-interference in a world where the concept of humanitarian intervention has received increasing support, they were challenged by radical Islamists seeking to create a unified Islamic state through the violent overthrow of existing regimes, and heeding calls emerging from Afghanistan, for the establishment of a new caliphate. Such irredentist visions highlight the fragility of the post-colonial states in Southeast Asia. The communications revolution has resulted in Southeast Asians receiving CNN images simultaneously with the rest of the world. Israeli attacks on Palestinian targets and US bombing of Osama bin Laden’s hideouts in Afghanistan are immediately transmitted to the region. Political violence in Europe and the United States is replicated by terrorists in the region. Contrary to the image of strong states treading on the rights of citizens, the reality in Southeast Asia is that the state remains fragile and open to challenge in an era of political instability, economic stagnation and social disruption.

NOTE 1.

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Amitav Acharya, Constructing a Security Community in Southeast Asia (London: Routledge, 2001).

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Islam in Southeast Asia: At the Crossroads

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ISLAM IN SOUTHEAST ASIA At the Crossroads

SHARON SIDDIQUE

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ince the 11 September 2001 terrorist attacks in the United States, a media blitz on terrorism has generally portrayed the world’s one billion Muslims as increasingly homogenous, uncompromising, and radicalized. These post-11 September pundits, who have only recently discovered the Muslim world, ignore historical contexts, ethnic complexities, social motivations, and national aspirations. This is unfortunate because it is certainly not how most Southeast Asian Muslims perceive their faith, or their future. Of course, there have been unsettling revelations about the Al Qaeda network in Southeast Asia being staffed and serviced by local Muslims. However, it is not tenable to argue that there has been a fundamental shift towards radicalism in all Muslim communities throughout the region in just one year. The violence that grabs headlines is perpetrated by a very small minority. Compromise and tolerance still remain the operative mode for Southeast Asian

Muslims. Places in the regions where there are conflicts involving Muslims should not be reduced to a simplistic explanation that it is driven by an Islamic internationale. What is involved are usually complex, longstanding, and often not strictly religious issues. For example, ethnicity also plays a large role in the struggles in Aceh and the Southern Philippines. That said, the media spotlight on the global Muslim ummah (community) has found some resonance with Muslims in Southeast Asia, who are members of this ummah. But one year after 11 September, another trend is emerging. There appears to be a revival of interest in exploring the uniqueness of the region’s religious heritage. This revival has, in part, been catalyzed by negative media coverage, in part by a more general desire to reconnect with the past. A deeper knowledge of Islam’s past in the region may help to lessen the misgivings about the present. Take the following hypo-

Reprinted from Sharon Siddique, “Islam in Southeast Asia: At the Crossroads”, in Regional Outlook: Southeast Asia 2003–04, edited by Russell Heng Hiang Khng and Denis Hew (Singapore: Institute of Southeast Asian Studies, 2003), by permission of the author and the publisher.

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thetical news report. The reader is asked to guess the location, and the date, of the described event: Radical Islamist, Peto Syarif bin Pandito Bayanuddin, has been captured by the authorities. According to a government spokesman, his arrest will herald the final chapter of his violent, bloody, Wahabistinspired rebellion. Introduced to the Wahabist doctrine during a pilgrimage to Mecca over thirty years ago, he has advocated a purist, fundamentalist Islamic reform of Minangkabau society, thus pitting himself against the local traditional elite, as well as the central government. Place: West Sumatra. Correct? Correct. Time: Sept. 2002, Correct? Wrong. Time: Sept. 1837

The incident did occur in West Sumatra, but exactly 165 years ago. Peto Syarif was the birth name of the famous Tuanku Imam Bonjol (1772–1864), who was the leader of the Padri Rebellion (1821–38). He was captured by the Dutch in 1837, and died in exile in Minahasa in 1864. On a pilgrimage to Mecca in 1803, he was so impressed with the strict Wahabi governance of the Holy City that he returned to West Sumatra, determined to reform Minangkabau society, and free it from colonial rule. It is useful to place Imam Bonjol in some historical context. He embarked on his mission well before Raffles even set foot in Singapore. In 1837, the United States was still ten years away from discovering gold in California, and twenty-four years from the outbreak of the American Civil War. Today, Imam Bonjol is revered as a great Indonesian freedom fighter, and national hero. There are three lessons that we can draw from this example, which highlights just how long and complex the region’s encounter with Islam really is. •

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•

•

for centuries — the current situation has clear historical precedents. Many such reform movements were led by charismatic local leaders who studied in Muslim centres of learning in the Middle East and South Asia. Again, there are parallels with the present. Finally, these impulses have enriched, but never supplanted, the Southeast Asian ethnic, social, and cultural contexts.

Southeast Asia has nurtured the great world religious traditions of Hinduism, Buddhism, Islam, and Christianity. Significantly, these religions, and many more, still coexist in relative peace and harmony. This is largely because religion was rarely brought with the sword. Forced conversion was the exception rather than the rule. Instead, the adoption of new cultural and religious influences was linked to the expansion of trade. Charismatic leaders have always been a feature of Southeast Asian life. The Sufi quest for an insan kamil (a perfect man) has a rich history in the region. Many charismatic Muslim leaders during the colonial period were referred to as ratu adil (just king), which was a Hindu concept transferred to Islamic reformers. These anticolonial leaders, like Imam Bonjol, were named as national heroes after independence, and Indonesian schoolchildren are very familiar with their stories. The interesting phenomenon to note is that the men who were advocating these ideas were seeking to reform their own societies, rather than to transform them into replicas of the Middle Eastern societies. Thus, Southeast Asian Muslims recognize a past that is distinctly regional, although it is also a part of the larger canvas of Muslim history. This Muslim world of Southeast Asia was profoundly affected by colonialism.

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The tale of Imam Bonjol is a case in point. Colonialism also facilitated the globalization of Islam because Sufi missionaries travelled freely throughout the British empire. An example was Maulana Abdul Aleem Siddiqui (born in Northern India in the late nineteenth century) who founded various missionary centres in South Africa, Singapore, British Malaya, Mauritius, and Canada. The Malauna and other early twentieth century reformers also focused on the need to bring Islam back into the historical mainstream. These reformers argued that it was possible to embrace modernity — in the form of science and technology — without accepting Western cultural values. Much discussion was devoted to harmonizing modernity and Islam, and to making a clear distinction between Westernization and modernization. These reformist initiatives were often connected to progressive Muslim traders, who funded publications that they themselves contributed to. This Muslim world’s engagement with the West has never been hegemonic. There is an Islamist theocratic, messianic, vision that rejects the possibility of accommodation with the forces of (Western-led) globalization. As such, Islamists have little to contribute to the struggle to fashion appropriate development models for the Muslim world in the twenty-first century. There are those who accept the possibility of accommodation with the West and, among them, is a diversity of views rather than a belief in a single, pan-Islamic development model. Muslims have begun consciously to fashion development models within their own cultural spheres, and at the same time, establish working relationships with other players in the game of global development. Accommodation is something with which Southeast Asians have a long experience. In addition, trade and commerce, cornerstones

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of twenty-first century globalism, are familiar territory to Southeast Asian Muslims. The events of 11 September have placed the diversity in sharp focus. The U.S.-led “war on terrorism” has continued this process. In Southeast Asia, three broad groupings of Muslim opinion have emerged immediately since the 11 September tragedy: • • •

Vocal critics of U.S. foreign policy Staunch supporters of America The silent majority, who are waiting

It is becoming apparent that the spotlight on the Muslim world — including the Muslim world of Southeast Asia — will not quickly dim. How heavy will the American military intervention be in regions that the U.S. government deems to be infiltrated with terrorists? Which countries and which groups will be identified as harbouring terrorists? Which countries will become involved, and on which side of the conflict? Equally important, will violence and terrorist attacks perpetrated by Muslim extremist organizations increase, and with what consequences? Southeast Asian Muslims are caught at the crossroads. From the perspective of the silent majority, support for the U.S.-led campaign against terrorism weighs on the one hand, while sympathy for Muslims facing the American action counterbalances on the other. How Muslim public opinion eventually swings depends on America’s response to the attacks on its people and resources — that is, how far it decides to take the “war on terrorism”. This depends on how much Muslim extremists are able to escalate the violence. Southeast Asia’s Muslims have successfully weathered similar storms in their long history. Therefore, one can be bullish on their ability to weather this one.

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40.

BUILDING KNOWLEDGE SOCIETIES ASEAN in the Information Age

RODOLFO C. SEVERINO

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uilding knowledge societies” is, in fact, a subject on which ASEAN itself has placed the highest priority. There are, at this time, few things more urgent or more important for ASEAN — or for any nation or region — than building “knowledge societies.” ASEAN’s leaders have recognized this. In the plan of action that they adopted in Hanoi in December 1998, the leaders called for the establishment of the ASEAN Information Infrastructure, or AII. For a start, they called for agreements among ASEAN members “on the design, standardization, inter-connection and interoperability of Information Technology systems by 2001.” In the same plan of action, they resolved to “(d)evelop the information content of the AII by 2004.” In compliance with these orders, ASEAN formed a working group on the AII, which put together a number of recommendations and submitted them to the ASEAN Economic Ministers in October last year. The core recommendation was the concept of e-ASEAN. According to this concept,

e-ASEAN would pull together and integrate ASEAN members’ efforts in information and communications technology while maintaining links with the Global Information Infrastructure. It would involve inter-connectivity, with its own high-speed backbone. It would seek to harmonize policies, regulations and standards in information and communications technology within ASEAN. It would place priority on the use of that technology for tourism, trade, education and employment. It would pay particular attention to cooperation in the development of human resources for information and communications technology. It would be government-led but private sector-driven. The ASEAN Economic Ministers adopted the working group’s recommendations and agreed to organize a combined publicprivate sector Task Force to carry out the recommendations and bring e-ASEAN to reality. The task force is to be headed by Mr. Roberto Romulo, former Foreign Minister of the Philippines, who once headed IBM’s regional operations in Southeast Asia.

Reprinted from Rodolfo C. Severino, “Building Knowledge Societies: ASEAN in the Information Age”, in ASEAN Today and Tomorrow: Selected Speeches of Rodolfo C. Severino (Jakarta: ASEAN Secretariat, 2002), pp. 332– 37, by permission of the author and the publisher.

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Building Knowledge Societies: ASEAN in the Information Age

At their summit in Manila last November, the ASEAN heads of state and government welcomed the launching of e-ASEAN and carried out a dialogue with Mr. Romulo and global and regional leaders of the information-technology industry. They also agreed on “the establishment of a free trade area for goods, services, and investments for the info-com industries under a new e-ASEAN agreement.” They noted the particular usefulness of information and communications technology for education and the development of human skills. Of course, ASEAN’s outlook on the information age, information and communications technology, and knowledge industries goes beyond technology and its applications. It is entirely consistent with the comprehensive and integrated approach of this workshop and of the conference to which it is leading. This project’s title refers to “knowledge societies” rather than to knowledge industries or knowledge economies. The term sends the message that the impact of the information age is not just on industry and the economy but on society as a whole and on people’s very lives. We in ASEAN regard information and communications technology as an amazingly powerful tool. It gives us and our children easier, quicker and broader access to facts and, hopefully, the wisdom of the ages. It immensely helps in education and training and in the acquisition and development of science and technology. It makes production more efficient and trade quicker and less expensive in ways that continue to multiply. It makes travel easier and cheaper. It enables us to render social services more effectively. Information and communications technology offers ASEAN and other developing countries a vital opportunity and means to leapfrog the historical stages of development and bypass the type of industrial revolution that the developed countries had to go through. Through this tech-

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nology, we could telescope the development process. Already, we have seen how technology has greatly increased the productivity of many workers and of whole societies. At the same time, even in its infancy, the presence of the new technology is so pervasive and its impact so deep that whoever masters it comes out ahead in the increasingly competitive environment of a globalized economy. In this light, the sweep of the information age through Southeast Asia presents us also with severe challenges, even threats. The new technology demands new skills, new mindsets, changes in economic and social policies, and shifts in cultural norms. The information revolution poses the danger that those who are already well advanced in these essential conditions — in science and technology, in education, in economic reforms, in modern organization and ways of thinking — will go faster and even further ahead. This means that, if we do not deliberately do something about it, the surge of the information revolution could widen the gap between developed and developing countries, including ASEAN, between the more advanced and less advanced members of ASEAN, and, within each nation, between those groups who can afford access to the new technology and those who cannot. We must ensure, then, that, as we strive to catch up with the more advanced economies, the gap narrows between those who have access to the benefits of technology and those who are in danger of being left out of the information age. All this would require a veritable forced march to acquire and develop technology. This means not merely the ability to use it but the determination to join the great global adventure of expanding the frontiers of technology if we are to be truly part of the information and communications revolution. This would, in turn, necessitate a crash

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program to raise the level of skills of the population as a whole. This is necessary because the creation of a knowledge society depends on achieving a critical mass of people plugged into such a society. We also need to ensure that one group or class does not hog the mastery of and access to technology and thus leave the rest of the people behind. The alternative would be to divide the nation in a potentially dangerous way. The broad upgrading of skills, of course, would need, from the public and private sectors, massive investments in education at all levels, especially for the poor, and, in many cases, the overhaul of the educational sector. At the same time, the political decision must be made to create a policy environment that would foster the development of information and communications technology. This would include the further opening of society to new ideas, wherever it comes from, and the provision of economic and social incentives to encourage the development and use of technology. As ASEAN’s leaders have directed, we are resolved to undertake much of this enormous task together. As in more and more areas of endeavor, we find that, in many aspects of information and communications technology, it is more efficient and effective to work together than as individual countries, making this area a vital one for ASEAN cooperation. The e-ASEAN initiative represents a collective endeavor, bringing together member countries’ efforts in information and communications technology. This is a strategic decision arising from ASEAN’s understanding of the immensity of the challenge and of how the challenge can be met only if ASEAN acts regionally. The Internet represents the new industrial revolution; but while the first industrial revolution took more than a hundred years to unfold, from the invention of the rotary

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steam engine by James Watt to its use in steamships and trains, the new technological revolution would be telescoped into decades or even years. It may well be impossible for a single developing country to cope with the challenge of this new revolution. Thus, e-ASEAN seeks to ensure that developing countries are not left behind by this industrial revolution. In cooperating through e-ASEAN, we will be harmonizing policies, regulations and standards. We will be cooperating in the development of human resources, learning from one another’s experiences and strengths. We will be ensuring the interconnectivity of our communications systems. Here are some specific projects that the Working Group on the ASEAN Information Infrastructure has put forward: a regional backbone, an ASEAN Tourism portal, an ASEAN Trade Link, an electronic network of institutions of learning and libraries, a job bank for the information and communications industry. The Task Force on e-ASEAN will be recommending actions that would bring these and other projects to reality. Cooperation in information and communications technology would not only enable ASEAN to harness that technology more effectively. It would serve the ultimate goal of tying Southeast Asia closer together culturally, socially, economically and politically. In economic terms, like the ASEAN road, power-grid and gas-pipeline networks, the ASEAN Information Infrastructure and e-ASEAN will be a physical bond to tie more tightly together an economy of half a billion people where barriers to trade are already fast being dismantled. Investments would be more strongly attracted to such an integrated economy. Capital would also be drawn by the convenience and efficiency that an inter-connected ASEAN would provide. The very creation of the ASEAN Information

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Infrastructure and of e-ASEAN would offer rich opportunities for investment. The promise of ASEAN cooperation in information and communications technology is clear to ASEAN, the promise of economic dynamism and of an immensely enriched life for its people. So is the challenge. The challenge of upgrading the skills of our people, re-allocating our

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resources, and adapting our cultures according to the demands of the information age. The challenge of ensuring that all the nations in ASEAN and all the people in them contribute to and benefit from the technological revolution. To achieve the promise and meet the challenge is the sum of ASEAN’s vision and mission for the information age.

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ASEAN, THE WIDER REGION AND THE WORLD The Social Agenda CHANDRA MUZAFFAR

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SEAN as a regional organisation does not have a social agenda. It may have some idea of the sort of economic tenets it should follow as it pursues economic prosperity; it may have some notion of the political institutions that should develop within the region; it may have reflected on the collective security arrangements that are needed to protect the sovereignty and integrity of the individual states that constitute Southeast Asia. But Asean has yet to work out a social programme for the region — a programme which will spell out in lucid language the aspirations of Southeast Asians in various spheres of social life related to inter-personal relations, intergender ties, family, community, education, health, welfare, environment and so on. At the heart of this social programme would be a profound concern for the quality of life of the ordinary Southeast Asian. There are certain important prerequisites for an Asean social agenda. Asean as an entity should resolve to eliminate absolute

poverty in the region by the year 2020. This is not an impossible task. A number of Asean states have succeeded in the course of the last two-and-a-half decades to reduce absolute poverty by significant margins. Of course, the challenge of eradicating absolute poverty is a challenge that individual states will have to take up but there should also be at the regional level a comprehensive policy and programme to help the poorer segments of the Southeast Asian community. In other words, the eradication of absolute poverty within Asean should become a regional concern and commitment. There should be an Asean budget operated through the Asean Secretariat for this purpose. The richer states in Asean should be required to contribute a percentage of their Gross National Product (GNP) for the region’s poverty eradication programme. Appropriate structures should be established and personnel assigned at the Asean level for this purpose. Mechanisms should be created

Reprinted in abridged form from Chandra Muzaffar, “ASEAN, the Wider Region and the World: The Social Agenda”, in ASEAN Towards 2020: Strategic Goals and Future Directions, edited by Stephen Leong (Kuala Lumpur: Institute of Strategic and International Studies, Malaysia; and London: ASEAN Academic Press, 1998), pp. 221–24, by permission of the author and the publishers.

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ASEAN, the Wider Region and the World: The Social Agenda

within the Asean Economic Ministers caucus to review the poverty programme from time to time. An Asean poverty eradication programme will not only raise the standard of living of millions of Southeast Asians but will also prevent the growth of two Southeast Asias — one rich, the other poor. The danger of this happening has become all the more imminent with the admission of Laos and Myanmar (and eventually Cambodia) into Asean. Besides, it will strengthen the sinews of solidarity within Asean. A collective effort against poverty would be the most tangible demonstration yet of Asean’s commitment to values such as justice and compassion — values which are fundamental to the illustrious religious philosophies that are part of Asean’s patrimony. Poverty eradication is one — albeit the most crucial — prerequisite for an effective social agenda. Asean should also set as its common goal the provision of piped water, electricity and modern sanitation to all its people by the year 2020. Here again we recognise that it is the responsibility of each and every government in the region to ensure that these basic amenities are available to its citizens but there is no reason why Asean cannot commit itself to such a goal for the collective well-being of Southeast Asians. By the same token, should not Asean aim to eliminate illiteracy in the entire region and allocate financial resources for this purpose through some common fund administered by some central Asean agency? Once the basic needs of all Southeast Asians are taken care of through both national and regional efforts, Asean should try to develop a social agenda which addresses the major challenges facing the different countries in the region. Should

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not Asean as a collectivity examine the problem of environmental degradation which has reached alarming proportions and its consequences for the Asean community? There is perhaps no alternative to a collective approach since some of the more serious environmental problems are truly ‘transnational’. Should not Asean be asking some searching questions about its congested cities with all their attendant ills: squatter colonies, inadequate housing for lower income groups, constant traffic jams, the lack of green ‘lungs’? Should not Asean show some concern for the new economic and social disparities emerging in even some of its most buoyant economies which are threatening to divide society into the ‘Havea-lot’ and the ‘Have-a-little’? Have Asean leaders looked at the impact of this new dichotomy upon social solidarity and upon popular perceptions of wealth and power? Are Asean elites aware of how rapid economic development — which has benefited certain sections of society more than others — has generated adverse consequences for family and community? In fact, the very character of the Asean family has begun to change. In the course of the last 30 years, the family, especially in the Asean city, has been transformed from an extended family to a nuclear family. What does this portend for the future? Are not escalating divorce rates and juvenile crimes, the increasing number of cases of drug abuse and alcoholism, the rapid upsurge in instances of homicide and violent robberies linked willy-nilly to the rapid changes occurring in the Asean region? Should not Asean also be concerned about elite corruption and cronyism — to some extent also a product of massive capital driven development — which is sapping the moral fibre of the Asean community?

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Introduction

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Section

IV

ECONOMICS, MODERNIZATION, AND CRISIS: AFTA AND AFTER

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Introduction

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INTRODUCTION

Sree Kumar

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SEAN’s economic record has been, at best, one of mixed results. In most instances the verdict has been that it could have been better. There had already formed, in the previous decade, a view that expectation and implementation gaps were significant in the group. The addition of new members in the last decade made these gaps more complex and less readily amenable to any attempt at seamless cooperation, partly because of the nature of the consensus decision-making approach, and partly because of the wide disparities in the stages of development among the member countries. Nevertheless, the 1990s saw three major thrusts in economic co-operation — the creation of an ASEAN Free Trade Area (AFTA), inducing greater foreign direct investment (FDI) through deregulation and privatization, and a mixed response to the Asian financial crisis. Each of the thrusts had its own impetus and political drivers, with different member countries having a national agenda of their own. Perhaps the most visible element of ASEAN’s economic co-operation efforts in the last decade was the agreement to create AFTA. Despite the best of intentions in setting forth an ambitious timetable to reduce tariffs over a large spectrum of

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traded goods, the scheme began to falter at the outset as member states sought exemptions and longer periods for continuing protection of specific sectors. But even more delicate in the overall implementation of a tariff reduction scheme was the paucity of institutional measures such as a dispute settlement mechanism (DSM) to address cross-border trade issues. Many of these measures became more concrete and formal after 1995 as impending changes in the global trading regime became apparent. The real pressure to expedite tariff reductions and to create AFTA within a shorter time frame became pronounced after the initial negotiations to form the World Trade Organization (WTO) were underway. The second thrust, that of inducing FDI, had several elements, the most important of which was deregulation and privatization. The wave of market-led reforms took hold in ASEAN just as it had in the rest of the developing world except that in ASEAN it was more closely aligned with trade policy. These reforms were seen as a pillar for supporting AFTA by ensuring that the export-oriented economies of the region would continue to enjoy FDIs to fuel trade and gave life to the idea of creating an ASEAN Investment Area (AIA) in tandem

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Introduction

with AFTA. Privatization and deregulation were seen to effectively remove the hand of the state in several parts of the economy, allowing domestic capital to play a more important role. In order to ensure that FDI continued to enjoy economies of scale in production and to take advantage of relative factor costs, member countries sought to create growth triangles such as the Indonesia-Malaysia-Singapore Growth Triangle (IMS GT) and the IndonesiaMalaysia-Thailand (IMT) GT. Such areas provided the best combination of resources for distributed manufacturing and formed attractive investment locations for both domestic and foreign capital. Yet the record of the growth triangles, with the exception of IMS GT, has been one of limited success because of resource constraints and bureaucratic impediments. While growth triangles, if they had been successful, could have provided a glue to hold AFTA together, the more important determinant of regional investment distribution would have been harmonized investment policies. This has been further aggravated by the diversion of investments to China leaving ASEAN member countries to attract smaller amounts than previously available. The net result of a diverted FDI flow, a weak Japanese economy, and a febrile attempt at forming AFTA has been the need to seek new models of growth away from the exportled example. The search for new models of growth was, however, thwarted by the onset of the Asian financial crisis in 1997. ASEAN’s response to the contagion was, on the face of it, a co-ordinated regional effort. But the reality lay elsewhere on the compass. Member countries had to seek remedies unique to their own problems, leaving others to fend for themselves. Even where assistance was offered it was felt to be too onerous or too close to the demands of the international agencies such as the International Monetary Fund (IMF) or the

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World Bank. Soon after there was a move to create an alternative to the U.S. view, personified by the IMF or the World Bank, by having an Asian Monetary Fund with Japanese leadership. But this was not to be following opposition from the United States and the prevailing view that countries in crisis would then seek an easy way out without attempting to address the deep-seated structural problems in their economy. The Asian financial crisis began in Thailand, one of ASEAN’s member countries, and brought home to ASEAN the fragility of depending on growth and development underpinned by foreign capital flows. The crisis exacerbated the decline in FDI as investor confidence fled the region. The contraction in foreign investment has been further deepened by the growth and attraction of China, the dominant role of India in information technology, and the weakness of the Japanese economy. Perhaps the more painful realization for most of the ASEAN member countries is the failure of the Japanese model of development. So the decade of the 1990s ended with ASEAN seeking a fundamental change in development strategy knowing that export-led growth was no more the panacea promised in the 1980s. AFTA is all the more important now than when it was first mooted. Unless a significant market can be created within the region, offering scale economies to manufacturers, China will continue to dominate investment inflows. In the meantime the technology frontier keeps shifting, and the time to market for products gets shorter, making it all the more difficult to re-engineer the internal economic structures of the member countries. The challenges are becoming more complex, and the political will to forge an ASEAN economic entity continues to wax and wane depending on how different crises are being managed at each juncture.

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The ASEAN Model of Regional Co-operation

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THE ASEAN MODEL OF REGIONAL CO-OPERATION

JOHN WONG

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ore than a decade after the Bali Summit, ASEAN’s achievements in the major area of regional economic cooperation have been uneven and modest. Its trade liberalization program, which lacks sufficient breadth and depth, is still ineffective in terms of restructuring ASEAN’s trade pattern and shifting it toward a greater regional focus, even though some nineteen thousand commodity items are now on the official list of tariff preferences. Results of industrial cooperation as embodied in the AIP and AIC programs are even more disappointing, and only a number of small joint ventures under the AIJV scheme are actually moving ahead. Is the lack of conspicuous success in ASEAN’s economic cooperation endeavors tantamount to a failure for ASEAN itself, as in the case of other ill-fated Third World regional groupings? A proper evaluation of ASEAN’s progress toward regional cooperation must be made

by placing it in the context of the historical circumstances under which ASEAN has evolved — that is, the geopolitical forces that have shaped it and the chronic problems that are inherent in the economic structures of the member countries. It is also not appropriate to pass judgment on ASEAN’s present pace of progress without taking into account its own stated time frame. The ASEAN leaders have all along stressed that economic cooperation is to be realized as a long-term goal, and fluctuation of events in the short run is considered irrelevant to these long-term objectives. As long as the ASEAN institutional apparatus is kept in existence, the option of cooperation is open and the process continues. In any case, it does not cost much to maintain the ASEAN machinery; the ASEAN Secretariat in Jakarta is inexpensive to run compared to many huge international bureaucracies. Hence there is quite a favorable cost-benefit ratio for ASEAN members.

Reprinted in abridged form from John Wong, “The ASEAN Model of Regional Cooperation”, in Lessons in Development: A Comparative Study of Asia and Latin America, edited by S. Naya, M. Urrutia, S. Mark and A. Fuentes (San Francisco: International Center for Economic Growth, 1989), pp. 121–41, by permission of the author.

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Furthermore, ASEAN is already reaping remarkable benefits from its extraregional cooperation activities. Over the years it has been successful in developing a unified perception of the many regional and international economic issues, such as protectionism, that affect it as a group. ASEAN has also developed a framework for regular dialogues with Australia and New Zealand, Canada, the EC, Japan, and the United States in order to improve bilateral relations. In this way, it has learned to yield some considerable external leverage in order to secure a better deal for its common interests. Gains from external cooperation can serve to increase ASEAN’s internal cohesiveness. They can also provide the needed incentive for the group to maintain its operational momentum despite sluggish progress and even despite setbacks in its intraregional cooperation programs. Ultimately, the effectiveness of ASEAN as a regional economic grouping will depend on breakthroughs in its formal areas of cooperation covering the trade and industry sectors. It is here that ASEAN’s past experiences in economic cooperation will be instructive both for ASEAN itself and for other regional groupings among developing countries. It is not possible in this context to go into all the major causes and circumstances that have led to the underper formance of ASEAN’s economic cooperation programs. Many of the underlying causes are well known and have been extensively discussed by ASEAN scholars and officials elsewhere. Here, ASEAN’s past problems in economic cooperation will be examined in terms of two “gaps”: one expectation, the other implementation. The expectation gap. The underperformance of ASEAN’s existing programs can be attributed to the existence of what may be called an expectation gap. Because of structural and policy obstacles, there has

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been a difference between what the existing economic cooperation programs were expected to achieve and what was actually attainable. Both the trade liberalization and the industrial cooperation programs were established to build some measure of regional economic integration. Yet neither has made much progress even though both may be theoretically sound. Apparently these programs could not overcome the structural and policy constraints. The basic structural constraint on ASEAN’s economic cooperation efforts is obvious. ASEAN is one of the world’s few regional groupings that is characterized by vast disparities in the economies of its member countries in terms of size, structure, orientation, resource base, and stages of economic development. Some member countries in ASEAN do not even enjoy physical contiguity with each other. The differences in their economic structures and orientations, as well as in their levels of economic development, are particularly unfavourable to efforts at regional economic cooperation. The less-developed members in the group are usually more inwardlooking in their overall economic orientation, since they are generally preoccupied with such domestic economic and social development problems as poverty, unemployment, and inequality of income. These countries cannot depend on external economic cooperation programs to cope with these problems, at least at the initial stage; rather, they need to devise appropriate domestic policies. The governments of the less-developed members are also reluctant to fully commit themselves to regional economic activities, which are perceived as invariably operating in favor of the more-developed members. Ironically, the more-developed members (which are generally outward-looking and are supposed to capture more gains from the various regional cooperation programs in the short

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run) may not necessarily accord high priority to a particular regional cooperation program either. This is because regional economic cooperation in developing countries can sometimes lead to serious trade diversion, which adversely affects the economically more-efficient members. To tackle the problem of unequal distribution of gains, some regional groupings — the Andean Pact countries, for instance — have devised special treatment for the less-developed members in the group. 1 However, ASEAN has no such provisions. The issue of distributive gains is instead dealt with indirectly, under the consensus mechanism of decision making. It is tacitly assumed that in reaching a consensus, no member country should take undue advantage of the others, and none should feel it is being exploited. Admittedly, this is an inefficient way of dealing with the equity issue, as in actual practice members tend to stall the decision-making process whenever they think their national interests are at stake. This leads to delay in the implementation of regional cooperation programs. In addition, ASEAN has introduced the five-minus-one principle, which allows for negotiations excluding one country if that country prefers to be excluded. It has rarely been applied, however, because of the strong preference for the prevailing consensus principle. Neither of these principles seeks to address the equity issue in a direct and efficient manner; it ultimately requires some kind of redistributive arrangements. The main problem in ASEAN is that its leastdeveloped member is Indonesia, which happens to be the largest country, whereas the more-developed members like Brunei or Singapore happen to be disproportionately small. Small members are inherently limited in their capacity to satisfy the needs of large members in any redistributive exercise.

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Along with these structural constraints, there are a number of self-imposed policy barriers that the ASEAN governments have chosen to erect against their regional cooperative programs. From the start, ASEAN has consciously avoided the term “integration”; all its regional activities are officially referred to as “cooperation,” which is by definition a lower level of regional activity. Some ASEAN governments have expressly stated their reluctance to participate in any substantial market-sharing arrangement as opposed to types of cooperation that involve pooling resources. This not only rules out any direct moves toward a free trade area or a common market, but also sets a natural upper limit on virtually all trade and industrial cooperation activities. As a result, the actual progress of ASEAN economic cooperation has fallen short of common expectations. The implementation gap. A survey of ASEAN’s regional cooperation experience would reveal that some of the programs have had good potential for regional economic integration and yet have failed to achieve anything substantial. This points to the difference between what is achievable and what has actually been achieved, or what may be called the implementation gap. Apart from the structural and policy constraints previously discussed, the various regional economic cooperation programs have underperformed because of a number of technical and administrative problems that have arisen in the process of implementation. To begin with, the AIP would have had greater success if the projects had been selected more carefully and sufficient technical preparation had been carried out beforehand. The first AIP package was hastily adopted after the Bali Summit without careful deliberation or a feasibility study. Sound preparatory work would have revealed the numerous practical problems

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inherent in Thailand’s soda ash project, as well as the duplication in Indonesia of the designated diesel engine project for Singapore. Singapore had to withdraw hastily from the diesel engine project, and Thailand took years to complete its feasibility study on the soda ash project, only to abandon it later. Proper technical preparation not only would have avoided the political embarrassment caused by the scrapping of some AIP projects but also could have reduced the many difficulties encountered at the implementation stage. To set up any new industry, a host of basic industry-specific problems pertaining to optimal location, infrastructural support, raw materials supply, labor availability, and pricing and market arrangements first have to be sorted out. It has been argued that if all these details had been dealt with at the beginning by the ASEAN leaders — who from the outset stressed that final approval would be given only to projects that were economically viable — the whole AIP package might not have been launched at all. There are many industries in the ASEAN region that could not be competitive at world market prices even if all the national markets in the region were fully integrated. None of the present AIP projects would have passed such a stringent market test. This inability to compete in world markets in many industries despite full regional integration also explains why it is so difficult for regional groupings to come up with a viable package of industries to achieve regional integration — a package that would yield optimum resource allocation on a regional basis and yet satisfy the various national objectives of the individual members. If tradeoffs must be made between economics and politics or between efficiency and equity for the sake of fostering the larger cause of regionalism, these decisions would best be made at the highest level by the political leadership. Such a procedure would be preferable by

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far to letting indecisive bureaucrats chip away at the problems in their endless rounds of meetings. This leads to the second aspect of administrative constraint, which involves the critical role to be played by ASEAN’s bureaucrats. It has been the practice of ASEAN political leaders to concern themselves only with the broad principles of the regional programs while leaving implementation to officials of the individual governments. These bureaucrats, though technocratically competent, tend to be overly cautious and averse to taking risks — unlike the business leaders, who have a keen sense of the market and are capable of perceiving prospective gains in the longer run. In the business world, successful new enterprises are normally launched on the basis of entrepreneurial decisions, but seldom in a bureaucratic way. Nor can bureaucrats match politicians in their ability to develop a vision and make bold decisions on larger issues and for the longer term. Not surprisingly, most ASEAN projects have been stymied in the implementation process as the bureaucrats struggle to balance the minutest costs and benefits and jealously safeguard national interests. Such a defensive approach is hardly conducive to the innovative decision making that is required to initiate a major regional project. The bureaucratic decision-making process is intertwined with complicated institutional arrangements covering the operation of all the regional cooperation programs. Although the ASEAN Secretariat, which functions only as a coordinating body, has not yet developed into an unwieldy structure, it is already accompanied by a web of working committees, expert groups, ad hoc working groups, and other subsidiaries. The complicated institutional structure, when coupled with the bureaucratic decision-making processes, has combined to cause delays in the implementation of regional programs.

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CONCLUSION Regional economic cooperation in ASEAN, as in many other regional groupings of developing countries, is destined to be a long, laborious process. In a microeconomic sense, ASEAN’s existing economic cooperation programs could considerably enhance their operational effectiveness and improve their performance standards if some of the administrative and technical

constraints were removed and the key problems were properly addressed. However, the chances of substantial progress still depend critically on those of a more favorable macroeconomic environment, which in turn depend on the continuing economic growth and development of ASEAN. In the final analysis, economic development remains the most effective technique of achieving regional economic cooperation.

NOTE 1.

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For a more detailed discussion of the comparative experiences of ASEAN and the Andean Pact, see Wong (1986).

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43.

THE ASEAN FREE TRADE AREA The Search for a Common Prosperity

LEE TSAO YUAN

T

he Association of South East Asian Nations (ASEAN) entered the decade of the 1990s faced with two new political challenges. The fall of the Berlin Wall in 1989 and the end of the Cold War meant that security issues would, in most parts of the world, no longer be of paramount importance. Instead, economic issues have moved to the top of the global agenda. At the same time, the signing of the Peace Accord in Paris in 1991 heralded the impending solution to the Cambodian problem, which had dominated discussions in ASEAN capitals and in New York for more than a decade. These two factors led to a fundamental re-thinking of strategy for ASEAN co-operation. The search began for a new glue which would be the focal point for ASEAN unity. While it is now widely acknowledged that, in the 1970s and 1980s, the raison d’être for ASEAN co-operation was political, a

consensus began to develop that the new raison d’être for ASEAN co-operation in the 1990s and beyond had to be economic. In addition to the political factors mentioned above, developments on the economic front, both external and domestic, also contributed towards this change of mind-set. Externally, the prolonged delay in concluding the Uruguay Round of GATT negotiations which had begun in 1986 created a climate of uncertainty over continued global trade liberalization and market access. In this environment, the creation of the Single European Market and negotiations towards a North American Free Trade Area (NAFTA) raised the spectre of a protectionist world divided into trading blocs. At the same time, two new sources of competitive challenge to ASEAN emerged in the form of the possible diversion of investments away from ASEAN. The first was Mexico, because of NAFTA and its free

Reprinted in abridged form from Lee Tsao Yuan, “The ASEAN Free Trade Area: The Search for a Common Prosperity”, Asian-Pacific Economic Literature 8, no. 1 (May 1994) (Canberra: Economics Division. Research School of Pacific and Asian Studies, Australian National University, 1994) by permission of the author and the publisher.

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The ASEAN Free Trade Area: The Search for a Common Prosperity

access to the USA, ASEAN’s largest export market. The second was the marketization of the socialist economies of China and Vietnam which, together with their low-cost labour and land, made these economies attractive, both as production locations for export and for the domestic market. Economically, therefore, ASEAN faced two new challenges. The first was that of sustaining ASEAN’s economic competitiveness, and the second, of ensuring continued market access to ASEAN’s major markets in the USA, Japan and Europe. Both were essential for sustained rapid economic growth in ASEAN. Internally, the rapid economic development that had been achieved since the mid-1980s gave the ASEAN countries a newfound confidence that they could meet the competitive challenges that came with increased liberalization. Indeed, it was these very same liberalization, deregulation and privatization measures that attracted the wave of foreign, especially Asian, investment, sparked off an unprecedented growth in the manufacturing and financial sectors, and resulted in ASEAN becoming the fastest growing region in the world. The old fears that Singapore, the most developed of the ASEAN countries, would gain most from intra-regional trade liberalization subsided as Singapore began to compete in the higher cost, higher value added market segments, and more successful local companies emerged in the other ASEAN countries. The coincidence of factors, external and internal, political and economic, made the timing right for the Fourth ASEAN Summit Meeting in Singapore in January 1992. The Heads of Government/State signed a historic declaration to achieve an ASEAN Free Trade Area (AFTA) within fifteen years. Considering that economic co-operation efforts in ASEAN had never made much headway in the past, the agreement to

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proceed with AFTA constituted a milestone in ASEAN economic co-operation.1

AFTA: THE CHALLENGES AHEAD ASEAN faces major challenges ahead with regard to AFTA. The CEPT scheme needs to be implemented efficiently and expeditiously. The original intention, announced at the Singapore Summit, was for implementation to begin on 1 January 1993. There have, however, been some delays. The AFTA Council of Ministers, established during the Summit to oversee the implementation of the CEPT scheme, did not hold its inaugural meeting until September of 1992, and by its third meeting in December 1992, one month before the 1 January 1993 implementation date, only tentative lists of product inclusion and temporary exclusions were exchanged. Although some countries did reduce tariffs in early 1993, the CEPT Products List was released only in November 1993 after confirmation by the ASEAN Economic Ministers meeting in October 1993. This delay has caused some degree of disillusionment, as witnessed in such phrases as ‘too little, too late’ (Business Times, 6 January 1993) and ‘market or mirage’ (Far Eastern Economic Review, 15 April 1993). The initial announcement of an AFTA at the Singapore Summit was greeted with much jubilation in the ASEAN capitals. Some of this jubilation has since been muted, and indeed, turned into scepticism as to the ability of governments to over-ride the objections of politically powerful lobby groups which would be adversely affected by the tariff reductions. In light of this initial delay, it is all the more important that implementation in the future be on time. There is some cause for optimism. The ASEAN Economic Ministers meeting in October 1993 has put AFTA firmly back on

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track, and some real progess in implementation has been achieved. All countries have begun to offer concessions beginning on 1 January 1994. The Inclusion Lists account for a large majority (78–98 per cent) of the total tariff lines of member states, including some agricultural products, although these are not strictly in the CEPT scheme. Moreoever, the conditions for exchange of concessions build in an incentive to lower tariffs quickly to 20 per cent and below in order to automatically enjoy tariff concessions by other countries. Nevertheless, much more needs to be done in terms of broadening the product coverage, speeding up the timeframe of tariff reductions, and achieving concrete results in the reduction of NTBs. For example, automobiles, a sector which has good production potential and the ability to create a network of supporting industries, is on the Temporary Exclusion List of all member countries. Although the CEPT scheme does provide for the elimination of NTBs by member countries on a gradual basis within a period of five years after the enjoyment of concessions applicable to the CEPT products, concrete progress in this area, including schedules of reductions, is urgent. There is, at present, insufficient knowledge regarding the short and long-term effects of AFTA on individual member states and on the region as a whole. It is important for ASEAN governments to invest in knowledge accumulation, in order to formulate enlightened policies. Since AFTA’s objective is to improve the investment competitiveness of the ASEAN region, details regarding the CEPT scheme and AFTA as a whole need to be widely circulated, particularly to the business communities, in ASEAN as well as in the rest of the world. In other words, just as individual countries have active and focused investment promotion programs domestically

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and abroad, a similar ASEAN investment promotion program, to highlight the opportunities available with AFTA, would be very useful in helping to achieve the objective of increased investments.

AFTA IN THE CONTEXT OF ASEAN CO-OPERATION Where does AFTA fit in the broader context of ASEAN co-operation? Is AFTA the new glue for ASEAN? As mentioned in the introduction, in the 1970s and 1980s, the focal point of ASEAN co-operation was primarily political. In the 1990s, I believe that ASEAN cooperation has broadened to comprise a two-track approach. Political and security issues are still important, and constitute the first track. The ASEAN Regional Forum, to be held in Bangkok in July 1994, is an important first step in the search for a collective security arrangement in this region. In light of a decreased US military involvement and the potential flash points that still exist, there will, no doubt, be more confidence-building measures. The second track comprises economic cooperation, the centrepiece of which is AFTA. Although there have been a number of economic co-operation measures in the past, the CEPT scheme is, by far, the most comprehensive and the most important. There are, in addition, other economic cooperation measures, the most notable of which are the subregional arrangements such as the Johor-Singapore-Riau Growth Triangle and the Indonesia-MalaysiaThailand Growth Triangle (Lee 1991b; Toh and Low 1993). Since the beneficial effects of AFTA are likely to be felt only in the long term, the Growth Triangles, which are smaller and hence more easily implemented, are likely to have more immediate positive effects.

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The ASEAN Free Trade Area: The Search for a Common Prosperity

There is some discussion as to whether free trade areas, which by definition lower trade barriers on a preferential, discriminatory basis, are becoming out-moded and less desirable as a trading arrangement.2 This argument is based on the view that unilateral liberalization on a nondiscriminatory, MFN basis, is preferable, especially with the impending conclusion of the Uruguay Round. Furthermore, it was unilateral liberalization that provided the impetus for the growth spurt in ASEAN since the mid-1980s. Free trade areas also have trade creation/trade diversion effects, and non-ASEAN countries may worry about the effects of intra-ASEAN trade liberalization on their ASEAN markets. While there is a strong case for this view, the answer in defence of AFTA is that it should be seen as an intermediate step in the process of gradual liberalization. This intermediate phase, where internal tariffs are lowered at a faster pace than external tariffs, affords ASEAN businesses some degree of protection while at the same time increasing the competition from other ASEAN businesses. This encourages the

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development of ASEAN businesses, along infant industry lines, on a regional scale. AFTA can also be viewed as a source of additional external pressure on individual member countries to adopt accelerated liberalization programs. The CEPT-AFTA scheme is GATT-consistent in the sense that it is outward-looking and does not seek to raise trade barriers against non-ASEAN economies. ASEAN has notified GATT of this scheme, in accordance with Article IV on Trade and Development (ASEAN Secretariat 1993:9). In a world which is increasingly focused on economics, AFTA can give ASEAN renewed credibility in global and regional forums, provided substantive progress is achieved.3 For example, in the APEC (AsiaPacific Economic Cooperation) forum, ASEAN as a grouping can provide a useful counter-weight to the economic giants, the USA and Japan, and in future, China. The idea of the linking of two free trade areas, NAFTA and AFTA, has also been floated, as a means of enabling ASEAN products to have continued access to the important US market.4

NOTES 1. 2. 3. 4.

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See also Lim (1992), Langhammer (1992) and Lee (1991a). See, for example, Professor Mohamed Ariff’s inaugural lecture on ‘AFTA — Another Future Trade Area?’, reported in the New Straits Times, 4 February 1994. See also Elek (1992). For more analyses on ASEAN in the global context, see the papers written for the Regional Symposium on ASEAN and the Pacific, September 1991, and published in Ariff and Tan (1992). Remarks attributed to Dr Supachai Panichapakdi, Deputy Prime Minister of Thailand (Business Times, 28 December 1992).

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44.

CO-OPERATION AND INSTITUTIONAL TRANSFORMATION IN ASEAN Insights from the AFTA Project HELEN E. S. NESADURAI

NATURE OF THE CONSTITUTIONAL DOCUMENTS Apart from the initial agreements made among the ASEAN governments in 1992 that launched AFTA and the Summit Declarations of 1995 and 1998, all other agreements signed between the ASEAN member governments are formal and binding, requiring domestic ratification by national legislatures (Table 1).1 Table 1 shows a progressive increase in the level of institutionalisation in ASEAN/AFTA when focusing on the nature of the constitutional documents underpinning AFTA. The initial AFTA agreements of 1992, the Framework Agreement and the CEPT agreement containing ten articles provided only general guidelines on tariff reduction schedules, with few specific details. The CEPT agreement as it was originally designed allowed enormous flexibility in tariff liberalisation. Senior officials subsequently worked out implementation details during the course of 1992. These

were detailed in three documents, the Operational Procedures for CEPT, Rules of Origin for CEPT, and Interpretative Notes to the Agreement on the CEPT Scheme for AFTA.2 Moreover, protocols on procedural matters were also adopted, notably on dispute settlement in 1996, on notification procedures in 1998, and on modification of CEPT concessions in 2000. The point to note is that after 1995, the constitutional documents pertaining to AFTA became formal and binding on signatories, while the level of detail provided also increased. It is clear that there has been a progressive institutionalisation of AFTA since 1992 as far as the nature of the constitutional documents is concerned. While vaguely worded initial statements of intent in the form of Framework Agreements were initially adopted, these were followed by negotiations to firm up commitments and obligations of participants. Contrary to popular perception, this approach to AFTA — cynically dubbed Agree First Talk After — is not unique. It is

Reprinted in abridged form from Helen E. S. Nesadurai, “Cooperation and Institutional Transformation in ASEAN: Insights from the AFTA Project”, in Non-Traditional Security Issues in Southeast Asia, edited by Andrew T. H. Tan and J. D. Kenneth Boutin (Singapore: Select Publishing and the Institute of Defence and Strategic Studies, 2001), pp. 197–226, by permission of the author and the publishers.

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TABLE 1: Nature of the Constitutional Documents Agreements (signed)a

Degree of Type of Formalityb Commitmentsc

Form of Agreementd

Singapore Declaration (28-1-92)

Informal

Not applicable

Statement of Intent

Bangkok Declaration (15-12-95)

Informal

Not applicable

Statement of Intent

Hanoi Declaration (16-12-98)

Informal

Not applicable

Statement of Intent

Framework Agreement on Enhancing Economic Cooperation (28-1-92)

Informal

Not clearly stated

Vague; Few specifics

Agreement on Common Effective Preferential Tariff (CEPT) Scheme for AFTA (28-1-92)

Informal

Not clearly stated

Some details provided

Protocol to Amend the Framework Agreement on Enhancing ASEAN Economic Cooperation (15-12-95)

Formal

Binding

Completion period set at 10 years; Allows accession of new members

Protocol to Amend the CEPT Scheme for AFTA (15-12-95)

Formal

Binding

More details provided than original agreement

Protocol Regarding the Implementation of the CEPT Scheme Temporary Exclusion List (23-11-2000)

Formal

Binding

Detailed procedures provided on modification of CEPT concessions

Protocol on Dispute Settlement Mechanism (DSM) (26-11-96)

Formal

Binding

Detailed procedures provided

Protocol on Notification Procedures (8-10-98)

Formal

Binding

Detailed procedures provided

Protocol on the Special Arrangement for Sensitive and Highly Sensitive Products(30-9-99)

Formal

Binding

Substantive targets and procedures outlined

ASEAN Framework Agreement on Services (FAS) (15-12-95)

Formal

Binding

Statement of Intent

Protocol to Implement the Initial Package of Commitments under ASEAN FAS (15-12-97)

Formal

Binding

Commitment details provided in annexes

Protocol to Implement the Second Package of Commitments under the ASEAN FAS (16-12-98)

Formal

Binding

Commitment details provided in annexes

Framework Agreement on the ASEAN Investment Area (8-10-98)

Formal

Binding

Statement of Intent, providing procedures for future negotiations

a

b c d

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Other agreements signed but excluded from this table are agreements on intellectual property rights, facilitation on goods in transit within ASEAN, industrial cooperation, customs harmonisation, electronic commerce, and mutual recognition arrangements. Ratification is required for formal agreements; informal agreements do not require ratification. Whether binding or non-binding. Whether detailed or vaguely worded/statement of intent. All agreements/protocols relating to AFTA and economic cooperation are available from the ASEAN Secretariat website at www.asean.or.id

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an approach commonly adopted in international agreements. As Christer Jonsson and Jonas Tallberg note, many international agreements are developed from general framework agreements that become increasingly specific protocols through a sequence of bargaining processes.3 For instance, in the case of the European Free Trade Area (EFTA), the initial Stockholm Convention establishing EFTA in 1960 was an open agreement whose details were filled in later, a striking parallel to AFTA.4 Global cooperation in services negotiated under the Uruguay Round of GATT initially took the form of a broad framework agreement signed in 1993, which outlined only generalised commitments to negotiate on services and lacked specific details. It was only subsequently that a series of detailed negotiations and hard bargaining in different services categories were conducted to try and obtain specific commitments and other details on global services liberalisation. Similarly, the Montreal Protocol on Substances that Deplete the Ozone Layer was signed in 1987, following two years of negotiations to flesh out the initial framework agreement concluded in 1985, which set out the broad commitments to reduce emissions. DECISION-MAKING PROCEDURES Consensus decision-making operates in AFTA at all levels, resulting in a weakly institutionalised AFTA as far as this dimension is concerned. A simple majority voting procedure is, however, incorporated within the settlement procedure outlined in the Protocol on DSM. In the event that a panel is established by the Senior Economic Officials Meeting (SEOM) to examine a dispute, the SEOM is to make a ruling on the panel’s report based on a simple majority vote. Thus far the DSM has yet to be invoked, with member

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governments preferring to engage in negotiations among themselves to resolve disputes. MODALITY OF COORDINATION ASEAN member governments have been engaged in the progressive tightening of rules and procedures in AFTA since 1992, but especially in the period after 1995. These rules and procedures cover a range of issues, including how to conduct future negotiations, schedules for tariff liberalisation, modification of concessions already made, dispute settlement and notification procedures, emergency safeguards, and how to treat exemptions. Substantive policy targets and procedural rules were made more transparent, while new rules and procedures were introduced where previously none existed. While flexibility continues to be a feature, the conditions governing flexibility were made more transparent and stringent. Clearly AFTA has undergone a gradual process of institutionalisation through rule building since its inception. Strengthening Rules and Procedures: General CEPT Implementation Although some policy targets were initially indicated in AFTA for the liberalisation of goods trade, these were not clearly specified, with individual member states able to determine their respective rates of reduction within the end tariff rates and the 15-year time period stipulated in the original CEPT agreement. Annual tariff reduction schedules were thus nationally rather than jointly determined. The starting date for tariff reductions could be later than 1 January 1993 provided the target dates were reached on schedule. Moreover, no clear procedures governed the treatment of exclusions.

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In 1994–95, ASEAN member governments undertook to introduce and/or tighten rules and procedures for the CEPT. First, the target date for AFTA was set at 2003. Second, rules and procedures governing the temporary exclusion list were tightened and stipulated that member governments would have to transfer on an annual basis 20 percent of the items in the temporary list to the CEPT inclusion list between 1996 and 2000. Where previously the temporary exclusion list was only to be reviewed in 2000, the amendments meant that the list would effectively cease to exist in 2000, when all products, except those in the General Exception List, 5 would be subject to AFTA tariff liberalisation.6 Strengthening Rules and Procedures: Unprocessed Agricultural Products The ASEAN member governments also undertook to formally tighten rules and procedures for the temporary exclusion of unprocessed agricultural products by signing a protocol on sensitive and highly sensitive agricultural products in September 1999. 7 The protocol stipulates that the original six ASEAN members are to begin phasing agricultural products on their sensitive lists into the CEPT scheme between January 2001 and January 2003. The deadline is 2010 when tariffs on these products have to be at the 0–5 percent level. Highly sensitive products are to be phased in between January 2001 and January 2005, but to be completed by January 2010 although the end tariff rates could remain at a maximum of 20 percent. Indonesia, Malaysia and the Philippines were the only countries to submit a list of highly sensitive products, essentially rice and rice-related products. They were allowed the flexibility to determine the final tariff rates for highly sensitive products although the protocol capped this at 20 percent.8

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Establishing Procedures for Dispute Settlement The 1992 CEPT agreement did not include any mechanism for dispute settlement, only specifying in Article 8 that member states should try to amicably settle any disputes arising from implementation of AFTA through consultations. In November 1996, ASEAN member states adopted a protocol on DSM. Comprised of 12 articles, this protocol specifies in some detail the procedures that member governments need to follow in the event of a dispute. Five stages in the dispute settlement process were detailed, consultation, elevation of dispute to the SEOM, appeal of SEOM ruling to the ASEAN Economic Ministers (AEM), implementation of decision of the SEOM or AEM, and compensation or suspension of concessions. While the protocol encourages consultations between disputing parties to find an amicable solution as in the 1992 agreements, the protocol specifies in some detail the procedures under which consultations are to be carried out. The protocol also allows for the formation of a panel to hear disputes, specifying the duties and obligations of the panel, including the maximum period allowed for panel deliberations. The protocol also specifies how panel results are to be treated and the procedures for appeal. Thus far the DSM has yet to be invoked, although a number of disputes have arisen in the course of AFTA. ASEAN member states have preferred to address these disputes, most notably in agriculture and most recently in automobiles, through diplomatic consultations and bargaining. Senior officials from Indonesia, Singapore, Thailand and Malaysia interviewed between July and September 2000 reiterated that invoking the DSM could jeopardise political relationships in ASEAN, something that all

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member governments wished to avoid. Nevertheless, the DSM was established to at least make available a framework of procedures and rules in the event it became needed. Although the ASEAN preference for diplomatic consultations to resolve disputes seemingly reflects the ASEAN cultural preference for diplomacy over legalistic forms of cooperation, the cultural argument should not be exaggerated. Kahler notes that this preference exists in many international forums. 9 Again, the European experience in EFTA is strikingly similar. Although a ministerial council had been established in EFTA to rule on disputes between member states, only very minor conflicts were brought to the council for resolution. Major disagreements between EFTA member states were settled bilaterally or multilaterally through consultation so as not to jeopardise the political relationships between these states.10 Specifying Notification Procedures Prior to 1998 when a protocol on notification procedures was adopted, there were no specific procedures for notification. This protocol details member states’ obligations if they intend taking any measures that may nullify or impair any benefit accruing to any other member state directly or indirectly under any ASEAN economic agreement. The protocol does not, however, apply to actions taken under the emergency or safeguard clauses in the CEPT agreement. Its adoption creates a more predictable and rule-based AFTA, as member states and economic actors can now be warned in advance of possible changes to AFTA concessions. Member governments decided to adopt such a procedure in response to concerns that some countries had occasionally modified or withdrawn their AFTA concessions without informing other members, thereby creating problems for firms in the aggrieved states who were

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unaware of the alteration. For instance, Indonesia raised its import tariffs on petrochemicals in 1996 from 5 percent to 40 percent without informing the ASEAN Secretariat as required under the CEPT agreement.11 Introducing Procedures for the Modification of CEPT Concessions The ASEAN economic ministers signed a protocol in November 2000 that provides rules and procedures to govern a more flexible implementation of the CEPT. The protocol enables member governments facing real economic difficulties to delay the transfer of a product from the temporary exclusion list to the inclusion list or to temporarily suspend concessions on products already transferred to the inclusion list. Modifications are, however, limited to the final tranche of temporary exclusion list products required to be moved to the inclusion list by January 1, 2000. The protocol also provides for compensatory adjustment from the offending party to other members on a most-favoured nation (MFN) basis. The ASEAN protocol is closely based on Article XXVIII (Modification of Schedule) of the GATT 1994. It was developed in response to Malaysia’s request that it be allowed a two-year delay in shifting automobiles onto the inclusion list and subjecting them to CEPT tariff reductions. NATURE OF COORDINATION Decision-making, monitoring and enforcement in AFTA remain decentralised, revealing ASEAN’s preference for intergovernmental mechanisms as opposed to third party or centralised modes of coordination. This approach to cooperation is, however, not unique to ASEAN.12 Decision-making in AFTA occurs at three principal levels, the SEOM, the AEM and the leaders’ summits. Prior to 1995, leaders’

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summits were held infrequently, with only four held between 1967 when ASEAN was formed and 1992. In 1992 at the Singapore Summit, the leaders agreed to hold formal summit meetings every three years. At the Bangkok Summit in 1995, ASEAN leaders agreed to meet annually on an informal basis to help advance AFTA. Thus leaders now meet either formally or informally at least once each year. The AEM meets at least twice annually, once formally and the second time informally. Between July 1998 and June 1999, the AEM, in fact, met six times. The SEOM meet more frequently each year, with 11 such meetings held between July 1998 and June 1999.13 Both the formal and informal AEM as well as the various SEOMs involve serious negotiations, consultations and ultimately decisionmaking on outstanding issues, including implementation issues. The process can be cumbersome and time consuming though, with difficult issues transferred to the higher-level meeting. Nevertheless, there clearly is a commitment to working through problems and outstanding issues in AFTA rather than deferring or avoiding them altogether, a charge often levelled at ASEAN. Monitoring is also carried out in a decentralised manner, with firms and national governments providing the main source of

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information on problems in AFTA. Firms may notify the AFTA units located within each national government or the AFTA unit in the ASEAN Secretariat of any problems they may have experienced with regard to impediments to AFTA. Enforcement is also decentralised, with the SEOM or the AEM the final arbiters on disputes in AFTA. Although coordination in AFTA is carried out in a decentralised manner, nevertheless the inter-governmental mechanisms for decision-making, monitoring and enforcement are well institutionalised rather than being ad-hoc or crisis-driven. At the very least, they provide an institutionalised arena for negotiations and bargaining, which has helped to advance the AFTA process on many occasions. Their presence does not, however, guarantee that the decisions that are made in these different forums will hasten implementation of AFTA. On a number of occasions, these institutionalised mechanisms have served as the arena in which compromises resulting in a lower level of compliance were worked out. Nevertheless, as all ASEAN senior officials and scholars of ASEAN interviewed between July and September 2000 have pointed out, it is unlikely that AFTA could have advanced as far as it has done without these compromises.14

NOTES 1. The Protocol Regarding the Implementation of the CEPT Scheme Temporary Exclusion List signed on 23 November 2000 does not explicitly mention ratification, although Article 12 stipulates that the protocol becomes effective on signing. 2. ASEAN Secretariat, AFTA Reader: Volume 1 (Jakarta: The ASEAN Secretariat, 1993), pp. 40–71. 3. Christer Jonsson and Jonas Tallberg, “Compliance and Post-Agreement Bargaining,” European Journal of International Relations, Vol. 4, No. 4 (1998), p. 372. 4. Victoria Curzon, The Essentials of Economic Integration: Lessons of EFTA Experience (London: Macmillan, 1974), p. 45. 5. Products on the General Exception List are exempted from AFTA on the grounds that their unrestricted trade could endanger national security and public morals or lead to the loss of national historical treasures. 6. Joint Press Statement, Twenty-sixth ASEAN Economic Ministers Meeting, Thailand, 22–23 September 1994.

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7. These categories are distinct from those covering the original products targeted for AFTA, namely manufactured goods and processed agricultural products. 8. The Philippines, however, continues to demand the right to impose a 70 percent tariff on these products. 9. Miles Kahler, International Institutions and the Political Economy of Integration (Washington, D.C.: The Brookings Institute, 1995). 10. Curzon, pp. 51–55. 11. The Bangkok Post (11 July 1997). 12. Kahler, International Institutions, p. 121. 13. ASEAN Secretariat, ASEAN Annual Report 1998–99 (Jakarta: ASEAN Secretariat, 1999), p. 113. 14. Stubbs makes a similar point, although he argues that this was primarily the result of the norm or culture of the “ASEAN way.” See Richard Stubbs, “Signing on to Liberalisation: AFTA and the Politics of Regional Economic Cooperation”, Pacific Review 13, no. 2 (2000): 312. I prefer an interest-based rather than a cultural argument.

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45. AFTA AND THE POLITICS OF REGIONAL ECONOMIC CO-OPERATION

RICHARD STUBBS

THE REDEDICATION TO AFTA’S GOALS There were three levels at which there was cause for concern that AFTA might be derailed. First, at the level of the ASEAN leadership, advocates of the agreement were worried that changes at the top would jeopardize the implementation stage. This fear was highlighted in Thailand when, after the March 1992 elections, the traumatic events of the middle-class revolt of May, and the elections of September, the government of Chuan Leekpai took office and forced a postponement of an AFTA Ministerial Council meeting that was to have taken place in Manila in October 1992. With Anand gone and Chuan’s pro-business government supported by cash-driven politicians back in firm control, Thailand, once AFTA’s sponsor, became much more cautious. Local business interests, which sponsored a number of Chuan’s political supporters; AFTA sceptics; and economic nationalists more generally, began to raise their objections. Concern was also expressed that President Aquino’s successor, Fidel

Ramos, would not be able to hold the Philippines to the original 1992 summit agreement. AFTA advocates were troubled by the fact that Ramos had won power with only 23.4 per cent of the popular vote in the May 1992 elections and that, rather like his predecessor, he was widely thought to lack the political will to assert the strong leadership that such a major foreign economic policy initiative as AFTA required. With two of the six summit signatories gone within twelve months, the region’s commitment to AFTA came into question. The second level at which AFTA could be sidetracked was within the bureaucracies of the key economies. While the agreement had been worked out and agreed to at the senior ministerial levels of the ASEAN governments, the responsibility for implementing AFTA lay with those at the directorgeneral level and below. Many of these individuals had strong economic nationalist instincts (Narongchai and Stifel 1992: 40). It was here that what Jusuf Wanandi, an Indonesian commentator, has described as

Reprinted in abridged form from Richard Stubbs, “Signing on to Liberalization: AFTA and the Politics of Regional Economic Cooperation”, Pacific Review 13, no. 2 (2000): 297–318, by permission of the author and Taylor and Francis Limited .

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the ‘vested interests of the bureaucracy’ were able to exert their influence (Business Times [Singapore], 25 April 1992). As the Malaysian minister for international trade and industry, Rafidah Aziz, noted, with more than 45,000 different tariff lines to be considered the economic nationalists and cautious bureaucrats with links to importsubstitution industries, or sympathetic to small firms seeking protection from large foreign corporations, had plenty of opportunities to delay the implementation process (Business Times [Singapore], 26 May 1993; Straits Times [Singapore], 23 August 1993). Finally, of course, there were the industries and industrial sectors that would be put at a disadvantage by AFTA. A steady stream of the AFTA ‘losers’ came forward during 1992 and 1993. Thailand’s petrochemical industry was one of the first to formally petition its government for exclusion from AFTA, citing unfair competition from more established producers in Singapore. Other sectors of the Thai economy, such as electronic parts and components and plastics products — both on the ‘fast track’ — soon followed suit. At least initially the Thai government was very sympathetic (Straits Times [Singapore], 10 December 1992). In the Philippines the textile — a ‘fast track’ product group — apparel, footwear, and iron and steel industries all thought of themselves as being put at a major disadvantage by AFTA. They appealed to their government for protection (Azarcon and Tecson 1995: 43–4). In Malaysia even the finance minister, Anwar Ibrahim, who was very sympathetic to the liberal reformers’ cause, expressed concern that recently privatized companies might need protection from more advanced competitors. In particular, he noted that with Malaysia developing its own car, the Proton Saga, the automobile industry was in need of exemption from AFTA. A similar dispensation was sought for Malaysia’s petrochemical industry. Like its Thai

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counterpart, it was viewed as being at a major disadvantage in the face of imports from Singapore. And in Indonesia, which was of special importance because it contained over half the population of ASEAN, special protection remained a high priority for the country’s powerful indigenous corporations (Baldwin 1997: 60). In other words there was considerable pressure on the four governments with the largest markets and a tradition of high protective tariffs to go slow or even renege on the AFTA agreement commitments. But, while groups opposed to AFTA began to mobilize, the transformation of the domestic economies of the region and the international changes that had begun to emerge around the time of the original decision to sign AFTA began to exert mounting pressure on the ASEAN governments (Bowles 1997; Bowles and MacLean 1996; Ravenhill 1995). During 1992, annual Japanese FDI to the ASEAN members rose to US$3.8 billion and the total annual inward flow of FDI reached US$14.2 billion. As a result of the wave of FDI that swept through the region, ASEAN’s exports of manufactured goods also continued to grow dramatically. For example, ASEAN exports of manufactured goods to Japan in 1992 increased to 35.1 per cent of all exports to Japan and in 1993 to 40.7 per cent (ASEANJapan Centre 1995: 29). The increase in Japanese investment in the region led to the emergence of a series of networks of parts and components producers linked to assembly plants. This trend was particularly noticeable in the electrical and auto industries (Pasuk 1990: 51–5; Dobson 1993: 40–59). The Japanese, and indeed other Asian companies that operated networks of production, therefore wanted to be able to move their products from plant to plant across borders without incurring too many costs in the form of tariffs or non-tariff barriers. The Japanese government started to use the leverage it had over the ASEAN

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governments, not only because of FDI but also because of the nearly US$2 billion a year in ODA that Japan was providing to ASEAN members (Japanese Government 1992), to push for more favourable foreign economic policies (Hatch and Yamamura 1996). It became clear that the political influence of the export manufacturing sector of the economy was growing. This trend added weight to the arguments of liberal reformers who favoured a dramatic liberalization of regional trade policy. Moreover, the beneficiaries of AFTA, in particular the export industries that would gain access to the new regional market and those industries which would have tariffs reduced on their inputs, began to become more vocally supportive of AFTA. As Busch and Milner have noted, the more a firm is dependent on exports, the less it will favour protectionism in general. Furthermore, ‘states are more likely to act on the demands of exporters and multinationals as these firms gain political clout as they account for a greater share of national income’ (Busch and Milner 1994: 268–9; see also Milner 1988). And the think-tanks which had housed many of the liberal reformers and originated the idea of a free trade area were also gaining in influence as they expanded their areas of research and fed ideas into the key ministries. Fuelled by funds coming in from their own governments and supporters of liberal orthodox economics around the world, these policy think-tanks were able both to provide a strong intellectual base for the process of regional economic liberalization and to build a momentum favouring AFTA among the region’s relatively small group of informed opinion-makers. In addition, the liberalization reforms put in place by the Anand administration in 1991 were beginning to attract interest in Thailand’s stock market and, hence, greater

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amounts of portfolio investment as well as loans from international banks and other offshore investors. With a fall in the percentage of global FDI going into ASEAN in 1992, Thailand’s neighbours saw the advantages of a similar set of reforms. A number of regional governments began actively to seek out portfolio capital and short-term loans to supplement the lagging FDI on which they had become so dependent for rapid economic growth. In Malaysia, for example, Anwar Ibrahim, who became finance minister in 1991 and who was associated with a younger generation of liberal reformers that included businessmen and technocrats, actively promoted a programme of liberalization which paralleled in important ways the programme adopted in Thailand. Clearly, the development of AFTA was seen as an integral part of the liberalization package that the ASEAN members were using to lure global capital to the region. At the same time there were a number of important developments in the rest of the world. First, the Uruguay Round of the GATT, which was completed in December 1993, provided for larger tariff cuts for developing countries and in a shorter space of time than did AFTA. Second, building on the Canada-US Free Trade Agreement which came into effect in 1989, the North American Free Trade Agreement (NAFTA) was signed in December 1992 and came into effect in January 1994. Within ASEAN it was widely assumed that NAFTA would have a trade- and investment-diverting effect that could have an adverse impact on the ASEAN economies. Third, the deepening of regional integration in Europe through the implementation of the Single European Act and the consequences of the Maastricht Treaty gave an added impetus to those who argued that Southeast Asia could not be left behind as the major centres of the world’s economic power gained added strength through regional trade liberalization.

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Finally, within East Asia, China was becoming an increasingly more competitive source of low-cost manufactured goods and, because of its massive and rapidly expanding internal market, a target of FDI. Indeed, the flow of FDI into China went from US$4.9 billion in 1991 to US$26 billon in 1993, an amount that was nearly twice that going into the ASEAN economies (Tan 1996: 3). The competition from China for FDI was of considerable concern to the ASEAN governments who feared that a diversion of investment funds would seriously reduce their rates of growth. The rise of China as a competitor for FDI was seen as a major cause of ASEAN’s percentage of global FDI falling in 1992. International events, then, added to the arguments being advanced by the liberal reformers and put added pressure on the decision-makers in the ASEAN members to make sure that more effective regional economic cooperation took place. Hence, during 1993 and 1994 a series of actions were taken by ASEAN member governments which they hoped would allay the fears of those idversely affected by AFTA. In Thailand, for example, the government set up an 8 billion baht (US$320 million) fund to aid industries adversely affected by AFTA’s provisions. The fund was designed to try to improve the competitive edge of affected industries through soft loans for such measures as plant upgrading, the training of workers, and research into more value-added products. Targeted industries included petrochemicals, electronics and palm oil. Other governments were persuaded by industries to reinforce nontariff barriers or place their industry on the exclusion list (Business Times [Singapore], 14 June 1993). These side payments were negotiated at the same time as governments sought ways to accelerate the overall process of tariff reduction so as to foster increased intraASEAN trade and attract more FDI to the

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region. With mounting pressure to reinvigorate the regional economic cooperation process by accelerating the pace of liberalization and broadening the scope of AFTA, the AFTA Council Meeting and the ASEAN Economic Ministers’ Meeting in September 1994 made a number of important revisions to the 1992 agreement. The revisions included a shortening of the overall timetable from fifteen years to ten years. Fast-track items were to have their tariffs reduced to 0–5 per cent by 2000, and reductions in tariffs under the normal track were to be completed by 2003. Some unprocessed agricultural products were also immediately included in the CEPT scheme. A working group was established to explore how the remaining products in the unprocessed agricultural sector could be included and particularly how to keep the list of excluded ‘sensitive’ agricultural products as short as possible. And it was agreed that members would strive to keep the temporary exclusion list to 7.5 per cent of total tariff lines and each year from 1995 to 2000 transfer 20 per cent of the products from the temporary exclusion list to the inclusion list. By 1995, then, the momentum had clearly swung behind the liberal reformers. Although the suggestion made in July 1995 by the Sultan of Brunei that member states agree to fully implement AFTA by 2000, failed to receive support from member states grappling with recalcitrant domestic business interests, at the summit in Bangkok at the end of 1995 the ASEAN leaders agreed to rededicate themselves to implementing the CEPT scheme as expeditiously as possible. The Bangkok summit put the final seal of approval on the AFTA agreement. Of course, problems remained. Tariff reductions on key ‘fast-track’ items such as plastics, leather goods, pulp and textiles were much slower than hoped for (http:// w w w. a s e a n . o r. i d / e c o n o m i c / t a r i f f ) .

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Moreover, officials still had to deal with nontariff barriers and the harmonization of tariff nomenclature, customs procedures and customs valuation. There was also some unease that the rules of origin for an ASEAN product under the CEPT, which were considered relatively liberal, could be abused, particularly for products entering ASEAN through Singapore.1 The expansion of ASEAN to include Vietnam (July 1995), Laos and Burma/Myanmar (July 1997) and Cambodia (April 1999) raised concerns that concessions made to the new members to allow them to fulfil their AFTA commitments at a much later date might be used by other members to demand exceptions for some of their disadvantaged industries (Chia 1998: 228; Baldwin 1997: 48–9, 62). Yet with political pressure mounting to ensure that AFTA was implemented, and key political leaders fully endorsing regional economic cooperation, progress was made. In part, of course this progress was a function of the limited impact that AFTA had on domestic political calculations. While some industries were adversely affected, overall, with economic growth so rapid and sustained and with the general population essentially unconcerned, all the governments in the region could support a cautious policy on the advancement of AFTA with few or no political penalties. Economic growth appeared to benefit, if only marginally, from the development of AFTA while generally the side deals meant that the AFTA agreement generated little in the way of sustained political opposition. From 1995 until the economic crisis started to envelop the region in 1997, the provisions of AFTA were gradually implemented. Official targets were not always met, but generally tariffs were reduced and intra-ASEAN trade expanded. Indeed, the average CEPT tariff rate for products in the inclusion list fell from 12.7 per cent in 1993 at the inception of

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AFTA to 6.38 per cent in 1997. Intra-ASEAN trade was expanding at a faster rate than total ASEAN trade with intra-ASEAN exports reaching 24.1 per cent of total ASEAN exports (AFTA Council Meeting, October 1997, Press Statement). A green-lane system at customs had been introduced for CEPT products and governments were looking at ways to implement a December 1995 agreement on trade in services. The economic crisis of 1997–98 brought about new and conflicting pressures on regional governments as they sought to implement AFTA. Significantly, at the 1997 Kuala Lumpur summit and again at the 1998 Hanoi summit, ASEAN leaders slated that they saw an increase in intra-regional trade as a way of overcoming the economic crisis they all faced. Indeed, in an attempt to take the initiative in the struggle to work their way out of the economic crisis, the ASEAN leaders at the Hanoi summit endorsed a ‘Statement on Bold Measures’ by which the six original signatories agreed to move up the implementation of AFTA from 2003 to 2002. In other words, by 2002 the tariffs on all items on the ‘Inclusion List’ should be below 5 per cent. Reinforcing the AFTA are the recently introduced ASEAN Industrial Cooperation Scheme (AICO) and the ASEAN Investment Area (AIA). Together they seek to attract more FDI to the region and allow participating companies to move their products between ASEAN members at 0–5 per cent tariffs. Spurred on by the same international and domestic economic forces that led to the original AFTA agreement, such as the increasing importance of international trade agreements and the rising domestic influence of the export manufacturing sector, the liberal reformers in the member governments pressed home the need to reduce tariffs and establish a regional trade regime so as to reflect the general commitment of the ASEAN members to economic liberalization.

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But the economic crisis has also bolstered the arguments of the economic nationalists. Since the Hanoi summit, for example, the government in the Philippines has become concerned that major reductions in tariff rates will substantially reduce its revenues. Leading politicians feel the country can illafford lower revenues as the government struggles to extricate the economy from the grips of the economic crisis (Businessworld [Manila], 21 May 1999; Manila Times, 24 May 1999). And while all governments are still being pressured by industries that believe they will be severely disadvantaged by the tariff cuts, Indonesia is coming under some of the heaviest pressure because of its disastrous economic circumstances. Indeed, the general chairman of the Indonesian Chamber of Commerce and Industry (KADIN), Aburizal Bakrie, had called for the government to postpone full implementation of AFTA from 2002 to 2005 (Antara: Indonesian National News Agency,

29 September 1999). Just as importantly, it is still not clear which products will be on the ‘Exclusion List’. Malaysia, for example, has indicated that it will not include automobiles in the tariff reduction programme and Thailand has threatened to retaliate if its neighbours fail to live up to the letter of the AFTA agreement (Bangkok Post, 19 May 1999 and 1 November 1999). Yet, despite the tensions between the liberal technocrats and the economic nationalists, the AFTA agreement continues to be implemented. The original goals have been regularly replaced by ones which accelerate the process of tariff reduction. At the same time there has been considerable flexibility in the implementation of the agreement. This combination of target dates and flexibility has been a characteristic of AFTA that sets it apart from other regional economic arrangements. Certainly, it can be argued that AFTA has developed in a decidedly ASEAN way.

NOTE 1.

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Products are considered eligible if 40 per cent of the value added has taken place within the AFTA member countries. As Ravenhill notes, ‘the rules are liberal in that they treat a component that reaches the 40% local origin as being 100% locally produced’ (Ravenhill 1995: 859). Hence, if a product is produced by assembling parts from different members then the cumulative total may be less than 40 per cent but still be considered eligible.

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INTRA-ASEAN ECONOMIC CO-OPERATION

MARI PANGESTU, HADI SOESASTRO, and MUBARIQ AHMAD

T

here are two approaches to strengthen intra-ASEAN economic co-operation. First is the encompassing idea of a free trade area, with the understanding that all else will follow. Second is the question whether the free trade area is sufficient to enhance the larger market forged through intraASEAN trade and investment, i.e. are specific or new programmes necessary in addition to the free trade area.

THE ASEAN FREE TRADE AREA Before analysing the prospects of the free trade area in strengthening intra-ASEAN economic co-operation, the basic net benefits from economic integration still stand as a strong argument for having such a concept. The static welfare gains from integration will result from net increases in production and consumption.1 The size of the gains will depend on the size of the union, the higher the level of intra-regional trade, and the

higher the differences between pre- and post-integration tariffs. In the case of ASEAN, intra-regional trade is small (lack of complementarity); present market size is small; and the differences in pre- and postintegration tariffs is substantial but narrowing due to unilateral liberalization. Differences in the level of development could also lead to unequal distribution of gains. Imada et al. (1991) estimates that reducing tariff barriers will have a positive but not substantial effect on trade and production in the region. However, while the net static gains are likely to be small, what is more important is the potential dynamic gains from the change in production structure and more efficient resource allocation; economies of scale; scope for intra-industry trade; increased investments; and technological and innovative developments due to increased competition. Furthermore, differences in development are narrowing as each country experiences robust growth; the size of the ASEAN market in terms of

Reprinted in abridged form from Mari Pangestu, Hadi Soesastro, and Mubariq Ahmad, “A New Look at Intra-ASEAN Economic Co-operation”, ASEAN Economic Bulletin 8, no. 3 (March 1992): 344–52, by permission of Mari Pangestu, Hadi Soesastro and the Institute of Southeast Asian Studies.

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population and purchasing power will become substantive; and the potential for inter-industry trade is great. Towards a Free Trade Area The idea of a free trade area is closer than ever to being attained. At the Manila Summit, the concept was still unacceptable, but discussions in anticipation of the coming summit have gone quite far in formalizing the concept. Renewed support for the ASEAN Free Trade Area (AFTA) began in 1991. The idea was revived by Thai Prime Minister Anand Panyarachun in early 1991 and was endorsed by Prime Minister Goh Chok Tong of Singapore. In the ASEAN Foreign Ministers meeting in Kuala Lumpur, July 1991, the AFTA proposal received enthusiastic support. The position of various countries at the time can be summarized as: “... Singapore and Malaysia had wholly supported the FTA proposal. Indonesia and the Philippines had some reservations on how fast they should go”.2 The latter two countries point to the differences between the two countries as leading to the possibility of dumping. Agreement over AFTA came much earlier than expected at the October 1991 ASEAN Economic Ministers Meeting (henceforth the AEM agreement). Official acceptance will only occur at the ASEAN Summit meeting, but endorsement at the ministerial level already provides a strong indication that agreement will be reached. AFTA will be the main vehicle to strengthen intraASEAN economic co-operation. In considering the prospects and problems of the ASEAN free trade area (AFTA), several aspects need to be analysed. These include the transition period, the scope of the free trade area, and the mode to reduce trade barriers.

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Transition Period Prior to the AEM agreement, there was already much discussion on the need for a deadline to indicate the political commitment to the objective of a free trade area. In June 1991, the ASEAN-ISIS suggested 2007, the 40th anniversary of ASEAN.3 At the Foreign Ministers Meeting in July 1991, achievement of AFTA in ten years was suggested by Thailand. A shorter deadline is preferable or it may be too far away to be meaningful. The AEM agreement settled on a fifteenyear deadline or 2007 as suggested by ASEAN ISIS. The outcome appears to be a compromise between countries which wanted a shorter deadline (mainly Thailand and Singapore) and those which wanted a longer deadline (mainly Indonesia and the Philippines). While it is true that a shorter deadline would have been more meaningful, given the considerations of Indonesia and Philippines, agreeing upon a deadline in itself must already be seen as a positive development. Furthermore, the deadline is meant to be a guideline which does not preclude some countries from achieving it earlier. The crucial push comes in the work toward achieving the deadline in a constructive and dynamic way. Experience of other integration efforts is that deadlines are often arbitrary dates chosen with practical and political considerations. The responses by the private sector are often unanticipated and faster than hoped for. For want of a better term, it can be termed as the “announcement effect”. What often happens is that once a deadline is announced and a clear political commitment made to achieving the deadline, economic forces will take over. For instance, in the Australia-NZ free trade area and EC

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single market cases, the deadline led to responses by the private sector to adjust and then lobby for a faster reduction in trade barriers.

chosen under CEPT for tariff reduction cannot be subjected to non-tariff barriers.

The CEPT Modus Scope of AFTA In conceptualizing the scope of AFTA, two aspects are important: first is whether an across the board or sectoral approach is adopted, and second, which trade barriers are to be included. The first approach is more efficient and easier to administer. Each country can reduce tariffs across the board by a certain MOP for all sectors to achieve a zero tariff by the prescribed deadline. However, such an approach is not likely to be accepted by the ASEAN-4. Once a sectoral approach is adopted, then a decision is needed regarding which sectors will be excluded from the free trade area. The decision in the AEM agreement reflects this approach. Several sectors are excluded4 under AFTA: agriculture and services as expected and most importantly capital goods. Within the prescribed industrial sector, a sub-sector approach is adopted under the CEPT agreement discussed below. A possible modification that would clarify the direction that ASEAN is going would be to keep the option of liberalization of other sectors open by providing a programme for the phasing in of the now excluded sectors over some specified time period. This will provide an important signal of political commitment to the objective. On the type of trade barriers to be included for liberalization, the existing schemes under ASEAN focus on reducing tariff barriers with the standstill and roll back agreement on non-tariff barriers since 1987. Under the AEM agreement, the focus is only on reducing tariffs. However, goods

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As part of the AEM agreement, the Common Effective Preferential Tariff (CEPT) has been chosen as the modus to achieve AFTA, the idea being that ASEAN countries shall be given uniform preferential treatment in intra-ASEAN trade. The main difference between Preferential Trading Arrangements (PTA) and CEPT is that PTA is granted only by the nominating country and there is no reciprocity. Whereas under CEPT there is reciprocity in that once the good is accepted to be under CEPT by all countries or accepted subset of countries (other countries to follow in three years), then all countries or subset thereof must give the preferential tariff. Therefore, the CEPT is potentially more encompassing. ASEAN Senior Officials are working on a list to be included in the CEPT and the product list at present includes furniture, fertilizers, processed foods, garments and textiles. The eventual aim is to have zero effective tariff, but at the beginning of the scheme there will be four tariff groups: 0–5 per cent, 5–10 per cent, 10–15 per cent and 15–20 per cent. However, the existing tariff rate for that particular product will remain unchanged vis-à-vis non-ASEAN countries in accordance with the definition of a free trade area.5 No exclusion list was originally proposed under the scheme. In theory, the CEPT will lead to the realization of a free trade area once it is reduced to zero. However, in practice, several implementation problems are evident. The details of the CEPT proposal are still being negotiated, but potential problems based on the AEM agreement

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actually point to a less than optimistic prospect for the realization of an ASEAN free trade area. First, contrary to the initial proposal that suggested a broad sector by sector approach with a clear timetable, the definition sectors chosen in the AEM agreement were at the six-digit Harmonized Code level, which is still too disaggregated.6 All goods in the prescribed scope of industrial products should reach a tariff of zero to five per cent by 2007. A second problem is that too many exclusions would render the programme ineffective. There are several exclusions to be considered. Countries which feel that goods within the six-digit classification are still “sensitive”, can exclude the goods at the eight- or nine-digit level. Such exclusion lists are reminiscent of the early days of PTA and runs counter to the initial proposal of not having an exclusion list. If the exclusion cannot be eliminated, then a strict restriction will be needed to prevent the exclusions from being larger than the inclusions, and for a deadline on the exclusion. Another exclusion is that not all countries need to agree to the goods under CEPT. The suggestion is for a 6-X approach: that is as long as there is an accepted number of countries (to be decided, three to four out of six probably), then the product will be included under CEPT for participating ASEAN countries. No deadline was given to the phasing-in of non-participating ASEAN countries. A final important exclusion is of capital goods. This will dilute the attraction and benefits of AFTA since it will reduce the possibility of setting up integrated production networks. It would also not be possible to liberalize inputs at a faster rate than final goods. The third issue of concern under CEPT is with regard to operationalizing it as the

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modus for achieving partial AFTA, especially in the light of existing PTA. Firstly, on how to reduce the tariffs, the tendency is to go with an MOP to achieve the desired CEPT of between 0–20 per cent, much like the PTA system. This would entail looking at each nine-digit item within the suggested six-digit category and working out the MOP for each item which may have different tariff rates. Then an averaging will need to be worked out to arrive at the MOP needed at the six-digit level. However, the approach appears cumbersome and administratively complex to implement. A simpler approach would be to determine a set tariff rate in the agreed categories and apply it across the board at the six-digit level. Secondly, on merging the PTA with the CEPT, under the AEM agreement it is not clear how this should occur. Several possibilities can be considered. Both could run parallel, that is existing items under PTA will now have the target of deepening of MOP to 95–100 per cent by the imposed deadline. New products or sectors can be added on to the PTA or CEPT list with the same requirement of achieving 95–100 per cent MOP or zero–five per cent tariff by the prescribed date. The list of products under PTA or CEPT should then also concur with the identified sectors under the free trade area and all countries must have the products under those designated sectors under PTA or CEPT. Another possible and preferable way would be to subsume the PTA under the CEPT since the latter is potentially more encompassing. Products already under the PTA scheme would come under the CEPT scheme and this can be done in several ways. The first step would be to cross the PTA list of each country and determine which PTA products are common to all countries and subset of countries. One possible way then is to determine that all PTA products

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already identified by a minimum subset of countries (the lower the better, therefore between two to four), will automatically come under CEPT and a decision made regarding the tariff category. A gradualism approach is also possible, by saying that if x countries already picked a product under PTA, then 6-X have a specified number of years to match and the product will then be under CEPT. New sectors will then be added accordingly under the CEPT. A final issue concerns establishing rules of origin. The ASEAN content for CEPT products to be eligible for the preferential tariff is 40 per cent. Implementing rules of origin in a timely way based on preapproved standards and procedures will be crucial for the success of the CEPT proposal.

The Need for an ASEAN Economic Treaty The possibility of having an ASEAN economic treaty has been suggested by Philippines, the idea being that AFTA needs to be couched in a legally binding document to indicate the strength of the political commitment. Compliance to AFTA will then be ensured. Furthermore, a treaty should help national governments deal with vested interests in their countries against AFTA since the agreement is internationally binding. In the AEM agreement, it was decided that a treaty was not necessary; instead a framework for agreement, which is a less legally binding document, was chosen. Further Steps Most discussions on ASEAN FTA focus on liberalization of tariffs. However, further thought is still needed on the issues of reducing non-tariff barriers, government procurement policies and other policies

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that impose trade barriers in general. Besides standstill procedures, reduction of non-tariff barriers in a systematic way will be necessary. Furthermore, once integration to facilitate trade of goods begins, the liberalization of services and factors of production will be a natural outcome to encourage the process of integration. Another corollary is that differences in industrial standards, customs classifications, environmental policies, investment policies, labour movements, taxes and other domestic policies that can limit intraregional trade and investment will also need to be harmonized and standardized. RESPONDING TO MARKET-FORGED LINKAGES Private Sector Participation in Agenda Setting Under the umbrella of intra-ASEAN economic co-operation, the issue of private sector participation is not a new one. Failure of government to government industrial cooperation led to this recognition in the early 1980s. Thus, under ASEAN industrial co-operation (AIC), the ASEAN Chambers of Commerce and Industry (ASEAN-CC1) would be given the task to identify appropriate products or industries to be included in the AIC package. However, such schemes have not been effective, so the response by the private sector to intra-ASEAN economic co-operation has not been forthcoming, as was evident with the AIJV. The above discussion of the problems with the various programmes indicate that the programmes and their implementation have not been designed with facilitating private sector participation in mind. There is obviously a problem in the mechanism by which private sector input should be filtered into the process of intra-

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ASEAN economic co-operation. The problem exists on both sides. The private sector feel that the government and private sector dialogue is one way since the ASEAN-CCI only reports and is not involved in the decision making process to ASEAN programmes which are supposed to be implemented by the private sector. “... they (the private sector) felt their participation is on ad hoc basis and subject to the whims and fancies of officials” and this is because “at the working level, government servants have not got the right kind of perception and understanding of their role”. 7 Another common criticism regarding the ASEAN-CCI input is that they often do not represent the private sector in their respective countries. The governments, on the other hand, claim that despite efforts to communicate requests for input and including their participation, the private sector are often not prepared and do not participate fully in the meetings. Furthermore, it is difficult to deal with the private sector since they are not a homogeneous group of people; parts of the private sector will support trade liberalization, while others would like to maintain protection. Given the importance of the private sector in forging intra-ASEAN links, now more than ever, the mechanism which relates the ASEAN-CCI to the ASEAN machinery needs to be upgraded from simple reporting to implementation. The ASEAN-CCI is the most logical and convenient umbrella representing the private sector. However, since the issue of whether the ASEAN-CCI represents the private sector has been raised, other ways of private sector representation needs to be thought of. Regular meetings between MNCs, domestic businesses and the government officials involved with ASEAN could be one way. At the recent ASEAN-ISIS meeting (June 1991) one idea suggested is to provide a role for the ASEAN think

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tanks. The idea would be to have a tripartite (government, academics and business) ASEAN forum on ASEAN economic cooperation. Its effectiveness will depend very much on the participation of relevant government officials who have influence on the decision making process. With regard to specific policies to facilitate the two market-forged links discussed above, it is our opinion that, rather than come up with new schemes, it is more pragmatic to come up with policies that would facilitate and foster increased intraASEAN linkages forged by the market. Implications of the Growth Triangle for ASEAN Economic Co-operation Can the Growth Triangle accelerate intraASEAN economic co-operation if it is expanded (concentric circles) or replicated (other triangles)? The 6-X approach is not a new one and is an appealing one. Expansion of the Singapore-Johore-Riau (S1JOR1) growth triangle on the Indonesian side seems feasible and is already happening. The growth zone on the Indonesian side has expanded from Batam to Bintan and to another two islands. It is quite probable that more Riau islands will be developed in the same way. The logical spread effects would be for developments in Sumatra; that is Sumatra can act as the hinterland for the Riau islands and enhance the linkage and spread effects. On the other hand it is unlikely that Johor will be expanded. The immediate problem is whether Johor should be declared duty-free or only parts of it and whether this could be done by expanding the existing export processing zones. Replication of the triangle to other parts of the region to expand intra-ASEAN economic co-operation is not as feasible as it may first appear. There must be very strong complementarity between the different areas and preferably existing economic links

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such as in the case of SIJORI. Then the role of government policy is to facilitate and accelerate the process. At the AEM meeting in October 1991, the contribution of the Growth Triangle toward overall ASEAN economic co-operation was recognized, but no formal endorsement was given. Furthermore, strong complementarity alone may not be sufficient. In the SIJORI case, despite the complementarity between Batam and Singapore, investors were hesitant until the Singapore Government provided support. Another consideration is the unique role of Singapore in providing supporting infrastructure and market access which may not be replicated in other growth areas. A final consideration is the danger that creation of sub-regions of economic co-operation will detract from the main objective of regional economic co-operation — the 6-X will not sum up to six in the long run. There is the familiar chicken and egg problem. If there is no trade and investment links to begin with, then should the government step in and provide infrastructure and facilitating policies in the hope that private sector investments will flow in? But if there had been strong enough complementarity, then the private sector would have seen the business opportunity and developed trade and investment links, as well as pressured the government to provide the necessary infrastructure and changes in policy — much like in the SIJORI case. The evaluation needs to be made on a case by case basis, but in general it would be difficult to replicate the concept without the existence of very strong complementarity. Implications of Increased Trade due to Investment Flows Is the FTA sufficient policy to attract MNCs with a regional production network? Or will specific policies be needed given the problems of realizing the FTA and the

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slowness anticipated in implementing AFTA? It turns out that as long as the production undertaken by MNCs is exported, then the import of components and intermediate products is duty exempt. Therefore, intraASEAN trade in supplying components, parts, and intermediate products can run smoothly as long as the final product is exported to non-ASEAN countries. This can be achieved in all the ASEAN countries by locating in duty-free zones or applying for duty exemption or drawback. As long as the investment is export oriented, then it is difficult to think of policies that would enhance such flows. MNCs will usually buy from the cheapest source which may not necessarily be their own affiliates or head office. However, there is often also pressure to take from within their own network because of transfer pricing and other reasons. Therefore, an important question to ask in approaching the production base type of investments is, what the benefits to the host country are. The pattern of investment and trade is now influenced by global production strategies of MNCs. How can ASEAN economic co-operation facilitate the flow of goods and services so that MNCs and ASEAN business groups will invest in multiplants spread throughout ASEAN and relying upon a larger market? Some possible programmes to enhance intra-regional linkages through MNCs and ASEAN business groups include: national treatment for investment by ASEAN nationals; ASEAN content to be treated as local content; 100 per cent MOP for AIJV products; improving AIJV approval mechanism and better co-ordination of policies concerning MNCs, such as harmonization of incentives. Chee (1988) also suggested that special incentives can be given to investors which fulfil certain objectives such as involvement in ASEAN Economic Cooperation Schemes,

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exports, or facilitating domestic tie-ups. The incentives suggested were obtaining the same tax treatment as locals, access to domestic credit and percentage of equity ownership. Chee also suggested that there could be cooperation over technology acquisition and information-sharing by MNCs. The latter would include monitoring MNC activities, reviewing policies on regulations affecting MNCs, assistance in seeking and selecting joint-venture partners, and providing information and expert assistance on technology.

CONCLUSIONS The major stumbling block toward the realization of ASEAN economic cooperation has been the lack of political commitment. If investors are to take the ASEAN concept seriously and incorporate it in their long-term strategies, then it will be crucial to have a more serious level of commitment. Given that it is now imperative, feasible and desirable to foster greater intra-ASEAN economic co-operation, the renewed push for the FTA in the coming summit is timely. Even though the net trade creation effects are likely to be small at present, the dynamic gains from increased efficiency and investments are likely to be great. Furthermore, by the time the FTA is achieved, ASEAN will be an important market to contend with. Investors will be attracted to the region not just for a production base to export from, but also as a dynamic and growing market to sell in. These tendencies are already apparent from the strategies of MNCs in the region. Initial reactions to the FTA have been pessimistic and sceptical, even though most of the recommendations about having a deadline and utilizing CEFT were accepted. The main problem still appears to be too many exclusions reaffirming the recurring

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perception about the ineffectiveness of ASEAN economic cooperation programmes. However, the form will not be as important as the political commitment that underlies the decision to push for the FTA in the post summit implementation. Early concessions on tariff preferences on a broad basis, minimum administrative processing and clear, as well as operational, implementation of the ASEAN content rule will be needed to provide the crucial signal about the seriousness of the ASEAN governments in implementing the FTA. To make ASEAN credible, it will be imperative to indicate the direction and timetable for strengthening intra-ASEAN economic cooperation. Indications regarding the steps in achieving FTA need to be spelled out in a clear and consistent way, which further steps will be considered and when they will be phased in will be important. This will eliminate the ad hoc approach that characterizes ASEAN economic co-operation to date that has discouraged investors from taking a longer term perspective. Improvement of existing schemes much along the lines already recommended follows: maintenance of targets and deadlines, reducing the bureaucracy of implementation, increasing promotion and dissemination of information on the programmes, strengthening of the institutional set-up such as the ASEAN Secretariat and so on, should be continued. In responding to the market-driven responses that have led to increasing intraASEAN economic ties, it becomes more important to rethink the role of the private sector in ASEAN economic co-operation. However, despite the new constellation, introduction of new ASEAN economic cooperation schemes to incorporate the needs of the private sector such as the common market and harmonization of policies are not recommended at present. These types of policies should come as a corollary once

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the FTA programme is under way, and the success of the FTA remains the main objective. Nevertheless, some simple harmonization programme could be initiated even now such as with industrial standards, documentation and so on. A workable area should be chosen and harmonization efforts undertaken. Specific programmes to cater for increasing the forging of intra-ASEAN links through growth triangles and private investment flows are also not pragmatic or workable. In addition to the FTA as the main programme, each ASEAN country should continue unilateral liberalization, improvement of investment climates and removal of bottlenecks such as infrastructure. Existing policies that favour export oriented industries in all the ASEAN countries are sufficient for export base investments. If there is a problem, it is more to do with implementation and how to make the process more efficient.

In the final analysis, increased intraASEAN links through MNC affiliates, and linkages that will increasingly involve the domestic suppliers and companies, will probably be best served by the formation of AFTA. There is an important link between pushing for greater intra-ASEAN economic co-operation through the FTA and enhancing intra-ASEAN linkages through private investors. By the time AFTA is achieved, the size of the ASEAN market will make it very attractive for investors. Additional incentives and new programmes of economic co-operation will not be needed. What will be of paramount importance is the political commitment, certainty and increased attractiveness that ASEAN can provide with AFTA. Investment will no longer be based just on resource pooling production-base considerations but also on market sharing considerations. If this sounds very familiar, we have come full circle with the ASEAN concept after all.

NOTES 1. 2. 3. 4. 5.

6. 7.

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That is trade creation minus trade diversion effects. Straits Times, 19 August 1991. See ASEAN-ISIS (1991). Including sectors excluded based on considerations of safety, security and protection toward small scale producers. Recall that in the difference between a free trade area such as AFTA and EFTA, member countries do not impose a common tariff on non-member countries such as in the case of a customs union like the EC. The reasoning is that at the six-digit level, there is a an internationally consistent description of goods. For higher than six digits, national description of goods prevail. Chee Peng Lim, p. 107, in Noordin Sopiee et al. (1987).

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47.

THE EXPANSION OF AFTA

JAYANT MENON

THE WIDENING OF AFTA The decision to establish AFTA was taken at the summit meeting of the Association of Southeast Asian Nations (ASEAN) heads of state in January 1992. All six members of ASEAN (the ASEAN-6) would participate. At inception, the ASEAN-6 countries agreed to a deadline of 2008 for reducing tariffs to 0–5 per cent. At the 1995 ASEAN summit meeting held in Thailand this deadline was moved forward to the year 2005, and later to the year 2003. More recently, there have been calls to move the deadline to the year 2000. At their meeting in September 1995, the ASEAN economic ministers agreed to work towards the 2000 objective, without formally endorsing it as the new deadline.1 Within the current time-frame, more than 85 per cent of tariff lines in the Inclusion List will be in the 0–5 per cent range by the year 2000 (ASEAN Secretariat 1996). The first step in the widening of AFTA took place at the Fifth ASEAN Summit on 15 December 1995, when Vietnam acceded

to the Common Effective Preferential Tariff (CEPT) Agreement. Vietnam agreed: •

•

•

•

•

to extend, on a reciprocal basis, most favoured nation (MFN) and national treatment to ASEAN member countries; to prepare a list for tariff reduction and start tariff reduction on 1 January 1996 leading to a 0–5 per cent tariff rate by 1 January 2006; to include, in five equal instalments, temporarily excluded products, beginning 1 January 1999 and ending 1 January 2003; to phase in agricultural products, beginning 1 January 2000 and ending 1 January 2006; and to provide information on its trade regime whenever requested.

Thus Vietnam, like the ASEAN-6, was given ten years to reduce its tariffs to 0–5 per cent. The second move in the widening of AFTA took place at the Seventh ASEAN

Reprinted in abridged form from Jayant Menon, “The Expansion of AFTA: Widening and Deepening?”, Asian-Pacific Economic Literature 12, no. 2 (November 1998) (Canberra: Economics Division. Research School of Pacific and Asian Studies, Australian National University, 1998) by permission of the author and the publisher.

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Summit in Kuala Lumpur on 23 July 1997, when Lao PDR and Myanmar acceded to the CEPT agreement. The provisions were identical to those of Vietnam described above, except for the time-frame. Both countries will also have ten years to satisfy AFTA obligations, but they will begin their program on 1 January 1998 and conclude it on 1 January 2008. Cambodia was to join with Lao PDR and Myanmar in formally acceding to ASEAN on 23 July 1997. However, following the rupture of the coalition between Mr Hun Sen and Prince Ranaridh (formed after the 1993 UNbrokered elections) in June 1997, ASEAN decided to postpone Cambodia’s membership indefinitely. The question of Cambodia’s membership is essentially one of timing. It is widely expected that Cambodia will move from its current observer status to full membership before the end of 1998 (assuming that the political uncertainty that currently stand in the way is resolved after the 1998 elections). Cambodia’s membership would complete the widening of AFTA to include all ten Southeast Asian nations. Thus far, widening of AFTA has been considered only in the context of expanding the number of its full members. A recent development associated with widening is the attempt to link up with other RTAs. AFTA has its closest link with the Australia– New Zealand Closer Economic Relations Agreement. The potential for explicit widening through a formal link, however, looks limited. Malaysia has promoted the East Asian Economic Caucus, which would exclude both Australia and New Zealand. There is a link between AFTA and the North American Free Trade Agreement (NAFTA), but this is also an informal arrangement, involving discussions and exchanges between officials over trade issues. Here too, widening through a formal link is unlikely, given ASEAN fears that such a link would be seen in Europe and Japan as co-option of

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ASEAN by the USA (Arndt 1996). The ASEAN-6 are also members of APEC but they have been resisting attempts to link AFTA too closely with APEC. This is indicated, for instance, by ASEAN’s collective rejection of the proposal by President Ramos of the Philippines (raised at the 1996 APEC Leaders Summit in Subic Bay) to multilateralise the AFTA accords within APEC. The informal nature of the links with other RTAs suggests that they have not contributed to the widening of AFTA in any substantial way. AFTA-PLUS: DEEPENING AFTA is not just about reducing intraASEAN tariffs on traded goods. Following the trend in the WTO and RTAs elsewhere, AFTA has a program to deepen regional integration by extending the agenda beyond just liberalization of barriers to trade in goods. This agenda for deepening is referred to as ‘AFTA-Plus’. In an earlier review of AFTA in this journal, Lee Tsao Yuan (1994:4) noted that “in order to achieve the goals of AFTA, ASEAN would need to go beyond tariff reduction to include non-border issues ranging from NTBs to investment policies…in other words, what is needed is not AFTA per se, but an ‘AFTA-Plus’ ”. The Framework Agreement on Enhancing ASEAN Economic Co-operation This agreement, concluded at the Fourth ASEAN Summit, contained provisions to increase co-operation in banking, finance, transport and communications. Other measures contained within AFTA-Plus include the harmonization of standards, reciprocal recognition of tests and certification of products, harmonization of customs procedures, removal of barriers to foreign investment (as part of the proposal for an ASEAN Investment Area), macro-

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economic consultations, rules of fair competition and promotion of venture capital. AFTA-Plus also aims to deal with issues such as trade-related investment measures (TRIMs) and trade-related intellectual property provisions (TRIPs), as well as the protection of copyrights, patents, and trademarks. This is quite a long list. In many of these areas, agreements on co-operation have yet to be concluded. Agreements have been reached in the following areas: non-tariff barriers, services, foreign investment, intellectual property, customs and tourism. The following paragraphs summarise the content of each of these agreements (or, in some cases, less formal efforts in the form of meetings and decisions arrived at). Non-tariff barriers Whilst quantitative restrictions on products in the Inclusion List must be eliminated immediately, a program to reduce other NTBs has been set in train. Article 5 of the CEPT agreement requires NTBs on a product to be eliminated within five years of the grant of CEPT concessions. The Eighth AFTA Council called on member countries to eliminate NTBs before the end of this five-year period, and no later than 2003. The Interim Technical Working Group on the CEPT Scheme identified the following NTBs as being the most prevalent in intraASEAN trade: customs surcharges, technical measures and product characteristics requirements, and monopolistic measures (particularly in relation to exclusive import rights of state-controlled enterprises). Services The ASEAN Framework Services was signed on 15 at the Bangkok Summit. objectives of this ambitious

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Agreement on December 1995 The two main agreement were

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to eliminate substantially all restrictions (discriminatory and market access measures) on trade in services among member countries and to liberalise trade in services by expanding the depth and scope of liberalization beyond those undertaken by member states under the General Agreement on Trade in Services (GATS) with the aim of realising a free trade area in services. This agreement represents an explicit identification of the potential of the regional approach to achieve a deeper level of integration than that pursued at the multilateral level (that is, with GATS). Article V of the agreement deals with ‘mutual recognition’, and encourages member states to recognize the education or experience obtained, requirements met, or licences or certifications granted in another member state, for the purpose of licensing or certification of service suppliers. Foreign investment In the Bangkok Summit Declaration 1995, the ASEAN leaders agreed “to establish an ASEAN Investment Region which will enhance ASEAN attractiveness and competitiveness for promoting direct investments”. This is seen as the foundation for the ASEAN Investment Area. The AIA is designed to promote ASEAN as a single investment region. Towards this end, there is a work program covering the period 1996–98 to implement the ASEAN Plan of Action on FDI and intra-ASEAN investment. Because of the investment-trade nexus in the region (Athukorala and Menon 1997) the promotion of foreign investment is viewed as perhaps an even more important objective of AFTA than the promotion of intra-ASEAN trade. The most significant initiative of the AIA is preferential treatment afforded to ASEAN investors in member countries. This will take the form of access to investment in

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particular sectors available only to ASEAN member countries on a reciprocal basis. ASEAN members will be asked to list sectors open only to investors from other ASEAN countries. The intention is to provide this access through the national treatment provisions for the period to 2010 (or at the very latest to 2020). At the March 1998 meeting of the working committee, Thailand put forward a proposal to begin preferential access from 2003 rather than 2010 (Bangkok Post 1998). This push to bring forward the starting date is a response to the perceived need to increase intraASEAN investment following the regional financial crisis. From 2020 onwards, the preferential access to ASEAN members will be eliminated and the AIA will operate on a non-discriminatory MFN basis. The AIA will maintain a Negative or General Exceptions List which will quarantine nominated sectors from the liberalisation process. An unresolved issue relates to the definition of an ASEAN investor. This definition is important because of the proposed preferential treatment to such investors. Two options are being considered. The first would require a firm to have a minimum (cumulative) ASEAN ownership share of 30 per cent; the second defines an ASEAN investor as a firm with a minimum 51 per cent ASEAN ownership.

promote the region-wide protection of trademarks. Other areas of co-operation to be covered are copyright and related rights, industrial designs, geographical indications, undisclosed information and lay-out designs of integrated circuits. Customs Co-operation in relation to customs covers tariff nomenclature; customs valuation methods; and customs procedures. ASEAN is in the process of simplifying and harmonising its tariff nomenclature. A common nomenclature is to be used in all ASEAN member countries starting from January 1998. As signatories to the Final Act of the Uruguay Round, ASEAN members must implement the GATT transaction value (GTV) method by the year 2000. The AFTA Council in 1997 allowed the implementation date to be extended to early 1998 for the ASEAN-6 members, and until 2000 (at the very latest) for Laos, Myanmar and Vietnam. In September 1994, the ASEAN economic ministers mandated that customs procedures in ASEAN be harmonised, to facilitate trade within ASEAN. Priority is to be given to two areas in which procedures are in urgent need of simplification and harmonisation: import clearance for home use; and export and transit clearance.

Intellectual property The ASEAN Framework Agreement on Intellectual Property Co-operation was signed in Bangkok on 15 December 1995. This agreement stipulated that member states shall “explore the possibility” of setting up both an ASEAN patent system, including an ASEAN Patent Office, to promote the region-wide protection of patents; and an ASEAN trademark system, including an ASEAN Trademark Office, to

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Tourism To increase intra-ASEAN tourism, two proposals have been put forward at meetings of ASEAN tourism ministers in 1996 and 1997: to establish a special lane for ASEAN nationals at immigration counters (already implemented at Bangkok airport, and to be implemented at the new airport in Kuala Lumpur); and to increase direct air links between secondary cities in ASEAN.

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Linkages with other regional trade agreements Although not part of the AFTA-Plus agenda, a recent development is the attempt to increase co-operation with other regional trading agreements, particularly with the Australia–New Zealand Closer Economic Relations Agreement. The Memorandum of Understanding (MOU) signed between the two parties in 1996 included provisions to co-operate on: (i) measurement standards; (ii) legal metrology; (iii) documentary standards development; (iv) accreditation of testing and inspection bodies; and (v) accreditation of certification bodies.

WIDENING AND DEEPENING: INTER-RELATIONS Widening may further slow the process of deepening within AFTA or cause further fragmentation. The European debate illustrates this risk. Wideners such as Margaret Thatcher were keen to use expansion of membership to limit the extent of integration and the resultant loss of national autonomy in various areas of social and economic policy (Weintraub 1994). The widening of AFTA to incorporate SEATEs could slow the pace of deepening because the new members are not yet in a position to match the reforms that the ASEAN-6 want to achieve. Conversely, these countries may not be willing to slow the pace of deepening to accommodate the new members, in which case they may proceed with arrangements which (at least temporarily) exclude them. This would further fragment AFTA. Widening may also affect some of the core aspects of AFTA such as the monitoring of rules of origin associated with implementing the CEPT preferences. Current customs procedures in the new member countries (and perhaps in some of the

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original ones) do not allow for the accurate measurement of domestic content of imports. It is an open secret that the process of ‘measuring’ domestic content in the new member countries is based purely on the Certificate of Origin; that is, a product may qualify for CEPT preferences even if its content does not meet the minimum 40 per cent ASEAN requirement, as long as the certificate of origin identifies an ASEAN country as the exporting country. This is another reason for providing the CEPT reductions on a non-discriminatory MFN basis. Has deepening within AFTA affected widening? Without significant progress in many areas of AFTA-Plus, and with agreements still pending in other areas, it has been easier for the new members to satisfy, if not accept, the conditions of membership. The slow pace of deepening within AFTA may have actually paved the way for its widening. Finally, how will the recent financial crisis in Asia affect deepening? Will the financial crisis hasten the process of deepening, or will it impede it? The rhetoric suggests that it will hasten the process. This mood was reflected, for instance, at the 30th ASEAN Ministerial Meeting in Kuala Lumpur in October 1997. In his opening address, Malaysian Prime Minister Mahathir raised the issue: “Are we setting our sights to be a single market or an economic union à la the E[uropean] U[nion]? What is certain is that we need to make the bold move towards greater economic integration as we will have to face an uncertain environment” (Bangkok Post, 17 October 1997). There has also been a proposal to use a regional currency in intra-ASEAN trade, again led by Prime Minister Mahathir.2 Although such proposals have been discussed, they are unlikely to materialize in any significant form. Intra-ASEAN trade amongst the ASEAN-6 is relatively small; any

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move to introduce the use of a common currency for this trade is unlikely to be worthwhile. Because of the great differences between member countries in stages of development, institutional structures and political systems, attempts to increase regional integration by moving towards an economic union are unlikely to succeed in the foreseeable future. Similarly, the view that the crisis will hasten the process of deepening within ASEAN is little more than rhetoric. The first round of crisis-induced reforms in most of the ASEAN countries, some of which have been reinforced by IMF programs, suggests that the prospects for regional deepening have been hampered rather than promoted, for the reforms are essentially unilateral in nature, not regional. In many areas the unilateral reforms have over-ridden prospects for a regional, and thus potentially discriminatory, arrangement. In the financial sector, for instance, the recent reforms have focused on rationalization of the banking industry and exerted pressure to open markets to foreign banks in a nondiscriminatory manner. In this there is an implicit recognition of the fact that the financial sector in Thailand would not have been assisted (pre-crisis) by the presence of Indonesian banks competing in its market,

or vice-versa. The only question, as posited by Garnaut (1998:9), is whether these market-oriented reforms will survive recovery, or whether they will be discredited as measures imposed by the West when Southeast Asian economies were weak.

CONCLUSION AFTA is undergoing a process of both widening and deepening. Widening has increased AFTA’s diversity, and made it more heterogeneous. There is now a twotier system consisting of a developing and transitional segment. AFTA’s attempts at deepening integration have had only limited success so far. There has been progress in harmonising customs procedures and tariff nomenclature, and in fast-tracking a common customs valuation method. Progress in other areas has been limited. In the area of foreign investment, failure to consider harmonising investment-related incentives is a case of missed opportunity where the regional approach could have been effective. In areas such as services and intellectual property rights, on the other hand, the multilateral rather than regional approach would appear to be both more effective and less likely to be subject to distortions.

NOTES 1.

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Pressure to speed up the AFTA program of tariff reductions has come from a number of areas including the successful conclusion of the Uruguay Round and trade and investment liberalisation measures agreed to within APEC (see Chia 1997). The ASEAN-6 are considering a proposal whereby intra-ASEAN trade will be conducted using the currency of an ASEAN country, and not a third-country currency such as US dollars or yen. The two ‘dollar’ currencies are being considered: the Singapore dollar and the Brunei dollar. Malaysia and the Philippines have recently agreed to us their respective currencies in bilateral trade.

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48.

AFTA = ANOTHER FUTILE TRADE AREA?

MOHAMED ARIFF

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n discussing intra-ASEAN trade, we need to exercise some caution. The role of Singapore as an entrepot port tends to distort the picture somewhat. A large proportion of Singapore’s exports to the ASEAN neighbours are really re-exports of products from outside the region. By the same token, a significant share of Singapore’s imports from its ASEAN partners are re-exported to third countries. It is in this sense that trade statistics seem to overstate the importance of intra-ASEAN trade, especially since Singapore accounts for the lion’s share of intra-regional trade. If Singapore is excluded, intra-ASEAN exports would only represent much less than onetenth of total ASEAN exports, (8.4 per cent in 1991). Seen from another angle, however, it does appear that intra-ASEAN trade may well be substantially larger than what trade statistics would suggest. This is so because trade statistics do not capture the thriving “illegal” trade flows among the ASEAN countries. Illegal trade links are particularly

strong between Mindanao and Sabah, between Cebu and Singapore, between Peninsular Malaysia and Southern Thailand, and between Singapore and Java. Given the secret nature of the entire operation, it is extremely difficult to quantify its extent. Nonetheless, it does seem that it is embarrasingly large. It is so embarrasingly large that Singapore does not publish statistics relating to its trade with Indonesia. It is quite obvious that Singapore’s figures will not tally with that of Indonesia, with a huge margin of discrepancy. It may well be argued that there is nothing wrong with all this. In economics, legality is a non-issue. What is illegal today can be rendered legal tomorrow or the other way around by an act of parliament. Illegal activities may be viewed as market responses to unrealistic rules and regulations. Illegal trade has a useful role to play, as it can help allocate resources optimally by circumventing policy barriers which defy economic logic. This is why economists prefer to brand it as “informal trade” or as

Excerpted from Mohamed Ariff, AFTA = Another Futile Trade Area? (Kuala Lumpur: Universiti Malaya, 1994), by permission of the author.

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“cross-border transactions” rather than as “illegal trade”, to make it more palatable. It is perhaps no exaggeration to state that “informal” trade may have contributed more significantly to regional cohesion within ASEAN than formal cooperation. Informal trade seems to be integrating the ASEAN region in a borderless fashion, while the formally orchestrated trade cooperation scheme seems to have paid just lip service, judging by the fact that only 2.6 per cent of the items in the preferential trade list or 19.0 per cent in value terms was actually utilised in the formal intra-ASEAN trade as of 1987 [Pengestu, et at., 1991]. This line of reasoning would lead us to the inescapable conclusion that it will pay the ASEAN countries to simply legalise this cross-border trade. Viewed in these terms, AFTA is clearly a move in the right direction. Under AFTA, we can expect intra-ASEAN trade to rise sharply in absolute terms, simply because what was left out by trade statistics previously will be recorded in the future, once such trade flows are legalised. But, this will amount to a one-shot increase only. In addition, AFTA can have a stimulating effect on intra-ASEAN trade, if it results in lower prices and higher incomes. All this notwithstanding, the percentage share of intra-ASEAN trade in total ASEAN trade is unlikely to increase markedly, given the high degree of economic openness of its members and the lack of complementarity of the ASEAN economies — which is not a bad thing. As alluded to earlier, economic openness exposes domestic industries to external competition so that they have no choice but to remain efficient and competitive. Complementarity is not necessarily a good thing. Of course, it would be politically easier for complementary economies to cooperate with one another, because regional imports will not threaten domestic industries, but it will not make much economic sense. Perfect

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complementarity would mean pure trade diversion with virtually no trade creation. The main reason why regional cooperation in many groupings, including ASEAN, has not been very successful is that preferential market access is given mostly to those products which do not compete with domestic products. The search for complementarity has led to the exclusion of too many important items from trade cooperation. ASEAN is advised in no uncertain terms not to aim at a high intra-regional trade ratio, quite unlike the EC where it accounts for a hefty 58 per cent of total EC trade. Such a high ratio of intra-regional trade will have serious cost implications for the open economies of ASEAN. AFTA is very un-ASEAN in a variety of ways. AFTA is by no means a new idea, as the free trade area option was considered and rejected by the architects of ASEAN some 25 years ago, albeit for the wrong reasons. AFTA cannot jive well with the informal and casual approach that ASEAN has nurtured and perpetuated over the years. Besides, as is well known, the ASEAN countries compete with one another in the world market, and it is unnatural for competitors to cooperate among themselves. Be all that as it may, AFTA is not a big deal, judging by the product coverage of the inclusion list, the size of the exclusion list, the mechanism of trade liberalisation and the long-drawn timetable. And, it pales in comparison with NAFTA which is a comprehensive package with liberalisation stretching beyond merchandise trade to services trade and investment regulations, and regional protection extending beyond trade to environment and intellectual property rights, with all technical details worked out well in advance. Having said this, we must hasten to add that it is not in the interest of the ASEAN countries to emulate NAFTA or any other

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grouping for that matter. The NAFTA Agreement exceeds 2,000 pages, compared with the AFTA Agreement of just 12 pages. Detailed rules and guidelines themselves can become formidable barriers to intraregional trade flows. It is sometimes virtuous to be ambiguous, as it permits flexibility. And, ASEAN knows it only too well. In all fairness, AFTA should be judged not by the input but by its output. Without a doubt, AFTA represents the most important trade initiative that ASEAN has ever taken since its establishment in 1967. AFTA can trigger dramatic changes in the structure of production and trade in the ASEAN countries. AFTA can serve as a “training ground” for the ASEAN businessmen who will learn to compete in the regional market before they could compete in the world market. Once ASEAN becomes commercially borderless under AFTA, a new pattern of production, with each member discovering its own niches, is likely to emerge, rendering ASEAN products competitive internationally. AFTA will then benefit not only its members but also its neighbours, trading partners and foreign investors. Seen in these terms, the bottomline of AFTA is really competition, not cooperation. However, trade liberalisation alone will not ensure all this. To be effective, trade liberalisation must be accompanied by a liberalisation of investment regulations in all of the ASEAN countries so that ASEAN investments are accorded “national treatment” in the member countries. Indeed, trade and investment are interrelated, as borne out by the fact that the ASEAN countries’ main trading partners are also their major sources of foreign investments. The fact that the bulk of the intra-ASEAN trade is conducted by Singapore and Malaysia may be attributed, in no small measure, to the strong investment linkages that exist between the two countries.

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To realise the full potentials of AFTA, ASEAN will need to widen the product coverage, shorten the process and ensure that AFTA is not strangulated by unnecessary red-tapes and complex rules. In the same vein, a harmonisation of tariff classifications, customs procedures and investment incentives would be helpful. If ASEAN is really serious about AFTA, it must do away with the “inclusion list” so that what is not excluded is automatically included, and ensure that the “exclusion list” is short and time-bound. All tariffs should be reduced to zero eventually, and it does not make economic sense to reduce it to 0–5 per cent. Customs revenue based on such low tariff rates may not even meet the cost of tariff collection and administration. The 15-year AFTA timetable is too long. The chances are that AFTA will be overtaken by world events by the year 2008. Tariff cuts under the GATT/WTO system may reduce the ASEAN preferential margins so that AFTA may become redundant or irrelevant before it reaches the deadline. Quite paradoxically, AFTA’s success will lie in making itself redundant or irrelevant sooner. AFTA will then have served a useful purpose by paving the way for a total integration of ASEAN with the global economy. This means that tariff concessions within AFTA need to be extended to nonmembers later on. In other words, AFTA should be seen as an exercise in “minilateralism”, i.e., a step towards fullfledged multilateralism. Two other possibilities, though remote, cannot be entirely ruled out. Should AFTA falter and fall short of our great expectations, ASEAN will lose its credibility and join the ranks of numerous ineffective regional groupings. Should it evolve into a trade bloc, it will strap itself to a low-level equilibrium. In either case, ASEAN will have lost a golden opportunity to scale greater

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heights, with AFTA being epitomised as an acronym for “Another Futile Trade Area”. All said and done, in the final analysis, it is ASEAN, not AFTA, that is really important. The end of the Cold War and the retreat of communism have not made ASEAN redundant or irrelevant. Peace in Southeast Asia cannot be taken for granted. ASEAN is needed now more than ever to avoid arms race, defuse tensions and avert military conflicts in the region. ASEAN can

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contribute significantly to geopolitical stability and security so that its members could concentrate on their economic pursuits. The ASEAN economies do not need AFTA, as they can perform pretty well on their own. But, the strength of ASEAN now hinges critically on AFTA. For AFTA can serve as a glue that would not let ASEAN fall apart. ASEAN’s image will be severely tarnished, should AFTA fail. AFTA must succeed for the sake of ASEAN.

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FOREIGN DIRECT INVESTMENT IN ASEAN Can AFTA Make a Difference? PREMA-CHANDRA ATHUKORALA and JAYANT MENON

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ntil 1992, regional trade preferences were not an important item on the policy agenda of ASEAN. Although ASEAN adopted a Preferential Trading Arrangement (PTA) at the Bali Summit in 1976 (becoming effective in 1977), this initiative had little impact on regional trade because of its narrow commodity coverage and the half-hearted nature of the implementation process (Ariff 1994c; Balasubramanyam 1989). At the summit meeting of ASEAN Heads of State in January 1992, the six countries of ASEAN agreed to establish an ASEAN Free Trade Area (AFTA) by the year 2008.1 This deadline has subsequently been moved forward to the year 2005. AFTA represents the most ambitious attempt at regional integration by ASEAN thus far. It is also the first political attempt to bring about regional free trade in Asia. The centre-piece of the AFTA proposal is the Common Effective Preference Tariff (CEPT). It differs from the previous PTA in that its approach is essentially sectoral, making it more com-

prehensive and less cumbersome than the item-by-item approach of the PTA. The objective of the CEPT scheme is to lay the foundation for the creation of a single ASEAN market. Under AFTA, tariffs are to be reduced to 20 per cent within a time frame of five to eight years (beginning in January 1993) before they are cut down to 0–5 per cent by the year 2005. The granting of tariffs and other preferences is governed by specific ‘rules of origin’ aimed at preventing third-country exporters from using a lower-tariff country as a back door through which to enter a high-tariff country. This discourages the deflection of third-country trade from high-tariff to low-tariff member countries. The formation of a FTA (or any other regional economic grouping) is usually viewed as an attempt to form an inwardlooking regional entity, since it offers its members certain privileges that are not extended to others. It also has the potential to lead to further discriminatory measures against non-members, particularly in the

Reprinted in abridged form from Prema-Chandra Athukorala and Jayant Menon, “Foreign Direct Investment in ASEAN: Can AFTA Make a Difference?”, in AFTA in the Changing International Economy, edited by Joseph L. H. Tan (Singapore: Institute of Southeast Asian Studies, 1996), pp. 76–92, by permission of the authors and the publisher.

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form of increases in tariffs over and above pre-regionalization levels. In its present form, AFTA constitutes a clear departure from this approach. It is widely regarded as a move towards open regionalism — the formation of a regional identity that would strengthen rather than weaken the members’ extra-regional linkages. Thus, as Ariff (1994c, p. 99) has aptly put it, “the cornerstone of AFTA is ‘positive’ discrimination, acting in favour of its members but not against the rest of the world”. Whether AFTA will be implemented in its originally proposed form is yet to be seen. As noted above, ASEAN’s achievements in the sphere of liberalizing regional trade over the past two decades have been lacklustre. On these grounds, one could argue that AFTA might serve more as a means to hedge against ‘regional’ efforts elsewhere in the world, or as a safety net in case the multilateral trading system temporarily falters (OECD 1993, p. 64), rather than as a serious effort at regional economic integration. On the other hand, AFTA has had a more promising start than previous ASEAN initiatives; it has been launched in an overall economic and political environment conducive to regional co-operation. There are also a number of reasons to expect this good start to continue. First, there is the strong political will in the wake of growing economic regionalism worldwide and in the face of the structural transformation in the ASEAN economies. Second, the raison d’être for the formation of AFTA has sprung from the recent closer economic tie-ups among the member countries, in particular, strengthening tradeFDI links within the region. Third, tariffs in ASEAN countries are relatively low by developing country standards, and further tariff cuts and removal of non-tariff barriers on a unilateral basis has become an integral part of the market-oriented policy stance of all member countries. Fourth, as a result of economic integration and the formation

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of intra-regional company networks, most of the existing non-tariff barriers have become less binding (porous) and therefore their removal is unlikely to generate strong opposition. One may therefore reasonably expect AFTA to be fully implemented by the year 2005 (Ariff 1994c, p. 112).

AFTA AND FDI: AN EX ANTE PERSPECTIVE AFTA is unlikely to trigger a significant inflow of tariff-jumping investment. As noted, there is a strong commitment among member countries to the pursuance of an outward-oriented development strategy. Gradual reduction of tariffs and removal of non-tariff barriers have been essential elements of the outward-oriented development policy stance of all ASEAN countries. Thus, it is unlikely that AFTA would lead to a ‘fortress’ ASEAN. Furthermore, there has already been progress in reducing the dispersion of protection across industries in all the countries. Thus there is little possibility that differential protection rates would act as a significant stimulant for resource transfers between sectors. It is important to note that tariffs in ASEAN are already relatively low by developing country standards, with considerable redundancy in the tariff structure.2 Thus it is difficult to imagine that the margin of preferences in AFTA would be an effective boost to foreign investment of the tariff-jumping variety. As discussed earlier, the economic growth of ASEAN countries over the past decade has been driven by extra-regional rather than intra-regional trade. Even so, the level of intra-regional trade is quite substantial by developing country standards, and is likely to grow following the implementation of regional tariff preferences under AFTA. Rapid income growth propelled by exportled industrialization is also contributing to a

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significant and continuous increase in the aggregate purchasing power of the region. Thus, with a large market (of over 335 million people and a combined income level of US$305 billion in 1991), AFTA would provide investors with significant potential to reap gains from scale economies. These opportunities might be significant even under the scenario of potential reductions in tariff levels of Organization for Economic Co-operation and Development (OECD) countries down to close to zero by the year 2005 under the Uruguay and subsequent rounds of multilateral trade negotiations. The greatest potential of AFTA in FDI promotion seems to lie in the sphere of efficiency-seeking investment, mostly of the export-oriented variety. Industrial restructuring through relocation of production activities and processing according to regional comparative advantage has become an important aspect of economic interdependence among the ASEAN countries in recent years. This process would be greatly facilitated by AFTA. Since factors of production are not mobile intra-regionally, the relocation of resources would be towards industries and sectors in which the country has comparative advantage relative to its partner(s). As part of this production restructuring process Indonesia, Thailand, and the Philippines would be able to attract FDI intensive in the use of cheap labour, while Malaysia and Singapore would attract investment intensive in the use of human and physical capital. The degree to which the investment restructuring process would occur depends on the degree of policy neutrality relating to FDI on the part of the participating countries. When the restructuring process is under way, the governments of individual countries might resort to using unilateral restrictive investment measures, particularly if such restructuring creates pressure for domestic economic adjustment. (If the

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adjustment process is particularly difficult, some of the domestic pressure would be vented through competitive investment promotional measures.) Thus, there is a clear need for policy initiatives to devise measures to harmonize technical standards and investment rules as part of AFTA in order to facilitate the industrial restructuring process. The possibility that investment relocation under AFTA might lead to unequal distribution of adjustment burden and benefits is suggested by the experience of the Singapore–Johor–Riau (SIJORI) growth triangle (Kumar 1994). The purpose of forming SIJORI was to provide firms with the opportunity to rationalize their production and distribution through vertical specialization by locating their production facilities according to factor intensity in various areas. In fact, it resembles a mini FTA which serves to link complementary production centres in Singapore and the two sub-regions in Malaysia and Indonesia by relaxing national trade barriers and adopting co-ordinated programmes for developing transportation and other infrastructure. SIJORI has already begun to contribute to export expansion from Indonesia and Malaysia, benefiting from comparative advantage arising from differences in factor endowments that are complementary rather than competing within the three areas. But, based on the experience so far, many in Malaysia and Indonesia see it as a launching pad for Singapore’s internationalization strategy. It is alleged that such internationalization serves primarily to strengthen Singapore’s pivotal role in the region, leaving Indonesia and Malaysia with little to gain from the process. Similar (perceived) conflict of national interests is likely to emerge as part of the process of restructuring production under AFTA if appropriate measures to harmonize investment regulations are not undertaken.

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NOTES 1.

2.

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The textbook definition of a free trade area provides mainly for the removal of barriers to trade in goods and services between partner countries, but it does not require them to adopt a common external tariff vis-à-vis third countries. FTAs do not call for the free movement of production factors or de jure harmonization of members’ economic policies. In the early 1990s, the average (unweighted) nominal tariff rate was 11 per cent in Malaysia, 14 per cent in Indonesia, 9 per cent in the Philippines and Thailand, and close to zero in Brunei and Singapore (Akrasanee and Stifel 1992, Table 4.8).

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50.

PRIVATIZATION AND DEREGULATION IN ASEAN

NG CHEE YUEN and NORBERT WAGNER

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rivatization and deregulation have attracted increasing attention in Southeast Asia, especially among ASEAN countries in recent years. In 1985, the Asian Development Bank (ADB) held a conference in Manila, Philippines, on “Privatization Policies, Methods and Procedures”. Meanwhile all ASEAN countries have, in varying degrees, studied the necessities and possibilities of privatization and deregulation. 1 Some countries are already carrying out several privatization and deregulation attempts, while others are lagging behind. Even countries like Vietnam are considering if not privatization, then deregulation of parts of their economies. In developed countries like France and Japan where government intervention, regulation, and manipulation have been dominant measures in economic policy-making in the past, privatization and deregulation are considered key instruments to restructure the economies and promote economic growth. Even in China and the Soviet Union where

the most dominant and pervasive role has always been assigned to the state, leaders have seriously reviewed the continued appropriateness of such policies and have been striving for a larger role for the private sector and the market mechanism. The recent emphasis on privatization and deregulation can also be seen in an ethical context as a manifestation of the spreading of democracy and individual freedom throughout the world. To a large extent, one is the corollary of the other since privatization and deregulation leave additional areas for individual decisionmaking, whereas democracy and individual freedom inevitably demand a predominant role being given to market forces. THE MEANING OF PRIVATIZATION Privatization as it is used here and throughout this volume is defined in a rather broad sense and includes deregulation as well. Thus, it comprises

Reprinted in abridged form from Ng Chee Yuen and Norbert Wagner, “Privatization and Deregulation in ASEAN”, ASEAN Economic Bulletin 5, no. 3 (March 1989): 209–223, by permission of the authors and the Institute of Southeast Asian Studies.

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— the transfer of ownership from the public to the private sector, — the transfer of production previously produced by the public sector to the private sector, — the financial privatization where the government charges market prices instead of fees for goods and services supplied, — the deregulation of the economy, i.e., liberalization and relaxation or removal of government regulations interfering with market forces. However, the focus of privatization clearly is the investment of public enterprises in favour of private investors and, consequently the transfer of ownership and decisionmaking from the public to the private sector. This reduces the role of the state and enlarges the scope of the market forces. PERCEPTIONS OF PRIVATIZATION AND DEREGULATION IN ASEAN Privatization and deregulation are complex concepts which may embrace many different policies and measures. In ASEAN countries, where not only the socio-economic objectives, but also the extent of the involvement of public enterprises in economic activities differ considerably, there are varying views on the degree to which privatization and deregulation are desirable or feasible. These varying perceptions are to a large extent influenced by the respective socio-economic objectives and policies towards public enterprises of countries in the region. These views range from an emphasis on a continued role for public enterprises but with improved efficiency to the belief that total privatization is the panacea to cure the ills of the economy being constricted by many inefficient public enterprises. Whatever the pros and cons of

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privatization and deregulation in the ASEAN region, the interest in the process has grown considerably. The governments of the ASEAN countries are increasingly committed to privatization and to reduced interference in the economy. PUBLIC ENTERPRISES IN ASEAN COUNTRIES Public enterprises have increasingly played an important role in most national economies of Southeast Asia. This phenomenon coincided with rapid industrialization in the region and to a great extent was aided by growing government revenue resulting from high commodity prices and economic growth. The tendency of increasing government involvement in the national economy has, to a large extent, been supported and driven by: — the underdevelopment of capital markets and their inability to mobilize the necessary financial resources; — the reluctance or inability of the private sector to invest in those sectors or industries with unusually high commercial and non-commercial risks and to implement investment projects which require large amounts of investment; and — the general conviction prevailing among development economists, development agencies, and governments of industrial as well as developing countries throughout the fifties, sixties, and even early seventies that only governments can undertake the steps necessary to promote and guide the development process. However, the more specific rationale for establishing public enterprises and the philosophy under which these enterprises were run differed among the countries.

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THE CASE FOR PRIVATIZATION IN ASEAN Public enterprises in all ASEAN countries are, as noted earlier, not confined to activities with characteristics of increasing returns, indivisibility, and positive externalities — such as justice and security — where optimal outcomes are unlikely to be achieved through private markets; or activities such as services of public utilities and housing, where state intervention has the possibility of reducing transaction costs. All states are also involved in activities that were or could have been the domain of private enterprise. However, control measures, orientation, and attitudes towards public enterprise differ among the ASEAN states and these factors directly or indirectly determine its nature, orientation, and structure. In Singapore, public enterprises are run strictly on a commercial basis, especially those involved with activities that could have been the domain of private enterprise. Public enterprises are expected to make profits and expand where feasible. If they lose money, they are supposed to be permitted to go bankrupt. For that matter, it is also the stated policy of the government not to buy failing private companies just to secure jobs. In fact, public enterprises in Singapore are obviously more efficient than other local companies. In this manner, Singapore has been able to avoid a number of major pitfalls so prevalent in other developing countries. For the other ASEAN states, though they may have professed some or all of these same policies, the results have not been the same mainly because the implementation and aims have been rather different. Generally, public enterprises are characterised by: — operating deficits, causing a drain on public budgets;

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— over-staffing, in many cases with politicians, relatives, friends, and exgenerals who have little concern or real incentives for efficient management; — heavy dependence on domestic and foreign credit, leading to serious indebtedness; and — sub-optimal use of resources, further lowering labour productivity. Public enterprises are run with inadequate attention to profitability, cost control, and efficiency. These enterprises receive privileges from the government, and in turn are used for blatantly political purposes, regardless of their qualifications. Even in some cases where enterprises are honestly run, they have often displayed a lack of initiative and arrogance towards the public they served. These and other factors contributed to the huge losses sustained by public enterprises and the burgeoning external debt of many ASEAN countries.

THE PROGRESS OF PRIVATIZATION IN ASEAN Modes of Privatization The predominant modes of privatization in ASEAN countries comprise: — new listing in the stock market; — secondary offer to the public at large or to existing shareholders; — management buy-out; — sale to original promoters; — negotiated sale; and — selective tender. The appropriateness of the mode of privatization depends on the respective circumstances. But, in the interest of an open and clean implementation of privatization, public enterprises should seek

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random allocation through listing or secondary offer to the public. This mode of disposal will not only add to the needed depth and breadth of the fledgling stock markets in the region, but also, improve absorptive capacity. However, with the exception of Singapore, capital markets are not well developed and this imposes serious limits to their absorptive capacities. In order to broaden the scope of possible shareholders, foreign investors may be invited to buy shares. However, due to strong nationalistic feelings many countries may be reluctant to open their capital markets to a considerable extent to foreign shareholders. PROBLEMS OF PRIVATIZATION IN ASEAN As in other countries or regions, privatization in ASEAN faces, many obstacles, hurdles, and problems which are hard to overcome. In some instances these problems are country-specific. Most of them, however, appear to be common to many other countries carrying out similar privatization programmes. Nationalistic Sentiments A major obstruction to privatization can come from increased nationalism and the suspicion of foreign influence into or even dominance of the economy. These sentiments played a major role when in August 1988 President Aquino announced the indefinite postponement of plans to privatize the Philippines National Oil Corporation (PNOC). The arguments of national independence and national security serve in many countries as the ultimate resort to stop the discussion on privatization and to prevent any further privatization attempts.

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However, it needs to be emphasized that foreign investors have been invited to participate in several instances. Thus, for example, Singapore has allowed foreign ownership of shares of Singapore Airlines. The Philippine Government has explicitly stated that in view of the limited internal capital market it is inevitable that foreign ownership be allowed in order to raise the maximum amount of funds. Management Resistance A very serious threat to any privatization effort may stem from resistance of the managers (bureaucrats) of those public enterprises which are to be privatized as they stand to lose their jobs, perks, fringe benefits, influence, and decision-making power. The government needs to persuade, cajole, and at times even pressure managers of public enterprises to co-operate in the national effort to privatize. Admittedly, countries like Indonesia and Malaysia face immense problems because of vested interests of managers of public enterprises as well as because of resistance of politicians concerned. For example, there was a flurry of activity and news concerning privatization in Indonesia during the first half of 1987. Ministers were told to report to the President, within a month, the performance of companies under their respective portfolios. At the same time, President Soeharto ordered the establishment of high-powered ministerial and official teams to study the feasibility of privatizing public enterprises. Subsequent public discussions showed that there was a general reluctance to privatize. Various ministers pointed out that most of the companies under them were profitable; in cases where they were making losses, they were classified as essential areas vital to national security (see above).

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The resistance of managers heading public enterprises also hampered the privatization progress in Thailand and the Philippines. On the other hand privatization is often opposed because of an alleged shortage of capable and efficient managers to run the companies after they are privatized. However, this argument is hardly convincing. On the contrary, one could argue that the previous reliance of many governments upon public enterprises and interference into the economy prevented the emergence of indigenous private entrepreneurship and management skills. Furthermore, given the poor performance of public enterprises in almost all ASEAN countries, the lack of efficient managers in the public sectors appears to be at least as prevalent. Employees Resistance Privatization is also opposed by employees and trade union leaders because of fears that it might result in job losses and thus contribute to an even larger unemployment problem within the country concerned. Employees of public enterprises may fear, too, that they may lose their benefits and perks after privatization. Trade unionists may also perceive privatization as the government’s stick to tame the trade union movement. As the predominant objectives of privatization are to ease the budgetary burden of public enterprises and to improve the overall efficiency of the economy, the reduction or abolition of some of the worker’s previous benefits and the lay off of part of the work force seem almost inevitable. Apart from these short-term effects however, privatization may rather improve the employees situation in the long term as it contributes to the improvement of the economy’s growth prospects and, thus, generates additional job opportunities. The position of employees and trade

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unions towards privatization in ASEAN countries is rather mixed. The Singapore trade union hardly comments on privatization, whereas trade unions in Thailand strongly oppose the government’s endeavour towards privatization. Trade union leaders of Thai state enterprises have even set up a “watch-dog” committee in order to monitor any move to privatize state enterprises. In the Philippines the guidelines of the privatization programme state that the disposition entities are to give due consideration to the impact of privatization on employment. However, the number of employees affected by privatization has been minimal so far. Some firms have even increased their work-force after privatization. In Malaysia, the government has required that there should be no layoffs for a certain period after privatization, and that employees of privatized companies should not lose any benefit they would be entitled to in government service. In general, trade union opposition towards privatization in Malaysia has not been very strong. Legal Problems In some countries privatization faces some legal problems, too. In Thailand only companies established under certain legal acts can be privatized without requiring approval of the parliament which might be either time consuming or render privatization unfeasible because of vested interests. The privatization programme in the Philippines is severely hampered by objections of previous owners who dispute the authority of the Asset Privatization Trust to sell the assets. Capital Markets The capital market plays a crucial role in any divestment process. The better developed the capital market the easier it is to sell the shares to the public or to find

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a suitable owner through auctioning. On the other hand, privatization may also contribute to develop and to strengthen the capital market by attracting new capital and new participants, either from within the country or from abroad. The participation of foreign investors may enhance the possibilities of raising maximum revenue, but may also cause nationalistic sentiments to increase (see above). The capital markets in Singapore and Malaysia are developed well enough to facilitate the privatization process whereas in the case of Indonesia and the Philippines the limitations and weaknesses of the capital markets may imply a serious constraint on privatization. Even in Singapore with total investable funds amounting to S$30.8 billion (which far exceeds the value of shares to be divested, amounting to S$20.8 billion) disruption in the market is likely to happen if the divestment is too rapid (Public Sector Divestment Committee 1987, p. 53). As to Indonesia, it needs to be seen whether the recently announced liberalization of the Indonesian capital market can improve the absorptive capacity of the capital market. Distribution Effects The privatization of public enterprises may have some repercussions on the distribution of income and wealth. First, privatization implies a transfer of ownership and control of assets from the public to individuals. Second, the mode of privatization and the valuation of the assets transferred can result in a substantial distributional effect. The problem of these distributional effects is particularly sensitive as the distribution problem is in many cases linked to ethnic groups. Thus, for instance, Indonesia seems to face a dilemma. On the one hand, the transfer of ownership of public enterprises to Chinese Indonesian entrepreneurs could cause serious political problems. On the

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other hand, businessmen with the entrepreneurial skills and resources to take over the public enterprises belong mostly to the Chinese Indonesian ethnic group. Even foreign ownership would be more acceptable than privatization that primarily favours this ethnic group (see also Indonesia Business Digest, 1987). Malaysia’s solution to this problem is quite unique. Public enterprises were initially promoted to rectify the economic wealth of the Malays who hold political power. Privatization is, therefore, politically not feasible, unless it serves the same purpose. Consequently, the government nowadays considers it to be advantageous for the Malay community to privatize those public enterprises which have previously been established for the benefit of the same community. Privatization is also expected to contribute towards meeting the objectives of the New Economic Policy (NEP), especially as Bumiputera entrepreneurship and presence have improved greatly since the early days of the NEP and they are therefore capable of taking up their share of the privatized services (Hassan Abdul Karim, in Jomo 1988, p. 122).

The linking of privatization and the New Economic Policy will, however, make the progress of the privatization programme even more difficult, as it reduces the chances of finding entrepreneurs with the capital as well as the managerial and technical skills to run the privatized companies. Moreover, this approach may cause additional problems. Privatization may favour the Malay community but may also contribute to further skew the distribution among this ethnic group. It is likely that political influence and connections will increasingly become decisive. One example is the privatization of the North-South Highway. The contract to build this highway was awarded to the company United

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Engineers Malaysia (UEM) which not only tendered at a price (M$3.4 billion) that was much higher than many others, but was also known to be insolvent and suspended by the Kuala Lumpur Stock Exchange with reported losses of more than M$100 million. This company, it is alleged by Mr Lim Kit Siang, an Opposition Member of Parliament, is 50 per cent owned by Hatibudi Sdn. Bhd., the investment arm of UMNO, the main component party of the ruling National Front. The trustees of the company include the Prime Minister himself and a number of other ministers. Therefore, Mr Lim alleges conflict of interest and applied for an injunction in the Supreme Court which has prevented the signing of the contract for the time being; but before the Supreme Court could hear the case, both Mr Lim and his counsel, Karpal Singh, were detained under the country’s Internal Security Act (“UEM: Political time-bomb ticking away”. In Business Times, 12 January, 1988). In other cases, privatization has not even been implemented by the open tender system. Rather, it appears, that beneficiaries are chosen on the basis of political and personal connections (see Hassan Abdul Karim, in Jomo 1988, p. 123.). Cases of contracts without open tender include the M$1.4 billion worth of 174 water supply projects that have been awarded to Antah Biwater which is a joint venture between a British company, Biwater PLC, and Antah Holding Sdn. Bhd. which is owned and controlled by the Negeri Sembilan Royal Family. Another considerable impact of privatization on the distribution may evolve from the undervaluation of shares sold to the public. For example, in Malaysia the subscription price of some shares was substantially lower than the price after these shares were traded at the stock exchange, thus indicating a considerable underpricing. Under-pricing is likewise a serious problem in Singapore and a number of

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initial public issues were grossly oversubscribed. These include Jurong Shipyard Ltd (145.7 times), Development Corporation Pte Ltd (14.2 times), Singapore National Printers (118.7 times), and Sembawang Maritime Ltd (93.3 times). This implies that the government collected far less revenue than would have been possible. Such a policy, however, whether deliberate or not, results in a transfer of wealth from the public to those who are lucky enough to get these shares. The argument that underpricing may encourage a wider share ownership appears to be not valid, as especially smaller shareholders obviously sold their shares almost immediately in order to realize the gain. Privatization and Efficiency The most crucial aspect of the privatization progress is, however, to what extent it leads to improved efficiency and thus contributes to the further economic development of the countries concerned. It is, of course, premature to thoroughly assess the impact of privatization on efficiency in the ASEAN context given the only recently emerging endeavour for privatization and the thus far rather limited progress of privatization in the region. Yet, some general remarks may already be possible. In order to improve efficiency, privatization must meet two basic requirements. First, the control of a company must really be transferred from the government to the private sector, thus making the private owner fully responsible and accountable for all management decisions as well as the consequences (e.g., losses) of these decisions. Only if control is fully transferred will the private owner be forced to achieve efficiency at the firm level by producing at minimum costs at a given market price. If the public sector continues to maintain a stake in a company (for instance, in the case of partial divestment) the government is

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most likely to continuously interfere, directly or indirectly, with the management decisions and, thus, will also be responsible for the consequences of these decisions. Moreover, in the case of partial divestment the companies concerned are most likely to maintain certain advantages and privileges over their competitors, like a better standing in the capital market and easier access to government contracts. The problem of a reduced impact of privatization upon efficiency on the firm level is particularly relevant in the ASEAN context. There are several examples (in Singapore, Malaysia, and Thailand) where previously publicly-owned companies are only partially divested or transformed into a private company, but the shares of this company are held by the government. Furthermore, in the case of Singapore, it appears that overall government control is not reduced even in those instances where previously publicly-owned companies are fully privatized as some of the funds raised are invested into new industries and sectors which the government considers to be promising in the future. Hence, the government uses these funds to implement a policy of industrial restructuring but by no means reduces the level of control over the economy and its interference with the market forces. Abolition of government control and interference is necessary but not sufficient to increase overall efficiency. A second condition must be met, too, namely increased competition. If monopoly power is merely transferred from the public to the private sector only, there will hardly be any effect on overall efficiency. This problem is particularly relevant in the case of telecommunication services, electricity and water supply, postal services, highways, and public transport. These industries usually enjoy economies of large scale and, consequently, a lack of competition. The danger of a mere substitution of pri-

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vate for public monopoly power, however, is prevalent not only in the case of more or less “natural” monopolies. Yet, examples from Malaysia and the Philippines suggest that privatization, as it is implemented there, may lead to an even higher concentration of wealth in the hands of a few rich families and cronies. In such cases, not only is the objective of increased efficiency not met, but a worsening distribution of income and wealth is the consequence of privatization. Prospects Privatization can only be a gradual and difficult process in the ASEAN region. The prospects of privatization may vary markedly among the ASEAN countries. Privatization is unlikely to be significant in Indonesia. At best, a few enterprises may be privatized and the main focus is on areas related to deregulation and liberalization of the Indonesian economy. The other countries of ASEAN may achieve partial privatization with varying degrees of success. Singapore may be able to privatize most of the identified enterprises. This, however, does not imply that state control would be reduced. In fact, if the Singapore Government continues to reinvest the revenue generated into new industries such as those identified by the Economic Development Board, the government’s control over the economy may be further strengthened. Privatization in Malaysia, Thailand, and the Philippines is likely to encourage greater foreign participation. For Malaysia in particular, if the present methods of privatization are not altered, fiscal problems may be further exacerbated. Addendum The committed move towards privatization and deregulation in ASEAN effectively implies a greater role for the private sector

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in the region. This trend has important implications for regional co-operation in a number of ways. Priority is given to the market mechanism and private initiatives with profit maximization as the main motivation force. The trend also reflects greater political maturity and a sense of confidence in the region — replacing nationalistic sentiments with the more practical business approach to regional cooperation. Should the privatization and deregulation exercise prove successful in some of these countries, which seems to be the case, it will have significant demonstration effects and will encourage the rest of the countries to further liberalize, deregulate and privatize their economies. Such a trend will shift previously obstructive political objectives such as those related to nationalistic considerations to that of the predominant economic objective of profit optimization — effectively a depolitization of business activities in the region. Although this trend necessarily implies greater competition among the ASEAN countries in the economic arena which will nurture competitive and efficient ASEAN industries,

at the international level, it is also necessary to foster closer cooperation among the ASEAN states vis-à-vis industries from other parts of the globe. With the down-play of nationalistic sentiments, a more open and deregulated economic environment and a larger role for the private sector, there will be greater feasibility and opportunities for a better division of labour among ASEAN states. Offshore production in other ASEAN states motivated by comparative advantage and profit objective will forge a stronger economic linkage among the states. Politicians will be left with the less onerous task of smoothening the process in terms of legal and bureaucratic discrepancies. These private sector initiated economic activities are more likely to succeed compared to the previous joint ASEAN projects forged through political compromises. One significant manifestation of this new cooperation is the growth triangle comprising Singapore, Johore in Malaysia, and Riau in Indonesia. Ng Chee Yuen and Nobert Wagner May 1992

NOTE 1.

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Indonesia Business Digest, State Enterprise and Privatization 1, no. 5 (June 1987); “A Few Facts About Privatization in the Philippines”, IPP Bulletin 1, no. 2 (February 1987); Government of Malaysia, Guidelines on Privatization (Kuala Lumpur: Economic Planning Unit, Prime Minister’s Department, 1985); Government of Singapore, Report of the Public Sector Divestment Committee, February 1987; Vuthiphong Priebjrivat, Financial Picture of the Thai Public Sector (May 1987).

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ASEAN AND THE ASIAN CRISIS

JÜRGEN RÜLAND

AFTER THE FINANCIAL MELTDOWN: ASEAN IN SEARCH OF DAMAGE CONTROL Processes of economic cooperation are central to the institutionalist argument. It rests on the axiomatic premises that economic cooperation produces gains for all and enhances national welfare. Trading states are therefore interested in a peaceful international environment. In ASEAN, however, economic cooperation has never reached the critical density that is needed to provide a secure empirical basis for institutionalist explanations of regional politics. Institutional arrangements in the field of economy are a late development and have been preceded by those in the security sector. Only in the 1990s, with the establishment of the ASEAN Free Trade Area (AFTA), has economic cooperation reached a higher level. But even so, ASEAN has hardly gone beyond what Fritz Scharpf — borrowing from Jan Tinbergen1 — calls

‘negative integration’. Negative integration refers to inter-state agreements on deregulation and liberalization, 2 while ‘positive integration’ signifies commonly agreed interventions in specific policy fields through the setting of rules and their subsequent implementation. The poor state of ASEAN’s functional cooperation and, as will be shown below, the long absence of any meaningful financial cooperation, seem to support such an assumption.3 ASEAN’s economic cooperation — though playing a great declaratory role throughout the grouping’s history — has always been subordinated to the national security agenda. From the very beginning, economic development was perceived as a vehicle to ward off communist and ethnic rebellions. Even more importantly, it served as the foundation for ‘national resilience’ (ketahanan nasional), an Indonesian concept later also transferred to ASEAN in the form

Reprinted in abridged form from Jürgen Rüland, “ASEAN and the Asian Crisis: Theoretical Implications and Practical Consequences for Southeast Asian Regionalism”, Pacific Review 13, no. 3 (2000): 421–51, by permission of the author and Taylor and Francis Limited .

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of ‘regional resilience’. Defined as ‘the ability of a nation to cope with, endure and survive any kind of challenges or threats she meets in the course of her struggle to achieve her national goals’, 4 ‘national resilience’ breathes genuine realist spirit. True, ‘national resilience’ also includes an institutionalist dimension because it stresses peaceful international relations and the principle of pacific settlement of disputes as necessary conditions for economic development. Yet, peace is not an end in itself, rather a means to buy time for modernization. In such a context economic strength becomes a crucial power resource in the hands of the nation-state. According to this belief, only an economically successful nation will be able to pursue a free and active foreign policy (bebas dan aktif). 5 Behind such reasoning stands a thinly veiled desire for national greatness which can only be saturated through a regional or — even better — global leadership role.6 Viewed against this theoretical background it is hardly surprising that initial reactions of ASEAN to the unfolding financial drama were very much conditioned by the grouping’s earlier handling of economic affairs. Accordingly, in a first stage of responses, the emerging symptoms of crisis were regarded as purely national problems. The Thai government, for instance, battled in vain against several attacks on the baht. An ASEAN intervention mechanism on which to rely under such circumstances — such as the European Monetary System (EMS) — did not and could not exist due to the limited size and diversity of ASEAN economies. When in May 1997, several Asian central banks intervened in support of the baht against another speculative attack,7 this was neither an ASEAN initiative, nor a fullfledged act of cooperation, as these central banks did not operate with their own funds, but rather with those provided by the Bank of Thailand.8 How much a coordinated effort to deal with the worsening current

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account deficits and the skyrocketing private sector debts was lacking, is perhaps best illustrated by the fact that until March 1997 not even an ASEAN finance ministers meeting had been established. Even worse, when the finance ministers finally met for the first time in Phuket, in typical ASEAN fashion, they sidestepped the painful issues. If the joint communique is a reliable guide, it seemed that, if at all, only a minor portion of the meeting was dedicated to the intensifying speculative attacks on Southeast Asian currencies.9 It was only when the severity of the crisis mercilessly exposed the inadequacy of the national response that — in a second stage stretching from the outbreak of the crisis in July 1997 to the second quarter of 1998 — collective responses were taken into consideration. While some authors writing in 1997/98 still took these initiatives as a sign of a vibrant and matured cooperation fitting the institutionalist paradigms,10 a closer look reveals a strong dose of realist thinking behind the façade of ASEAN solidarity. Many of the proposed joint actions were of the ad hoc type, an instant reaction to a suddenly emerging threat, that much more resembled conventional alliance-building than a well-designed blueprint for cooperation. Not surprisingly, thus, the appeals for ASEAN solidarity sounded like a hollow populist appeal targeted at domestic audiences for fighting an alleged Western conspiracy, which Malaysian Prime Minister Mahathir Mohamad regarded as the root of the crisis. Mahathir perceived the attacks on Southeast Asian currencies as a ‘well planned effort to undermine the economies of all the ASEAN countries’ — a form of ‘economic war’ to use a term frequently heard in the region at the height of the crisis. The first proposal ventilated by ASEAN was the creation of an Asian fund. In tandem with Japan, ASEAN hoped to win over other Asian countries to create a

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standby fund which could be used to bail out ailing economies. The target was to drum up some US$100 billion. The rationale behind the proposal was the intention to find an Asian solution to the crisis in order to by-pass the IMF which was essentially seen as a Western, or, to be more precise, an American instrument. Mahathir also floated the idea of an ASEAN-wide common market11 and then, in early 1998, an ASEAN currency.12 The latter proposal was soon dropped in favour of a diplomatic whirlwind tour through several ASEAN capitals to win support for a plan to conduct intra-ASEAN trade with local currencies.13 It replaced earlier plans to use the Singapore dollar as the common currency for trading among ASEAN members.14 Singapore also spearheaded solidarity with Indonesia, the ASEAN country most seriously affected by the crisis. The city-state pledged US$5 billion to the US$43 billion IMF rescue fund for Indonesia, Malaysia and Brunei another US$1 billion and US$1.2 billion, respectively.15 In addition, Prime Minister Goh Chok Tong sought to establish a multilateral committee to guarantee letters of credit issued by Indonesian banks in order to help Indonesia finance badly needed imports.16 Singapore offered US$2 billion for the scheme which was to come from the country’s US$5 billion contribution to the IMF rescue package.17 With participation of G7 countries, Singapore hoped to mobilize guarantees up to US$20 billion. The majority of these proposals appeared more as a hectic forward defence than a carefully designed strategy to shore up the region’s economies. Proposals such as a common ASEAN currency, or the creation of a common market, though not entirely new, were ill-prepared and not backed up by in-depth studies. Instead of building up a joint ASEAN position in negotiating more favourable IMF conditionalities, ASEAN —

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by actively propagating the Asian fund — embarked on a strategy to circumvent the IMF. As was to be expected, the proposal was shot down by the USA, the EU and the IMF at a World Bank/IMF meeting in September 1997 in Hong Kong.18 The fund was viewed as a thinly veiled move to evade the strict conditionalities that usually go hand-inhand with IMF-dispensed aid. Without structural reforms and the IMF-prescribed austerity programmes, it was argued, the problems of the ailing economies would even escalate.19 Apart from the fact that, except for Singapore, ASEAN countries as the main victims of the crisis could contribute little to the facility, the plan also sorely exposed the lack of Japanese leadership. Japan, reeling from the legacies of her own bubble economy, was easily persuaded by the US to drop the plan. Alternatively, at a gathering of finance and central bank deputies in Manila in early November 1997, fourteen Asian and Pacific countries, including several ASEAN states, agreed on a new framework to promote financial stability and regional cooperation. The key elements of what since became known as the ‘Manila framework’ include a strengthening of the IMF’s crisis management capacities, a cooperative financing arrangement that would supplement IMF resources, and the creation of a regional early warning system.20 In order to facilitate financial surveillance, the finance ministers agreed to set up a permanent secretariat. It would be housed and — at least initially — financed by the Asian Development Bank (ADB) in Manila before being transferred to the ASEAN Secretariat in Jakarta.21 The surveillance process emulates mechanisms of the G7 and the European Union.22 Subsequently, a checklist of criteria for monitoring has been developed. It includes items such as foreign exchange developments, interest rate policies, capital flows and the fiscal health of ASEAN countries.23 Although the creation of the surveillance

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system was endorsed by ASEAN finance ministers as an urgent measure, implementation was agonizingly slow and took almost one year.24 Moreover, whether ‘peer surveillance’ will work crucially depends on the quality of the data provided by members. Previous experiences raise doubts in this respect as some ASEAN members surround their economic data with an aura of secrecy and only agreed to submit them on a voluntary basis.25 Vietnam, for instance, until recently did not even publish its state budget. 26 Especially, foreign banks entangled in the crisis and international rating agencies repeatedly claimed to have fallen victim to false data provided by the authorities of the crisis-ridden countries.27 The Singaporean proposal to accelerate AFTA met the same fate as Brunei’s initiative three years earlier.28 It was discussed at the Kuala Lumpur Informal Summit, but opposed by Indonesia. Members thus failed to agree on a new time-frame and only called for an ‘accelerated implementation of AFTA, including the ASEAN Investment Area (AIA), 29 the ASEAN Framework Agreement on Services (AFAS) and the ASEAN Industrial Cooperation (AICO)’.30 After a long tug of war, finally, in October 1998, the economic ministers’ meeting agreed to accelerate tariff reductions by three years31 — a decision that was, however, reversed by the Hanoi Summit three months later. The summit’s decision to complete AFTA by the year 2002 was little more than a face-saving for the economic ministers. Moreover, ‘The Statement on Bold Measures’ passed by the Hanoi Summit in December 1998 is much less spectacular than the title suggests. The unilateral measures proposed by ASEAN members for revitalizing the influx of new foreign investment differ widely and may not be enough to restore ASEAN’s shattered image among investors.32 Nor will shifting to local currencies in intra-ASEAN trading much alleviate the

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shortage in foreign exchange. So far only Malaysia and the Philippines have implemented the scheme.33 It will hardly contribute to more intra-ASEAN trade which in 1996 still stood at only 22.8 per cent.34 Even if the local currency plan were part of a ‘buy-ASEAN’ campaign, it is more than questionable whether ASEAN countries will be able to absorb more imports from the region. A typical case in point is the decision of the Malaysian government to review and eventually put on hold the purchase of six Indonesian-made CN-235 aircraft by the Malaysian Armed Forces.35 In order to balance their bloated balance account deficits, ASEAN countries will probably do what they have always done: focus their export offensives on the North American, European and Japanese markets. A flooding of Western markets, however, will inevitably invite pressures for reciprocal market openings and therefore limit the capacity (and willingness) to import from peer countries. Without cooperation from G7 and other industrial nations, the Singaporean guarantee scheme for Indonesian letters of credit did not make headway. As a result, Thai rice exporters abandoned Indonesia even at a time of acute food shortages caused by El Niño and thus forced Jakarta to turn to Vietnam and Pakistan for alternative sources of supply.36 By mid-1998 bilateral conflicts among ASEAN members erupted, opening the third stage of ASEAN responses to the crisis. Malaysia, Singapore and Indonesia were at the centre of increasingly acrimonious mutual recriminations which in some cases even carried racist overtones.37 Singapore’s relations with Indonesia have been strained ever since the ascendance of the Habibie government in May 1998. Prior to the Indonesian presidential elections in March 1998, Senior Minister Lee Kuan Yew linked the nosediving of the rupiah to apprehensions over a Habibie vice-presidency.

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Habibie’s penchant for an inward-looking economic policy is clearly at variance with the Singaporean commitment to free trade. Singapore thus withheld the promised US$5 billion, citing lack of reforms in Indonesia.38 Singaporean–Malaysian relations, on a roller coaster course ever since Singapore’s expulsion from the Federation of Malaysia in 1965, also deteriorated again after improvements earlier in the year.39 Malaysia and Indonesia have repeatedly accused the island republic of sabotaging them — a charge angrily dismissed by Singapore’s Prime Minister Goh Chok Tong.40 More recently, Philippine–Malaysian relations became strained, after the Philippine navy discovered structures erected by Malaysia on

a reef in the Spratly area claimed by the Philippines. For the Philippines the construction marked a violation of ASEAN’s non-escalation norms first agreed in the Manila declaration in 1992. 41 Tensions also characterize Thai–Burmese relations due to a series of unsolved problems: border disputes, refugees, the deportation of illegal Burmese labour migrants, and the growing Thai impatience with the junta’s unwillingness to enter into a genuine dialogue with the opposition and the ethnic minorities. While Busse is correct in saying that such disagreements should not be blown out of proportion,42 they nevertheless undermine mutual trust and, hence, a crucial precondition for identity building.

NOTES 1. See Jan Tinbergen, International Economic Integration, Amsterdam: Elsevier, 2nd, revised, edn, 1965. 2. See Fritz Scharpf, Regieren in Europa. Effektiv und demokratisch?, Frankfurt and New York: Campus Verlag, 1998. 3. ASEAN’s functional cooperation is severely weakened by a notorious lack of funding. Much of the functional cooperation depends on financial support by ASEAN’s dialogue partners, thus severely compromising ASEAN’s policy-making autonomy. Despite the elevation of functional cooperation to the same priority level as security and economic cooperation, it has so far hardly gone beyond declaratory politics. 4. See Dewi Fortuna Anwar, Indonesia and the Security of Southeast Asia, Jakarta: Center for Strategic and International Studies, 1992, p. 13. 5. Ibid., pp. 13–14. 6. For examples of assertive foreign policy under Sukarno and since the mid-1980s under Suharto, see Leo Suryadinata, Indonesia’s Foreign Policy Under Suharto. Aspiring to International Leadership, Singapore: Times Academic Press, 1996. 7. See John Funston, ‘ASEAN: out of its depth?’, Contemporary Southeast Asia, Vol. 20, No. 1, April 1998, p. 29. 8. See Callum Henderson, Asia Falling? Making Sense of the Asian Currency Crisis and its Aftermath, Singapore: McGraw-Hill, 1998, p. 101. 9. See Joint Press Communiqué, The First ASEAN Finance Ministers Meeting, Phuket, 1 March 1997; and Südostasien aktuell, Vol. 16, No. 3, May 1997, pp. 177–8. 10. See John Funston, ‘ASEAN: out of its depth?’, Contemporary Southeast Asia, Vol. 20, No. 1, April 1998, pp. 22–37; Michael Wesley, ‘The Asian crisis and the adequacy of regional institutions’, Contemporary Southeast Asia, Vol. 21, No. 1, April 1999, pp. 54–73. 11. See Suara Karya, 17 October 1997. 12. See The Nation Review, 24 October 1997; 28 October 1997. 13. See The Jakarta Post, 18 January 1998, p. 1; 3 February 1998, p. 11; 7 February 1998, p. 9; 11 February 1998, p. 4; 16 February 1998, p. 11; The Straits Times, 3 February 1998, pp. 3 and 4. 14. See The Jakarta Post, 9 February 1998, p. 10; 14 February 1998, p. 9.

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15. In May 1998 Malaysia announced she would extend another US$250 million loan to Indonesia. See The Straits Times, 13 May 1998. Singapore also pledged US$1 billion to the IMF package for Thailand, Brunei an additional US$0.5 billion. See The Straits Times, 28 November 1997, p. 30; Asiaweek, 17 July 1998. Thailand provided Indonesia with 5,000 tons of rice and US$1 million worth of medicine. See The Jakarta Post, 11 February 1998, p. 2; Asian Wall Street Journal, 3 March 1998, p. 3. 16. See The Jakarta Post, 4 February 1998, p. 1; 20 February 1998, p. 8; 6 March 1998, p. 8; 12 March 1998, p. 8; 14 March 1998, p. 8. 17. According to Indonesian reports, Singapore planned to provide even US$3 billion. See KOMPAS, 8 April 1998. 18. See The Jakarta Post, 20 September 1997, p. 5; The Straits Times, 24 September 1997, p. 56; International Herald Tribune, 24 September 1997, p. 15; and International Herald Tribune, Asia Business Outlook, November 1997, S. I. 19. See Bisnis Indonesia, 6 November 1997; Masahiko Ishizuka, ‘The politics of rescue packages’ [http://web3.asial.comsg/timesnet/data/ab/docs/abl480.html]. 20. See The Jakarta Post, 2 December 1997, pp. 1 and 4; The Nation Review, 2 December 1997. 21. Interview information, Bangkok, August 1999. 22. See The Nation Review, 2 December 1997. 23. See The Jakarta Post, 19 March 1998, p. 8; and 8 October 1998, p. 11. 24. See The Nation Review, 6 August 1998. 25. See John Funston, ‘Challenges facing ASEAN in a modern complex age’, Contemporary Southeast Asia, Vol. 21, No. 2, August 1999, p. 214. 26. See Nick J. Freeman, ‘Greater Mekong sub-region and the Asian crisis. Caught between Scylla and Charybdis’, Southeast Asian Affairs 1999, p. 44. 27. Interview information, 2 April 1998 and 5 June 1998. 28. See Far Eastern Economic Review, 14 September 1995, p. 60. 29. See The Jakarta Post, 9 October 1998. 30. See The Nation Review, 16 December 1997; Statement by the ASEAN Finance Ministers and the Finance Ministers of Australia, China, Hong Kong, SAR China, Japan, Korea and the United States and Joint Press Statement. The Second ASEAN Finance Ministers Meeting, Jakarta, 28 February 1998. 31. See Joint Press Statement of the Thirtieth ASEAN Economic Ministers Meeting, 7–8 October 1998, Makati City, Philippines; The Jakarta Post, 8 October 1998. 32. See also Far Eastern Economic Review, 17 December 1998, pp. 26–7; The Jakarta Post, 15 December 1998, p. 4; and 19 December 1998, p. 4. 33. Interview information, Bangkok, August 1999. 34. See Far Eastern Economic Review, 19 February 1998, p. 25; and The Jakarta Post, 5 March 1998, p. 8. 35. See The Jakarta Post, 17 March 1998, p. 1. 36. See The Nation Review, 16 May 1998; and The Jakarta Post, 17 February 1998, p. 8; 20 August 1998, p. 8. 37. For examples, see The Jakarta Post, 13 February 1999, p. 1, and 16 February 1999, p. 1; Far Eastern Economic Review, 25 March 1999, p. 31. 38. See Far Eastern Economic Review, 9 July 1998, p. 19. 39. See The Straits Times, 18 February 1998, pp. 1 and 27; 28 April 1998; Far Eastern Economic Review, 13 August 1998, p. 26. 40. See The Straits Times, 24 August 1998. 41. See Far Eastern Economic Review, 8 July 1999, p. 14. 42. See Nikolas Busse, ‘Constructivism and Southeast Asian security’, The Pacific Review, Vol. 12, No. 1, 1999, pp. 39–60.

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EXTERNAL CAPITAL FLOWS AND POLICY CHALLENGES IN THE ASEAN ECONOMIES J. MALCOLM DOWLING and NARHARI RAO

EFFECTS OF CAPITAL INFLOWS AND MACROECONOMIC MANAGEMENT BY THE ASEAN COUNTRIES Almost all the Asian developing countries which attracted significant capital inflows faced many of the positive and adverse macroeconomic consequences. 1 On the positive side, acceleration in the rate of growth of GDP is evident for several countries during the capital surge phase. The phenomenon is observed in the case of Malaysia, Thailand, Indonesia, and the PRC. In the case of the Philippines, while significant capital inflows began around 1992, economic growth remained sluggish and only picked up in 1994. In all these economies, acceleration in economic growth became feasible by a combination of policies that restored macroeconomic stabilization and promoted structural reforms in conjunction with higher investment rates. The latter could be attained partly by higher domestic savings on account of ongoing financial sector reforms and partly by the influx of foreign savings.

A discernible increase in investment-GDP ratio during the capital inflow phase is observed in Indonesia, Malaysia, the Philippines, Thailand, and the PRC. The three economies that received the largest capital inflows, Malaysia, Thailand, and the PRC, also experienced the largest increase in investment-GDP ratio. Malaysia’s investment rate increased from 28 per cent of GDP in 1989 to 31 per cent in 1990, remained at about 35 per cent over the next three years, and was estimated at 37 per cent for 1994. In Thailand, where capital inflows began in 1988, the investment-GDP ratio jumped from 28 per cent in 1987 to 33 per cent in 1988 and rose further to 35 per cent in 1989. Since then the investment ratio has averaged 40 per cent per annum. A similar trend is observed in the PRC, where in response to large inflows of FDI, the investment-GDP ratio increased almost nine percentage points in 1993, from 34 per cent in 1992 to 43 per cent in 1993. The Philippines also witnessed an increase in the investment ratio during the capital inflows

Reprinted in abridged form from J. Malcolm Dowling and Narhari Rao, “External Capital Flows and Policy Challenges in the ASEAN Economies”, in ASEAN in the WTO: Challenges and Responses, edited by Chia Siow Yue and Joseph L. H. Tan (Singapore: Institute of Southeast Asian Studies, 1996), pp. 137–58, by permission of J. Malcolm Dowling and the publisher.

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phase; the ratio rose from 21 per cent of GDP in 1992 to an estimated 25.0 per cent in 1994. Did capital inflows reduce aggregate savings by giving room for an increase in public and private consumption? The evidence on this issue is mixed. Domestic savings as a proportion of GDP increased in Indonesia, Malaysia, and Thailand. Some of the economies (Indonesia, Malaysia, Thailand, and the Philippines) adopted a tight fiscal stance partly by pruning government consumption as a proportion of GDP. In the Philippines there was an increase in private consumption during the capital inflow phase with the result that the overall savings ratio does not show much change, despite a decrease in public consumption. With investment increasing simultaneously, the Philippines experienced a large external current account deficit. The domestic savings ratio in the PRC does not show a discernible increase during 1993 and 1994 when the economy received large inflows of capital. Almost all the economies experienced a significant widening of the external current account deficit during the capital inflow phase due mainly to a sharp rise in domestic investment in relation to national savings. The sole exceptions were Malaysia and the PRC. In 1991, Malaysia’s external current account deficit increased to about 9 per cent of GDP. However, over the next two years, despite a sharp increase in gross domestic investment, the current account deficit was brought down perceptibly as a result of fiscal tightening. The fiscal deficit as a proportion of GDP declined from 2 per cent in 1991 to a mere 0.2 per cent in 1993. The process was further helped by an increase in private savings. However, Malaysia’s current account deficit increased sharply in 1994 due to a strong increase in investment. The PRC’s current account turned from a surplus in 1992 (1.4 per cent of GDP) to a sizeable deficit in 1993 (2.1 per

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cent of GDP) mainly because of large FDI inflows. With a devaluation of the yuan, the PRC registered a current account surplus in 1994 (1 per cent of GDP). Stabilizing the nominal exchange rate was an important policy target and hence Central Banks intervened in virtually every case to moderate the effect of capital inflows. Malaysia, however, let the ringgit appreciate somewhat in 1992 and, more recently, the Philippine peso has also appreciated in response to capital inflows. By intervening to prevent the nominal exchange rate from appreciating in the face of capital flows, all countries accumulated foreign exchange reserves at a brisk rate. Accumulation of reserves was probably viewed as providing a cushion against possible reversals of capital inflows. However, the accumulation of foreign exchange reserves can cause the domestic money supply to increase, creating inflationary pressures. Thus in attempting to avoid a nominal appreciation of the exchange rate, the Central Bank’s intervention in the foreign exchange market can cause the real exchange rate to appreciate. The monetary impact can, however, be moderated by various forms of “sterilization”. Since large-scale sterilization is generally impractical, policy-makers have adopted a combination of policies involving some amount of sterilization, non-sterilized intervention, other policy measures aimed at moderating the impact on money supply, fiscal tightening, and modest real exchange rate appreciation. Indonesia was relatively successful in moderating the impact of capital flows on the money supply by a tight fiscal stance and by partial sterilization. Sterilization was accomplished through open market operations and by obliging public enterprises to convert their commercial bank deposits into Bank Indonesia’s certificates (SBIs). The Indonesian authorities also imposed limits on external borrowing by commercial banks and public enterprises. Simultaneously,

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restrictions on current and capital account transactions were reduced. With monetary expansionary effects moderated by these measures, the inflation rate was maintained at single-digit level. Furthermore, despite capital inflows and accumulation of foreign exchange reserves, a competitive exchange rate policy was adopted to support exports of non-oil manufactured products. The nominal and real exchange rates both depreciated. Malaysia also adopted a tight fiscal stance but the magnitude of capital inflows was too large to avoid an acceleration in money supply despite aggressive sterilization. Sterilization took various forms. The Central Bank indulged in open market operations and the statutory reserve requirements of commercial banks was increased from 6.5 per cent in 1991 to 8.5 per cent in 1993 and further to 11.5 per cent in 1994. The government also prepaid some of its external debt which also helped in sterilizing the monetary effects of capital inflows. The Central Bank has also been involved in open market operations. In addition, Malaysia also eased restrictions on current and capital account transactions. Tariffs were reduced to encourage imports, and restrictions were lifted on domestic borrowing by non-residents. Both measures eased the impact of capital inflows on monetary expansion. Inflationary pressures were also abated by allowing the nominal and real exchange rates to appreciate. The Philippines reduced the fiscal deficit gradually in the initial years of the 1990s. In 1994, largely due to higher GNP growth, intensive tax collection efforts, increased income from privatization and prudent expenditure and borrowing policy, the national government’s budget turned into a surplus while the consolidated public sector deficit declined to about 0.1 per cent of GNP. It simultaneously adopted several macroeconomic stabilization measures to counteract the effects of capital inflows. The Central Bank has attempted open market

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operations through issuing its own domestic securities and the government has also assisted in sterilization by issuing Treasury bills and using the proceeds to make deposits with the Central Bank. Measures were simultaneously undertaken to liberalize current and capital account transactions. And the exchange rate was allowed to appreciate significantly in 1994 although significant Central Bank interventions were required to moderate adjustments in the exchange rate. The Bangko Sentral ng Pilipinas purchased about US$2.9 billion in 1994 itself, which represented about 39 per cent of the total volume of transactions. The Central Bank complemented these efforts by stimulating greater “outflow” of foreign exchange and moderating the inflow of foreign resources. In order to encourage outflows, restrictions were lifted on repatriation of foreign investment under the debt-to-equity conversion programme as well as the remittance of dividends, profits, and earnings; encouraging Philippine borrowers to pre-pay external debt whose maturity was due within the next year or two; encouraging domestic investment by residents (including banks and financial institutions) in Philippine international bond issues; and increasing the ceiling on outward investment per investor from US$1 million to US$6 million. Thailand vigorously pursued a tight fiscal policy and was largely successful in curbing the growth of money supply. The Central Bank has implemented open market operations by issuing its own bonds to absorb liquidity and the fiscal surplus of the government was deposited with the Central Bank instead of commercial banks. Thailand also sterilized capital inflows through early repayment of external debt. Capital account transactions were liberalized, allowing residents facilities to invest abroad and to open foreign currency accounts in Thailand. Simultaneously, Thailand also reduced the import tariff rates

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and liberalized the trade regime. As a result of these measures, inflation pressures were moderated and there was little pressure for the exchange rate, either nominal or real, to appreciate. The adverse macroeconomic consequences of capital inflows were evident in the PRC in 1994. While the economy was able to push up the investment levels, since much of the capital inflow was in the form of FDI, there was considerable overheating with GNP growing at about 13 per cent. Sustaining economic expansion at the rate proved to be difficult, and with limited levers for monetary management, there was a rapid expansion of money supply and the inflation rate was above 20 per cent in 1994. The growth in money supply was fuelled largely by surplus both on the current and capital accounts, which has increased foreign exchange reserves to almost US$53 billion by the end of 1994. Some countries also imposed direct or indirect controls on capital inflows. Malaysia instituted specific measures in January 1994 to discourage destabilizing short-term capital inflows by prohibiting residents from selling short-term monetary instruments to non-residents, by requiring commercial banks to place with the Central Bank the domestic currency funds of foreign banking institutions in non-interest-bearing accounts and by imposing ceilings on external liabilities of commercial banks. In the following month, additional action was taken in the form of stopping non-traderelated currency swaps, banning the sale of private debt of less-than-one-year maturity to foreigners and by imposing maintenance charges on non-interest-bearing foreign deposits. The restrictions were lifted in August 1994. LINKAGES TO TRADE AND THE WTO How does the preceding analysis of capital movements and policy issues relate to the

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World Trade Organization (WTO) and trade issues? There are two main linkages to international trade and the WTO. The first is through the investment channel. Within ASEAN the bulk of the FDI coming into these economies is directed to the export market. While accurate figures are hard to pin down, it is likely that the bulk of FDI is directed to exports, particularly in electronics and apparel. In fact, several ASEAN economies have regulations that link the degree of foreign participation in an enterprise to sales in the export market. Thailand, for example, requires that all products be directed to the export market before the foreign firm can retain 100 per cent ownership. Therefore, rapidly increasing levels of FDI in ASEAN are directly responsible for increasing the capacity of exporting industries. In the case of Japanese firms, much of the FDI in the past few years has been by subcontracting firms which have joined main producers in the foreign market in a keiretsu arrangement similar to that which was originally developed in Japan. This type of arrangement deepens the participation of the overseas investor in the domestic market but at the same time it reduces the potential for backward linkages to domestic suppliers. In some instances, such as automobiles, domestic suppliers of parts and ancillary equipment such as tyres, electronics, and batteries have developed rapidly. The second linkage to trade and the WTO is through provisions of the General Agreement on Tariffs and Trade (GATT) on trade-related investment measures, commonly referred to as TRIMS. This provision stipulates that under GATT, certain trade-distorting investment measures are prohibited. This means that regulations such as the Thailand legislation will have to be phased out over the next five years. The impact of implementing TRIMS on FDI to the region depends on a number of

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factors. By relaxing the requirement that FDI be tied to exports, foreign investors may be further attracted to the domestic market and this could provide additional competition to domestic producers. Foreign producers that can effectively compete in the world market will present a formidable foe for local manufacturers that still enjoy protection. Furthermore, as incomes and the quality of domestic goods increase, the distinction between domestic and foreign markets will blur. But will this also mean that the rapid rate of increase in exports experienced within ASEAN for the last two decades may diminish, and will this have an adverse impact on growth and on the balance of payments? At the same time foreign investors are becoming more interested in helping to develop physical infrastructure through build, operate, and transfer (BOT) schemes. This source of FDI could extend the investment potential and productive capacity of ASEAN economies in a new direction without any adverse impact on exports. CONCLUSIONS The ASEAN countries have managed the macroeconomic effects of capital flows reasonably well. A majority of them have utilized external resource inflows in a productive manner by pushing up their investment-GDP ratios. Consequently,

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economic growth accelerated in these economies due to the combined effect of liberalization measures (which increased the efficiency of capital) and higher investment. Moreover, larger inflows of external capital did not lead to an increase in public and private consumption and domestic savings effort remained strong, which allowed higher investment and growth with a modest increase in current account deficits. Stabilizing the nominal exchange rate appears to have been an important policy goal for a majority of the countries. Hence, the Central Banks had to intervene in virtually every country and they all accumulated foreign exchange reserves rapidly. It appears that foreign exchange reserves are viewed by the authorities as a cushion against possible reversals of the volatile components of external capital stocks. Almost all the countries attempted sterilization by different means to reduce the impact of capital inflows on the domestic monetary stock in order to contain inflation and prevent the real exchange rate from appreciating. Success in those experiments are mixed; some countries were able to prevent the real exchange rate from appreciating but many had to accept an appreciation. Finally, it is noteworthy that there were few attempts at directly controlling the inflow of capital.

NOTE 1.

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In discussing the effects, the caveat must be borne in mind that it is difficult to isolate the effects of capital inflows. Thus the observed increase in domestic investment and economic growth could well be a combined effect of structural reforms, other autonomous policy changes, and access to higher external savings through capital inflows. Similarly, a widening current account deficit could arise due to changes in external market conditions as well as on account of lax fiscal policies financed by money creation in addition to the expansion in the monetary base due to capital inflows. Thus in examining the effects of capital inflows on an economy, other factors should be simultaneously considered.

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53.

ASEAN AND THE IDEA OF AN “ASIAN MONETARY FUND”

SHAUN NARINE

EVALUATING THE CASE FOR AN ASIAN MONETARY FUND There are a number of crucial questions to address when considering the idea of an AMF. First, what would be the purpose of such a fund? Should it be a supplement to the IMF, or should it support a particular “Asian” approach to economic development? Which country or countries would lead such an organisation? What role would ASEAN play within an AMF, and how would the establishment of such a regional economic instrument affect ASEAN’s institutional development? There are no definitive answers to these questions, but the possible answers can be analysed on the basis of political and historical evidence. First, what should be the relationship of the AMF to the IMF? The most common response to this question is that an AMF should complement the IMF, rather than compete with it. It would be, essentially, an Asian arm of the IMF — better able to act quickly, not dependent on the American

Congress for its funds, but still guided by, and subordinate to, the principles and policies articulated by the IMF. The second response is more militant: the AMF should replace the IMF in Asia. It should promote and defend a model of “Asian developmental capitalism” that is more appropriate for Asia than the Anglo-American model promoted by the IMF. The following discussion addresses each of these views in turn, then considers the political obstacles that stand in the way of either AMF model becoming a reality. It also examines how the issues surrounding the AMF affect the institutional evolution of ASEAN.

AMF and IMF: Working Together in Asia An AMF could fulfil various stabilising functions in an unstable world economy. An AMF would be better placed than the IMF as an early warning mechanism and watchdog over Asian economies. Most important, an AMF would be well capitalised and able to

Reprinted in abridged form from Shaun Narine, “ASEAN and the Idea of an ‘Asian Monetary Fund’: Institutional Uncertainty in the Asia-Pacific”, in Non-Traditional Security Issues in Southeast Asia, edited by Andrew T. H. Tan and J. D. Kenneth Boutin (Singapore: Select Publishing and the Institute of Defence and Strategic Studies, 2001), pp. 227–54, by permission of the author and the publishers.

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provide financial support to Asian states without going outside the region. However, this capacity has profound implications. How an AMF disburses its funds and its relationship to the IMF is of critical importance in determining its effect on the world economy. The argument that an AMF should complement and be subordinate to the IMF is widely promoted by analysts in and outside the region. 1 Ramakishen Rajan notes at least six good reasons to create an AMF (beyond those noted above), although there is some overlap among the six.2 First, past economic crises have been regional in nature, and the bailout packages organised by the IMF have been heavily financed by regional powers. Thus having a regional body to coordinate such rescue is not a great departure from established practice and increases efficiency. Second, there is an East Asian demand for a regional economic facility, and the resources to fulfil this demand are available. Third, an AMF can complement other East Asian efforts to facilitate regional economic development and interaction. Fourth, a regional economic facility can improve the East Asian voice in the international financial architecture. Fifth, there is no strong regional hegemony in Asia or regional monetary institution, in contrast to the dominant role of the United States in the Americas, or the European Union in Europe. Sixth, an AMF could deal with the contagious effects of economic crises in one part of the region, which could easily spread to other parts and beyond. An AMF could focus on crisis prevention, leaving the tasks of crisis management and resolution to the IMF. An AMF could protect regional currencies under attack from speculators. To be an effective deterrent, an AMF would have to provide its members access to a large pool of funds, built through appropriate donations from the regional states. The ability to access these funds:

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255 ... ought to be conditional on/tied to member economies maintaining some predetermined standards of macroeconomic and financial stability ... if and when necessary, the members must be willing to subject themselves to regional peer pressure to undertake necessary policy adjustments ... promotion of policy dialogue will be a key function of such a facility.3

Rajan notes that there are difficulties in clearly demarcating the respective roles of the IMF and the AMF in times of crisis. Nonetheless, he sees the AMF as the coordinating regional body that would work with the IMF and other institutions to coordinate bilateral aid, ensure speedy disbursements of aid, and suggest “the appropriateness of various policies/ conditionalities, given its knowledge of regional circumstances.” 4 Conditions attached to the loans would be set by the IMF, although the AMF could lend funds separately, in order to bypass the IMF’s system of quotas for individual economies. Rajan sees the IMF as lending its experience and expertise to the AMF to help it fulfil its crisis prevention function. However, he also notes that any regional facility must have the ability to force members to “take appropriate actions if domestic weaknesses and imbalances are apparent.”5 Questions surrounding conditionality and its enforcement are the source of the ideological and political tension around the AMF idea. Moreover, the primary role assigned to the IMF assumes that the goals of the IMF and AMF would be the same. Supporters of the argument that the AMF should complement the IMF privilege a view of the world economy as a unified whole, with the IMF as the necessary and appropriate shepherd of monetary and economic cohesion. This vision is, in some ways, being challenged by some Asian states. The political and ideological issues aside, it is not clear that this vision of the AMF

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could ever work. Even if the institution started out as an adjunct of the IMF, it is unlikely it would remain so, given its financial independence. An Asian-funded AMF would not likely stay under the IMF thumb for long, especially if the IMF advocated policies that most AMF members opposed. Thus, from this perspective, any effective version of an AMF would become a threat to US and IMF domination of the structures of the world economy. The AMF and “Asian Capitalism” When Eisuke Sakakibara proposed an AMF in 1997, he explicitly argued that the AMF would defend the “Asian model” of economic development by quickly providing emergency funds to Asian states without IMF-like conditionalities. Earlier, Sakakibara had argued that the “Asian model” was more favourable to development than the liberal Anglo-Saxon model supported by international financial institutions.6 The AMF may, therefore, be a vehicle that could support and further an “Asian” conception of the regional economy. As such, it would be a direct competitor to the IMF and the American vision of the world economy. There is, in fact, no clear “Asian model” of economic development that is followed by all Asian states, indeed, only a few Asian states possess the proper mixture of state capacity and social cohesion necessary to successfully emulate the Japanese development model.7 Nonetheless, there may be a broadly identifiable “Asian approach” to the relationship between the state, the economy and society.8 Robert Wade notes characteristics of an “Asian financial system” that are common to most East Asian states. Foremost among these is a high rate of domestic household savings, most of which is deposited in banks.9 Most Asian corporate investment is financed by bank loans, forming a “creditbased” or dedicated capital system.10 In the

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US, corporations finance their production through depreciation and profits, with less reliance on bank debt. Investment capital is provided mainly by stock and bond markets. In the developmental Asian states, the high levels of corporate debt are buffered by long-term financial commitments between firms, banks and the state. The government is ready to support banks or firms and protect them from sudden economic shocks. Without the long-term commitments of the main actors, lenders could call in loans and liquidate firms in response to sudden economic shocks. This financial rationale is the basis of “alliance capitalism,” now commonly disparaged as “crony capitalism.”11 In Anglo-American business regimes, competition and the maximising of shortterm profit make high-debt structures unsustainable. Economic shocks cause lenders to call in loans and liquidate firms. Banks may be subject to “runs” from depositors if they are too exposed to defaults. This behaviour causes the financial system to shrink. To deal with this, Anglo-American countries have created “lenders of last resort” and regulatory bodies that place limits on the levels of acceptable indebtedness for private firms and banks. In Asia, the limits of “prudent indebtedness” are set far higher. In Anglo-American capitalism, the failure of a firm results in its immediate liquidation and the unemployment of its workers. In the East Asian/ Japanese model, governments try to negotiate adjustments with the affected social parties, including workers. Business and labour, to varying degrees, are part of a larger attempt to socialise economic risks.12 Alliance capitalism appears to invite corruption. In many Asian countries, it does. Nonetheless, this approach was the source of rapid economic growth for countries such as Japan, South Korea, Taiwan and Singapore.13 Thailand and Indonesia — and to a lesser extent, Malaysia — are examples

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of weak states where crony capitalism and corruption have lessened the prospects of development. Throughout the 1990s, Asian states have moved more towards an AngloAmerican liberal model of business. However, governments continue to accept the principle that the state has a legitimate role to play in managing economic and social relations. If there is an enduring “Asian model” of development, it is represented by this commitment. It is this flexibility that an AMF may act to preserve.14 Many Asians conceptualise an Asian Monetary Fund as a buffer against future currency crises. It should shield Asian economies from the vagaries of the international market by providing emergency funds to threatened economies. In doing this it would, implicitly, protect these economies from being forced into structural adjustments that would run contrary to the political and social goals of the state government. The activities of the IMF and the US Treasury during the crisis were based, in part, on the belief that Western financial markets need to be involved in regional resource allocation. The failures of Western financial institutions in allocating resources in Asia helped fuel the speculative bubble; their panicked rush to the exits, even when Asian economic fundamentals remained strong, further undermined their claim to any special economic insights or privilege. According to Wade, “the economic performance of the emerging Asian economies prior to the crisis suggests that Asian governments and their financial institutions can allocate resources more efficiently” than Western actors.15 An AMF that acted to protect Asian economies might well preserve economic inefficiencies and, more importantly, the political and social dominance of the existing — and often corrupt — domestic elite. Thus the call for an AMF may be an attempt by the elite to protect themselves

against the forces of change. However, an AMF independent of the IMF might prevent the catastrophic effects of a future investor panic or the other kinds of economic instability that might be produced by the volatile world financial system. If so, it could serve the positive social purpose of protecting the weakest members of Asian society from social and economic disaster. For states that are dependent on “performance legitimacy” — i.e., economic success — in order to preserve political stability, this is a fundamental concern.16 Ideally, an AMF would preserve an alternative approach to capitalism and economic development that could evolve at its own pace. It would protect the Asian development model and Asian economies from the domination of wealthy Western interests. The Asian elite argue that their developmental model can bring about the best kind of political and economic systems for their countries with far less unnecessary social pain and destruction. Before we dismiss these claims as the rationalisations of the entrenched elite, we should acknowledge, again, that the Asian developmental model has led to economic success and political evolution in states, such as Taiwan and South Korea. Many Asian states are pursuing economic solutions to the effects of the crisis that are leading to greater government involvement in their economies. Bank restructuring in Japan, South Korea, and the affected Southeast Asian states, is extending government control and ownership of the financial sector. Malaysia’s capital controls have elicited considerable regional support and have not prevented the country from undergoing a dramatic economic recovery. Throughout all Asia, recovery and restructuring are being fuelled by government resources. Asian governments have agreed that they need to radically restructure their financial systems and promote economic transparency, but restructuring has been

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proceeding very slowly in most of the crisisaffected states.17 The preceding analysis indicates that, regardless of whether it is initially constructed to complement or compete with the IMF, an AMF will ultimately be at odds with the established international global architecture. This does not mean that an intractable struggle will develop between the East and the West; the global economy is too interdependent, and the political realities are too complex for easy predictions of conflict. However, reaching some kind of accommodation with Asian aspirations and ideas is a necessary — and long neglected — part of future institution building.18 Obstacles to the AMF The first problem for the AMF is the question of leadership. The obvious leader of an AMF is Japan. Japan possesses enormous reserves of wealth and foreign exchange. Japan would be the primary source of funds for an AMF. Japan has also quietly and persistently pursued the idea since its initial rejection by the West. However, despite these measures, it is still unlikely that Japan is prepared to exercise regional leadership, or that its leadership would be accepted by other Asian states. The question of Japanese leadership is first complicated by the uncertainty of Japan’s commitment. Leading an AMF would, probably, lead Japan into conflict with the United States. Little in the postWorld War II record suggests that Japan is truly willing to seriously antagonise the United States. Japan’s continuing reluctance to move decisively towards an AMF underlines this point. Moreover, so long as the region remains dependent on the US market to absorb its exports, its relationship with the United States remains key to its economic health. Again, the AMF may be the first step towards creating a

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more dynamic and internally focused Asian economic region. If there is an East Asian region emerging, however, it is still in a very nascent stage and is complicated by historical distrust and uneven economic interdependence among the Asian countries. Moreover, the American military presence helps to maintain regional stability. This makes possible economic cooperation among the Asian states, and also makes it possible for the regional powers to work around their own tensions. Asia must be prepared to deal with the uncertainty of an American withdrawal, if it is prepared to challenge American economic power. The leadership of an AMF also requires some resolution of the rivalry between Japan and China. When the United States first rejected Japan’s proposal for an AMF, it was supported by China. China was unprepared to accept a Japanese-dominated economic institution that would cement Japanese influence in the Asia-Pacific and might, conceivably, be the first step towards creating a “yen bloc.” It is important — and telling — that China is now an active supporter of the AMF idea. Apparently, it now feels that curbing American economic influence is more important than containing Japan. Nonetheless, China remains wary of Japan, reflecting the historical animosities and mutual suspicion that the two great powers share. The nature of the China-Japan relationship remains unclear. China’s concerns about Japanese power will remain a source of tension within Asia and have the potential to sabotage any efforts at creating effective regional institutions. Japan’s uncertainty about China’s regional intentions and influence is also relevant, and will become more pronounced if and when China becomes more assertive in the Asia-Pacific. Continuing regional anxiety about China’s intentions in relation to Taiwan and the Spratly Islands underlines these concerns.

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The tension between China and Japan provides ASEAN with an opportunity to play a fundamentally important role in the creation of the new regional institution. The ASEAN Plus Three meetings have resulted in the signing of currency-swap agreements that may be enough to combat future currency crises. The May 2000 meeting of ASEAN Plus Three was initially billed as an effort to discuss an AMF. In the end, a lack of support from the major economic powers — indicating, again, the complex implications of pursuing an AMF — forced the AMF onto the regional back burner. Yet, the swap agreement may be the first step towards an AMF. ASEAN gets considerable credit for playing an intermediary role between China and Japan. While neither country would be willing to accept the dominance of the other in an AMF, both can accept ASEAN as a compromise leader. 19 As in the ARF, ASEAN’s relative weakness makes it a suitable foundation on which to build a new institution. This role has profound implications for ASEAN. Its intermediary position provides it with, potentially, considerable political influence within whatever institution may emerge. As noted, ASEAN’s viability as an institution is in serious jeopardy, due to the crisis. It is extremely unlikely that the organisation can

be reformed sufficiently to play a major role in future economic crises. However, the great power realities of the Asia-Pacific are creating a new and important role for ASEAN in the larger region. Nonetheless, the boost that ASEAN can gain from its position in the AMF would only be temporary. First, in the case of an actual crisis that demanded action from the AMF, the new institution would create deep strains within ASEAN itself. There were significant differences among the ASEAN states on how to handle the Asian crisis. Singaporean leaders were fairly unsympathetic to the travails of their ASEAN neighbours. Their general attitude was that the crisis revealed important structural deficiencies and inefficiencies (such as rampant corruption) in the neighbouring states, and they were reluctant to offer assistance outside of the confines of an IMF-approved bailout.20 By contrast, Malaysia has pushed for an AMF that would provide unconditional loans to Asian countries. As Singapore is one of the states in a position to make a significant contribution to an AMF, it is unlikely that it would agree to what it might see as a waste of its resources. ASEAN is likely to break down along the lines of borrowers and lenders within an AMF.

NOTES 1. Fred Bergsten, “Reviving the ‘Asian Monetary Fund’ ” International Economics Policy Brief, Institute for International Economics (December 1998), http://www.iie.com/NEWSLETR/news98-8.htm; Andrew K. Rose, “Is There a Case for an Asian Monetary Fund?” FRBSF Economic Letter, No. 99-37 (17 December 1999): www.sf.frb.org/econrsrch/wklyltr/wklyltr99/el99-37.html. 2. Ramkishen S. Rajan, Examining the Case for an Asian Monetary Fund, ISEAS Working Papers, No. 3 (Singapore: Institute of Southeast Asian Studies, 2000), pp. 2–4. 3. Ibid., p. 12. 4. Ibid., p. 13. 5. Ibid., p. 14 6. Kristen Nordhaug, “Asian monetary fund revival?” Focus on Trade, No. 51 (June 2000), www. focusweb.org/focus/pd/apec/fot/fot51.htm.

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7. Bruce Cumings, “The Asian Crisis, Democracy, and the End of ‘Late’ Development” in T.J. Pempel, ed. The Politics of the Asian Economic Crisis (Ithaca: Cornell University Press, 1999), p. 18. 8. Richard Stubbs, “Asia-Pacific Regionalization and the Global Economy,” Asian Survey, Vol. 35, No. 9 (September 1995), pp. 785–797. 9. Robert Wade and Frank Veneroso, “The resources lie within,” The Economist (7 November 1998), p. 19. 10. Stephen Gill, “The Geopolitics of the Asian Crisis,” Monthly Review (www.montlyreview.org/ 399gill.htm): 5. 11. Wade and Veneroso, op. cit., pp. 20–21. 12. Ibid. 13. Ibid. 14. Stubbs, pp. 787–791; Douglas Sikorski, “The Asian Financial Crisis: Explanations, Controversies, Responses,” www.fba.nus.edu.sg/depart/bp/fbads/crisis.htm: 24. 15. Wade and Veneroso, op. cit., p. 21. 16. Muthiah Alagappa, ed. Political Legitimacy in Southeast Asia (Stanford: Stanford University Press, 1995); Muthiah Alagappa, ed. Asian Security Practice (Stanford: Stanford University Press, 1998). 17. Sikorski, pp. 22–25; Asian Development Bank, Asia Recovery Report 2000 (October 2000), http:// aric.adb.org. 18. Fred Bergsten, “East Asian Regionalism: Towards a tripartite world,” The Economist (15 July 2000), pp. 23–26; Peter W. Preston, “Reading the Asian Crisis: History, Culture and Institutional Truths,” Contemporary Southeast Asia, Vol. 20, No. 3 (December 1998), pp. 241–260; Charles Morrison, “East Asia and the Financial System,” The Trilateral Commission: http://www.trilateral.org/annmtgs/tria/og/ trlgtxts/t54/mor.htm. 19. G. Pierre Goad, “Asian Monetary Fund Reborn”, Far Eastern Economic Review, 18 May 2000, p. 54. 20. “Beggars and choosers,” The Economist (1 November 1997), pp. 43–44; “Meanwhile, back where the wagons are circling...,” The Economist (29 November 1997), p. 41.

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Introduction

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Section

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GEOPOLITICS, DEFENCE AND SECURITY

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INTRODUCTION

Sharon Siddique

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n the early years, Cold War rivalries were the defining element for ASEAN. Security among the newly independent ASEAN members was inter-state, giving primacy to the principle of non-interference within ASEAN, and a preoccupation with balancing regional and global superpower interests in the region. This general orientation remains even though ASEAN has increased its membership from the original five, to ten. How far ASEAN members have come can be gauged by comparing the regional positioning during the Vietnamese occupation of Cambodia in the late 1970s, with the situation in 2003, when Cambodia, now an ASEAN member, held peaceful national elections. The peaceful expansion process itself is a testimony to intra-ASEAN strength and cohesion. However, there are areas in which ASEAN’s management of its internal affairs have been less than successful. ASEAN had to rely on external lobbying to settle the Cambodian conflict; the problem of cross-border air pollution continues to blaze; ASEAN was a marginal player in the resolution of East Timor’s independence; and perhaps more could have been done on a regional level to ameliorate the impact of the 1997 economic crisis.

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It must be acknowledged that ASEAN’s strength has been largely as a collective body to lobby and manage external threats and influences. This continues to be true, despite the fundamental shifts in fortunes within and among these external players — China, Japan, the (former) USSR, and the United States — particularly over the past fifteen years. During this time we have seen the removal of the Soviets as a player, the primacy of the United States as a global superpower, the re-emergence of China as regional player, and the diminished role of Japan. The Korean peninsula remains volatile due to the potential of nuclear conflict. And Australia continues to carve out an Asian role, as it also increasingly dominates the South Pacific. Most recently, the region has had to adjust to the United States in its new role as the lead-state in the post-911 War on Terrorism. Of course this intra-ASEAN versus interstate ASEAN plus external players scenario often blurs. A case in point was the Vietnam invasion of Cambodia in the late 1970s, which had elements of Sino-Soviet and U.S.USSR rivalries, as well as varying officially and unofficially held differences of opinion on solutions to the crisis among ASEAN members themselves. Another illustration is

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the decades-long controversy in the South China Sea over the sovereign ownership of the Spratly islands, which are variously claimed by China, Taiwan, Vietnam, the Philippines, Malaysia, and Brunei. It was not until 1994 that ASEAN — in the form of the ASEAN Regional Forum (ARF) — formalized an institution dedicated to discussing security issues. Security dialogues which have evolved over the past decades have been institutionalized in the ARF, which links the Southeast Asian security complex to Northeast Asia and the South Pacific. The ARF includes all the major players in the Asia-Pacific among its members. In formalizing the ARF, ASEAN has created a focal point for the discussion of Asia-Pacific security issues. It remains to be seen whether the ARF can progress beyond confidence-building measures (CBMs) to proactive, preventive diplomacy. It was not coincidental that the ARF was created several years after the end of the Cold War, and before the Southeast Asian economic crisis. ASEAN, in economic takeoff trajectory, was confident enough to take the step. Also, security as an issue has increased in importance in the post-Cold War period, with the uncertainty over the role of the United States. There is an increasing need to move from more passive hub and spoke security formation of the Cold War period, to developing shared norms on which to base confidence-building and other security instruments. But seeing the problem, and solving it, are two different issues. Without doubt, the past decade has seen the definition of “security” broadened from its traditional, territorial meaning to include “human security”, or “comprehensive security”. Human security concerns transnational issues, like environmental degradation, mass

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migration, energy security, drug trafficking, and cyber crime. All these issues are transstate, in that they cross the borders of individual nation-states, and hence affect not only the citizens of a single state, but “human”-ity as a whole. It is inevitable that this process will question the importance of national sovereignty, and this is a sensitive issue in ASEAN. Moreover, some argue that this expanded definition of human security is a function of the dominance of the Western (particularly U.S.) security paradigm, which assumes that there is a link between “human security” and democratic practices. Further, these two processes are prerequisites for both economic growth and political stability. Many human security issues are championed not by governments, but by thinktanks and private sector institutions and organizations. The expansion of the security domain to include human security issues has, thus, seen a parallel and related expansion of Track Two activities. Track Two organizations provide the vital function of serving as mediating factors between the state and its citizens. In ASEAN, Track Two organizations like ASEAN Institutes of Strategic and International Studies (ASEAN-ISIS) in the political field, and lately Council for Security Co-operation in the Asia-Pacific (CSCAP) in the security arena, serve a second important function. They allow discussions, negotiations, and positions to be aired and clarified in an “informal”, non-governmental atmosphere. Some Track Two initiatives are then formally accepted by Track One ministries. Their involvement in the security dialogue process is therefore vital, as ASEAN continues to search for an acceptable expanded version of the concept of security for the twenty-first century.

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IS ASEAN A SECURITY ORGANIZATION?

MICHAEL LEIFER

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he Association of South East Asian Nations was conceived as a means of promoting intra-regional reconciliation in the wake of Indonesia’s confrontation of Malaysia. Its founders exhibited also an interest in the management of regional order. At the formation of ASEAN in August 1967, the Governments of Thailand, Malaysia, Singapore, Indonesia and the Philippines committed themselves “to accelerate the economic growth, social progress and cultural development in the region”. This commitment assumed greater initial prominence than the promotion of “regional peace and stability”. But the underlying concern intensified concurrently with changes in the balance of external influences bearing on South East Asia exemplified above all by the direction of American policy. In consequence, ASEAN is best contemplated as a security organization even though it does not possess the form or the structure of an alliance and its corporate activity has been devoted in the main to regional economic cooperation. This paradox

is a function of the perceptions of threat held by the individual governments of the association and of other limits to the degree of cooperation between them. It is the intention of this article to explore the paradox and to explain why ASEAN cannot assume alliance form or undertake activities which are normally associated with security organizations.

SIGNIFICANCE OF THE BALI SUMMIT It is some indication of the limited measure of progress on the part of ASEAN that more than eight years elapsed from its advent before the heads of government of its member states deemed it appropriate to convene a common meeting. This meeting took place in February 1976 on the island of Bali in Indonesia and was prompted by the shared sense of anxiety at the radical political changes which had occurred throughout Indo-China in the preceding year. At the Bali Summit, the prime

Reprinted in abridged form from Michael Leifer, “The Paradox of ASEAN: A Security Organisation without the Structure of an Alliance”, The Round Table, no. 271 (July 1978), pp. 261–68.

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common interest of the members of the association was articulated explicitly within a joint Declaration of ASEAN Concord. The five heads of government maintained that: 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.

The significance of this statement was that it demonstrated the common perception of threat held by the five governments. Thus, although an earlier commitment by ASEAN Foreign Ministers in Kuala Lumpur in November 1971 “to secure the recognition of South-East Asia as a Zone of Peace, Freedom and Neutrality” was reaffirmed, provision for security through the exclusion of extra-regional involvement had become a secondary consideration to containing internal challenge of an ideological kind. Indeed, much of what the ASEAN states have striven to achieve in economic cooperation has been justified in terms of security. Thus, although its members have engaged in cooperative enterprise directed against protectionist practice by industrialized states, a common denominator of interest has been a desire for mutual protection on the part of conservative governments which wish to uphold the political status quo. This close link between economic and social advance and political stability in the region was enunciated in the final communiqué of the second meeting of ASEAN heads of government which convened in Kuala Lumpur in August 1977 to commemorate the tenth anniversary of the formation of the association. The raison d’etre of ASEAN has been well indicated by a Yugoslav observer who has maintained that “The identity and closeness

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of many political and economic interests of these countries stemming from the similarity of their socio-political orders as well as their more or less outspoken hostility towards the national-liberation movements in Vietnam, Laos and Cambodia provided the cohesive element and basis for their association”. 1 This observation requires some qualification because from the advent of the communist governments in Indonesia, the ASEAN states ceased their “outspoken hostility” and welcomed the new administrations in Vietnam, Laos and Cambodia. This attempt to face up to political facts has, however, not changed the sense of common identity and outlook of the ASEAN states or the common concerns from which they derive. Paradoxically, the nature of perceived threats as well as of the capability of the ASEAN states has meant that there are major obstacles to cooperation to serve common interests. One such obstacle arises from the fact that the security threat is posed in such a way that it is neither practical nor politic for the members of ASEAN to contemplate an alliance role. A significant impediment to alliance formation is that while the five governments share a sense of common uncertainty arising from regional circumstances, they have been unable to engender a prerequisite consensus by identifying a tangible external threat against which it might be possible to concert and mobilize countervailing military power. For example, one might contrast the front line outlook displayed by the government of Thailand with the sense of maritime insulation of its counterpart in the Philippines, despite the current dispute with Vietnam and China over the possession of islands in the Spratly Archipelago. Indeed, this divergence in perspective was very marked during the tenure of office of the former Prime Minister of Thailand, Thanin Kraivichien, who was obliged to take

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account of alternative attitudes to security when he visited the capitals of the member states. On his departure from the Philippines in January 1977 after a tour of these capitals, President Marcos maintained, “We pinpointed insurgency and not external aggression as the principal problem confronting our respective countries in the immediate future”.

COPING WITH BORDER PROBLEMS Given the obstacles to multilateral military cooperation within ASEAN, the members of the association seek to meet their individual security needs on ad hoc bases outside of its formal structure. Apart from exchanges of information between intelligence communities and occasional joint military exercises between two and at the most three member states, substantive military cooperation has taken place along common borders straddled by insurgent activity. Indeed, bilateral military cooperation to this end between Malaysia and Thailand, and Malaysia and Indonesia, preceded the establishment of ASEAN in August 1967. Cooperation has taken the form of combined operations such as those launched from January 1977 by Malaysian and Thai security forces against the fractured military wing of the Malayan Communist Party. But provision for security of this kind is not an identifiable function of ASEAN. Nor is the association linked in any way with those security arrangements of a formal kind distinguished by external powers’ participation which involve Malaysia, Singapore and the Philippines. Nonetheless, ASEAN is best regarded as a security organization, given the shared sense of priorities of its member governments. But they are only able to give attention to apprehensions which they hold in common through displays of political solidarity and

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attempts at harmonization of policy as well as through economic cooperation. Alliance association is out of the question.

PREVENTING RADICAL INTERNAL POLITICAL CHANGE The nature of ASEAN has been discussed in terms of the limitations placed on the fulfilment of its unstated function as a security organization. Any such organization based on an intergovernmental structure will tend to be less than cohesive in the absence of an identifiable common threat to its members. Such a common threat does not manifest itself in external form in South East Asia and in internal form varies very much with individual circumstances which do not necessarily lend themselves to joint military action. In this respect, the limitations of ASEAN as a security organization are an essential product of its nature and it would be unreasonable to expect spectacular success in regional cooperation from such an association. ASEAN is nonetheless a security organization because its members share a common interest in preventing radical internal political change. Indeed, the five governments which established the association in August 1967 bear a resemblance in outlook and priorities to those which adhered to the Act of the Holy Alliance drafted by Tzar Alexander I at the Congress of Vienna in 1815. The ASEAN governments seek to promote mutual security by consultation and cooperation wherever practical and also to engage where possible in conflict avoidance, exemplified by the statement by President Marcos in Kuala Lumpur in August 1977 that he would be taking steps to withdraw the territorial claim of the Philippines to Sabah. The rationale of the collective exercise is that by promoting harmony within the walls

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of ASEAN, the member states will be more able to devote their energies to the cause of internal economic development, while external powers will be prevented from exploiting regional tensions to their own advantage. The association is moved by a belief that political instability is indivisible among its members and that political stability attained in one state will contribute to the attainment of such a circumstance in the others. Its goal is the realization of

a condition described by the Indonesian Government as national resilience which, in aggregate form, is expressed as regional resilience. The progress of ASEAN towards this end has been limited rather than outstanding and has come about primarily from individual rather than collective endeavour. The very nature of the association and of the problems which confront it serve to ensure only modest achievement.

NOTE 1.

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M. Zarkovic, “The Revival of ASEAN”, Review of International Affairs, October 5, 1977.

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A Post-Cold War Architecture for Peace and Security

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A POST-COLD WAR ARCHITECTURE FOR PEACE AND SECURITY

SARASIN VIRAPHOL

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he shape of the securiy architecture in the post-bipolar world will, to a large extent, be determined by our assumptions of what security entails. The premise of structural realism, the influential doctrine behind international power politics, is that the state is a unitary actor seeking to survive in an essentially anarchical international system.1 Based on these assumptions, some scholars have predicted that the post-Cold War multipolar world will lead to a return of the shifting alliances and instabilities that existed before World Wars I and II, as states seek to bolster their individual security by forming “balancing alignments in order to survive in the face of threats from aggressive competitors”.2 Another view contents that the end of the Cold War has rendered balance-of-power politics obsolete for the so-called core states, which comprise the industrialised states, of Western Europe, the United States and Japan. Shared norms regarding markets and

democracy, together with technology, would make it more likely that conflicts will be resolved peacefully. Among the peripheral states, however, in the absence of absolute deterrents to war and similar shared norms, the possibility of a return to old-fashioned balance-of-power politics would remain strong.3 In East Asia, certainly, balance-of-power politics has formed the core assumption of regional security since the end of the Second World War. While the world has changed much since then, current developments suggest that the region is still operating, out of circumstantial necessity, in a realist mindset. In anticipation of a power vacuum, a network of military links has arisen. The US has naval and air access to facilities in Singapore and Malaysia. Singapore holds military exercises with India and the Philippines, as well Thailand, Taiwan and Brunei. China is stepping up purchases of arms and military technology from Russia. Malaysia is on a shopping spree

Reprinted in abridged form from Sarasin Viraphol, “A Post-Cold War Architecture for Peace and Security”, in The Making of a Security Community in the Asia-Pacific, edited by Bunn Nagara and K. S. Balakrishnan (Kuala Lumpur: Institute of Strategic and International Studies, Malaysia, 1994), pp. 89–95, by permission of the author and the publisher.

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for military hardware to modernize its forces, and even contemplating military cooperation with China. These developments are to be expected, given realist assumptions about regional power politics. As intimated earlier, however, security in this new age involves more than military considerations, as the concept of national interest becomes more complex. As Paul Kennedy has pointed out in his neoMalthusian study, transnational forces like trade, technology, demographic pressures and the environment are redefining the security and stability of states in this age of interdependence.4 This does now mean that we can discard traditional notions of security, but rather that we should incorporate these new considerations into a comprehensive conception of security. SECURITY REVISITED Comprehensive security for the coming century has two main, interrelated components. The first is the traditional military component. This could take either the form of a balance of power, which in a multipolar environment would be unstable and may lead to armed conflict, or a region-wide military alliance, like NATO, aimed at deterring would-be aggressors from outside the region. The second form is of course preferable, but the requisite confidence for such a framework in East Asia is still absent. It is absent because until the end of the Cold War, there was no impetus for it. The hub-and-spokes arrangement was quite sufficient, until the cracks started to show. Since it will be a long time yet before the region is able to develop a collective security framework, the US presence remains indispensable for East Asia. Its main purpose will be to keep Asians from each others’ throats, but it will not be enough to create the atmosphere of trust and cooperation that ensures true security.

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The second component of security concerns non-traditional areas, in particular transnational forces, over which individual states have little control. The most important of these is trade, which will challenge us in the coming years to reexamine our notions of sovereignty and statehood. Even now, international capitalism is reshaping the way we live and look at the world. As it being ever more closely integrated into the global economy, East Asia is rapidly becoming more affluent, its teeming cities bustling with materialistic ambition. This drive to make money has important implications for regional security. The first concerns the natural physical environment. As scarce resources and the environment are sacrificed to fuel economic development, issues of resource management and international property rights will gradually increase in urgency. For example, Western countries are already anxious about the dwindling forests of Southeast Asia which will presumably accelerate global warming and in turn lead to rising sea levels, with possibly devastating effects on mankind. Another example is the development of the Mekong River and the effects of that development on countries downstream. Secondly, international capitalism leads to changes in society and politics. Besides creating a consumer society, free market policies create a middle class, encourage decentralized decision-making, and facilitate greater information flows. We have only to look at countries like South Korea, Taiwan and even Thailand to see that economic freedom leads to pressures for commensurate political freedom. The implication for regional security is that, as demands grow for human rights and democracy, external players sympathetic to those causes may bring pressure to bear. Well-intentioned as this may be, such actions may inhibit

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cooperation among regional partners by accentuating the absence of shared norms and values among the partners. With capitalism propelling regional growth, however, the resulting web of interdependence creates its own momentum for change. Francis Fukuyama may have been a little premature to proclaim the end of history, but his point is well taken that an ideological convergence is underway in politics and economics. East Asia is growing too rapidly to be classified as part of the global periphery. Still, it does not yet fully share the liberal values and norms that would enable it to be reclassified as part of the core. Caught in a transitional developmental stage, the region’s security architecture would have to be responsive and sensitive to both balance-of-power considerations and transnational issues. THE NEW ARCHITECTS While East Asia is not entirely comfortable with taking the lead in security matters, in order to reflect regional needs and aspirations, the designers of the new security architecture should be those within the region. States in the region have for too long been relying on outside powers to balance their interests. It is time to build faith in one another, a faith that, given the clamouring for continued American involvement in the region, is not much in evidence. ASEAN, however, has shown that it can be done. Southeast Asia was once plagued by much the same kind of uneasy suspicion that pervades the Asia-Pacific today. It has taken time and determination, but the ideas embodied in ZOPFAN and the Bali accord now provide basic behavioural parameters for the association’s members. Certainly, there will continue to be disputes and friction among fellow members, but the ever-broadening web of interdependence among the governments and peoples, made

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possible by ASEAN, has made the use of force unthinkable as a means of dispute settlement. A concrete example of successful regional initiative is the role played by ASEAN in resolving the Cambodia question. While it is too early to predict whether lasting peace will prevail in Cambodia, there is no denying that ASEAN and other countries in the region took the lead in bringing the problem to international attention, and then working with the United Nations towards a peaceful and equitable solution for the Cambodian people. That free and fair elections were finally held in that troubled country is a feather in ASEAN’s cap, and testimony to the efficacy of regional security cooperation. The same kind of confidence and cooperation needs to be extended to the region at large. East country with an interest in the Asia-Pacific seems to have its own version of the most appropriate approach. Ideas put forward have included, among others, multilateralism along the lines of the CSCE, a rule-based military alliance similar to NATO, concurrent bilateral and multilateral consultative forums, confidencebuilding through information networking, transparency of arms transfer processes, and regional peacekeeping. Some of these ideas are more feasible than others. In light of the diversity of interests and anxieties about intentions among East Asian nations, it might not be practical at this point to fix any one forum or model that will immediately and singlehandedly tackle a wide-ranging spectrum of concerns. The main idea that the various proposals seem to agree on is to get all the parties concerned talking, for a start, and to seek ways to build confidence within both multilateral and bilateral frameworks. Confidence is not built overnight, It requires a habit of dialogue nurtured through years of common endeavours.

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A good place to start would be to build what has been called interlocking networks of cooperation among governments and private sectors. The example of ASEAN tells us that cooperation in one area tends to spill over into others, and it might be timely to remind ourselves that what the region needs at this point is a flexible and not necessarily formal forum akin to ASEAN, but with a broader, inclusive membership. APEC comes to mind as a loose consultative forum that could well fit the bill. The United Nations should also be consulted regularly, to avoid the impression that any regional state is dominating the forum. With time, as the US completes its phased reduction of Pacific forces, sufficient momentum will have been attained in the confidence-building process to proceed with

a formalized regional security structure ruling out the use of force. The heart of confidence-building, and of true security, is to develop shared norms and mutual interests. It is a task that up to now has been unnecessary for East Asia. But with a US policy that is less committed to the region, the task has suddenly become urgent. The region’s security architecture in the post-Cold War era will be a great deal more complex than the hub-and-spokes scheme. At the same time, it will be what the countries in the region want it to be. A continued US security presence in East Asia seems assured for the time being, but East Asia is not Japan or the Korean peninsula. The groundwork for the security architecture of the next century begins with the present.

NOTES 1. 2. 3. 4.

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Hedley Bull, The Anarchical Society: A Study of World Order in Politics (London: Macmillan, 1977). Thomas J. Christensen and Jack Snyder, “Chain Gangs and Passed Bucks: Predicting Alliance Patterns in Multipolarity”, International Organisation 44 (Spring 1990), pp. 140. James Goldtgeiger ande Michael McFaul, “A Tale of Two Worlds: Core and Periphery in the PostCold War Era”, International Organisation 46 (Spring 1992), pp. 467–91. Paul Kennedy, Preparing for the Twenty-first Century (New York: Random House, 1993).

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ASEAN and the Southeast Asian Security Complex

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ASEAN AND THE SOUTHEAST ASIAN SECURITY COMPLEX

YUEN FOONG KHONG

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n the aftermath of ASEAN’s success — no doubt aided by the end of the Cold War — in pressuring Vietnam to leave Cambodia and thereby making a solution to the Cambodian problem possible, some have predicted that ASEAN would lose its raison d’être and that its solidarity and cohesion would be weakened. Thai prime minister Chatichai Choonhavan’s eagerness to turn the “battlefields [of Indochina] into market places” and to promote Thailand as the gateway to that economic market seemed to confirm such predictions, since his policy could be interpreted as Thailand’s attempt to pursue an independent course once ASEAN’s utility had diminished. This led some observers to suggest that Thailand’s geopolitical interests lay with the Indochinese states and that ASEAN would splinter along ThailandIndochina and Malaysia-IndonesiaSingapore lines (Simon 1992, 112). The reverse happened. Chatichai’s unilateral pursuit of Thailand’s economic and security interests was an aberration.

After Vietnam pulled out from Cambodia, ASEAN, instead of splintering, moved in the direction of deeper institutionalization and expansion on the security as well as economic fronts. Two concurrent developments have done much to redefine the nature of the Southeast Asian security complex, its relations with external actors, and its regional order. The first is the expansion of ASEAN. For twenty years, Vietnam had dismissed ASEAN as a SEATO in disguise or worse; in that sense Barry Buzan’s expectation of continued Vietnamese-ASEAN enmity as the defining characteristic of the complex had solid historical foundation. But the global strategic situation underwent such fundamental changes that by the 1990s Vietnam was ready to apply to join ASEAN. In July 1995, it was formally admitted as ASEAN’s seventh member. Laos, Cambodia, and Myanmar are to become full members in 1997 or 1998. The Southeast Asian security complex of the late 1990s — the ASEAN-10 — is essentially ASEAN writ large over the

Reprinted in abridged form from Yuen Foong Khong, “ASEAN and the Southeast Asian Security Complex”, in Regional Orders: Building Security in a New World, edited by David A. Lake and Patrick M. Morgan (Pennsylvania: Pennsylvania State University Press, 1997), pp. 318–39, by permission of the author and the publisher.

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geographical expanse of what is commonly accepted as Southeast Asia. The amity that has characterized security relations between the original ASEAN-5 since the 1970s should spill over to the new members and continue to define the security dynamic of the enlarged complex. One would expect the Treaty of Amity and Co-operation norms and decision-making procedures that have governed interstate relations in ASEAN — and that have been instrumental in shaping regional peace and order — will continue to be observed. The second development that bears on the ASEAN-10 security complex and regional order is the advent of the ASEAN Regional Forum (ARF). Building on and modeled after ASEAN’s postministerial conference (PMC), the ARF brings together the foreign ministers of ASEAN, ASEAN’s dialogue partners — the United States, Japan, Canada, the European Union, South Korea, Australia, and New Zealand — and Russia, China, Vietnam, Laos, Cambodia, and Papua New Guinea for multilateral discussions of Asia-Pacific security issues.1 Three meetings have been held so far, each preceded by extensive staff work by senior officials. The actual ARF sessions have been informal, restricted to the top principals, with consultations and consensus building being very much the order of the day: in other words, they have been very “ASEAN.” Among the issues taken up are nuclear proliferation on the Korean peninsula, competing claims in the South China Sea, confidence-building measures (CBMs), and the exchange of defense white papers to increase military transparency in the region. In the second meeting in Brunei (1995), working groups on CBMs (chaired by Indonesia and Japan), peacekeeping (chaired by Malaysia and Canada), and search-andrescue cooperation (chaired by Singapore and the United States) were established. A concept paper, outlining the ARF’s future trajectory was also adopted. The paper

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envisaged security cooperation to unfold in three stages, beginning with CBMs, followed by the development of preventive diplomacy, and culminating in the elaboration of approaches to conflicts. A substantive result of the Brunei meeting was China’s willingness to discuss the South China Sea dispute multilaterally with ASEAN. Three meetings later, the ARF has become an institution linking the Southeast Asian security complex with that of Northeast Asia and the South Pacific, while including almost all of the other major actors in the Asia-Pacific. It is of course the only such security institution in the AsiaPacific. The ARF should not be viewed as an “ASEAN security community” writ large. The number of major powers involved in the ARF and their suspicions about one another make it premature to dismiss the possibility that they may still resort to force to settle disputes. More important, despite ASEAN’s enviable record, it is still a pluralistic security community in its nascent stages. ASEAN’s solidarity is palpable and has grown from strength to strength in the last thirty years, but ASEAN has yet to reach a stage where mutual trust is so strong that using force against member states is unthinkable. The recent incorporation of the Indochinese states into ASEAN suggests that the original bases of ASEAN’s “we-feeling” can no longer be taken for granted and that they may need to be periodically reiterated, if not renegotiated, as part of the ASEAN myth. Analysts are split over the question whether the ARF will play a significant role in the management of post-Cold War order in the Asia-Pacific. Realists informed by changing power distributions and patterns of enmity doubt that such a motley institution will have the wherewithal to deal with a rising China or Japan (Buzan and Segal 1994). Others are more optimistic, focusing as they do on the ability of the ARF to facilitate cooperation, as well as its

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potential to help rising powers define their interests in sociable ways (Khong 1995a, 1995b). It is too early to tell who is right. Perhaps a more meaningful assessment will be possible when the ARF reconvenes in Bangkok (site of the inaugural meeting) six to eight years from now. If the ARF is still around, if most East Asians feel as secure as they did in the early 1990s, if the ARF has helped prevent rivalry in the South China

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Sea from degenerating into warfare, and if ARF-sponsored CBMs have checked an arms race, then it may be proclaimed a success. Conversely, if the ARF dies (as did the Association of Southeast Asia, Maphilindo, and SEATO), if arms racing has become a permanent feature of the East Asian military landscape, perhaps because of violent contentions in the South China Sea, then one must conclude that the ARF has failed.

NOTE 1.

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In 1996, India and Myanmar became members of the ARF. Britain and France have expressed interest in participating in the ARF as individual states, separate from their European Union representation.

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Chapter 57 "The ASEAN Regional Forum" by Akiko Fukushima is not available for sale electronically. Printed copies of The 2nd ASEAN Reader, compiled by Sharon Siddique and Sree Kumar (Singapore: Institute of Southeast Asian Studies, 2003) are available at < http://bookshop.iseas.edu.sg >

Akiko Fukushima

57.

THE ASEAN REGIONAL FORUM

AKIKO FUKUSHIMA

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58.

THE ASEAN-ISIS AND CSCAP EXPERIENCE

CAROLINA G. HERNANDEZ

THE ASEAN INSTITUTES FOR STRATEGIC AND INTERNATIONAL STUDIES ASEAN-ISIS is the most important and visible peace and security-related track two mechanism in Southeast Asia.1 Initiated by the Indonesian Centre for Strategic and International Studies (CSIS), it was organized on 3–4 September 1984 in Bali, Indonesia. There were two Filipino specialists in the Bali meeting: Dr. Jesus Estanislao of the then Center for Research and Communications (CRC, now the University of Asia and the Pacific) and this author. Dr. Estanislao thought that this author should be involved in the effort as CRC was then focused on economic and business-oriented research. Thus, Philippine involvement in ASEAN-ISIS started with an individual with no research institution behind her. The original members of ASEAN-ISIS were CSIS Jakarta, ISIS Malaysia, Carolina G. Hernandez for the Philippines, the Institute

of Security and International Studies (ISIS Thailand) based in Chulalongkorn University, and the Singapore Institute of International Affairs (SIIA). It was formally launched in June 1988 in Singapore at the Fourth ASEAN-ISIS Conference highlighted by the signing of its Charter. In 1991, the newly-organized Institute for Strategic and Development Studies, Inc. (ISDS) became the Philippine member of ASEAN-ISIS. In 1995, with the anticipated entry of Vietnam as a full member of ASEAN, the Hanoibased Institute for International Relations (IIR) became the sixth member of ASEANISIS. In April 1997, at an ASEAN-ISIS conference in Hanoi, the Cambodian Institute for Cooperation and Peace (CICP) will join as the group’s seventh member. ASEAN-ISIS is registered with the ASEAN Secretariat as an ASEAN non-governmental organization (NGO). Its Charter mandates that only research institutions based in ASEAN member countries may join. Although Brunei has no counterpart

Reprinted in abridged form from Carolina G. Hernandez, “Governments and NGOs in the Search for Peace: The ASEAN-ISIS and CSCAP Experience”, in Focus on the Global South website, (accessed on 23 April 2003), by permission of the author.

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institution, it is involved in ASEAN-ISIS activities through its Foreign Ministry. ASEAN-ISIS also maintains an extensive network of institutional linkages with leading think tanks in many countries and territories in the Asia Pacific, including Australia, Cambodia, Canada, China, India, Japan, New Zealand, South Korea, Taiwan, and the United States. It was a leading actor in the process that led to the establishment of the Council for Security Cooperation in the Asia Pacific (CSCAP) to provide track two activities for the ASEAN Regional Forum (ARF) and is represented by CSIS Jakarta in the Council for Asia-Europe Cooperation (CAEC), a newly-established track two mechanism that seeks to provide policy inputs to the Asia-Europe Meeting (ASEM). In the early years since its launching, ASEAN-ISIS worked individually through their respective governments, rather than collectively through the ASEAN machinery.2 Formal communications took the form of ASEAN-ISIS memoranda on various policy issues. These documents have been submitted to ASEAN governments as key issues emerged since 1991. But the formalization of the institutional relationship between ASEAN and ASEAN-ISIS started only in April 1993, where ASEANISIS was invited to meet ASEAN senior officials shortly before the Senior Officials Meeting (SOM) in Singapore. ISDS Philippines was the ASEAN-ISIS Chairperson during this momentous occasion. Since then, ASEAN-ISIS has met with ASEAN-SOM in Pattaya, Bandar Seri Begawan, Yogyakarta, and Kota Kinabalu. The Pattaya meeting represents a critical turning point in the relationship of ASEANISIS to ASEAN.3 It was at this meeting where the ASEAN senior officials expressed their desire to meet with ASEAN-ISIS prior to their annual meeting which precedes the ASEAN Ministerial Meeting (AMM). They also expressed their appreciation to ASEAN-

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ISIS for helping the association think about regional issues, a function the officials recognized as extremely important in addressing the political, security, and economic concerns affecting ASEAN and the larger Asia Pacific region. The meeting discussed the following substantive issues: (1) the future shape of the ARF; (2) the possible agenda of the First ARF Meeting in Bangkok in July 1994; and (3) the East Asian Economic Caucus (EAEC) within the Asia-Pacific Economic Cooperation (APEC) forum. Since June 1991, ASEAN-ISIS has submitted six regular memoranda to ASEAN. These are: (1) A Time for Initiative: Proposals for the Consideration of the Fourth Summit, 4 June 1991; (2) The Environment and Human Rights in International Relations: An Agenda for ASEAN’s Policy Approaches and Responses, July 1992; (3) Enhancing ASEAN Security Cooperation: An ASEAN-ISIS Memorandum, 5 June 1993; (4) Beyond UNTAC: ASEAN’s Role in Cambodia, October 1993; (5) Confidence-Building Measures in Southeast Asia, December 1993; and (6) The South China Sea Dispute: Renewal of a Commitment for Peace, May 1995. In February 1994, ASEAN-ISIS endorsed in a confidential memorandum to ASEAN the idea initiated by President Fidel V. Ramos in December 1993, during the Manila Conference of the ASEAN-Vietnam Interaction for Progress, that the decision for Vietnam’s admission into ASEAN be made during the July 1994 AMM in Bangkok. The degree to which ASEAN-ISIS has succeeded in influencing the foreign policy making bodies of ASEAN and several other governments in the Asia Pacific and the extent it played the role of track two diplomacy may be seen in the institutionalization of meetings between ASEANISIS and ASEAN policy making structures such as the ASEAN-SOM, in the adoption

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of an overwhelming majority of its policy recommendations by ASEAN, in the policy research it has been commissioned to undertake by the ASEAN Secretariat, and in its initiation of and participation in policy discussions with the foreign policy community in many countries in the region, including Japan, Australia, Canada, and the US. The first regular ASEAN-ISIS memorandum is illustrative of its contribution to ASEAN decision-making. The memorandum outlined four initiatives the Fourth ASEAN Summit should take in the light of fundamental changes which had occurred in the international system. These initiatives included: (1) an Asia Pacific Political Dialogue; (2) a New Regional Order in Southeast Asia; (3) the Strengthening of ASEAN; and (4) Enhancing ASEAN Economic Cooperation. The initiative for an Asia Pacific Political Dialogue was approved in principle during the Fourth Summit in January 1992 and reiterated during the Manila AMM in July 1993. In the interim between the first regular memorandum dated June 1991 and the Fourth Summit, the Japanese Foreign Minister, Mr. Taro Nakayama, articulated the need for such a dialogue during the Kuala Lumpur AMM in July 1992, prior to ASEAN’s consideration of the initiative. Having come from a ranking official of a major regional power about whom lingering suspicions on foreign policy motives remained in the minds of many of its neighbors, the idea was met with a deafening silence.4 Foreign Minister Nakayama’s endorsement of the idea articulated in the ASEANISIS Memorandum No. 1 should be seen as an enthusiastic support for the idea which was brought to his attention by the head of the Policy Planning Office of the Gaimusho. The head of this office was present during the discussion of this idea by ASEAN-ISIS at its meeting in Jakarta prior to the Asia Pacific Roundtable of June 1991. ASEAN-

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ISIS requested this official (now serving as Japan’s Ambassador to Australia) to seek the support of Japan for the initiative if it should be brought up in the Kuala Lumpur AMM and subsequently in the ASEAN Post-Ministerial Conference (ASEAN-PMC) with ASEAN’s dialogue partners. The unintended Japanese pre-emption of the initiative reflects the time lag between the submission of the memorandum to ASEAN in June 1991 and its approval in principle during the Fourth Summit in January 1992.5 This ASEAN-ISIS initiative urged ASEAN to play “a central role” in any dialogue mechanism which would be established; to be “a creative initiator” and “an active participant” in the process. It also urged that “ASEAN’s initiative should build upon existing processes and institutions” and should have the following objectives: (1) to contribute to the process of reducing conflict and resolving contentious problems; (2) to contribute to the enhancement and enrichment of understanding, trust, goodwill and cooperation; and (3) to contribute to the constructive management of the emerging international processes in the region, with a view to the establishment of a multilateral framework of cooperative peace.6 ASEAN-ISIS then proposed the extension of the ASEAN-PMC for the purpose of this dialogue whereby after each PMC, “an ASEAN-PMC-initiated conference be held at a suitable retreat...for the constructive discussion of Asia Pacific stability and peace ... that the agenda and arrangements for each ASEAN-PMC-initiated Conference on stability and peace in the Asia Pacific be prepared by a meeting of senior officials of the ASEAN states and the dialogue partners.” 7 It should be noted that the specifics of the ARF reflect the main points of the ASEAN-ISIS proposal. On the initiative for a New Regional Order in Southeast Asia, the memorandum proposed the accession of other regional

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states to the Treaty of Amity and Cooperation (TAC) in order to enhance regional resilience and strengthen the foundations for peace, stability, and constructive cooperation in the region. It also urged the initiation at an appropriate time of a process of constructive dialogue among all the signatories to the TAC. Vietnam and Laos were subsequently invited to accede to the TAC, becoming observers in the ASEAN processes and members of the ARF beginning with the Singapore AMM in July 1993. Vietnam subsequently became a member of ASEAN in 1995. Cambodia and Myanmar have also acceded to the TAC, became observers in ASEAN, members of the ARF, and, together with Laos, have applied for full ASEAN membership. While ASEAN-ISIS fully endorsed the entry of Cambodia and Laos as full members of ASEAN by 1997, it expressed in uniform letters sent by each member institute to its respective foreign ministry, its serious concern over the admission of Myanmar at this time. Endorsing the vision of one Southeast Asia under ASEAN in the 21st century, the letters argued that ASEAN’s strength as an international actor rests on its economic, political and diplomatic stature, and that its credibility as an international actor could be undermined by the precipitate and untimely inclusion of Myanmar as a full association member, and that this matter should be postponed for a more appropriate time in the future. If Myanmar becomes a member in July 1997 (and the probability of this happening is

extremely high), it would be one of the very rare occasions when the policy suggestion of ASEAN-ISIS would be sidelined in the interest of geostrategic and geopolitical considerations by the ASEAN governments. Regarding the strengthening of ASEAN, the memorandum called for (1) the regular holding of ASEAN Summit Meetings once every two years; (2) strengthening of the ASEAN Secretariat, including the enhancement of the status of the Secretary General, its organization and operation according to the 1976 Agreement on the Establishment of an ASEAN Secretariat, and the provision of resources it requires for its operations; (3) the widest participation of all sectors in ASEAN activities, including research institutes, business and youth leaders; and others to ensure that ASEAN becomes “a people’s process;” (4) the expansion of the ASEAN process in the political, security and defense fields without converting it into a military or security pact; and (5) the enrichment and strengthening of the ASEAN PMC process as well as fully developing the dialogue partnerships and moving in new directions.8 The Singapore Summit adopted these proposals with the result that Summit Meetings are now being held every two years one of which is informal, the Secretariat strengthened, the Secretary General upgraded in status, track two activities involving various sectors institutionalized, enhanced security and defense cooperation being sought through the special SOM and the conduct of defenserelated activities beyond the bilateral and trilateral modes of old.

NOTES 1. 2.

3. 4.

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Carolina G. Hernandez, “The Role of the ASEAN-ISIS”, ASEAN-ISIS Monitor, 1993, pp. 1–3. Hernandez, “Complex Interdependence and Track Two Diplomacy in the Asia Pacific in the PostCold War Era”, documents the work of ASEAN-ISIS and the founding of CSCAP as track two mechanisms within the context of increasing regional and global interdependence. Ibid., p. 16. Ibid., p. 17.

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Carolina G. Hernandez Ibid. ASEAN-ISIS Memorandum No. 1, A Time for Initiative: Proposals for the Consideration of the Fourth Summit, 4 June 1991. Ibid. Ibid.

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EVOLUTION OF THE SECURITY DIALOGUE PROCESS IN THE ASIA-PACIFIC REGION DALJIT SINGH

THE NON-OFFICIAL DIALOGUE PROCESS Official dialogue, often referred to as Track One dialogue, is confined to officials of governments. Non-official dialogue, conducted by non-governmental organizations, should in theory be independent of governments, but in reality there are often varying degrees of governmental influence, representation or support. Nonofficial security dialogue often takes place in support of or parallel to official security dialogue. Non-official dialogue has been characterized as Track Two, Track Three or Track One-and-a-Half, depending upon the degree of governmental influence or involvement. However, the distinctions between the various “tracks” are often blurred as the precise degree of government influence is not always clear. In this chapter, for the sake of convenience, non-official dialogue with some governmental involvement will loosely be described as

Track Two. Track Two dialogue is usually organized by non-governmental organizations like think-tanks and involves scholars, journalists and others from the private sector who can make a contribution, as well as government officials taking part in their “personal capacity”. This format is intended to allow for more frank discussions and the involvement of non-governmental expertise. Among the earliest Track Two meetings that included political and security issues were the ASEAN-Japan Dialogue which began in the 1970s and the Quadrilateral Conferences between ASEAN, the United States, Japan and South Korea organized by the Institute of East Asian Studies of the University of California at Berkeley and CSIS, Jakarta, in the 1980s. The Kuala Lumpur Roundtable also began in 1987 (see below). Asia-Pacific Track Two security discussions then grew in response to the same anxieties about the post-Cold War world that gave rise to the ARF. Indeed, Track Two discussions contributed to the establishment of the ARF.

Reprinted in abridged form from Daljit Singh, “Evolution of the Security Dialogue Process in the Asia-Pacific Region”, in Southeast Asian Perspectives on Security, edited by Derek da Cunha (Singapore: Institute of Southeast Asian Studies, 2000), pp. 35–59, by permission of the author and the publisher.

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Worth mentioning in this context are the contributions to regional security of the ASEAN Institutes of Strategic and International Studies (ASEAN-ISIS),1 which was first organized as a sub-regional nongovernmental organization in Bali in September 1984. Initially, it represented four ASEAN think-tanks: Indonesia’s Center for Strategic and International Studies (CSIS), Malaysia’s Institute of Strategic and International Studies (ISIS), Singapore’s Institute of International Affairs (SIIA), and Thailand’s Institute for Security and International Studies (ISIS), plus individual representatives from the Philippines. In 1988, ASEAN-ISIS was formally launched in Singapore with a charter, and the Institute of Strategic and Development Studies (ISDS) of the Philippines became its fifth institutional member in 1991. ASEAN-ISIS has convened Track Two policy dialogues with countries outside Southeast Asia, including China, South Korea, and India. It also played a significant role in the establishment of the Council for Security Cooperation in Asia-Pacific (CSCAP), the body for Asia-Pacific-wide Track Two security dialogue. CSCAP originated from discussions organised in 1991–92 by ASEAN-ISIS, the Pacific Forum/ CSIS, the Japan Institute of International Affairs and the Seoul Forum for International Affairs. At the third such meeting in Seoul in November 1992 these institutes decided that it was necessary to establish an Asia-Pacific-wide Track Two security forum with a coordinating council. CSCAP was established in June 1993, and these eight institutes, together with the Joint Center for Asia-Pacific Studies, Canada, and the Strategic and Defence Studies Centre, Australia, became its founding institutes. In December of the same year, a CSCAP Charter made up of articles and by-laws of the Council was drawn up.

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CSCAP is meant to provide a “structured process for regional confidence-building and security cooperation among countries and territories in the Asia-Pacific region”. It now has 17 members: Australia, Canada, China, the European Union, Indonesia, Japan, Malaysia, Mongolia, New Zealand, North Korea, the Philippines, Russia, Singapore, South Korea, Thailand, the United States and Vietnam. The Indian Institute of Defence Studies and Analyses (IDSA) remains an associate member. National CSCAP committees have been set up in member countries, comprising mostly representatives of think-tanks and governments. There are now five CSCAP working groups: on confidence and security building measures, maritime security cooperation, comprehensive and co-operative security, North Pacific Security Cooperation, and transnational crime. CSCAP was hobbled in the first few years by the problem of how to include China, crucial for CSCAP’s success, without Taiwan’s complete exclusion. This problem was resolved only in late 1996: China replaced Taiwan as a CSCAP member but Taiwanese scholars could continue to participate in the working groups in their individual capacity. The first general meeting of CSCAP was held in Singapore in June 1997. CSCAP, according to some, was to play a role in relation to the ARF that PECC played in relation to APEC, providing ideas, analysis and the backup network of an epismetic community. There is no doubt that CSCAP can marshal an impressive range of non-governmental expertise on security issues to assist the ARF. However, CSCAP has not yet been recognized by the ARF as its Track Two counterpart. Nevertheless, the work of its working groups continues, and the studies are made available to member governments through the national CSCAP committees. CSCAP has

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also organized some Track Two activities for the ARF. Even if CSCAP develops a formal institutional relationship with the ARF, it is unlikely to replace other Track Two activities. ASEAN-ISIS will still remain important for Track Two inputs to the ARF because of its relationship with ASEAN and ASEAN’s leading role in the ARF. There will probably continue to be different layers of Track Two activities at Asia-Pacific, as well as subregional, levels. By 1996, ASEAN-ISIS had expanded to include the Vietnamese Institute of International Relations and, in 1997, the Cambodian Institute for Cooperation and Peace. An important forum linked to ASEAN-ISIS has been the annual Kuala Lumpur Asia-Pacific Roundtable, in 2000 running into its fourteenth year. It was established by ISIS Malaysia but since 1994 has been co-ordinated by ASEAN-ISIS, though Kuala Lumpur remains the venue and ISIS-Malaysia provides the secretariat. As one of the earliest Asia-Pacific-wide Track Two fora on security issues, the Roundtable has played an invaluable role in socializing the security and political élites of the region to the need for dialogue. ASEAN-ISIS may also become involved in another Track Two mechanism, the Council for Asia-Europe Cooperation, as a Track Two partner of ASEM (Asia-Europe Meeting). There has been a dramatic increase in Track Two multilateral security dialogue in the Asia-Pacific region during the 1990s. By 1995, there were 83 known Track Two multilateral dialogues compared with 17 Track One meetings.2 Some, such as the Asia-Pacific Roundtable, CSCAP, and the Asia-Pacific Peace Research Association, are region-wide. Others like ASEAN-ISIS and the North Pacific Co-operative Security Dialogue, have a subregional focus. There are also ad hoc Track Two discussions on specific issues. The most prominent

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example of this has been the series of workshops on the South China Sea organized by Indonesia for the purpose of building confidence and avoiding conflict over the territorial claims in that area. Another is the Asia-Pacific Dialogue on Maritime Security. As a result of the proliferation of Track Two dialogue, there is probably considerable duplication of effort and lack of machinery for sharing of information between different Track Two endeavours, especially since the deliberations, conclusions and recommendations are not always published. Yet, there is no denying the fact that Track Two security discussions have their utility. Dialogues at the official levels may not be able to accommodate all countries and territories, while Track Two dialogues have the flexibility to do so. For instance, ASEAN-ISIS continues to hold Track Two dialogues with Taiwan, while Taiwanese representatives continue to participate, in their individual capacity, in the discussions of the working groups under CSCAP, even though they are not members of the CSCAP Steering Committee. North Korea is not a member of the ARF, but it is of CSCAP and also participates in the AsiaPacific Roundtable in Kuala Lumpur. These fora allow North Korean representatives to be exposed to regional realities and opinion in an informal setting. Track Two dialogue has also been used to sound out and explore new ideas and to pave the way for the establishment of official co-operative security mechanisms like the ARF. As mentioned above, ASEAN-ISIS has made inputs to ASEAN-SOM and ARF-SOM, and some of the recommendations have been accepted by governments. The Track Two process can be particularly useful in initiating and promoting security dialogue between “non-like minded” countries separated by ideological or cultural barriers and reluctant to engage in such discussions at the official level.

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NOTES 1.

2.

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For this account of the contributions of ASEAN-ISIS, I am much indebted to Carolina G. Hernandez. See her article, “Philippine Participation in Track Two Activities on Security-Related Issues: ASEAN-ISIS and CSCAP”, Foreign Affairs Quarterly, January–February 1999. Dialogue Monitor, no. 1 (July 1995) and no. 2 (January 1996), University of Toronto-York University Joint Centre for Asia-Pacific Studies, North York, Ontario, Canada.

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NEW SECURITY ISSUES AND THE IMPACT ON ASEAN

KUSUMA SNITWONGSE and SUCHIT BUNBONGKARN

NEW SECURITY ISSUES IN ASEAN It can rightly be said that for ASEAN countries, many non-traditional security issues have long been their concerns with emphasis on freedom from want, similar to the UNDP’s definition of human security. This is evident in their concerns with developing their economies. Such developments are seen as the basis for “national resilience” and, by extension, “regional resilience”. Nevertheless, the ultimate referent object of security has been and mainly still is that of the state. The growing civil society in many ASEAN countries provides the prospect of a shift more towards the people as referent object of security. In the early days of their independence from Western colonialism, most ASEAN countries were concerned with the task of nation-building. This focused on developing the economy and creating national unity. Economic development itself has brought about new security issues that include environmental degradation, resource depletion, and looming food,

water, and energy scarcity. These security threats, along with ethnic problems may well generate mass migration, mostly illegal. The impact of globalization could also have a negative impact in the form of transnational crimes involving drug, human, and small arms trafficking. The most recent security issue is the e-crime that is a function of the revolution in information technology. All these and more are transnational in nature and could impact on ASEAN in either a positive or negative way. This chapter will deal with each of the issues and their possible impact. It will then consider how ASEAN has sought to respond to these new issues.

ENVIRONMENTAL DEGRADATION The smoke haze from Indonesia’s forest fires in 1997 that affected neighboring countries served as an alarm bell calling attention to the environmental problems facing Southeast Asia. The fires that were

Reprinted in abridged form from Kusuma Snitwongse and Suchit Bunbongkarn, “New Security Issues and Their Impact on ASEAN”, in A New ASEAN in a New Millenium, edited by Simon S. C. Tay, Jesus Estanislao, and Hadi Soesastro (Jakarta: Centre for Strategic and International Studies, 2000), pp. 138–52, by permission of the authors and the publisher.

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started as an inexpensive way of clearing forest cover for palm oil plantations also pointed to the problem of resource management in the region. It was just one example of ASEAN governments’ prodevelopment policy to the neglect of preserving natural resources and being conscious of environmental impact. The forest fires also made it evident that the environmental issue has become a security issue both for the states and people in terms of economic cost and impact on health and general well being of the populace. It should be recognized also that environment degradation as a security issue is closely linked to other security issues that include deforestation, water and food scarcity, and migration. Besides the more visible devastating smoke haze from forest fires, the ASEAN countries are experiencing pollution from other sources due to economic growth. The resulting fast growing urbanization and increased consumption of the urban middle class, especially energy for transportation vehicles, contribute to degradation of environmental conditions that include air pollution and water pollution. The latter has a necative impact on the ability to access safe drinking water. This trend can be expected to continue over the long term with the expected growth in the economy, population, and energy consumption. Further pollution, with cross border implications, can be expected in the long run from industrial emission from Southern China. It has also been pointed out that the South China Sea has become a sink for regional environmental pollution from the industrial effluents of the littoral countries as well as the spills and dumping of vessels in transit.1 The forest fires also reflect the deforestation that has been occurring in Southeast Asia at an alarming pace. Thailand’s forest cover which was 53.33% of the country’s total land area in 1961 went

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down to 28% in 1988, the year the government banned logging in the country.2 The Philippines’ forest cover went from 70–80% in 1900 to 20% in the mid-1990s. Over all, nearly 50% of Southeast Asia forest cover has been destroyed.3 Environmental impacts from deforestation include land degradation, water shortages, transboundary air pollution, and emission of green house gas. The latter contribute to global warming and the related rising of the sea level, estimated to be 20 centimeters by the year 2030. All countries bordering on the South China Sea would be especially vulnerable and as much as 20.000 square kilometers in Malaysia, Thailand, and Indonesia could be threatened with flooding.4 As a result of deforestation, the capacity for grain production will be adversely affected. Given the rising population, there is a high likelihood of food scarcity. There is an indication also that crop yield increases has begun to level off and there is little sign that biotechnology is on the verge of a creating another green revolution.5 Depleted fish stocks are another threat to security related to food scarcity. Fish is the main source of protein for an estimated one billion Asians, The Pacific, however, is showing signs of environmental degradation, caused by coastal pollution, overfishing, and unsustainable exploitation of other forms of living marine resources.6 Thailand, with the third largest fishing fleet in Pacific Asia, has long depleted marine resources in its own waters and is now known to poach in waters of neighboring states which has led to disputes with other ASEAN members. The South China Sea with its abundant fishing resources that bring in large earnings, could well be the site for increasing conflicts among the littoral states. Water scarcity could be another cause of conflicts among the peninsular ASEAN states, particularly those located in the Mekong River Basin. The Mekong water is vital to the economy of many countries.

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Cambodia’s Tonle Sap, which is sustained by the Mekong, is vital to the country for fish, irrigation, transport, and rice growing. For Vietnam, the Mekong Delta provides more than half of the country’s rice. Thailand uses the Mekong water to irrigate its northeast provinces. Laos looks to its hydroelectric energy from dams to be its major income earner. However, dams, especially the 14 projected in China, could affect the flow of the Mekong that will have negative impact on the lower riparian states of ASEAN. Despite the 1995 “Agreement on Cooperation for the Sustainable Development of the Mekong River Basin” signed by Cambodia, Laos, Thailand and Vietnam, potential problems exist in the relative freedom to divert water. The accord allows each state to divert the river’s water without seeking the approval of other members except during the dry season.7 Ecological damages can be expected from the building of dams and deforestation, with the Lower Mekong states bearing the most damages in terms of reduction in water level, silting, and increasing salinity. One can well imagine how Vietnam would react to the salinity of the Mekong in the delta area caused by dams. It is, therefore, not difficult to imagine that disputes could arise out of water allocation and ecological damages. Closer cooperation is required but even more important is the sense of community in that the Mekong is the common heritage of all riparian states which means national interest should not come before that of the community. In this respect, China needs also to be convinced. Thus far, China has claimed that its dam building on the upper Mekong is its internal matter.

MASS MIGRATION Illegal immigrants crossing from Sumatra into Malaysia and the presence in Thailand of hundreds of thousands of refugees and

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illegal immigrants from Myanmar are just the tip of the iceberg. The problem from mass migration can be expected to grow and create problems in intra-ASEAN relations. One major cause of migration, legal and illegal, is inequity in economic development among countries that creates both push and pull factors. It is noted that people in abject poverty normally do not migrate as they are too occupied with day to day survival and that it is from middle range countries, just emerging from extreme poverty, that seek to migrate.8 Present problems related to migration in ASEAN countries are related mainly to illegal mass migration which is transnational in nature. There are two major causes: economic inequity due to different levels of development, and political uncertainty and turmoil in a country that cause people to escape from threats of persecution or violence. Thailand’s migrants from Myanmar, as a result of government suppression of dissidents in 1988 as well as continuing ethno-nationalist strife, that number more than 500,000. Other than the refugees, there are those who are economic migrants, seeking better economic opportunity. The political and ethnic turmoil in Indonesia has caused the influx of illegal migrants to Malaysia. Proximity and easy access due to porous nature of frontiers also encourage influx. As compassion fatigue unavoidably sets in after a period of time, conflict between the receiving country and the country of origin could result. Mass migration becomes a security issue when the government and its people perceive it to be a political, economic, social, or cultural threat. As states are increasingly putting up barriers to migration, criminal elements have found the illegal trafficking of people to be a lucrative business opportunity. Thus the issue of migration becomes a threat also by its association with transnational crimes. As more barriers are

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created to discourage migration, it is to be expected that illegal trafficking will rise. Criminal trafficking of people does not involve only moving people within Southeast Asia. Thailand has become the transit for illegal migrants from South Asian countries as well as China to Europe or North America. With globalization, continuous advances in information technology, and transportation, the trend of migration and related illegal trafficking of people is likely to follow an upward trajectory. The issue of migration and security must also be looked at in the domestic context. Causes of internal migration include government policy such as Indonesia’s transmigration policy. Among other causes is the inequitable income distribution, especially between rural and urban centers that draws a segment of rural population, seeking employment, to urban areas. Growing population and environmental degradation could also lead to people moving into unoccupied areas, often reserved forests. Such internal migration has caused conflict and threatened domestic instability. Ethnic conflicts have erupted in Irian Jaya of Indonesia between the original inhabitants and the newcomers. Migration into urban areas with overcrowding and difficulty in earning a living along with other unpleasantness can cause social tension. As agricultural frontier has been reached due to growing population, many move into “unoccupied area”, mainly reserve forests. This has caused conflict between the state and the people as happened in Thailand when the government evicted the “trespassers” 9 . To avoid threats to internal stability, attention has to be given to growth with equity and resource management and allocation. In the ASEAN context, mass migration is transnational in nature and needs to be treated in a cooperative mode. This will mean for ASEAN the need to narrow, if not

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eliminate, the gap in economic development between the better off and less developed members. Managing and preventing ethnic conflicts by ASEAN will be difficult as long as the principle of non-intervention is strictly adhered to by member countries. Norms for intervention should be considered for such cases that involve excessive burden on other members. The best way to deal with mass migration is at the source. It is to be hoped, however, that as ASEAN becomes economically integrated, easier flows of labor according to market forces will help cut down on illegal human trafficking in the region.

ENERGY SECURITY In response to the recent astronomical rise in the oil price in the world market, the Thai Foreign Minister Surin Pitsuwan, expressed his concerns to the United Nations Millennium Summit that the economic recovery in Thailand and the Asian region could be hit by surging oil price. Accordingly he voiced his hope that “the international community will be able to find a mutually satisfactory resolution to this problem before it gets out of hand and possibly leads to another world-wide economic crisis”10. It can be said that the Thai Foreign Minister was speaking for other ASEAN countries’ that see that their economic development hinges to a great extent on the availability of affordable energy. Such concerns are not surprising. The oil crisis in the late 1970s aside, the trend towards higher energy demand in ASEAN is inevitable. As a predominantly agricultural country in the throes of modernization, as was the case of Thailand, there will be a move away from non-commercial energy such as bio-mass toward greater use of oil products. With a growing middle class, much of this growing demand will come from transportation and domestic use. The

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1997 crisis may have temporarily slowed down automobile purchases in Southeast Asia that was increasing at the rate of nearly 30% annually.11 The greater demand for electricity, if not met adequately, could result in frequent brownouts as was the case in the Philippines, resulting in the disruption of industrial production and private life. When population growth is factored into energy demand, the potential for expansion would appear immense. The prospect is one of large increases in oil imports and thus greater vulnerability to variability of supply and price. The present net oil exporters that include Indonesia, Malaysia, Brunei, and Vietnam, according to some forecasts, may become net importers by the year 2010.12 At the same time, China’s share of oil consumption is expected to rise sharply which means that ASEAN will have to compete for a potentially tight regional and global market.13 China’ share of Asian oil import will rise from 10.9% in the year 2000 to 19.4% in 2010, compared to ASEAN’s 5.9% in 2000 to 16.9 in 2010.14 Natural gas provides a most promising respite to the competition for oil supply. Indonesia, Malaysia, and Brunei are already major exporters. With China and India shifting from traditional coal and oil to cleaner-burning gas, the potential for the exporting countries are greatly promising. Thailand expects to deplete its gas reserve in the Gulf of Thailand in the not far future and is looking to Myanmar for supplies. Another possible source of energy is nuclear energy. However, there are a number of concerns among the public especially with safety as well as the disposal of spent fuel. The projected increase in demand for oil has created concerns for growing tension in the South China Sea over disputed claims. However, increasing reliance on gas from ASEAN countries could provide the basis for interdependence that could promote better relations. ASEAN’s own planned gas and power grid could also serve to bind the

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members closer together in the web of interdependence. What ASEAN needs to do in facing the future of oil scarcity, besides looking for alternative sources of energy, is to cooperate on working out a long-term strategy for energy security. This should include instilling in the public the culture of conservation and promoting efficient use of energy. The roots of disputed claims in the South China Sea include, among others, the anticipated oil and gas reserves in the area. These disputes are potential source of conflict and admittedly will be difficult to resolve. However, the shift to cooperation and the building of interdependence provides a better alternative to dealing with the prospect of energy scarcity.

DRUG TRAFFICKING The flood of methamphetamines that have been entering into Thailand from factories on its western and eastern borders in recent years have led to drug trafficking being identified as a serious threat to national security. The threats are perceived to come from the lower level of productivity of those addicted to drug abuse. A Thai general expressed his concern with the high degree of pervasiveness of drug abuse, “What is the benefit of Thailand becoming more democratic if the vast majority of its young people are addicted to drugs?” 15 Other threats are perceived to come from violence, crime and power amassed by criminal elements involved in drug production and trafficking. The Colombia drug lords exemplify the extent to which the sovereign power of the state could be challenged by criminal elements. The problems of drug production and trafficking are difficult to deal with as the drug traders have shown as much sophistication and adaptability in their business as in any licit business. This can be seen in the shift from opium growing and

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production of heroin to production and trade in synthetic drugs such as methamphetamine. The cost of producing the latter is much less and is thus much more profitable. Not only is Southeast Asia a lucrative market, it has also served as transit route to other areas of the world, particularly Europe and North America. More recently, China has become a transit route as well. Myanmar has been the major site of drug production and trade. More recently Laos has become another location for such illicit enterprise. The ethno-nationalist conflicts in Myanmar and the government’s policy in dealing with the problem explain the situation. In dealing with ethnic rebellions, the government entered into several cease fire agreements since 1989. Lacking economic resources as leverage, the cease fire terms allowed the rebel ethnic groups to maintain their own armed forces and freedom to carry out their own enterprises, understood to include the drug trades.16 As a result, the Shan State became the infamous center of heroin production and trade. A similar deal was struck with the Wa ethnic group from whose area of control 600 million to 1 billion amphetamine tablets are produced annually, most of which are shipped to Thailand. Other ethnic groups that continue to fight the government rely on income from the drug trade to acquire arms. Laos, which is faced with similar problems with ethnic rebels, has become another source of the drug trade. As to the case of Myanmar and Laos, it can be said that from the supply side, weak states make control of drug problems more difficult. The very high profit margin, the porous borders among ASEAN states, and the proximity to the drug production area, make control of the supply side of drug trade most difficult. However, it has been argued convincingly that to deal with drug problems, equal if not more attention should be given to the demand side.

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While there are both the supply side and demand side to the problem, the demand side concerns not just Southeast Asia but has a global dimension. Thus cooperation to curb drug problems will have to go beyond the confines of Southeast Asia. Nevertheless, ASEAN countries need to work individually and cooperatively on reaching the goal of the Joint Declaration for a Drug Free ASEAN set for the year 2015. The projected date may appear overly optimistic. Cooperation on the supply side has to do basically with the police and the military in the suppression of production and trafficking. However, the root cause of ethnic problems in Myanmar and Laos will have to be successfully managed with an eye also to drug production. Dealing with the demand side will require educating and imbuing its citizens with the commitment to a societal zero tolerance of drugs. Unless actions are taken at the national and regional levels, the scourge of drug addiction and the criminality related to drug trade can undermine the viability of individual ASEAN country and ASEAN as a whole. CYBER CRIME Over the past decade, we have witnessed the rapid development of information technologies that have improved the military effectiveness and the functioning of government bureaucracies, as well as research and academic institutions. This development has also improved the performance of financial and economic institutions, making trade and service transactions at the global level faster and more efficient. With the development of information technologies, the internet has grown from a tool in intelligence and research communities to a global electronic network affecting almost all aspects of everyday life not only in America and Europe

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but also in the Asia Pacific region. However, the reliance on the internet has created vulnerabilities as well. Cyber attacks on leading commercial web sites such as Yahoo! and Amazon.com and the bombardment of electronic viruses like the ‘I Love You’ one have done serious damage to a large number of internet users worldwide. As many experts have said, these attacks are only the tip of the iceberg and the largest part of the iceberg lies beneath the surface of the water and is difficult to detect.17 Moreover, as the ‘I Love You’ virus indicates, these attacks can originate anywhere in the world and most of the attackers’ motives are more sinister than just the thrill of breaking into a secure system.18 Cyber crime is expected to increase significantly with the rise in computer use in the next ten or fifteen years. The cyber crime of computer crime is defined as “an offence in which a computer network is directly and significantly instrumental in the commission of the crime. Computer interconnectivity is the essential characteristic.”19 Hackers are another threat. They sometimes crack into the system for the thrill of the challenge, but there have been more cases of hacking for malicious purposes. As the attack mechanism are becoming more sophisticated, they are easier to use. Hackers can now download attack scripts from the World Wide Web against the victim sites. Virus writers pose another serious threat to network worldwide. The proliferating computer viruses have corrupted data and caused damage to computer systems as in the case of the Melissa Macro Virus, The CIH (Chernobyl) Virus, and the I Love You Virus. Another threat comes from criminal groups or frauds who seek to use cyber intrusions for illicit financial gain. These intrusions include ‘pump and dump’; bogus investments or advanced fee fraud and fraudulent internet banking sites. The ‘pump and dump’ starts with a fraud who buys cheap shares in a lesser-known company and

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generates false publicity in an effort to pump up the shares’ price through the internet. After having increased the price, the fraud then dumps them, taking a profit and leaving other investors with valueless shares. The bogus investments involve a website which misleads investors into believing that they could invest with extraordinary rates of return. The fraudulent banking sites can entice victims with high interest rates. They can be established anywhere to attract funds and be dissolved anytime. Terrorists are increasingly using computer systems for their activities. Some transnational terrorist organizations are using computerized files, e-mails and encryption to support their operations. It is anticipated that the use of the internet and other computer networks in the Asia Pacific region will rise markedly in the future. In the Hanoi Plan of Action (HPA), e-commerce is one of the items to be encouraged in ASEAN. The development of information technologies is also one of the top priorities in ASEAN as reflected in the HPA. It is estimated that the volume of e-commerce in Asia in the next three years will be at 250,000 to 300,000 million US dollars, compared to 6000 to 8000 million US dollars in 1998. It is also estimated that in 2003, the 90 percent of e-commerce in Asian will be ‘Business to Business’ and the number of internet users in the region will increase from the present 21 percent of the total number of users worldwide to 25 percent. 20 In ASEAN, Singapore and Malaysia may be the prime movers for the development of the information super highways, followed closely by Thailand, the Philippines and Indonesia. With the increased reliance on computer systems in ASEAN, the cyber crime in the region will be on the rise and will have a vital impact on regional security. ASEAN will be more vulnerable to hackers/crackers, frauds, criminals and terrorist groups who could

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manipulate or corrupt data and information to disrupt the functioning of national security and defense systems, communication facilities such as aircraft control systems, and economic infrastructures,

including stock markets, banking systems and power systems. Cyber crime is transnational in nature and to fight against it requires cooperation of all the states concerned.

NOTES 1. David Rosenberg, “Environmental Pollution around the South China Sea”, Contemporary Southeast Asia, Vol. 21, No. 1, April 1999, p. 121. 2. Chai-an and Samudavanija and Kusuma Snitwongse, The Environment and National Security, Security of the State, Insecurity of the People (Bangkok: Institute of Security and International Studies, 1992), p. 33. (In Thai) 3. Alan Dupont, “The Environment and Security in Pacific Asia”, Adelphi Paper 319, IISS, 1998, p. 62. 4. Op. cit., Rosenberg, p. 127. 5. Op. cit., Dupont, p. 47. 6. Ibid, p. 50. 7. Patrick Lescott, “Asian Nations Sign to Preserve Mekong”, The Australian, 7 April 1995, p. 8, cited in op. cit., Dupont, 9. 71. 8. John McFarlane, Paper on Transnational Crimes, presented at 5th Kanazawa Symposium. See also Margaret Beare, “Illegal Migration”, in Carolina G. Hernandez, Gina R. Pattugalan, Editors, Transnational Crime and Regional Security in the Asia Pacific (Manila: Institute for Strategic and Development Studies, Inc., 1999), pp. 261–263. 9. Op. cit., Samudhavanija and Snitwongse. 10. “Act on oil, Surin pleads”, The Nation Review, September 9, 2000. 11. Robert A. Manning, “The Asian Energy Predicament”, Survival, Vol. 42, No. 3, Autumn 2000, p. 78. 12. Ibid., p. 78. 13. Kent E. Calder, Asia’s Deadly Triangle (London: Nicholas Brealey Publishing Ltd, 1996), p. 56. 14. Ibid., p. 57. 15. “Fighting a losing battle”, The Nation Review, August 20, 2000. 16. Apirat Pumkumarn, Thai-US. Relations: A Case Study of the Development of Cooperation among Drugs and Narcotics Control and Enforcement Organizations, 1987–1997 (In Thai). An M.A. Thesis, Faculty of Political Science, Chulalongkorn University, 1999, p. 83. 17. Statement of Congressman Stephen Horn, Chairman, Subcommittee on Government Management of Information and Technology at a hearing on Computer Security: A War without Borders, July 26, 2000, and the Statement for the Record of Louis J. Freeh, Director, Federal Bureau of Investigation on Cyber Crime before the Senate Committee on Judiciary Subcommittee for Technology, Terrorism and Government Information, Washington, D.C., March 28, 2000, at hhtp//www.or.th. 18. Congressman Stephen Horn, op. cit. 19. Steven Philippsohn, “Combating Financial Fraud on the Internet: An Overview of the Electronic Crime of the 21st Century”, at http//www.pcbsols.co.uk. 20. Krungthep Thurakij, 12 September, 2000, p. 8 (in Thai)

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THE LIMITS OF CONFLICT RESOLUTION IN SOUTHEAST ASIA JUWONO SUDARSONO

THE MATRIX OF CONFLICT From both the theoretical and practical points of view Southeast Asia ranks as one of the more complex regions, resulting in difficulty in establishing conceptual, much less policy-relevant, security arrangements. Neither the United States nor the Soviet Union regards the entire region as an area of vital security interest. Their marginal economic and military involvements absolve them from pursuing any sustained, concerted, or coherent effort in the manner that Central Europe provides a stabilizing framework, leading to the institutionalized security interests through NATO and the Warsaw Pact forces. Of the two other major powers, neither Japan nor China possesses overwhelming political and economic preponderance over the entire region, a preponderance essential in devising a durable security framework commensurate with its short-term and long-term interests. It is this marginality and asymmetry of major power interest in the region that

makes attempts at regional or comprehensive solutions difficult at best. A distribution of relative indifference among major powers can, to some extent, work to the advantage of regional powers that are seeking an autonomous solution to the security of the indigenous states. But this presumes that the regional states themselves see some commonality in extraregional sources of security threats. Indeed, the very fragility of most of the Southeast Asian states (and, no less importantly, of their governments) in turn often calls for periodic interventions by extraregional powers to secure the survival of assorted regimes within the region. Coupled with attendant problems of socioeconomic development and of domestic political management, a circle of conflict arises and creates a momentum of its own, one which neither major power nor the indigenous states themselves are able to control. The asymmetry of relationships among the major powers is compounded by a

Reprinted from Juwono Sudarsono, “Security in Southeast Asia: The Circle of Conflict”, in Economic, Political and Security Issues in Southeast Asia in the 1980s, edited by Robert A. Scalapino and Jusuf Wanandi (Berkeley, Calif.: Institute of East Asian Studies, University of California, 1982), pp. 63–68, by permission of the author and the Institute of East Asian Studies, University of California.

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balance of weakness within regional states. Not one of the Southeast Asian states is likely to be able to bear its full imprint on the entire region. Vietnam since 1975 and particularly since 1979 may have achieved de facto primacy over the Indochina region, and the ASEAN states after the Bali Summit of early 1976 may claim to some semblance of influence to determine the parameters of international politics in the maritime portion of the region. But neither the Indochinese nor the ASEAN grouping is likely to be able to claim full authority over the entire area. The conflicting ebb and flow of major power involvement, the diverse strategic outlook of the Southeast Asian states in regard to the form and source of extraregional threats, and, not least, the differing priorities in economic development efforts defy attempts to achieve an immediate and practical solution to the current crises in the region. The fait accompli which the Vietnamese presented to the region in 1978–1979 heightens the complexity of the regional security situation at present. In addition to the interplay of major power involvement, regional security interests are defined by individual countries of the region according to varying levels of perception and interpretation. At times even a single country’s security perception changes markedly with the reshuffling of the composition of its government. Often the style of a particular leader or of an important faction can substantially change previously agreed understandings, necessitating perhaps a fundamental reexamination of past initiatives and commitments.

THE REGIONAL APPROACH First attempts at unraveling the crisis precipitated by the Vietnamese occupation

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of Kampuchea were inspired by a common diplomatic perception among the ASEAN states that the fait accompli in Kampuchea was unacceptable on grounds of principle. Throughout most of 1979 the ASEAN states, with the support of the United States, Australia, and New Zealand, condemned Vietnam for its invasion of Kampuchea and its attendant policy of evicting mainly ethnic Chinese nationals from the country. Diplomatic victory was achieved in November 1979 when the U.N. General Assembly called for the withdrawal of foreign troops in Kampuchea. Indonesian perceptions of the nature of the problem (and to the manner of its resolution) changed in early 1980. Apart from its empathy toward Vietnamese revolutionary achievements, the Indonesian government began to emphasize the need to reevaluate the main source of threat to the region in the long term. Despite outward appearances of ASEAN solidarity or common outlook, it was clear that Indonesia saw China as the greater threat to regional order. While Thailand and Singapore regard Vietnam as nothing more than a proxy for the Soviet Union, Indonesia (and to some extent Malaysia) tended to accept some of the more political as well as military justifications for the Vietnamese intervention in Kampuchea. In effect, this was the beginning not only of a reconsideration of past events in Indochina of the 1977–1978 period (particularly as regards Chinese provocations toward Hanoi through the Pol Pot government) but, more importantly, of the desirable course of diplomatic action to break out of the Kampuchean logjam. The Kuantan principle, while admonishing the Vietnamese for their action in Kampuchea, in effect constituted an attempt by the Indonesian and Malaysian governments to seek a more regional approach in resolving the crisis. Perhaps it may have inadvertently inspired later counter-

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proposals by the Indochinese governments to construct a dialogue between ASEAN and the three Indochinese states rather than to broaden the issue by encompassing extraregional powers. Apart from differences regarding the main source of threat to the region, the Indonesians and Malaysians also differed with the Thais and Singaporeans in respect to resisting the Heng Samrin government in Phnom Penh. While Singapore often spoke openly of a strategy of attrition to bleed the Vietnamese, Indonesia and Malaysia felt inclined to consider with sympathy Vietnam’s fears in respect to Chinese threats toward it from three sources: the Sino-Vietnam border, the KampucheanVietnam border during the Pol Pot regime’s control over Kampuchea, and the role of the ethnic Chinese in the Vietnamese economy. The Kuantan principle almost immediately lost its luster in the wake of the Vietnamese incursion into Thailand in June 1980. Indonesia and Malaysia were subsequently put into a defensive position, and ASEAN’s diplomatic unity was regained with the repeated call for the withdrawal of foreign troops from Kampuchea at the U.N. General Assembly meeting in October 1980. The meeting also called for the holding of an international conference as part of a continuous effort to achieve a comprehensive solution to the Kampuchean crisis. In effect, the holding of the conference in July 1981 marked the formal end on the part of the Indonesians to seek a more regional-centered solution.

THE COMPREHENSIVE APPROACH Despite the failure of the Indonesians and Malaysians to convince their ASEAN colleagues of their more sympathetic approach toward Vietnam and despite their ac-

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quiescence to the formal declaration of the U.N. Conference on Kampuchea, the Indonesians continued to maintain sporadic dialogue with the government in Hanoi. The decision to continue the dialogue with Hanoi in part reflects the previous emphasis on the nature of the long-term threat to Southeast Asia from China. But in part it also stems from a growing realization that a comprehensive and internationalized (as opposed to a region-based) approach to the Kampuchean question brings more complications to the issue in question. By recognizing the legitimate interests of all parties concerned, the conference approach institutionalizes the essentially extraregional character of the Sino-Soviet conflict as a substantially more impelling issue than the presence of Vietnamese troops in Kampuchea. While recognizing the fact that one of the more important reasons for Vietnamese intervention in Kampuchea was its growing enmity with China, Indonesians believe that two extra-regional dimensions were too difficult a task to handle by all conflicting parties concerned. In addition, resort to a comprehensive approach, even if it places priority on an understanding reached among Southeast Asian nations, necessarily reduces the prime responsibility of the Southeast Asian states in initiating breakthroughs involving matters of concern to the region. To the Indonesians and Malaysians, the comprehensive effort smacks of a great power imposition of a security arrangement that serves primarily the interests of the United States, China, and Japan. In deference to Thailand, however, both Indonesia and Malaysia for the moment seem to be willing to give the comprehensive approach a chance. In the meantime, both governments (or at least elements within the respective governments) out of choice and opportunity will be eager for a more propitious moment for

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another round of an intraregional-centered understanding. The Malaysian foreign minister recently warned China that its strategy of attempting to bleed the Vietnamese into submission was foolish and bound to fail. Coming as it did prior to deliberations at the United Nations on the Kampuchean question, it may portend further evidence of a two-track diplomatic-cum-military approach evidently pursued by Indonesia and Malaysia, on the one hand, and the unified ASEAN stand, on the other. INDONESIAN VIEWS ON THE CONFLICT Indonesia’s clear preference for a regional approach rests on three premises, which differ distinctly from the underlying principles governing the objectives of the conference approach. First, Indonesia’s view on the motives of Vietnamese intervention into Kampuchea differs from that of Thailand and Singapore. Although it cannot openly endorse the installation of a government through the use of armed force in a neighboring country, most Indonesian observers view the Pol Pot-Ieng Sary government as having been overtly provocative toward a nation which, from an Indonesian point of view, has strong claims and a legitimate position of dominance within the Indochina region. In addition, whatever misgivings China may have over Vietnam’s treatment of its ethnic Chinese minority, Indonesians view with sympathy Vietnamese apprehension over the degree of control that the ethnic Chinese have over the commercial economy. Finally, in strategic terms a strong Vietnam within a consolidated Indochinese front would act as an important buffer against Chinese expansionism in the long term. Indeed, concern over the future of Chinese conventional and nuclear capability, helped by current U.S. and Japanese diplomatic

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and economic support (particularly after the August 1978 Sino-Japanese Treaty of Peace and Friendship and the recognition of the Beijing government in January 1979), has underscored Indonesian concerns over the future of regional resilience, one of Indonesia’s principal tenets of national defense. Viewed from Indonesia’s defense perspective of concentric circles emanating outward against extraregional threats, a convergence of interests between ASEAN and the Indochinese states would constitute a formidable bulwark against China as well as insurance against potential domestic fifth columnists. Understandably, the Indonesian perspective is viewed with strong suspicion and alarm in Thailand. Thailand’s traditional rivalry with Vietnam for influence over Laos and Kampuchea has in the past aligned it with China for precisely these reasons. Thailand was also fully aware that ASEAN unity could only go as far as concerted diplomatic efforts; the combined forces of the ASEAN countries remain no match for the battled-hardened Vietnamese army. Whereas Indonesia had strong reservations about China’s punitive action toward Vietnam in February–March 1979, Thailand was relieved that China’s limited attack forced the Vietnamese to think twice about possible consequences of a second front should it contemplate moving its troops well beyond Indochina. Thailand was also relieved to note that there were limits to the Soviet support of Vietnamese regional ambitions when the Soviet Union only provided verbal support to Vietnam during the Chinese attack. Since in the view of Thailand only China retains any semblance of effective deterrent against Vietnamese aggression westward, there are also important discrepancies in respect to Thai and Indonesian tactics in regard to the Thai-Kampuchean border area. Thai units are known to resupply

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Khmer Rouge forces who cross the border and then return to fight Vietnamese and Heng Samrin forces. Thailand has also permitted movement of Chinese military supplies for the anti-Heng Samrin resistence forces. The Indonesians view such tactics as not only perpetuating the border area conflict but, more importantly, as exacerbating the Sino-Vietnamese conflict. Also, the Indonesian and Malaysian view of a strong Indochina acting as a buffer zone against China is in direct conflict with the Thai view that it is only Vietnam that poses an imminent threat to the rest of mainland Southeast Asia. The second point of contention between Indonesia and Thailand in regard to extraregional dimensions involves the role of the Soviet Union. The Soviet Union recognizes the different perceptions among the ASEAN states concerning the sources of instability to the region. As the Chinese and U.S. governments gradually moved toward normalization of diplomatic relations and the Vietnamese hope of diversifying its major power relationships were constricted by Chinese pressure and U.S. vengeance, the Soviet Union successfully persuaded Vietnam that a Soviet-Vietnam alliance was a firm guarantee in securing economic and military assistance. From the Thai perspective, Vietnamese dependence on Soviet support enhanced its perception of an increased Vietnamese capability to strike across the border toward a wider regional dominance. The Indonesian view, on the other hand, was that the SovietVietnamese alliance came as a result of U.S. failure to give the Hanoi “Titoists” a fair chance to embark upon a more flexible and independent foreign policy stance. That this U.S. failure was perpetuated in tandem with the Carter administration’s obsession with its strategic understanding with China was all the more reason for Indonesian empathy for the Vietnamese predicament. More importantly for the Indonesians, the U.S.

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obsession to reach a strategic understanding with China, subordinating Hanoi’s concern with the larger perceived threat of Soviet naval power, served to confirm the belief that the sooner ASEAN and the Indochinese grouping agreed to a region-based and region-centered security arrangement, the better it would serve the long-term interests of all the states concerned. In the eyes of the Indonesians, what has transpired in the past five years in the broader spectrum of East Asia has not been favorable to Southeast Asian regional stability. A system of quasi-alliances has polarized the East Asian setting in the six months between July 1978 and January 1979, one of which only served to aggravate the intraregional nature of the conflict centering on Kampuchea. First, Japan concluded with China (at the active encouragement of the Carter administration) the Sino-Japanese Peace and Friendship Treaty. It was immediately viewed by Moscow as a major breakthrough as part of an effort to establish an East Asian antiSoviet alliance. When the deteriorating Sino-Vietnamese and U.S.-Vietnamese relations finally brought about the Soviet-Vietnam Treaty of Friendship and Cooperation, the Chinese in turn foresaw the prospect of a Vietnamese invasion into Kampuchea. China then normalized diplomatic relations with the United States, hoping that it would deter Vietnam from overturning the Pol Pot government. When it failed to do so, the U.S. connection seemed sufficient to deter Soviet military reaction to China’s subsequent military action into northern Vietnam in February–March 1979. The crisis in Kampuchea, initially a conflict among fraternal Communist states within Indochina, has thrust itself into three layers of extraregional conflict: the Sino-Vietnamese dispute, with strong implications for both intra-ASEAN and ASEAN-Indochina relationships; the

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hardening of Sino-Soviet competition with respect to their secondary security relationships in Southeast Asia; and SovietAmerican rivalry at the global level, specifically at “periphery areas.” Given the intricacies of the issues involved, it is doubtful whether a comprehensive solution as envisaged through

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the U.N. conference system can ever have a chance to succeed. Indeed, the long-term and internationalized nature of the comprehensive approach serves to confirm Indonesian fears that the circle of conflict in Southeast Asia is beyond the capacity and political willingness of the Southeast Asian states to break.

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ALTERNATIVE SECURITY MODELS Implications for ASEAN

WILLIAM T. TOW

IMPLEMENTING THE ALTERNATIVE SECURITY MODELS Southeast Asia’s post-war history is marked by the preoccupation of the elite with sustaining their political power (an intrastate security preoccupation) and by minimising their sovereignties’ vulnerability to external aggression (an inter-state security orientation). These two characteristics remain embedded as key security referents throughout most of the region, with recent events in Indonesia reinforcing the first concern and with China’s rising power base and its aspirations directed towards the South China Sea underscoring the latter. Security dilemmas remain easily concocted within such a framework, either through suspicions that the tools of violence will be readily employed either by political rivals within a nation’s own boundaries or by predator states outside of them. All three security models that have been reviewed here have something to offer in terms of modifying this obsessively brutal

outlook. Constructivism invites policymakers and analysts alike to delve beneath perceived (or misperceived) interests and intentions of potential opponents. Southeast Asians are not predestined to be ethnically divided or to be geo-political enemies if they are able to fashion a regional security order, based as much on mutual social and cultural respect as on historical interests or values that may no longer be applicable. In the aftermath of Indochina’s incorporation into ASEAN, that institution’s relentless commitment to community building appears to offer a better formula for conflict prevention than any power-balancing formula currently available to the ASEAN states. The latter approach would only reinforce the Asia-wide security dilemma, which is in danger of intensifying between China and the United States, if those two countries’ engagement postures fail to endure beyond the end of the Clinton and Jiang presidencies. The ultimate measure of constructivism’s effectiveness in Southeast

Reprinted in abridged form from William T. Tow, “Alternative Security Models: Implications for ASEAN”, in Non-Traditional Security Issues in Southeast Asia, edited by Andrew T. H. Tan and J. D. Kenneth Boutin (Singapore: Select Publishing and the Institute of Defence and Strategic Studies, 2001), pp. 257–85, by permission of the author and the publishers.

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Asia, however, will hinge on how amenable both the United States and China are to reconstituting their own preferences for an ASEAN security environment. Ideally, this environment would be less influenced by great power prerogatives and more shaped by ASEAN’s own agenda. Greater understanding of how securitisation might work in a Southeast Asian context could be the first step in modifying ASEAN relations with external actors. Like constructivism, securitisation evolves around distinguishing “we-ness” from “other-ness.” Unlike constructivists, however, those who embrace securitisation may endorse divisions as a means to perpetuate power, distorting incentives for building collective identity and squandering opportunities to face structural change through coalition building. ASEAN would have been better served, for example, to desecuritise the Indonesian military’s role in East Timor far sooner than it did, rather than adhering to its long-standing habit of viewing that entity as a guardian of “nation building.” East Timor was, above all, a problem of political socialisation–securitisation — within a contested sovereign boundary, rather than a state security concern. It is the human security model, however, that posits the most significant challenge to traditional security referents in Southeast Asia. Ultimately, security is about all of us and each of us, regardless of how we may choose to organise institutions or instruments at a given time to achieve it. This model supplants the collective human rights concept. For example, in the aftermath of Asia’s financial crisis, the argument that individuals’ sacrifices will lead to more prosperous and fulfilling lives for their descendants would appear to be tenuous, if not fully discredited. It is apparent that, in the ASEAN region and elsewhere, the human security model may represent an essential element in the next decade’s security regime.

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Efforts to transform these three models into actual policy need to be spearheaded at the state level, where most of the resources to do so remain invested. National governments can work within institutional frameworks to implement this process. Three key aspects of such institutional coordination are: 1) provision of early warning mechanisms for human security crises; 2) development of a continuing discourse on regional security, which incorporates constructivist, securitisation and human security implementation elements; and 3) linking of the principles of the three models to traditional, positive approaches to regional security, such as confidence building and preventive diplomacy. Human Security: Early Warning Mechanisms Several human security crises in Southeast Asia in recent years could have been anticipated and addressed more effectively if viable early warning mechanisms had been in place and operative. Persistent haze over Indonesia, Malaysia, Brunei and Singapore caused by fires in Indonesia tested ASEAN’s Cooperation Plan on Transboundary Pollution (implemented in 1995) and found it wanting. ASEAN’s “constructive engagement” approach towards Myanmar, adopted in conjunction with that country’s entry into the grouping during 1996, has been largely discredited by the elite of that country continuing to observe a hard line against civil society interest groups in Myanmar and other ASEAN states. The 1997 economic crisis exposed the rampant “crony capitalism” evident in many ASEAN economies at the expense of savaging the economic welfare of the region’s middle classes. The East Timor crisis has already been assessed here, exposing the principle of nonintervention in its traditional form as an impediment to ASEAN’s international credibility.1

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Any effort to redress the tendency for events flowing from rapid structural change to overwhelm the capacity of the elite or state mechanisms to cope with them (what is commonly labelled a “crisis of governance”) must confront “the subjective, relational and normative dimensions of security relations and elucidate the polarising implications of identity politics.”2 Long-standing cultural and political practices, such as “saving face,” “non-interference in sovereign affairs” and reinforcement of elite power structures, need to give way to greater encouragement of transparency in communication and making human and social considerations core elements of governance in both intrastate and inter-state relations. Achieving these broad objectives by utilising effective early warning mechanisms, of course, will be no easy task. Yet a number of regional epistemic communities (groups of experts), capable of addressing key areas of human security to identify and shape broad approaches to the problem, already exist.3 Some of these are active within the Council for Security and Cooperation in the Asia-Pacific (CSCAP) framework. It provides track-two, non-governmental panels and working groups, including representatives from academe, research institutes and other leading centres for policy analysis, working on human security-related issues. Mechanisms for environmental monitoring, the control of transnational crime and narcotics traffic, water supply management and food security have all been proposed by various CSCAP working groups and have been considered or implemented to some degree by ASEAN governments.4 Translating these proposals into full policy commitment with requisite funding, however, has proven to be challenging. The policy elite in ASEAN, the AsiaPacific region and internationally continue to assign priority to traditional, statecentric security approaches. They have coopted normative concerns, such as

humanitarianism, into what Astri Suhrke has aptly labelled “a combined interest-and institutional” perspective or approach.”5 Human security is often relegated to the realm of development politics, while traditional security retains a powerful centrality in the mindsets of those who rely on statecentric modes of governance for justifying and retaining their own power bases. Such concepts as “vulnerability,” “unstructured violence” and “welfare goals” remain superseded by the quest to define and sustain “order” and “resilience,” however fragmented or imperfect those latter concepts may be. This relates to the question of whose security is being pursued — i.e. the state as a concept or the collective body of individuals who inhabit our planet?6 Or, as one respected Southeast Asian analyst concluded following the ASEAN debate over flexible engagement, “there is no way of compelling a country to change its behaviour if it does not want to.” Neither is there any viable enforcement mechanism for compelling any ASEAN (or other AsiaPacific) state to change its behaviour if it threatens the collective good of the rest.7 Nevertheless, opportunities do exist for selected early warning measures to be implemented. Most significantly, existing collaborative mechanisms for environmental and resource management need to be employed more rigorously and in a more integrated fashion than at present to monitor and enhance cooperation in these sectors. The ASEAN Environmental Programme was established in 1978, for example, to promote sustainable economic development. Sixteen years later, the inaugural conference of the APEC environment ministers was convened. It adopted an environmental action programme three years later. Simultaneously, CSCAP has devoted substantial study to these issues.8 To date, however, there is little evidence of an ongoing and systematic effort to combine such initiatives in ways that would work

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effectively either at the state or regional level of policy management. The national elite in a number of Southeast Asian states are often hamstrung by the inadequacy of law enforcement or bureaucratic infrastructures in neutralising those in either the criminal and commercial sectors who openly flout efforts to control their actions. ASEAN and ARF have not assumed primary responsibility for identifying and implementing “grand strategies” to alleviate region-wide environmental concerns, to combat Southeast Asia’s growing narcotics problem or to confront its intensifying food and water resource crises. Non-governmental organisations and pressure groups are making limited inroads, however, in checking the power and influence of those who otherwise would continue to prey on the vulnerability of ASEAN populaces. More extensive dialogue and policy coordination between these groups and the ASEAN elite would appear to be an essential step in advancing human security in these policy sectors. Expanding Discourse Yet, how to tailor regional security discussions so as to advance this dialogue? By the mid-1990s, an intra-ASEAN consensus had developed over the value of multilateral dialogues for broadening security perspectives and strengthening regional confidence building. 9 At the turn of the century, this optimistic appraisal had been undermined by a widening divergence among Asian policy-makers and their populaces over the extent to which economic growth and political stability relate to the advance of human security and democratic practices. As previously noted, leaders, the various intellectual elite and other advocates of Asian values in China, Malaysia and elsewhere in East Asia reject any such linkage and have instead

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designated the “West,” and particularly the United States, as an adversary to their own collective identities and aspirations. The prevailing view in ASEAN and beyond is that security must remain statecentric. That view, however, begs the question of how the state should protect its sovereign subjects, if the interests of the state elite emerge clearly at odds with those of its citizens. By exercising more care to ensure that knowledge is truly “shared,” that freedom from basic deprivation and constant vulnerability is at the forefront in how “security” is defined, and that this concept is not defined arbitrarily or only for the sake of socio-political manipulation, ASEAN policy-makers may well be successful in winning genuine, long-term support from the societies they govern. In this sense, greater progress is required in moulding national identity into collective or multilateral concepts that define and shape security agendas. At the state level (and as intimated previously), Singapore’s leadership appears to have been most successful in reaching a compact of understanding about “broader security paradigms” with its electorate. The other ASEAN elite are considerably less advanced in prescribing how to confront such challenges, while simultaneously preserving whatever legitimacy they may have as agents for economic and human security for their constituents. Discourse that has recently evolved at the multilateral level of diplomacy, however, has been more promising. The July 1998 ARF Meeting in Manila was dominated by concerns about “... the socio-economic impact of [proposed economic] reforms, particularly its effect on the less privileged sectors of society” as it could “impact on the peace and security of the region.”10 While there may not have been a conscious initiative among the ARF representatives to conceptualise security along alternative security lines, greater interest was clearly directed towards

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assessing the human implications of nontraditional threats arising from rapid structural and environmental change.

embedded in the conceptual framework of most of the ASEAN policy elite. The best to which proponents of alternative security can aspire over the short term is that a workable modus vivendi can be derived to resolve some of the more urgent security problems now challenging Southeast Asia and the entire region. One area of possible convergence is in the field of conflict prevention. Traditional security practitioners prescribe bargaining

Linking Traditional and Alternative Security The realist/liberal legacy, predicating that international security relations are the product of how material capabilities are distributed in an anarchical world, remains

TABLE 1: Traditional and “Alternative” Security: Areas of Comparison

Forging Linkages

Policy Approaches

• strategic reassurance - (alliance politics) - (multilateral dialogue and negotiations)

(Traditional Security) • deterrence • power balancing

(Traditional Security) • sustaining military parity • forging state-centric alliances

(Alternative Security) • cooperative security - (confidence building) - (preventive diplomacy) • collective identity

(Alternative Security) (Alternative Security) • ensuring food and • ASEAN (and the ARF) resource security • United Nations • resolving territorial disputes • moderating in ethnic/ religious disputes

Policy Approaches

Examples of Implementation

Relevant Mechanisms/ Institutions

(Traditional Security) • projecting statecentric diplomacy • building military power

(Traditional Security) • forging a regional power equilibrium

(Traditional Security) • summit diplomacy • military alliances & coalitions

(Alternative Security) • identifying common norms and values • knowledge sharing

(Alternative Security) • enhancing human welfare • realising a “security community”

(Alternative Security) • epistemic communities • institutional diplomacy • development politics • human rights covenants

Reducing Vulnerability

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coercion, deterrence and power balancing as time-honoured strategies to achieve some form of regional stability or order that will prevent war. Alternative security proponents attempt to discern and eradicate root causes of conflict, based on economic deprivation, social cleavages and human suffering. The two approaches converge, however, in pointing to cooperative security (either through the pursuit of common interests or through the achievement of intersubjective understanding) as the preferred means for maintaining peace and stability. There appears to be a basis for at least a limited integration of means to achieve a common objective in this case. A second linkage relates to the need to reduce the vulnerability of the security subject. 11 The traditionalists are preoccupied with “order” as a security precondition to overcome anarchy and achieve prosperity and an enduring political identity. This “ideal” of stability or predictability is a transcending concept, as

are the ideals of ensuring welfare and attaining greater, more enduring knowledge about ourselves and “others,” which underscore the alternative security ethos. Again, the language may be different, but the policy ends — to improve the condition of the human race through the pursuit of and adherence to viable norms (based on collective interests or values) — are very similar indeed. The preferred outcome is an international security “community,” whether it is based on hierarchy by assent or on reconciliation of different societies and the removal of differentiation. To a traditional security proponent, it matters little if power is invested in a state or in a higher authority, as long as it is wielded efficiently and in the interest of international stability. Alternative security analysts exercise an abiding faith that any structural hierarchy can eventually be transformed into human communities, capable of recognising and managing a broad array of global threats.

NOTES 1. A good synopsis of these general trends is by Daljit Singh, “Southeast Asia in 1999: A False Dawn?” Southeast Asian Affairs 2000 (Singapore: Institute of Southeast Asian Studies, 2000), pp. 3–25. 2. Joseph A. Camilleri, “The Security Dilemma Revisited: Implications for the Asia-Pacific,” in Tow et al, eds. Asia’s Emerging Regional Order: Reconciling Traditional and Human Security (Tokyo: United Nations University Press, 2000), p. 315. 3. See especially Sung-Han Kim, “Human Security and Regional Cooperation: Preparing for the Twenty-First Century,” in Tow, et al, eds. Asia’s Emerging Regional Order: ReconcilingTraditional and Human Security (Tokyo: United Nations University Press, 2000), pp. 295–299. 4. For a recent and excellent overview of CSCAP activities and reports, see Desmond Ball, The Council for Security Cooperation In The Asia Pacific, Canberra Papers on Strategy and Defence No. 139 (Canberra: Strategic and Defence Studies Centre, Research School of Asian and Pacific Studies, The Australian National University, 2000). An assessment of how such track-two activities can be incorporated to pursue human security more directly is offered by Toshiya Hoshino, “Pursuing ‘Informal’ Human Security: A Track II’ Status Report,” in Tow, et al, eds. Asia’s Emerging Regional Order: Reconciling Traditional and Human Security (Tokyo: United Nations University Press, 2000), pp. 267–288. 5. Astri Suhrke, “Human Security and the Interests of States: Reviving the Oslo-Ottawa Axis,” Security Dialogue Vol. 30, No. 3 (September 1999), p. 268. 6. A point raised by Camilleri, p. 317. 7. Singh, p. 7.

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8. Alan Dupont, The Environment and Security in Pacific Asia, Adelphi Paper 319 (London: The International Institute for Strategic Studies, 1998), p. 78. 9. Andrew Mack and Pauline Kerr, “The Evolving Security Discourse in the Asia-Pacific,” Washington Quarterly, Vol. 18, No. l (1995), pp. 123–140. Also see Graeme Cheeseman, “Asian-Pacific Security Discourse in the Wake of the Asian Economic Crisis,” The Pacific Review, Vol. 12, No. 3 (1999), p. 334. 10. Chairman’s Statement at the Fifth Meeting of the ASEAN Regional Forum, 27 July 1998. Reprinted at www.dfat.gov.au/arf/arf5.html. Also see Cheeseman, p. 345. 11. William Tow and Russell Trood, “Linkages Between Traditional and Human Security,” in Tow et al, eds. Asia’s Emerging Regional Order: Reconciling Traditional and Human Security (Tokyo: United Nations University Press, 2000), p. 22.

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63.

Mohamed Jawhar bin Hassan

DISPUTES IN THE SOUTH CHINA SEA Approaches for Conflict Management

MOHAMED JAWHAR BIN HASSAN

THE SPRATLYS, THE CLAIMANTS AND THE CLAIMS Four areas are in dispute in the South China Sea: the Paracels, which is contested by China, Taiwan and Vietnam; the Gulf of Tonkin, disputed by China and Vietnam; Pratas Island and Macclesfield Bank, contested by China and Taiwan; and the Spratlys, contested in whole or part by six littoral parties: China, Taiwan, Vietnam, Philippines, Malaysia and Brunei. This chapter discusses only the Spratlys, a group of 230 or so islets, sandbanks and reefs of which only three dozen features are above water level and none of which are more than half a square kilometre in area. China and Taiwan claim about 80 per cent of the entire South China Sea bounded by a U-shaped line that China made public in 1947 and which appears on official Chinese maps. (The China and Taiwan claims are in fact a single claim.) China believes that the Sea has been part of

Chinese territory since at least the Qing or Han period. In July 1995, however, China issued a policy statement indicating that it was “ready to work together with the countries concerned to resolve appropriately the relevant disputes according to recognized international law, (and) the contemporar y law of the sea, including basic principles and the legal regime defined in the United Nations Convention on the Law of the Sea [UNCLOS]”.1 In 1996 China ratified UNCLOS. Vietnam claims all the islands and features that are above sea level in the Spratlys. The Philippines claims all features (above sea level as well as submerged) in the area it calls Kalayaan (Freedomland). Malaysia claims seven features, while Brunei has laid claim to a 200-nautical mile exclusive economic zone (EEZ) which includes Louisa Reef, also claimed by Malaysia. The claimants cite various grounds for their claims. China, Taiwan and Vietnam

Reprinted in abridged form from Mohamed Jawhar bin Hassan, “Disputes in the South China Sea: Approaches for Conflict Management”, in Southeast Asian Perspectives on Security, edited by Derek da Cunha (Singapore: Institute of Southeast Asian Studies, 2000), pp. 98–109, by permission of the author and the publisher.

Disputes in the South China Sea: Approaches for Conflict Management

base theirs on ancient discovery, continuous usage and effective occupation. The Philippines claim, as contained in a presidential decree of June 1978, cites “history, indispensable need and effective occupation and control”. Malaysia’s claim is based on the grounds that the features it considers Malaysia’s are located on its continental shelf. The largest number of features — 22 — is occupied by Vietnam. China occupies 9 (including Mischief Reef), the Philippines 8, Malaysia 3 and Taiwan one (Appendix 6.1).

APPROACHES TO CONFLICT MANAGEMENT AND MECHANISMS FOR CONFLICT PREVENTION The approaches adopted by the claimants appear to be influenced by consideration of several factors which impinge upon or are a part of the strategic environment surrounding the Spratlys. Among these would be the following: • • • • •

• •

•

the maritime setting of the disputes; the relatively low conflict potential of the disputes; expectations regarding possible exploitable resources; the low, though var ying, militar y capabilities of the disputing parties; the increasing military capabilities of some of the claimants, in particular China and Taiwan, but also to a much lesser extent Malaysia and most recently the Philippines; heavy international interest in the maritime routes in the vicinity; the special position of China, which is perceived as the most threatening power and the one most likely to initiate resort to force; and the existing strategic balance among the major powers in the region, and the

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tremendous military reach and clout possessed by the United States. The conflict management approaches and mechanisms adopted by the claimants of course vary in some respects, but some generalizations can be made. Peaceful Negotiations Negotiations aimed at resolving territorial disputes have essentially been bilateral in nature. The overwhelming differences in the relative size and bargaining strength of China and the other claimants, as well as the existence of ASEAN which provides a natural grouping for the Southeast Asian claimants, have also led to calls by some of the claimants from the latter to negotiate with China on a collective basis. This move has gathered momentum especially after the Mischief Reef discovery in early 1995, which unified the ASEAN states as never before. However, as is common with negotiations regarding territory, progress has been slow. Attempts have therefore been made for some time now to explore cooperation in various fields while setting aside the issue of sovereignty and forestalling conflict. Confidence-building Measures These are being conducted at both Track One and Track Two fora, either dedicated to discussing issues surrounding the disputes or to more general subjects. Bilateral discussions, ASEAN (itself a confidencebuilding mechanism for members), the Indonesian-sponsored (Canadian-funded) Informal Workshops on the South China Sea, and the ASEAN-ISIS-organized AsiaPacific Roundtable, constitute some of these processes. Specific measures for confidencebuilding, though much discussed (for instance, at the Informal Workshops), have not got off the ground yet. The reasons for

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this appear to be the lack of a sense of urgency and even necessity, given the relatively low tension levels in the area, the already generally cordial relations that exist among virtually all claimants, and the low importance and priority attached to confidence-building proposals, such as marine scientific research and environmental protection, which do not have sufficiently pressing and over whelming rationales of their own, besides confidencebuilding, for states to consider them worthwhile. Military Deterrence All the claimant states except Brunei have established a military presence on selected features of the Spratlys as a strategy to reinforce the legitimacy of their claims and to deter occupation by other claimants. More importantly, all states are enhancing their maritime military capabilities, partly to strengthen their capacity to surveil, police and defend the areas they claim, as well as to deter hostile moves by other parties. As stated earlier, Vietnam has the most extensive presence in the Spratlys, that is, on 22 features. China has a presence on only 9, the Philippines 8, Malaysia 3 and Taiwan one. There is no doubt, however, that China possesses by far the greatest militar y potential over the area, and that what deters it most is the likely political cost of expanded occupation and its as yet limited capability to successfully sustain and defend a presence over a widely dispersed area some distance from its southern base on Hainan Island. It may also be noted that the militarization of the Spratlys is still at a relatively low level, and that most of the claimants do not possess the resources to substantially enhance their presence to alarming levels in the near future. To some extent, this explains why militar y confidence-and-security-building measures

Mohamed Jawhar bin Hassan

(CSBMs) are not a pressing issue in the Spratlys. Preventive Security Regimes There are a number of preventive security regimes which condition state behaviour over the Spratlys. The most important are those subsumed under ASEAN, namely the Declaration of a Zone of Peace, Freedom and Neutrality (ZOPFAN); the 1976 Treaty of Amity and Co-operation in Southeast Asia; the 1976 ASEAN Concord; and the 1992 ASEAN Declaration on the South China Sea. Together, the regimes embodied in these instruments exert significant normative pressures on the ASEAN claimants to moderate their behaviour, refrain from resorting to the military option, seek co-operative modes of conduct and explore peaceful resolution of disputes. It can be argued, however, that given the low levels of institutionalization and the relatively weak sanctions upon aberrant behaviour contained in these regimes, they are “soft” regimes. The nonactivation of the ASEAN High Council provided for by the Treaty of Amity also weakens the force of this particular regime for the ASEAN claimants. Nevertheless, despite their “softness”, the regimes have proved remarkably successful in constraining conflict and enhancing cooperation and confidence among the ASEAN states. This indicates, perhaps, that a more rigorous regime, while probably desirable, has so far at least proved unnecessar y. In any case, ASEAN has been gradually increasing its level of institutionalization over the years, and incrementalism would continue to be favoured by all its members who remain very state-centric in their approach. The ASEAN Regional Forum (ARF) and the Council on Security Cooperation in the Asia-Pacific (CSCAP) have significant

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potential for reinforcing preventive diplomacy and security in the Spratlys in the future if regime-building progresses gradually in the years ahead. For the present, their writ is highly proscribed by China’s refusal to discuss the Spratlys in the ARF. The only moderating regime which embraces China is the bilateral Code of Conduct between it and the Philippines, agreed upon in 1995. Again, this is a “soft” regime. Therefore, there is a great need to develop and strengthen preventive regimes which firmly embrace China. Political and Diplomatic Constraints More than military deterrence, claimants from among the ASEAN states utilize and rely upon their not inconsiderable diplomatic weight and influence to constrain China from becoming overly assertive in the Spratlys. Until the 1992 Declaration on the South China Sea, ASEAN studiously avoided being drawn into the bilateral disputes in the Spratlys, most of which involved its members. Beginning from the 1992 declaration and especially after the Mischief Reef incident, however, ASEAN has evinced greater collective interest in stabilizing the situation in the area. In this regard it has to be noted that ASEAN is unlikely to allow itself to be drawn into any bilateral controversy that may arise between a member and China if the member is responsible for initiating or aggravating the situation. Undue pressure exerted by China,

NOTE 1.

Asian Wall Street Journal, 13–14 October 1995.

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however, may force ASEAN to intervene politically. ASEAN’s expansion to now include the whole of Southeast Asia is further adding to its political weight and diplomatic influence in the international community, and the potential constraints upon China have therefore increased. Strategic Balance Most ASEAN states favour a continued American military presence and linkages in the East Asian region. None of them, except Singapore (and maybe the Philippines), however, is prepared to have any significant American military presence in Southeast Asia. This notwithstanding, it is believed that virtually all the ASEAN claimant-states see continuing American strategic-political interest, substantial economic presence, and militar y co-operation and reach as counter vailing influences upon overwhelming Chinese power. This interest and perception prevails despite doubts regarding American commitment and staying power and the minimal likelihood of the United States getting militarily involved in the Spratlys in any foreseeable eventuality. Besides American presence, the interest of Japan and other regional and Western powers in the security and stability of the South China Sea in general is also a constraint and balance against destabilizing behaviour in the area, although they too are unlikely to get militarily involved.

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INTEGRATING ASEAN AND FRAGMENTING ARF IN A SUBREGIONAL AND REGIONAL CONTEXT KWAN KWOK LEUNG

SUBREGIONALISATION AND REGIONALISATION1 IN SOUTHEAST ASIA The centripetal force within the ASEAN is being counter balanced by the centrifugal force of the ARF. The subregional ASEAN states have to apply their survival skills among the regional Great Powers. In the east, to maintain its economic and political interests in the East and Southeast Asia, the Japan-USA alliance seems indestructible. Indeed, the long-term protection by the United States of many of the Southeast Asian countries to a certain extent safeguards the stability of the region. These countries have their price to pay. They suffer from the partial loss of autonomy in dealing with the regional affairs in places under their sphere of influence. The retreat of the United States after the Vietnam War reinforces the consolidation of the ASEAN as a whole yet simultaneously Japan has been ‘endorsed’ by the United States to ‘look after’ the

region. However, many Southeast Asian countries are hostile to Japan as a gatekeeper in the Asia-Pacific for historic reasons. Any move from Japan to interfere in Southeast Asian affairs will trigger a reaction within the ASEAN. The interplay between the regional bloc and the allying Great Powers is intricate and delicate. In the west, after the disintegration of the Soviet Union and the withdrawal of the Russia from Southeast Asia, India’s efforts to scramble for control in the region was temporarily curbed. As one of the nuclear powers in Asia, India is deemed a threat to its regional neighbors, particularly Indochina. Although political confrontation between the ASEAN and India is being diluted by economic cooperation, the former tend to be exploited by the latter as a leverage against another nuclear power, China. Any potential confrontation between India and China will definitely have an impact on the stability of Southeast Asia. In the south, Australia plays a significant

Reprinted in abridged form from Kwan Kwok Leung, “Integrating ASEAN and Fragmenting ARF in a Subregional and Regional Context”, in Development in Southeast Asia: Review and Prospects, edited by Raymond K. H. Chan, Kwan Kwok Leung, and Raymond M. H. Ngan (Hampshire, UK: Ashgate Publishing, 2002), pp. 3–15, by permission of the author, the editors, and the publisher.

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role in the APEC and the ARF. And it regards Southeast Asia as a stepping stone to the international theatre. However, a socially unstable, religiously passionate, politically undemocratic, and densely populated Indonesia makes Australia feel uneasy. To Australia, Indonesia is often a barrier to the vast blue sea and to the more friendly ASEAN states like Malaysia and Singapore. Geographical proximity coupled with political diversity may lead to potential conflicts if economic relations of the two countries deteriorate. The situation in the north is more problematic. The political, economic and military expansion of the PRC poses a threat to the collective ASEAN. The ASEAN has always developed this ambivalence towards China. As an emerging economic giant, China provides many market opportunities for its neighboring countries. It is high time that the Southeast Asian countries revived their economy especially after the Asian Financial Crisis in the late 1990s. At the same time China can also check the possible aggression of Japan in the region. Still, China will exert its pressure on territorial claims in the South China Sea and attempt to dominate the political arena. The South China Sea dispute is a flashpoint in the Asia-Pacific region. Since the 1970s, disputes over the territorial waters between the PRC and Brunei, Malaysia, Vietnam and the Philippines, have made the relations between China and the ASEAN tense. The Manila Declaration of 1992 led to a temporary agreement on the South China Sea dispute. It urges ‘all parties concerned to exercise restraint in order to create a positive climate for the eventual resolution all disputes’ and emphasises ‘the necessity to resolve all sovereignty and jurisdictional issues about the South China Sea by peaceful means, without resort to force’.2 China at the same time declares that it ‘has maintained a highly restrained, responsible and constructive attitude on the

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issue of the South China Sea, adhering to friendly consultations in resolving disputes with the countries concerned’.3 The SinoASEAN relations are to some extent in a deadlock over the South China Sea issue. Moreover, there is more than one issue between the ASEAN and China. It involves the vested interest, sphere of influence, and rights of navigation claimed by the Great Powers. Most of the parties concerned, namely, China, India, Japan, North and South Korea, and the United States, are the members of the ARF. With the exception of China, all countries in the world would like to see the South China Sea turn into an international water. Therefore, rather than being a dispute between China and the ASEAN; it is one between China and the ASEAN supported by the Great Powers concerned. The ARF becomes a political arena for wrestling power. Six approaches4 for sustaining the dialogue between the ASEAN and China have been presented by various parties for consideration but none was accepted unanimously. While the ASEAN states subjectively hope to regionalise/internationalise the issue, China tries its best to subregionalise it in the hope that it will become more manageable. Regionalisation or internationalisation of the South China Sea dispute would help the ASEAN gain more political momentum and support any defense against China’s claim. A concerted force may compel China to negotiate with the claimants one by one on a subregional basis. However, the competence of the ASEAN to settle disputes with China is questionable. 5 Solidarity among the ASEAN member states is established on mutual understanding, mutual trust, and mutual compromise, assuming the conflicts among them are minor. Major political issues like the South China Sea dispute have usually stopped at the Elaboration of Approaches to Conflicts stage even if they have the chances

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to go through the earlier stages of CBMs and Preventive Diplomacy. A possible outcome is that the ASEAN may let external powers intervene so that it can fish in troubled waters. However, China is very firm on the territorial issue. While agreeing that the issue should be resolved by peaceful means, China has not conceded an inch of territorial water to neighboring countries. Foreseeing the dispute will be internationalised by the ASEAN, China has separated the issue into three components: (1) the waters can be internationalised for navigation in order to safeguard the Great Powers’ interests and needs for communication and transportation; (2) the potential oil reserve in the South China Sea, if

founded, can be mutually exploited and developed in cooperation with the neighboring countries so that the need of the claimants for scarce natural resources can be met; and (3) sovereignty is nonnegotiable as far as China’s military forces can manage to maintain. The centrifugal effect of the major powers from the ARF make the centripetal effect of the ASEAN more shaky. On the one hand, it seems that the external pressure forces the ASEAN to become more consolidated. On the other hand, the continuous fragmentation will lead to the disintegration of the ARF and further endanger the endurance of the ASEAN as a whole.6

NOTES 1. 2. 3. 4.

5.

6.

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Subregionalisation or regionalisation refers to ‘the process that actually builds concrete patterns of transaction within an identified [sub/]regional space’ (Stubbs and Underhill, 2000, p. 72). See ‘Political and Security Cooperation’, retrieved in September 2001, from World Wide Web: http://www.aseansec.org/view.asp?file=/politics/ov_psc.htm See ‘ASEAN Regional Forum: Annual Security Outlook 2000, China, retrieved in September 2001, from World Wide Web: http://www.aseansec.org/view.asp?file=/amm/aso/aso_chi.htm. They are: (1) South China Sea informal annual meetings organised by Indonesia, (2) establishment of an Eminent Persons Group (EPG), (3) third-party mediation, (4) multilateral talks between the ASEAN and China, (5) two-step approach — bilateral-first and multilateralsecond negotiations, and (6) establishment of Joint Resource Development Authority. See The United States Institute of Peace, ‘Special Report: The South China Sea Dispute: Prospects for Preventive Diplomacy’, retrieved in September 2001, from World Wide Web: http://www.usip.org/ oc/sr/snyder/South_China_Seal.html As Acharya remarks: ‘ASEAN’s ability to handle what is essentially an extra-mural conflict may not only fail (although it might have a moderating effect on the conflict), but the [South China Sea] dispute may severely test intra-ASEAN solidarity, including its ability to offer a common position vis-à-vis external powers’ (2000, p. 5). Some international politics scholars use a label ‘fragmegration’ to describe a situation in which ‘the clash between that world [populated by authorities free from the domestic and international constraints and responsibilities of governments] and the world of sovereign states has produced integrative and fragmenting dynamics’ (Earnest and Rosenau, 2000, p. 90).

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Reproduced from The 2nd ASEAN Reader, compiled by Sharon Siddique and Sree Kumar (Singapore: Institute of Southeast Asian Studies, 2003). 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 Northeast Asia and ASEAN: Security Linkages, Implications, and Arrangements 317 < http://bookshop.iseas.edu.sg >

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NORTHEAST ASIA AND ASEAN Security Linkages, Implications, and Arrangements KUSNANTO ANGGORO

THE KOREAN PENINSULA AND THE RELATIONSHIP OF THE MAJOR POWERS It should be no less importance in that the inter-Korean relationship also entered an entirely new phase. Within the Korean Peninsula there is a new atmosphere and movement of the glacier towards a thaw in inter-Korean relations. Faced with the spectre of political isolation and a rapid economic decline in the 1990s, Pyongyang became much more accommodating in its strategy towards Seoul. In September 1991 the two Koreans were admitted to the UN, paving the way for an even more significant inter-Korean reconciliation. Among favourable factors defusing the international tensions around the Korean Peninsula, one notes the rapid full-scale development of relations between Moscow and Seoul, including the development of diplomatic relations, progress in relations between Seoul and Beijing, and the process

of establishing contact between Pyongyang, on one side, and Washington and Tokyo, on the other. Like the Sino-American rapprochement if the early 1970s, the normalisation of Moscow-Seoul relations in 1990 proved to be a major catalyst for a more vigorous inter-Korean dialogue, opening up new pathways to the adoption of the “Agreement on Reconciliation, NonAggression, Exchanges, and Cooperation between South and North Korea” in October 1991. The agreement testifies, among other things, to the fact that Pyongyang recognises Seoul as the party with which it would work together in transforming the current state of armistice into permanent peace. Both sides also formed a joint nuclear control committee (JNCC) on March 1992 to settle their differences over mutual military inspections to verify the non-existence of nuclear arms and discuss the arms control between the two countries.

Reprinted in abridged form from Kusnanto Anggoro, “Northeast Asia and ASEAN: Security Linkages, Implications and Arrangements”, in The Role of Security and Economic Cooperation Structures in the Asia Pacific Region: Indonesian and Australian Views, edited by Hadi Soesastro and Anthony Bergin (Jakarta: Centre for Strategic and International Studies, 1996), pp. 66–77, by permission of the publisher.

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Despite all these developments, however, one should not underestimate the objective and subjective difficulties that lie in the way of unification in the nearest future. The diminution of Russia’s nuclear umbrella, for example, seemed to have strengthened the determination of the North Korean leadership to go nuclear as a matter of necessity. Both South and North Korea have been developing their missile capabilities, although they took different routes for that goal. Benefited from a security patron who deployed advanced missile in and around the Korean Peninsula, the South Korean could concentrate on developing industrial and commercial capabilities in missile-related high-technology sectors, including space and aerospace industries. In the North, missile programme is faced with absolute limitation by various constraints, including the primitive technology and lack of funds. In the light of strengthening American commitment to the South as well as the South’s military modernisation programme, a nuclear weapon programme is the most cost effective nuclear deterrence and “strategic equalizer” in its competition with the south and, even if technologically unsuccessful, to present a nuclear ambiguity. As its leverage in Moscow and Beijing has considerably weakened, what Pyongyang still possesses now is at best a certain measure of geopolitical leverage in the form of nuisance value by showing its unreliability and unpredictability. The euphoria of 1990–1992 engendered by Beijing-Seoul and Moscow-Seoul normalisation was greatly overshadowed, if not completely belied, by the Korean nuclear crisis in 1993–1994. Rounds of negotiation revealed that many contradictions in the positions of each side remain and that timeconsuming and painstaking efforts are needed to remove them. In Geneva, the United States and North Korea agreed on 21 October 1994 to resolve the nuclear

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issue. This is a remarkable step forward to build a peace and stability in the region. The implementation of the WashingtonPyongyang nuclear deals, however, seems to linger on for some reasons. First, the Geneva deal itself is still very fragile. Under the terms of the agreement, for example, North Korea would freeze its nuclear programme and open its sites to international inspection and will reopen an intra-Korean dialogue. In returns Washington would organised a consortium including South Korean and Japan to supply the North with two light-water reactors, a technology less susceptible to diversion for bomb-making. The prerequisite for these all Washington’s concession is that Pyongyang should resume to the intra-Korean dialogue. The inspection would, however, only occur once one of the reactors is in place, a process that could take at least five years. Second, mutual distrust of the inter-Korean relations still posit another squabble. When Seoul proposed a resumption of the inter-Korean talks, for example, Pyongyang rejected the proposal as “an anti-unification and antinational crime”. Earlier expectation that the deals would initiate the improvement of Japan-North Korean relations seems unfounded. The normalisation talks drag on because of some issues, such as a substantial gap between the two concerning the scope and nature of compensation to be made by Japan. Another complication stems from the external powers that seems to share immediate policy goals of sustaining peace and stability but have no clear motives to promote the Korean unification. China was interested only in revising the Asian security order into a hierarchical system with itself predominant rather than maintaining a regional status quo where it would be forced to share power with others. For one thing, Beijing considered South Korea to be a key player in the implementation of Beijing’s coastal development strategy. For another,

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Beijing may look upon South Korea as a potential ally against Japanese hegemony, as a political gambit to increase Taiwan’s diplomatic isolation, and, last but not least, to giving more leverage to defuse the mounting “super 301” pressure from the United States on unfair trade practice. Therefore it is not likely that Beijing is willing to deliberate on certain issue, such as the Korean Peninsula. China seems more committed to maintaining stability on the Korean Peninsula than to the long-term objective of denuclearising the Korean Peninsula. Beijing seems determined enough not to have another socialist regime collapsing on its vital northern strategic backyard, with the ominous implications that would have for its domestic and regional stability. It has extended qualified support for UN efforts to dissuade North Korea from leaving the NPT but would not openly affiliate with the West in coercing Pyongyang into future compliance with that regime by supporting sanctions as an enforcing mechanism. A nuclear-armed North Korea may well bring Japan into the nuclear weapons club as she has all the components necessary to build nuclear weapons; and this would have a serious impact upon the possible escalation of SinoJapanese arms race. The same logic applies to Russia. Promise of economic cooperation with one of the four East Asian tigers was a major determinant in the Moscow-Seoul thaw. While in the short term Russia will decrease its interest in supporting North Korea’s position, it would in the longer term try to keep leverage on the two Koreans. Viewed from ASEAN, this state of fluidity creates loosening of tension and begets hope that emanates from a more benign international setting. However, it also raises images of uncertainty and instability. Uncertainties include the political succession in China that may heighten a continuing buildup of tension in China between liberal

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economic reform and ideological rigidity of an authoritarian political system and may inevitably complicate the relations between the Chinese and the Taiwanese. Stagnation of political and electoral reform in Japan is another question. It could determine the direction and substance of Japan-American security cooperation. Still, the instability of the inter-Korean relations might to this squabble. For the process of gradual rapprochement in the Korean Peninsula is definitely one factor that in part subject to the process and success of authority-making and legitimacy-building of Kim Yong-il.

ZOPFAN AND NUCLEAR PROLIFERATION That the strategic development in the Northeast Asia should impact on the Southeast Asian subregion should not come as a surprise. Alongside the unresolved problem of the Northern Territories, developments in the Korean Peninsula will determine how and when ASEAN’s spirit on multilateral security cooperation would materialise. Their security implications for ASEAN may come into two forms, ideological (that is related in some way with the ASEAN’s spirit) and practical which is the case with a great deal of relevance with ASEAN diplomacy in some issues. Basically, this may be understood into at least two interrelated phases: one is to arrange a peace settlement in the Korean Peninsula, and the other is to find ways toward a peaceful transition from bipolar to multipolar security system. Included to the bracket of ideology is ASEAN relations with external powers. ASEAN has been relying on a regional order based on ZOPFAN, and the Treaty of Amity as its legal instrument, and the SEANWFZ as a security sequence to the idea. The idea of ZOPFAN, as laid down in the Kuala Lumpur Declaration of 1971, and developed further in the ASEAN Concord and Treaty of Amity

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and Cooperation at the first ASEAN Summit in Bali in 1976, contains several elements, among other things is the structuring of relations between the ASEAN countries and the major powers based on the latter’s recognition of Southeast Asia’s regional order in which there is no hegemony of any one of the major powers. In the face of an uncertain strategic environment, there is the danger that differing strategic perspectives that had been submerged in favour of an ASEAN united stand against Vietnam’s invasion of Kampuchea may affect ASEAN cohesion. In the more practical level of analysis is the problem of the uncertain transition from bipolar to multipolar system. The Korean Peninsula is one of the three hot spots facing Southeast Asia, alongside with Taiwan and South China Sea. Armed conflict between the North and the South, should this happen, may not be limited to the United States and South Korea but cold possibly draw in Japan as support base to the American forces deployed in or projected to the peninsula. Even if such conflict could be limited to conventional arms, the sounds of the war would surely reverberate throughout the region. Perhaps the issue of greatest importance for Southeast Asia on the Korean Peninsula is that of nuclear proliferation. Proliferation in the Northeast Asia can have three types of security implications. First, there are both regional and extraregional threat perceptions leading to security dilemmas and these could generate arms race in both conventional and nonconventional weapons. Second, it may reduce the role of extraregional actors, such as the United States, to maintain relationships or to cooperate effectively on measures that contribute to regional security. Third, it

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could involve escalating costs eventually leading to bankruptcy and crisis instability. For the entire Asia Pacific region the reduction of nuclear and conventional armament will take a long time. One should remember that the global nuclear NPT has failed to contained nuclear proliferation in Northeast Asia. Of the six powers present in the region, three (the United States, Russia, and China) are already heavily armed with nuclear weapons. A nuclear armed Korean Peninsula would encourage deep concerns in Japan about its own nuclear vulnerability. China would view these developments with great alarm and would modernise and expand its existing nuclear arsenal. The Chinese nuclear modernisation and the Japanese acquisition of nuclear weapons might cause Taiwan to move towards nuclear development. This will destabilise the region dramatically and will arouse responses that will become an arms race without limits. In the next Summit of December, ASEAN is to sign the SEANWFZ, but the idea of nuclear free zone cannot be obtained if directed only towards the Southeast Asian sub-region, and nuclear development in the Northeast Asia would hamper a serious attempt at nuclear disarmament. Yet, the direct American-North Korean talks might be seen as an indication that Pyongyang gained international standing by being ambiguous about its efforts to develop nuclear weapons. Questions that are brought to mind in such circumstance include the danger that competitive arms build-ups of North Pacific will leak across into Southeast Asia. Added to this conundrum is the fact that China has stepped up its military presence in the South China Sea, its naval predominance will have a relatively large influence in the region.

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ASIA-PACIFIC SECURITY Strategic Trends and Military Developments

DEREK DA CUNHA

THE EVOLVING STRATEGIC SITUATION IN NORTHEAST ASIA North Korea The Korean peninsula remains the key focus of any assessment of security threats in the Asia-Pacific region simply because the peninsula remains one of the most militarized places in the world. Along its side of the 38th parallel, North Korea deploys the world’s largest commando force of more than 80,000 men at the van of a one-million-strong army and enormous concentrations of artillery well within range of many targets across the demilitarized zone, 1 including Seoul (where about a quarter of South Korea’s population is located). The prospects for conflict on the peninsula have tended to ebb and flow in recent times as a result of a combination of factors. These have included North Korea’s severe and chronic famine; the North’s sharp economic decline and the attendant realization by the Pyongyang regime that as

each year passes, and its weapons systems continue to degrade for lack of spare parts and maintenance, the conventional military balance on the peninsula continues to shift in favour of the South. As the conventional balance shifts, North Korea could well lean more heavily on its arsenal of weapons of mass destruction, including chemical weapons — the sort of weapons, the use of which would be abhorrent to the public conscience and a violation of the most fundamental norms and principles of humanitarian law. In its past conduct, however, the North Korean regime has shown itself oblivious to both the public conscience and humanitarian law. It is unclear how the onset of the financial crisis in South Korea in late 1997 and throughout 1998 would have affected North Korean calculations of the military balance on the peninsula. On the one hand, because of the crisis, the economic gap between the two Koreas had narrowed somewhat, albeit momentarily. As such,

Reprinted in abridged form from Derek da Cunha, “Asia-Pacific Security: Strategic Trends and Military Developments”, in Southeast Asian Perspectives on Security, edited by Derek da Cunha (Singapore: Institute of Southeast Asian Studies, 2000), pp. 20–34, by permission of the author and the publisher.

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North Korea might well have felt less insecure. It could have considered less pressing any desire it might have had previously to initiate some kind of military action to forestall a widening of the already significant economic and military lead South Korea possessed over it. In other words, paradoxically, the financial crisis that set-in in late 1997 might well have had an indirect stabilizing effect on the Korean peninsula. Putting aside the security implications of the Asian economic crisis, a crisis which now no longer obtains, from the standpoint of June 2000 and the summit between North and South Korean leaders in Pyongyang, it appears that conflict on the peninsula is somewhat remote, though the situation could so easily change due to the unpredictable nature of the North Korean regime. Whatever the scenario, the longer term outlook for the Korean peninsula is unification of some sort between the two Koreas. This could result in a substantial drawdown of U.S. troops from both Korea and Japan. Such a drawdown would ultimately erode stability in Northeast Asia and the wider Asia-Pacific region. Japan If the Korean peninsula is a more immediate security issue in Northeast Asia, uncertainty over the direction of Japanese strategic policy appears to be a potentially longer term issue of concern. In recent times there has been a perception of gradual policy changes affecting Japan’s strategic outlook — the sort of changes that could well prefigure a more assertive Japan in the future.2 Some of the changes that could well see a significant increase in Japanese military capabilities include Japan’s establishment of a Defence Intelligence Headquarters in January 1997 to co-ordinate all defence-related intelligence activities, 3 suggesting a greater

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reliance by Japan on its own intelligence capabilities and, inversely, less on those of the United States. Yet another change has involved the guidelines to the U.S.-Japan Security Treaty; this could well see an enhanced role for Japan in the alliance relationship.4 Japanese statements about security issues have also witnessed a recent modification in tone. Previously, such statements spoke about the key concern of the Korean peninsula and then made reference to “other contingencies” — the phrase “other contingencies” was interpreted widely as an allusion to China. Now, however, the Japanese are more explicit, less coy, in their references to China. This has clearly been seen in the more recent White Papers on Defence put out by the Japanese Defense Agency.5 If the Japanese are now less constrained in articulating their concerns about China, they are equally less constrained when it comes to expressions of neo-nationalism. These expressions have been most vividly exemplified in the increasing number of Japanese politicians openly paying homage at the Yasukuni Shrine to Japan’s war dead, which include Class A criminals from World War II.6 While subtle and not-so-subtle changes to Japanese policies and attitudes might add up to merely piecemeal and fragmentary evidence of a Japan appearing to move in a certain direction,7 other evidence might seem more compelling. Here, the issue is not one of change, but rather a lack of it. This is illustrated in the Japanese SelfDefense Forces’ weapons programmes and the legacy left by the Cold War. The Japanese Maritime Self-Defense Force (JMSDF), for example, continues a warshipbuilding programme that will see the induction into the fleet of more formidable Kongo-class destroyers equipped with the Aegis area defence system. This building programme was conceived during the height of the Cold War, essentially for

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contingencies against the Soviet Pacific Fleet. The continuation of this programme is significant. Indeed, it is as well to note that the Japanese navy deploys one of the largest fleets of major surface combatants in the world (just second to the U.S. Navy).8 During the Cold War that fleet was tasked, among other things, with the responsibility of establishing an anti-submarine warfare and air defence screen, covering the advance towards the Soviet coast of U.S. fleet striking carrier battlegroups. With the Soviet threat no more, the Japanese fleet has lost one of the key purposes of its existence. Yet, it continues to enhance its capabilities (including a plan to acquire specialized intelligence-gathering ships) and this might well be reflective of the Japanese navy staff’s increasing operational aspirations. The bottomline with regard to Japan, is that strategic competition with China could well be conceivable at some point in the foreseeable future.9 This would highlight the possibility of eventual full-scale Japanese rearmament. That rearmament could take place over the next 20 to 30 years, a period which would constitute ample time for Japan to shake off the yoke of the pacifist sentiment that currently is so firmly entrenched in its body politic. The question that then arises is what would Japanese rearmament actually look like. The acquisition of nuclear weapons, ballistic missiles, and long-range bombers would, in short, represent the key elements of Japanese rearmament. The Japanese have stockpiled sufficient plutonium to develop nuclear weapons,10 and they have civilian rocket and aerospace programmes that could, with relative ease, be converted to the production of ballistic missiles and longrange bombers that, in a 7-year crash programme, they could field in strength.11 A rearmed Japan, if it does become a reality (and this is still very uncertain), would likely be a consequence of two key developments: a unified Korea (mentioned

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earlier) and Japanese perceptions that the locus of power in the Asia-Pacific had shifted decisively away from the United States to China. It would seem then that the central issue is one of power — or, to be more precise, the exercise of power as founded on classical raison d’êtat, and how such an exercise can have causal effects of immense strategic magnitude. China The steady accretion of economic and military power by China represents one of the key defining features of the contemporary world. In 50 years’ time, it is likely that China would be in the full plenitude of its power, and there is a confection of theories as to how Chinese power will impact upon the rest of the AsiaPacific.12 One such theory is touched upon in the foregoing, that is, a possible response by Japan and the spawning of Sino- Japanese strategic competition. Another theory has it that China will change internally politically, becoming a more democratic country and integrating itself irreversibly into the international state system as a status quo power and as a force for peace and stability. But rather than gaze into the opacity of the distant future by enumerating theories, it might be more fruitful to analyse the near future based on recent developments and current trends in the military sphere. The Chinese military exercises in and around the Taiwan Strait in March 1996 were probably one of the most significant security-related developments to take place in the Asia-Pacific in recent times, and for a number of reasons. First, the exercises were an egregious aspect of Chinese military demarche in relation to Taiwan.13 Second, they followed by just a year the Chinese encroachment on the Philippine-claimed Mischief Reef in the Spratly Islands. And, third, the exercises revealed, in the starkest possible way, the extent of the People’s

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Liberation Army’s (PLA’s) deficiencies in a whole gamut of operations. It would be appropriate to deal first with the initial two points by quoting a Malaysian analyst, who has said that in its diplomacy, particularly in relation to the South China Sea, China has engaged in what he calls a “three-steps-forward, two-steps-back strategy”.14 What he apparently means is that Beijing would, for example, advance into the South China Sea — such as it did onto Mischief Reef — and then, when there is a regional outcry, would appear conciliatory, that is to say, take two steps back, but without relinquishing the gains it made in its advance. If one accepts that particular theory then it would appear that in the immediate period following the discovery of the Chinese incursion onto Mischief Reef, Beijing had moved into the two-steps-back phase. This perhaps would seem to be illustrated by two events in 1997: in the first, the Chinese showed their conciliatory side by agreeing to co-chair with the Philippines, and in Beijing, an intersessional meeting of the ASEAN Regional Forum on Confidence Building Measures. This was an inspired move by China, even if the meeting itself had more than its fair share of problems. Secondly, during the sporadic episodes over the Diaoyutai/Senkakus earlier in the same year, the Chinese demonstrated admirable restraint in the face of what they saw as provocative expressions of Japanese nationalism. These aspects of responsible behaviour by Beijing did not appear emblematic of future Chinese conduct. This is because in late 1998, the Chinese renewed their assertiveness in the South China Sea by turning their “fishermen’s huts” on Mischief Reef into full-fledged fortifications. The Chinese had waited for the region to lower its guard — preoccupied as the Southeast Asian states were with the regional financial crisis — before making a further tactical move in the South China Sea.

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We now come to the third reason why the PLA exercises in March 1996 were significant — the deficiencies they revealed. Slowly but surely, the truth about the performance of PLA units during those exercises has been coming out into the open. Almost everything that could go wrong during the exercises did. For example, due to a communications lag, the PLA could only manoeuvre about 10 per cent of the approximately 150,000 troops it had deployed.15 More stark perhaps was the PLA’s inability to coordinate aircraft, warships and ground forces in combined arms operations. 16 This was particularly apparent during bad weather, which led to almost a complete halt in the PLA’s air operational activity. The only aspect of the PLA exercises which went off without apparent problems was the launching of the Scud-type M-9 missiles, which hit their designated target-areas — symbolically, at the entrances/exits to the Taiwan Strait. PLA deficiencies are one reason, among several, why China has decided to invest billions of dollars to acquire advanced Russian weapons systems, from dieselelectric submarines, to multi-role combat aircraft, 17 to high-altitude air defence systems,18 and so on. It is clear that Russian weaponry is making a material difference to Chinese military capabilities. However, the kinds of Russian weapons systems and quantities being delivered to China are not in themselves sufficient to have a significant impact on the regional balance of power. What would have such an impact is if the Chinese were, for example, to acquire between 80 and 100 Tu-26 Backfire bombers (about two air regiments) from the Russians. The maritime version of that formidable medium-range strike aircraft had been conceived by the Russians during the Cold War as one of their principal weapons systems intended to range out of the Russian landmass and strike at US carrier battlegroups. If Beijing were to

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acquire 80–100 Tu-26 Backfires, that would vastly magnify Chinese conventional military capabilities and have an appreciable effect on the regional balance — that is, if those capabilities are matched directly against the capabilities of the key regional balancer, the United States. United States The deployment to the East China Sea in March 1996 of two U.S. battlegroups led by the aircraft carriers Independence and Nimitz was possibly the most significant U.S. military move in the region in a decade. It was also an event at once momentous and deceptive. That deployment was hailed by some observers as the United States providing a deterrent to the Chinese in relation to Taiwan. This writer would take a different view. The fact of the matter is that it had already been agreed at the highest levels of the American and Chinese governments that no untoward incident would occur during that deployment. Therefore, to describe the events in and around the Taiwan Strait in March 1996 as a classic example of Peking Opera,19 would not in fact be too far off the mark. The real objective of the American deployment, rather than intending to deter the Chinese, was to retrieve American credibility in the Asia-Pacific, which had suffered some erosion through Washington’s relative neglect of the region over the previous years. Washington’s credibility has indeed been retrieved, but there is a caveat. The fact is that if the Chinese had real intentions of engaging in actual military operations against Taiwan, they would not give any notice, let alone the several months notice to the international community of their planned exercises, and at least the Nimitz carrier battlegroup would not be seen anywhere near the East China Sea — it would still be sailing somewhere in the Arabian Sea. Here, the issue of warning time

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is important, and so too is the issue of the physical presence of forces to provide visibility and, ipso facto, a deterrent effect. But it is not quite clear whether the Americans are having that particular effect. In their rhetorical policy U.S. officials have said that the Chinese were so impressed by the U.S. carrier battlegroup deployment that Beijing had since begun to take countermeasures (such as the deal to acquire formidable Sovremenny class antiship destroyers from Russia — a deal which in fact was negotiated before the Taiwan Strait episode).20 This is a feeble and unconvincing assertion. The most emphatic evidence in counterpoint to that assertion was China agreeing, in late 1996, to allow the U.S. Navy to continue to make port calls to Hong Kong after its reversion to China’s sovereignty on 1 July 1997.21 That Beijing specifically extended to the U.S. Navy rights to call into Hong Kong is very telling. In this writer’s opinion, what it says is that over the medium term, China would not be especially concerned with an American regional military presence, if only to forestall Japanese rearmament, which the Chinese would view with greater alarm.22 Here, Chinese realpolitik calculations of what they consider to be the greater and lesser evil become all too apparent. The question of the U.S. military presence in the Asia-Pacific region is a complex one that would require an essay in its own right rather than the cursory treatment given to it here. However, the key points to note are that: •

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Almost the entire U.S. military presence is hedged up in one corner of the AsiaPacific, in Northeast Asia. By and large that presence has little utility to the rest of the region, simply because it is overwhelmingly ground force and air force in orientation, whereas the regional operating environment is largely maritime in nature. Only a single carrier

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battlegroup, the Independence (some 7,000 personnel) is deployed in Northeast Asia. For a variety of reasons the United States does not want to restructure its regional presence, by redeploying naval units from the Atlantic to the Pacific, so as to make its Asia-Pacific presence more relevant to the operating environment. One reason for this is inter-service rivalry within the U.S. Armed Forces. Another reason is sociological — the very nature of U.S. society, which is still overwhelmingly Atlantic-centred in orientation. American society still looks across the Atlantic to Europe for social and cultural direction. The United States is not about to diminish the significance of Europe simply because of the Asia-Pacific’s economic ascendance. This is not least due to the power of the Eastern Establishment, that concatenation of cultural, economic, and political élites that gravitate around the U.S. East Coast. Such élites are quite happy to enjoy all the trade and investment opportunities that the AsiaPacific has to offer, but when it comes to security, it is largely an ironclad U.S. security guarantee to South Korea and Japan but, as the catchphrase has it, it is “strategic ambiguity” for the rest of the region, including Southeast Asia.

It is for these reasons, among others, that since the mid-1980s there has been a robust military modernization and expansion programme by the ASEAN states, which was temporarily put on hold (by most of the countries, except Singapore and Brunei) during the Asian economic crisis in 1997 and 1998. It would appear that the attitude of the governments of the ASEAN states has been that if the United States does provide assistance in the event of conflict, this would in fact constitute a bonus, but — like any responsible government — they would not be banking on it in the formulation of any of their contingency plans. The Asian economic crisis of 1997–98 was however to result in a shift in the relative influence of the United States vis-àvis the ASEAN states. In short, the U.S. position was considerably strengthened as Washington, through the International Monetary Fund, provided bailout funds to the stricken economies of Thailand and Indonesia. The desire of the ASEAN states to see the United States as a key determinant of their security — defined in the broadest sense — suddenly became more apparent. Whether this will continue to be the case as the ASEAN economies’ recovery from the Asian crisis picks up speed remains to be seen.

NOTES 1. One source has put the strength of the North Korean Special Purposes Forces at 88,000. However, like the rest of the North Korean armed forces, it is likely that the operational readiness of that force is low and continues to decline due to shrinking resources. See, The Military Balance 1999/ 2000 (London: International Institute for Strategic Studies, October 1999), p. 183. 2. William Dawkins, “Japan shoulders arms for Asian stability”, Financial Times, 10 June 1997, p. 7; and, Ralph A. Cossa, “In defense of Japan’s new regional role”, Asia Times, 16 January 1997, p. 7. 3. See “Tokyo to set up giant military spy agency”, Straits Times, 24 May 1996, p. 22; “Japan to set up military intelligence agency next month”, Straits Times, 2 December 1996, p. 2; “Japan’s Defence Agency opens its biggest spy organization”, Straits Times, 21 January 1997, p. 18; and, “Tokyo ‘to beef up regional military intelligence’ ”, Straits Times, 13 August 1997, p. 16.

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4. See, variously, Nigel Holloway and Sebastian Moffett, “Cracks in the armour”, Far Eastern Economic Review, 2 May 1996, pp. 14–16; “US ‘yes’ to defence guidelines under Tokyo charter”, Sunday Times, 5 May 1996, p. 1; “US-Japan defence pact won’t specify areas covered”, Straits Times, 5 September 1997, p. 26; and, “US and Japan seek backing on security”, Straits Times, 24 September 1997, p. 17. 5. Kwan Weng Kin, “China a more serious threat than Russia, says Japan”, Straits Times, 20 July 1996, p. 3. 6. See “8 Japan Cabinet members visit war shrine”, Straits Times, 16 August 1997, p. 22; and, “Japan war shrine visit shows right-wing’s rise”, Straits Times, 25 April 1997, p. 32. 7. “Japan’s defense agency tests the waters”, Asia Times, 31 January 1997, p. 7. 8. Prospective cuts to the Japanese Defence Agency’s budget for new weapons systems for the fiveyear period ending March 2001 will see earlier plans for 8 “escort” ships (that is, destroyers) being axed. This, however, will not significantly affect the JMSDF surface fleet’s numerical strength. (See “Japan to spend much less on weapons systems”, Straits Times, 8 August 1997, p. 24) Also, relative to the U.S. Navy, for example, the JMSDF surface fleet is maintained at a higher state of operational readiness. It would be able to put a higher percentage of vessels at sea at a moment’s notice than that of the U.S. Navy’s destroyer force. 9. François Godement, “Weighing up the conflict factor between China and Japan”, Asia Times, 10 June 1997, p. 8. See also Derek da Cunha, “Strain Ahead Between China and Japan”, International Herald Tribune, 21 July 1993, p. 3. 10. The ability of Japan to use its plutonium stockpile to produce nuclear weapons is examined in the essay by Jinzaburo Takagi, “Japan’s Plutonium Program: A Critical review”, in Japan’s Nuclear Future: The Plutonium Debate and East Asian Security, edited by Selig S. Harrison (Washington, D.C.: The Carnegie Endowment for International Peace, 1996), pp. 69–85. 11. For observations on the ability of the Japanese to switch with relative ease from civilian to military production see Derek da Cunha, “Japan pushes hard to beef up its military intelligence”, Straits Times, 4 July 1996, p. 44. For a more detailed and historical elaboration of the point, see Richard J. Samuels, “Rich Nation Strong Army”: National Security and the Technological Transformation of Japan (Ithaca and London: Cornell University Press, 1994). 12. For a Southeast Asian view of China, see Derek da Cunha, “Southeast Asian Perceptions of China’s Future Security Role in its ‘Backyard’ ”, in China’s Shadow, Regional Perspectives on Chinese Foreign Policy and Military Development, ed. Jonathan D. Pollack and Richard H. Yang (Santa Monica, CA: Rand, 1998), pp. 115–26. 13. Derek da Cunha, “Lessons from China’s military theatrics”, Straits Times, 27 March 1996, p. 26. 14. That analyst is B. A. Hamzah, who works on maritime issues in Kuala Lumpur. 15. Richard Halloran, “Glitches in the Chinese military machine”, Trends, No. 72 (Singapore: Institute of Southeast Asian Studies, 1996), supplement to the Business Times (Singapore), Weekend Edition, 31 August–1 September 1996, p. 1. 16. Ibid. 17. “Russia sells China licence to build Su-27 fighters”, Sunday Times, 4 February 1996, p. 3; and, “Deal to buy 72 fighter planes from Moscow back on track”, Straits Times, 8 February 1996, p. 18. 18. Dough Tsuruoka, “Moscow sells advanced missiles to anyone with the cash to buy”, Asia Times, 14 December 1995, p. 6. 19. I thank Stuart Harris for this characterization. 20. The announcement in late 1996 that China would acquire two Russian-made Sovremenny-class anti-ship destroyers has been used by U.S. officials as somehow providing evidence of Beijing’s reaction to the U.S. carrier battlegroup deployment. What those U.S. officials conveniently fail to say, however, is that the Chinese and Russians had been negotiating the sale of those destroyers for two years — and more than a year before the Taiwan Strait episode. 21. The first port-call by U.S. Navy warships to Hong Kong after its reversion from British to Chinese sovereignty on 1 July 1997 was made, symbolically, by the U.S. Seventh Fleet flagship, the USS Blue

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Ridge, in company with two escort vessels, USS Patriot and USS Guardian, in early August 1997. (See James Kelly, “Third US ship docks as PLA date set”, Hong Kong Standard, 6 August 1997; and, Wong Wai-Yuk, “PLA takes lunch on US warship”, South China Morning Post, 7 August 1997, p. 5.) 22. See Michael Richardson, “What China doesn’t want with Japan is war (because it might lose)”, International Herald Tribune, 3 October 1996, p. 7. See also “US military presence in Asia in China’s interest, says Perry”, Straits Times, 7 December 1996, p. 2.

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THE INTERRELATIONSHIP BETWEEN GLOBAL AND REGIONAL SECURITY ISSUES SEIZABURO SATO

LOCAL CONFLICTS AND THE SUPERPOWER RIVALRY Among this region’s local conflicts, those having important global implications, as noted, are the North-South confrontation on the Korean peninsula, the Sino-Soviet confrontation, China-Taiwan relations, the conflicts surrounding the Indochina peninsula, and the domestic disturbances in the Philippines. Even though it is not possible to examine each fully in this essay, these local conflicts are unlikely to escalate into a major war involving the United States and the Soviet Union. They have been relatively well contained in the past, and with the exception of the Philippines, the various situations are generally moving toward improvement — although one must admit that permanent solutions may be illusive. On the Korean peninsula, due to the highly successful economic development and military buildup in South Korea, the possibility of North Korea achieving a military victory by surprise attack is decreas-

ing. Further, the progress of political democratization and social liberalization since June 1987, has earned South Korea a greater degree of political stability and more favorable international recognition. While one cannot dismiss the possibility of North Korean sabotage, the 1988 Seoul Olympics promises to be a major success, and it will almost certainly enhance South Korea’s international standing with the Soviet Union, China, and the many other communist nations participating in the event. The fact that bilateral trade has been growing between China and South Korea is yet another factor contributing to the stability of the Korean peninsula. While it is true that military cooperation between North Korea and the Soviet Union has been expanding in recent years, such military assistance remains contained within important limitations. It is unthinkable, moreover, that the Soviets would risk provoking the United States into a military clash for the sake of North Korea, and

Reprinted in abridged form from Seizaburo Sato, “The Interrelationship Between Global and Regional Security Issues for the Pacific-Asian Region”, in Regional Dynamics: Security, Political and Economic Issues in the Asia-Pacific Region, edited by Robert A. Scalapino, Seizaburo Sato, Jusuf Wanandi, and Sung-Joo Han (Jakarta: Centre for Strategic and International Studies, 1990), pp. 1–18, by permission of the publisher.

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North Korea itself does not wish to be induced into a superpower confrontation or military clash. It is also true that recently there have been signs of a growing anti-U.S. nationalism in South Korea, which can be interpreted, in part, as an expression of disapproval of the Chun Doo Hwan administration and also as a protest against the intensifying trade frictions with the United States. As long as Korea’s political democratization makes further advances and the influence of radical antigovernment political movements wane, Korea’s anti-U.S. nationalism is unlikely to reach heights that would inflict serious injuries on existing U.S.-Korea relations, especially given the obvious importance to South Korea of continued U.S. military and economic cooperation. It is also possible that the United States may wish to effect the reduction of its forces stationed in South Korea in line with its overall military budget cuts. If, however, the removal of U.S. forces from South Korea were undertaken in an illprepared manner, it would certainly add to the destabilization of the peninsula. On the other hand, if South Korea can further consolidate its economic gains, continue its military buildup, improve its political stability, and productively cope with the task of relaxing North-South tensions, the reduction or outright removal of U.S. forces should not have negative effects on the peace of the Korean peninsula. The United States, Japan, the Soviet Union, and China have respectively serious stakes in the issue of the North-South confrontation on the Korean peninsula, and therefore the improvement of bilateral relations and tension relaxation among these four major powers will substantially contribute to the stability of the peninsula. In turn, a stabilization of the Korean peninsula will exert positive influence on the future relations among the big four. The scale of the Sino-Soviet confrontation has indeed been extensive but nevertheless

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remains a local conflict in that it exists independently of the superpower rivalry between the United States and the USSR. Both China and the Soviet Union desire to relax existing tensions between them but given the world’s longest common borderlines, the conflicts inherited from past history, and the fact that there is so little economic complementarity, it remains unthinkable that the two countries could soon return to the close alliance of the 1950s. The basic characteristics of Sino-Soviet relations of the future, therefore, are likely to consist of pragmatic diplomatic relations built on deep-rooted distrust and fairly narrowly circumscribed economic and cultural intercourse for a considerable period. On the other hand, China will continue to expand and deepen its relationship with the West but will continue to avoid making an irrevocable commitment to the U.S. side in the superpower rivalry game. China-Taiwan relations remain less predictable. Recently, the Nationalist government of Taiwan has allowed more freedom for its people to come in contact with the mainland Chinese. But, this policy is not the reflection of a change in the Nationalist government’s foreign policy direction in favor of unification with mainland China but rather an expression of Taiwan’s selfconfidence in its economic performance. If the Taiwanese economy manages to maintain its high economic growth while China remains economically stagnant, the growing gap in material accomplishment between the two will make the task of political unification progressively more difficult. Also, the gradual progress of political democratization of Taiwan will inevitably bring about the “Taiwanization” of the present government, providing a new impetus to Taiwan’s de facto independence. While South Korea’s political democratization will contribute to the stabilization of the Korean peninsula, Taiwan’s democratization will push unification

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further away unless China’s decommunization makes simultaneous progress. This will bear potentially dangerous seeds for more tension between them, and the Taiwan problem will long remain a cause for new U.S.-China and Japan-China confrontations. It also remains improbable that the Soviet Union will become involved with Taiwan at the risk of damaging Soviet-China relations, or support China’s military takeover of Taiwan at the risk of provoking the United States. In this sense, therefore, the Taiwan problem will not be directly tied to the superpower rivalry. The conflicts surrounding the Indochina peninsula centering on the Cambodia problem are extremely complex with longstanding backgrounds. Hence, the process of reaching a solution acceptable to all parties concerned is extraordinarily difficult. Furthermore, the ASEAN nations have different interests from one another when it comes to this question, as is well known, and any further spread of the conflict in this area carries with it the potential danger of creating a fissure in the ASEAN nations’ solidarity. Nor is Vietnam looking for the expansion of conflict in Cambodia, because even if it remains confident about its military superiority there, it is confronted by very serious economic problems at home. Also, as with the Korean peninsula, China, the Soviet Union, the United States, and Japan have serious stakes in the Cambodia problem, and therefore the improvement of their mutual relations will make a considerable contribution to the relaxation of tension on the Indochina peninsula. In particular, since the Sino-Vietnam confrontation over Cambodia stands as the most significant roadblock in front of any further improvement in Sino-Soviet relations, one might expect both parties to be interested in relaxing tension in this area. The implication of the internal strife in the Philippines regarding superpower

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rivalry mainly relates to the relative importance of the U.S. military bases in the Philippines, especially that of the Subic naval base. While relatively less important as an operational base in the event of an allout U.S.-Soviet war, its peacetime utility as a means of maintaining the U.S. military presence in Southeast Asia is not negligible, and its role in providing the needed logistic support for securing the safety of the Sea Lines of Communication (SLOC) in peacetime is imperative. Therefore, if the domestic politics of the Philippines should make it difficult for the United States to maintain this base, it would seriously affect the U.S.-Soviet peacetime power balance in this area. As to the local tension in South Asia, as typically represented by the conflict between India and Pakistan, it is extremely difficult to find ultimate solutions, but their relationship with the superpower rivalry is weaker and more indirect when compared to the principal conflicts in East Asia. For countries like Japan and China, the reduction of the Soviet threat constitutes a primary national security task, while for South Korea, Thailand, and other southern Asian nations, the task of resolving their respective local conflicts is paramount. And for the Philippines, Indonesia, and Malaysia, the chief national security task is to strengthen political and economic resilience. These three major security problems are closely interrelated, however. For instance, if the Soviet influence should rise, regional conflicts will become progressively more difficult to contain, and as a result, the NICs’ prosperity and stability will be threatened. The reason why most of the countries in this region can take the Soviet threat as something indirect and of secondary significance is because the military balance between the United States and the Soviet Union in this region is in the former’s favor. The Soviets maintain only a limited military presence. On the other hand, should regional conflicts intensify and

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expand, or the resilience of the region’s nations be weakened, it would surely nurture and strengthen Soviet influence. Local conflicts within this region, however, remain relatively well contained. As long as the deterrent force against the Soviet Union is properly maintained, tension between the United States and the Soviet Union further relaxed, and Soviet military power limited, the chance within the foreseeable future of local conflicts threatening this region’s security is relatively small if not impossible. Since the third requirement of strengthening internal resilience is closely tied to the task of achieving national security in the economic sense, I shall defer further discussion to the next section, and deal exclusively with policy questions regarding the Soviet Union below. Central to our security policy relative to the USSR are the questions of how to prevent the expansion of Soviet influence and how to realize arms control and a relaxation of tension. Typical methods currently proposed for further ensuring effective deterrence are three in number. First is the strengthening of conventional deterrence and raising the nuclear threshold. This approach is appropriate in that it enhances the credibility of deterrence, reduces our fear of nuclear war, and gives us a sense of security. Especially at a time when Gorbachev’s Soviet Union is confronting us with new proposals much more bold and imaginative than in the past, if the West’s security policy continues to rely heavily on the nuclear deterrent, it will enhance the Soviets’ “peace offensive” and help consolidate its influence. But the problem with this approach is that it is costlier than relying more heavily on nuclear deterrence. Therefore, if the conventional force balance is in Russia’s favor as in Europe, the cost of strengthening the conventional deterrent force becomes extremely heavy, making it difficult to secure the needed public support. However, in the

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Pacific-East Asia region, the conventional force balance is tipped the other way, and as long as Japan continues to strengthen its own self-defense capability that adds to the renewed buildup by the U.S. forces since the late 1970s, it will be relatively easy to enhance the credibility of conventional force deterrence. Moreover, the U.S. force structure in this region is overtly offensive while the Japanese self-defense force structure is overtly defensive. Given this complementarity, close cooperation between the United States and Japan in jointly strengthening their conventional deterrence against the Soviet Union carries a special significance. The second method of deterring the Soviets is the establishment of a link between theaters. If and when the Soviets commence military actions in a given region, this method would make it possible to launch attacks on them in other regions. If the deterrent system in each region is well organized, such intertheater linkage will undeniably enhance the reliability of deterrence. However, there is a real possibility that this strategy will arouse concern among the nations in a region (such as East Asia), which is least likely to be exposed to the Soviets’ first attack. Especially in Japan, where people tend to regard the intensification of U.S.-Soviet confrontation as a greater threat than the Soviet Union itself, rejection of the horizontal escalation strategy is a virtual certainty. Adding to the Japanese concern is the fact that there are no buffer states between the two nations. Since the Sea of Okhotsk constitutes an important element of Russia’s Submarine-Launched Ballistic Missile (SLBM) strategic second-strike capability, any direct clash between the two military giants in this region has a high probability of escalating into a nuclear war. Thus, in East Asia as in Europe, this approach threatens to cause a split between deterrence and reassurance.

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The third method of enhancing the credibility of deterrence is to develop an extended air defense system capable of effectively intercepting a variety of hostile missiles. This is a plan to achieve deterrence by means of lessening the chance of success of the opponent’s attack, especially the first strike. Even though the operational deployment of such an extended air defense system incorporating Strategic Defense Initiative (SDI) is still a long way off, the technological innovations, especially the advances in surveillance technologies, will be useful in enhancing deterrence credibility. The fact that Japan and the United States, the two nations most advanced in high technology, are to work together is going to be a major contributing factor in organizing the extended air defense system. However, in connection with the research and development of this system, as already witnessed in the SDI program, there will be conflicts emerging between both governments and private corporations in the allocation of funds and personnel on the one hand and the title to and utilization of the fruits of the joint efforts on the other. Also, should it require an excessive mobilization of financial and human resources, it will give birth to neglecting conventional deterrence that is at present of dire importance. Japan and the United States are the only two nations in this region seriously considering (or capable of considering) these three methods of deterring the Soviet Union. That Japan and the United States collaborate in augmenting conventional deterrents against the Soviet Union in the Pacific-East Asia region is important not only for their security but also for providing other nations of the region with a safeguard. Thus, the threat of Soviet military forwarddeployment remains severely limited. Further, it carries global significance in that it will restrain the Soviet actions in still other regions (especially Western Europe). More-

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over, this form of deterrence is achievable for Japan without itself becoming a military giant as long as Japan and the United States cooperate closely in building up conventional deterrence that utilize the region’s geostrategic factors and favorable military balance. However, there are not a few hurdles that Japan must overcome, if it intends to make a positive contribution to the region’s conventional deterrence. The first hurdle is to overcome the strong Japanese public opinion against open acceptance of a collective self-defense policy. The second hurdle is the popular fear that such a move would provoke the Soviet Union into a new round in the arms race. The third hurdle is the fear on the part of Japan’s neighbors with regard to the expansion of its military forces. Already, China has repeatedly expressed its apprehensions over the fact that Japan has gone beyond the selfimposed military budget limit of one percent of its GNP. Japan’s strengthening of its conventional force when coupled with the powerful U.S. offensive capability, particularly once the extended air defense system is in place, will be taken by the Soviets as an increased threat, adding to the danger of mounting tension and a renewed arms race. This is one of the major reasons why there are not a few Japanese who oppose an arms buildup and are especially critical of cooperation with the SDI program. The strengthening of deterrence must be undertaken, therefore, while simultaneously negotiating arms limitations and controls together with tension relaxation with the Soviet Union. At a time when the Soviet Union is beginning to show new attitudes on these issues far more positive than in the past, the Western nations would be forced into a disadvantageous position both at home and abroad if they took negative attitudes. But it is also a fact that there are serious limitations on the extent to which tension

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relaxation and arms reduction between the East and the West can be achieved. For even if the reform efforts within the Soviet Union should progress without a major setback, effective reforms will be a very lengthy process, and even then, the reformed Soviet regime will not be similar to our liberal democracy. Therefore, the existing differences between the Eastern and the Western systems, their conflicts, and the U.S.-Soviet superpower rivalry will continue. The total abolition of INF will be realized shortly, but the fifty percent strategic nuclear arms reduction will face many more technical problems making it difficult to go beyond an agreement in principle.

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Reduction of conventional forces and chemical and biological weapons is far more complex and difficult to achieve as the history of negotiation of the so-called Mutual and Balanced Force Reduction (MBFR) indicates. In the Pacific-Asian region especially, there are stubborn ongoing local conflicts not fully related to the East-West confrontation or the superpower rivalry but requiring various countries to maintain considerable military forces to deal with them. Therefore, conventional arms control and reduction are a much more difficult task in this region than it is between the forces of NATO and the Warsaw Pact.

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ASEAN AND MULTILATERAL RELATIONS

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INTRODUCTION

Sree Kumar

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here is a sense that ASEAN is being eclipsed by global events and factors beyond the control of individual member states even when they happen within the region. ASEAN has, in the meantime, been trying to find its centre in its interactions with the multilateral world. In the formative years there was the broader theme of being in the eye of the North-South dialogue. With low-cost labour, large supply of primary resources, and manufacturing capability, the importance of economic relations in a rapidly interdependent world formed the core of such a view. But the world has moved on. ASEAN has had to contend with different levels of multilateral interaction. ASEAN has had to come to terms with the European Union (EU) through the Asia-Europe Meetings (ASEM), with the Pacific region through the Asia-Pacific Economic Co-operation (APEC) forum, with the North American Free Trade Area (NAFTA) and other regional trading arrangements, and a wider security dialogue through the ASEAN Regional Forum (ARF). If there is one word which is anathema to ASEAN, it is the word “integration”. ASEAN leaders have stayed clear of this word and all that it means for fear of being drawn into a path similar to that followed by the EU in its ambitions. ASEAN’s desires have been more

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modest. The hard “integrationist” approach of the EU is not for the region. The preferred approach is a soft one, more in consonance with the ASEAN way of consultation, facilitation and the like. But the ASEAN-EU relationship has been a beneficial but challenging one for both sides. The EU has been an important investor in the region, receiving in return manufactures and key primary products. Along this path ASEAN has had to weather the storms of social dumping, labour rights, minimum wages, environmental concerns, and a litany of complaints from the European “green” politicians and their constituency. The EU who was a latecomer to the ASEAN economies was also the first to depart when the Asian crisis hit. Despite all the best intentions of thinking about a EU relationship, ASEAN has had to learn that Brussels does not have the purse strings to help the region. That has always been the prerogative of the national governments of the EU member states. ASEM, however, is still an important focus with the ARF becoming a wider platform for discussing security concerns. The ARF allows the main actors in Asia, and those with an interest in the region, to actively seek congruence on ideological, political, economic, and territorial challenges. ASEM

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is a strong but less visible pillar that supports the ARF architecture. At a time when economic relations are shifting resulting from the changing technology contours, ASEM, it has been felt, has to become more relevant by deepening the political dialogue, sharing common values, and seeking to create a network of future leaders. On ASEAN’s eastern flank, however, the principles of open regionalism and the increasing importance of APEC shed new light on how ASEAN should participate as a regional body. There was a constant refrain that APEC should be a loosely structured organization without a large and inflexible bureaucracy. This then became a chorus and that is exactly how APEC has been crafted. ASEAN’s role within APEC, and its weight, will depend largely on the trade-off between national interests of member countries and the collective interest, at one level, and the willingness to seek advantages by influencing the policies of other participants by sacrificing some sovereignty, at another. In the ASEAN world this is a tall order, following from the experience of the financial crisis. Of all the free trade areas that have instilled fear in ASEAN, NAFTA is the most commonly pronounced. There have been concerns over investment diversion, trade deflection and diversion, income effects, decline in export competitiveness, and the other such economic miseries. But the track record of the last five years has been a muted one. All economies have suffered from the collapse of the technology bubble; loss of competitiveness is being felt everywhere as the world’s workshop, China, has absorbed investments at a furious pace; and the developed world has discovered the pleasures of outsourcing, with India becoming the darling. Economic malaise compounded by political change has transmuted ASEAN’s concerns from having

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to deal with external events to dealing with problems associated with nationhood and the social fabric. An economically weak Japan and the collapse of the technology industry have left an indelible impression on most of ASEAN’s multilateral initiatives. Japan has been ASEAN’s largest investor and was instrumental in creating a web of intra-firm linkages within the ASEAN economies. A weak Japan has been unable to provide the necessary knitting to support a financially fragile ASEAN of the recent years. With security high on the agenda following the surge of terrorism in more recent times, the ARF has become a more potent symbol of ASEAN’s international engagement. The world of terror has now descended on ASEAN and Indonesia has had to bear the brunt of its fury. If there is an unseen world of ASEAN’s multilateral relationships, it is in the unspoken world of security relations. The fight on terror has a universal theme and ASEAN has become part of that architecture. Meanwhile, there are other preoccupations such as the expansion of membership within ASEAN and its attendant issues. The energies are now focused inwards rather than outwards as was the case in the past. The growing importance of security matters, the sweeping competition from China and India, and the challenge of domestic policy-making are all now taxing ASEAN’s leaders. There is a greater effort at seeking bilateral solutions to critical problems because the “ASEAN way” may not be expedient enough. This is a quandary for the economists who, in their search for a centre, have lost sight of the wider concerns holding ASEAN together. The issue now in the multilateral arena is whether ASEAN has become a solution in search of a problem.

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ASEAN and the North-South Dialogue

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ASEAN AND THE NORTH-SOUTH DIALOGUE

ALI ALATAS

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hat relevance do North-South issues have for ASEAN and what is ASEAN’s stake in the North-South negotiations? I submit that not only has ASEAN a vital stake in them, but it has also a crucial role to play both in the North-South dialogue and in the recovery of the world economy. ASEAN’s direct interest is involved in at least four areas central to the New International Economic Order, namely, primary commodities, international trade, transfer of technology, and money and finance, with a fifth area, energy, being of particular concern to Indonesia. First, let us consider the field of primary commodities and commodity trade. ASEAN’s natural resource endowment is a cornucopia of strategically important commodities and minerals. It is the world’s principal supplier of natural rubber, palm oil, and coconut oil. It is a major producer and exporter of oil and natural gas, tin, tropical timber, coffee, copper, tungsten, sugar, rice, and tobacco.

In the field of international trade ASEAN’s performance is no less spectacular. It enjoys an increasing share of international trade with a steady growth rate averaging 24 percent per annum (in the period 1975– 1980) as compared with a world rate of about 18 percent (in the same period). It has emerged as Japan’s second largest trading partner and the fifth largest trading partner of the United States. Though its trade with the European Economic Community is of a more modest nature, it has exhibited a phenomenal growth rate of over 30 percent per annum between 1975 and 1980. Export trade alone constitutes a significant source of foreign exchange and accounted for 42 percent of ASEAN’s total gross national product in 1980. Turning now to technology, ASEAN’s current vigorous level of development and its surging industrial drive inevitably create essential needs. It requires large quantities of technological imports and capital goods to sustain that development. Apart from

Reprinted in abridged form from Ali Alatas, “North-South Issues and Their Relevance to ASEAN”, in ASEAN Security and Economic Development, edited by Karl D. Jackson and M. Hadi Soesastro (Berkeley, Calif.: Institute of East Asian Studies, University of California, 1984), pp. 10–15, by permission of the author and the Institute of East Asian Studies, University of California.

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access to and availability of technology, the enhancement of indigenous technological capability will henceforth be a crucial determinant not only for ASEAN’s further growth but also for its capacity to grow. Financing and access to financial markets have assumed a central importance for ASEAN. Adequate financing is essential to facilitate rapid industrialization and largescale international trading. Singapore has become a financial center of growing importance for the entire Asian-Pacific region. The need to assure adequate financing flows on a continuous and more predictable basis is paramount to ASEAN’s continued successful growth. Given ASEAN’s heavy stake in each of these vital areas, it should come as no surprise to anyone that the ASEAN countries have assumed an active and highly visible part in the North-South negotiations since their inception. First, because of its concentration on commodities and its predominant position in commodity trade, ASEAN has always fully supported the call for remunerative and equitable price and earnings stabilization arrangements. Thus, ASEAN countries were in the forefront in the negotiations for the Common Fund and for UNCTAD’s Integrated Program for Commodities, including the establishment of new international commodity agreements for individual commodities. Of the ten core commodities of the Integrated Program for Commodities, almost all are of direct importance for ASEAN. At present, ASEAN’s attention is directed to the next area for negotiations, namely, the establishment of new frameworks of cooperation with a view to increasing the participation of developing countries in the processing, marketing, and transport of their commodities. The recent collapse of commodity prices has had a particularly severe impact on the ASEAN economies, and it is obvious that the existing

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international economic relationships continue to operate to the inherent economic disadvantage of the developing countries. Second, the heavy dependence of ASEAN countries on international trade compels it to play a major role in restructuring trade relations. A key issue for ASEAN in world trade is that of access to markets. The current trading system tends to discriminate against imports from developing countries, especially those labor-intensive manufactures, agricultural products, and processed commodities so vital to their further industrialization. Moreover, there has been a marked rise in non-tariff barriers and various new measures of contingent protection. Unlike tariffs, many of these measures fall outside the purview of the General Agreement on Tariffs and Trade system. Their application and implications are very much dependent on the unilateral interpretation of the importing country or on bilateral arrangements between the affected parties. They appear to be directed mainly against a small number of dynamic exporting developing countries, and the ASEAN countries, due to their success in industrialization, have absorbed the full impact of such protectionism. ASEAN, therefore, has vigorously called for the redress of tariff and non-tariff barriers erected against their manufactures, as well as for better regulation of the more insidious forms of protectionism. Similarly, ASEAN places a strong emphasis on the fashioning of a more equitable and viable monetary and financial system. The dangerous contraction in international liquidity has to be effectively and comprehensively addressed. The growing deficits in the balance of payments of developing countries and the drying up of flows of multilateral concessional and semiconcessional assistance must be reversed. There also exists an objective need to develop a more effective multilateral frame-

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work for the restructuring of the debt burden of developing countries in order to provide an orderly and timely international response to the emergence of serious debt crises. It is undeniable that the ASEAN region has become a dynamic element in the international economy. Economically, it is one of the fastest growing regions of the world. Despite the current recession, it has shown its resilience by maintaining an average real growth rate of about 7 percent per annum over the last decade. In short, it has the resources, potential, and political will to sustain its present momentum for rapid economic development. But in the world in which we live today, sustained economic progress at the national level can be made only if it can be assured at the global level as well. As Albert Bressand rightly pointed out in the spring 1983 issue of Foreign Affairs magazine, the world economy can no longer be defined as and limited to the interaction of national economies. Rather, it is now the national economies that can be seen as the extension of a global and integrated system, with a logic and dynamics of their own.

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This explains why the ASEAN countries, even with their proven capacity and determination to forge ahead under adverse conditions, have a vital stake in and indeed must contribute actively to the solution of North-South issues in order to secure a global environment conducive to its continued progress. I would like to stress that while ASEAN has always been vocal and firm in its support of the New International Economic Order, its approach has always been a rational one. We do not seek a zero-sum outcome in the North-South negotiations but a global economic order of mutual and equitable benefit to all countries. While our position is inseparable from that of the Group of 77, we believe that because of particular strengths, traditions, and temperaments we can and should play a substantial, constructive, and moderating role, both within our own group as well as vis-à-vis the countries of the North. We are determined to continue to play that role in our own enlightened self-interest as well as, we would hope, in the interest of greater stability, security, and progress for the region and for the world.

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69.

THE PARALLEL TRACKS OF ASIAN MULTILATERALISM

SHELDON W. SIMON

A

s the Asia-Pacific region approaches a new millennium, regional international relations are moving away from Washingtoncentered bilateralism to a more diffuse multilateral structure. This new structure consists of both economic and politicalsecurity components, which currently run along separate tracks. The structure is quite comprehensive in that almost all Asia-Pacific states are involved, although it is not completely inclusive. For example, Russia, North Korea, the Indochinese states, and Burma (Myanmar) in early 1996 are not yet members of economic regional groups. Nor are North Korea, Burma, and Taiwan members of the new regional security gathering. (In all probability, however, Burma, Vietnam, Laos, and Cambodia will join both types of Asia-Pacific organizations by the turn of the century.) Economic regionalism in the Asia-Pacific region, in contrast to Europe, has been driven by market forces rather than politics. The European Union (EU) evolved over a thirty-five-year period through top-down

political decisions. Economies were linked through negotiations among West European governments. In Asia, economic regionalism has been a product of market forces through which capital from Japan, the United States, and Europe has created linkages among Asian economies via transnational corporations and technology transfer. Again, unlike Europe, this marketled regionalism is open to interaction with states outside the Asia-Pacific region on the basis of reciprocity. The European model is rejected in Asia as too rigid, institutionalist, and discriminatory.1 Open economic regionalism in East Asia is partially driven by fears that other regionalisms will be closed. Asian states fear being shut out of the North American Free Trade Agreement (NAFTA) as well as the European Union. They are attracted, rather, to the concept of global free trade embodied in the General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organization (WTO). Asian states have initiated policy con-

Reprinted in abridged form from Sheldon W. Simon, “The Parallel Tracks of Asian Multilateralism”, in Southeast Asian Security in the New Millennium, edited by Richards J. Ellings and Sheldon W. Simon (Armonk, N.Y.: M. E. Sharpe, 1996), pp. 13–33. Copyright © 1996 by The National Bureau of Asian Research. Reprinted with permission of M.E. Sharpe, Inc. and the author.

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sultations among themselves as well as some coordination to establish such common goals as the gradual elimination of trade barriers. They hope to accomplish these tasks through ASEAN (Association of Southeast Asian Nations) Free Trade Area negotiations and Asia-Pacific Economic Cooperation (APEC) forum plans. At this stage, however, no member-state is willing to consider sharing authority with a supranational mechanism that could make binding decisions, as in the EU. One of the most striking features of Asian economic growth has been mutual economic penetration. In the aggregate this has led to remarkable rates of economic growth in the region over the past fifteen years. But it has also led to friction with respect to the distribution of trade benefits, particularly between the United States and Japan and the United States and the newly industrializing economies (NIEs). America has been running large annual deficits with the Asia-Pacific region — currently around $80– $90 billion — since the early 1980s. To ameliorate this financial drain, Washington has pressed its Asian trading partners to open their markets further to U.S. products, in the case of Japan (until autumn 1994) even insisting that some U.S. exports be guaranteed shares of Japan’s market (e.g., government procurement, automobile parts, computer chips). U.S. bilateral negotiations with Japan, China, South Korea, and Thailand in particular have created political tensions that threaten to undermine the generally favorable U.S. relationship with Asia in the post-Cold War period. Despite these frictions, Asia-Pacific economies are of vital importance to the United States. American trade across the Pacific is one-and-a-half times as large its counterpart with Europe. Exports to APEC countries account for 2.6 million jobs in the U.S. economy. Approximately half of all U.S. exports go to Asia, and about 60 percent of U.S. imports come from that region. Thirty

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percent of U.S. overseas investment goes to APEC countries.2 The other parallel track of Asian multilateralism lies in the political-security realm. Although America’s Cold War-originated bilateral security arrangements remain in place, their relevance for such new security concerns as the South China Sea islands disputes, overlapping maritime exclusive economic zones (EEZs), and regional burgeoning arms buildups is now problematic. These issues must be confronted multilaterally. The Clinton administration, unlike its Republican predecessor, has accepted this new reality and is encouraging regional security discussions both as an active participant through membership in the new ASEAN Regional Forum and as a benevolent onlooker in the case of the several Indonesian-sponsored workshops convened to help resolve the Spratly Islands conflict. The important point to emphasize here is that U.S. bilateral security commitments to Japan, South Korea, Thailand, the Philippines, and Australia ensure a sustained U.S. military presence in the western Pacific; however, the uncertainty about conditions that could lead to the use of these forces in a post-Cold War setting has motivated the creation of new multilateral fora to deal with new security concerns. THE DECLINING U.S. POSITION IN THE ASIA-PACIFIC REGION The United States plans to sustain important political-security and economic positions in the western Pacific. However, as a declining hegemon, it can no longer do so either unilaterally or bilaterally. Its allies now share the costs of maintaining forwarddeployed U.S. forces on their soil, with Japan paying virtually all local costs after 1995 and the Republic of Korea (ROK) paying approximately 35 percent of these costs.3

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Since trade drives American foreign policy toward the Pacific Rim in the postCold War era, the U.S. Department of Commerce and the Office of the U.S. Trade Representative seem to take precedence over the departments of both State and Defense. And U.S. economic pressure on Japan to open its markets has been exerted even at the potential cost of weakening the bilateral security relationship. Thus the Clinton administration places the need to protect foreign patents, copyrights, and intellectual property at the top of its foreign policy agenda in dealing with Thailand, Indonesia, China, and South Korea. It also presses for more open markets throughout the region. The United States believes that the Pacific’s economic dynamism is at least partly based on the export emphasis of virtually all its economies. Unlike Europe, so far Asia does not appear to be sliding toward protectionism or inward-looking regionalism. Washington hopes to ensure that this economic openness continues. President Clinton has consciously used the American military presence as a lever to open regional markets further for U.S. products. At the November 1993 APEC meeting in Seattle, he stated: “We do not intend to bear the cost of our military presence in Asia and the burdens of regional leadership only to be shut out of the benefits of growth that stability brings.”4 Thus, under Clinton, the United States has brandished its security role as a good for which improved trade and investment access should be exchanged. Another point of contention between the United States and several of its Asian partners is Washington’s emphasis on human rights as a condition for economic assistance and favorable political relations. Increasingly, U.S. aid is allocated to nongovernmental organizations (NGOs) in recipient countries. Many of these NGOs are in conflict with their governments. In Indonesia, for example, $320,000 was

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recently given to the Indonesian Legal Aid Institute, one of the country’s leading NGOs in the promotion of democratic reform. Such actions, though small in scale and impact, are seen by some as interference in Jakarta’s internal affairs.5 Further complicating this issue is the fact that the U.S. vision of human rights is derived from North American and European histories, which emphasize the rights of the individual vis-à-vis governments. Asian experiences reverse these priorities, insisting that benefits for the collective (society) must come ahead of the individual; and government’s primary responsibility and a basic “human right” must be economic development. Additionally, U.S. efforts to link workers’ rights and environmental issues to trade are challenged in Asia as a form of American protectionism. Better wages and working conditions are seen as a way of raising costs and lowering the competitiveness of Asian products.6 Finally, it should be noted that the ability to use access to the American market as leverage is declining. By the early 1990s, 43 percent of Asia’s exports were sent to other Asian states. Relative dependence on the U.S. market declined from 30 percent in 1986 to only 21 percent in 1991.7 All the more reason for the United States to remember that “get tough” unilateralism will not fit in an era of economic globalization and regional multilateralism. ASEAN: EARLY LINKS ACROSS THE TRACKS Formed in 1967, the Association of Southeast Asian Nations was ostensibly created to promote economic and social ties among five anticommunist Southeast Asian states (Indonesia, Malaysia, Singapore, Thailand, and the Philippines — Brunei joined in 1984 and Vietnam in 1995). The more important, though unstated, purpose for ASEAN’s creation was, however, political

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security. That is, each member, fearful of internal communist subversion possibly backed by Vietnam, China, and the USSR, and concerned that the United States would withdraw from Southeast Asia after the Vietnam War, concluded that their common domestic security could best be obtained through a united front. Over the next several years, that front developed a regional security policy which declared Southeast Asia’s long-term interest in Cold War nonalignment — the Zone of Peace, Freedom, and Neutrality (ZOPFAN) — and insisted that foreign bases (in particular the U.S. bases in the Philippines) were ultimately to be removed. This apparently anti-Western posture was not, in fact, what it appeared to be at first glance. Its primary goal was to preclude either the Soviet Union or China from establishing new bases in Indochina by insisting on ASEAN’s neutrality. Gestures, such as ZOPFAN in the 1970s, were meant to reassure Beijing, Moscow, and Hanoi that the ASEAN states would not serve as a counterrevolutionary base against them. Therefore, there would be no need for these communist victors to subvert ASEAN regimes. By the end of the 1970s ASEAN seemed almost moribund. Although the economies of the Association’s members grew in that decade, the proportion of intra-ASEAN trade to its members’ total trade actually declined. Once again, security concerns revived ASEAN’s fortunes in the 1980s as the group coordinated diplomatic efforts against the Soviet-backed Vietnamese invasion of Cambodia. Leading annual UN condemnations of Vietnam’s actions, ASEAN had achieved a major regional security victory by the end of the decade: (a) Vietnam had withdrawn its forces back to its own territory, abandoning designs for a Hanoi-controlled Indochina; (b) the Soviets were retreating from their forward politicomilitary position in Southeast Asia; and (c)

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both China and the United States had followed ASEAN’s diplomatic lead toward the restoration of an independent Cambodia. By the early 1990s, ASEAN had become Asia’s most successful example of regional cooperation. The path had been prepared for new regional endeavors. APEC AND OPEN REGIONALISM APEC represents the culmination of a process of market-oriented, outward-looking policy reforms that began in the ASEAN economies in the 1980s. These reforms ultimately convinced ASEAN’s most skeptical member — Indonesia — that an Asia-wide economic consultative body had become a necessity. Because the market economies of East Asia are trade-dependent, APEC was launched in 1989 in support of the GATT process of open regionalism — a commitment to nondiscrimination or the offer of most-favored-nation (MFN) treatment to all trade partners either inside or outside APEC who are willing to reciprocate. Thus APEC has been more concerned with the health of global trade than the creation of an East Asian trade bloc.8 Indeed most APEC members, with the exception of the United States, Australia, Singapore, and possibly Indonesia, prefer that the organization confine its activities to discussions of trade and investment liberalization and related topics. There is little sentiment to institutionalize this forum by creating a permanent bureaucracy or allocating decisions on these matters to the membership as a group. Thus APEC has no decision-making capability. Nevertheless it has established ten working groups capped by a distinguished array of well-known economists and other intellectuals drawn from its members. This Eminent Persons Group (EPG) has taken two years to devise a free trade blueprint for the region, a recommendation guaranteed to generate controversy. The ten working groups are less

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controversial. They have already produced useful reports on APEC investment patterns and a tariff data base for all members.9 The United States may have a different agenda for APEC, however. The Clinton administration sees APEC as a vehicle for opening Asian markets. It is thought that if there is a regional commitment to trade liberalization through APEC, then U.S. efforts to deal with bilateral trade imbalances with Japan, China, and Thailand should be eased. However, any special U.S. bilateral trade arrangements may be at the expense of other APEC partners. This occurred in Japan’s negotiations with the United States on both beef, at the expense of Australia, and plywood, at the expense of Indonesia and Malaysia.10 U.S. behavior reinforces the apprehensions of the ASEAN countries that Washington is out to “hijack APEC and turn it into a free trade area dominated by the large economies. Certainly the results of the November 1994 APEC meeting in Jakarta could be read in this light. The meeting ended with a call for regionwide trade and investment liberalization in two phases, with industrial countries eliminating all barriers by 2010, and less-developed states doing so by 2020. The August 1994 EPG Report also took note of potential conflicts between APEC and such subregional arrangements as the ASEAN Free Trade Area (AFTA) and the North American Free Trade Agreement (NAFTA), urging that these latter bodies equalize the preference arrangements they offer members with the larger APEC.11 This is in keeping with APEC’s commitment to

open regionalism: equal benefits to outsiders providing they reciprocate. Parallel recommendations have been made for investment policy through a separate APEC committee report, which requested that members provide nondiscriminatory treatment to foreign investments, that is, that they treat foreign investors the same as domestic investors, This recommendation is also consonant with GATT principles.12 The free trade proposals forwarded by the Eminent Persons Group are interpreted as particularly advantageous to the United States because they call for reciprocity, a procedure the United States has advocated in bilateral negotiations with its Asian trade partners. Reciprocity would require trade partners to open their markets ‘to each other on an equal basis. As U.S. negotiators insist, this would level the playing field. Thai officials, reflecting the concerns of other ASEAN states, have reacted cautiously, however, fearful that equal treatment for foreigners would drive some local industries out of business. Malaysia and the Philippines have openly criticized the EPG proposals, claiming that, if implemented, they would move APEC toward a trade bloc, diminishing ASEAN’s importance within the larger Pacific group.13 Nevertheless, with Indonesian president Soeharto’s support, the free trade timetable could well prevail — even though it may be inconsistent with GATT principles against discrimination and despite Malaysian prime minister Mahathir Mohamed’s objection to APEC’s becoming a trade bloc instead of a “loose forum.”14

NOTES 1. For recent discussions of these distinctions, see Tsuneo Akaha, “Asia-Pacific Regionalism: The Economic Dimension,” a paper prepared for the International Studies Association — West meeting, The University of Washington, Seattle, October 15, 1994; and Richard Higgott, “Introduction: Ideas, Identity and Policy Coordination in the Asia-Pacific,” The Pacific Review, vol. 7, no. 4, 1994, pp. 367–379.

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2. Asahi shimbun (Tokyo), July 8 and November 6, 1993. 3. For an extended assessment of the U.S. position in the Pacific, see Sheldon W. Simon, “U.S. Policy and the Future of Asian-Pacific Security,” The Australian Journal of International Affairs, vol. 47, no. 2, October 1993, pp. 250–262. 4. Quoted by Kyodo News Service (Tokyo), November 19, 1993, in Foreign Broadcast Information Service (hereafter referred to as FBIS), Daily Report: East Asia, November 23, 1993, p. 4. 5. Nigel Holloway, “Seed Money,” Far Eastern Economic Review, August 18, 1994, p. 18. 6. Statement by Foreign Minister S. Jayakumar of Singapore as carried by The Straits Times, July 28, 1994. 7. Sean Randolph’s presentation to The Heritage Foundation’s Asian Studies Center Symposium: The New “Malaise”: Clinton Adrift in Asia, Washington, D.C.: The Heritage Lectures, June 21, 1994, p. 15. 8. Richard A. Wilson, “APEC: The Next Step Toward a New Pacific Community,” CAPA Report No. 12, San Francisco: The Asia Foundation, November 1993. 9. Mohammed Ariff, “The Multilateralization of Pacific-Asia,” a paper prepared for the Fourth Defence Services Asia Conference, Kuala Lumpur, April 21–22, 1994, p. 3. 10. Ibid., p. 11. 11. “APEC Set to Consider Ambitious Plan to Create World’s Most Open Trade Area,” The Asian Wall Street Journal Weekly, August 8, 1994, p. 4. 12. Kyodo News Service, September 10, 1994, in FBIS, Daily Report: East Asia, September 12, 1994, p. 2. 13. The Nation (Bangkok), September 7, 1994, in FBIS, Daily Report: East Asia, September 7, 1994, p. 80; Kyodo News Service, September 21, 1994, in ibid., September 21, 1994, pp. 2–3; and The Bangkok Post, September 24, 1994, in ibid., September 26, 1994, p. 2. 14. The Asian Wall Street Journal Weekly, September 26, 1994, p. 2.

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70.

ASEAN AND THE INTERNATIONAL TRADING SYSTEM

H. S. KARTADJOEMENA

IDENTIFYING STEPS TOWARDS ASEAN REGIONAL INTEGRATION Political considerations led to the persuasive conclusion that intra-ASEAN relations must be reinforced. However, because of ASEAN’s great dependence on the international market, its overall orientation in trade must remain global. As regional efforts are being further encouraged, the ASEAN countries must also operate in the context of two other fora, APEC and the WTO. How can a more consolidated and consistent position be formulated, given these considerations? In the three decades of its existence, ASEAN has taken some important steps to intensify regional co-operation, which have been creditable political achievements in their own right. We have alluded to these accomplishments in the foregoing pages. However, these achievements have largely been in the area of dealing with third parties and in negotiating common positions. They have not included the process of regional integration, as it is conventionally defined.

Even the free trade area in ASEAN has not moved far. The Exception and Exclusion Lists are very long, covering many important areas. Moreover, even if the ASEAN free trade area is fully in place, it does not replace trade with the rest of the world in terms of importance. Given these limited accomplishments, can we visualize an approach to ASEAN regional integration which accepts the primordial importance of the WTO for future ASEAN trade and growth and yet makes use of the advantage of regional integration? In this section, we shall argue for an approach which is appropriate for ASEAN.

Economic Integration: The “Hard” Option There is an ambiguity about the intention of economic integration in ASEAN when one looks at the declarations and statements of ASEAN leaders and officials. The word “integration” has been used so often that the time will come when a decision needs to be made on how far the process of

Reprinted in abridged form from H. S. Kartadjoemena, “ASEAN and the International Trading System: Regional Trade Arrangement vs. the WTO”, in ASEAN Beyond the Regional Crisis: Challenges and Initiatives, edited by Mya Than (Singapore: Institute of Southeast Asian Studies, 2001), pp. 203–42, by permission of the author and the publisher.

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integration is intended to go. If we take the concept as described in the mainstream literature, we are really talking about an extensive process and moving towards a degree of intensity of interdependence which is quite far-reaching. This process has taken place in the European Union. Although members of the EU may have different views about the speed of the process, there is less doubt about where they are heading — a politically and economically unified Europe. It is necessary to know how far ASEAN wishes to go on its part. Widening and Deepening of Substantive Coverage The mainstream “classical” view of regional integration, as developed by Balassa and Scitovsky, has implications beyond trade. Beyond the stage of a free trade area, wide policy measures are required if the process is to be completed as intended. At the stage of a customs union, ASEAN would have to decide on the appropriate level of common external tariffs. Whose tariff levels would it be: the higher tariff levels of Indonesia, the Philippines, Thailand, and other countries, or the lower tariff levels of Singapore which call for the free movement of goods and services, and factors of production? How far and how fast would this process be pushed? Institutional Implications There is also the institutional aspect of economic integration. It calls for a supranational authority to make major economic decisions. In the prevailing literature, it calls for a common policy on a whole array of major economic areas. The European Union has reached that point and beyond. It is questionable whether this is what has been intended when leaders of ASEAN talk about integration. Let us take this exercise of stocktaking the policy and institutional issues a step further. Macroeconomic policies in the

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integrating countries must be compatible, harmonized, and eventually fully unified and attuned to the needs of the region and the realities prevailing in the countries if the objective of integration is to be achieved. Social policies of the individual countries also need to be harmonized. Regional disparities, which have been of concern at the national level, also need to be addressed at the ASEAN level. “Hard” Option and ASEAN If ASEAN follows this path of “hard” integration, the process would have wideranging implications. Those who wish to measure the success or failure of ASEAN in terms of the criteria above would be engaged in judgements which are not appropriate for ASEAN. There is a limit to which the “hard” integration of the European model can be applied. Relying on the ASEAN domestic market as the main thrust for growth is economically unrealistic. Moreover, the European model is predicated on the implicit (now explicit) goal of complete economic and political unification. That has not been the goal of ASEAN. Economic Integration: The “Soft” Option If the “hard” option is not realistic to attain, what is the “soft” option that can be expanded? The fact that “hard” integration cannot be pursued does not mean that “soft” integration cannot take place. The “soft” option centres on institutional questions and trade facilitating measures which are needed in any case, although in themselves they do not lead to the establishment of economic integration as the process is understood by the mainstream literature. The “soft” option can be examined in further detail as we attempt to formulate a consolidated position of ASEAN on the

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subject of economic integration, given the economic and political realities prevailing in the region. They could be put in motion by developing the following initiatives 1. Free Trade Area as the Political Base-line. At the policy level, an ASEAN free trade area could be encouraged, without necessarily expecting the FTA to produce dramatic economic results. Nevertheless, it would encourage increased interdependence and broader based regional trade than it would otherwise have been the case without FTA. It could be used as the political baseline. This is one element in the “soft” option, which has something in common with the “hard” option. 2. Regional Liberalization through Global Liberalization. The process of being actively liberalizing and reforming in the context of the global system would lead to much more open economies in individual ASEAN countries. Openness in the region, without much governmental intervention, would be “residual” to the openness maintained at the global level. Continued liberalization of the ASEAN economy with respect to the rest of the world would automatically make the ASEAN economies more open to each other. 3. Institutional Infrastructure and Facilitation Measures. The development of institutional “infrastructure” similar to the development in the EU enables ASEAN to undertake harmonization in the way of doing things. Given the experience of the Asian crisis, this institutional development is crucial to enable work on the harmonization of policies and approaches. The “infrastructure” would include the necessary mechanisms and processes of consultation and policy harmonization in the broader area of macroeconomic and monetary management. 1 They

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would also include specific areas of economic and commercial practices, such as developing best-practices in accounting procedures, the development of the legal system, the development of bank supervision systems and procedures which are more compatible with international standards, developing systems and procedures in customs valuation, and all the “software” of a modern trade-oriented economy which would make the ASEAN economies increasingly more competitive globally. 2 These “infrastructural” aspects include: –

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Consultation, Harmonization and Standardization of Policies. As mentioned, consultations among monetary authorities would make it possible to develop a kind of early warning system about the trends and emergency measures that could be undertaken in the ASEAN economies. They could be useful when there is a run on one of the ASEAN currencies. These facilities for consultation, harmonization of policies, and standardization of important procedures in economic activities would facilitate the co-ordination of economies which are becoming interdependent. On the subject of ASEAN interdependence, we can note that despite the relatively low level of intra-regional trade, the level of interdependence among the ASEAN economies has become greater through the links with the international financial market. This was demonstrated during the regional crisis where events in one ASEAN country had immediate impact on its neighbours. Competition Policy and Nurturing a Competitive Environment. The subsequent step to be taken by ASEAN

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to adjust to global competition is to look at the competitive environment of the ASEAN economies at the corporate level. Some may adopt a competition policy. Others may have policies which are competition driven, without finding it necessary to have a competition policy. Harmonization in policy approaches may help to strengthen the corporate base and facilitate the emergence of sound corporate governance and fair competition.3 Harmonization of Investment Policy. Harmonization of investment policy may be conducive to making the region more hospitable to foreign investment without engaging in excessive and unnecessary artificial incentives. This process is more formal in the context of “hard” integration, where the process would be specified in a treaty. It would be a necessary component of the principle of freedom of movement of factors of production. In “soft” integration, the process is not necessarily immediately binding, but there is mutual interest to develop a harmonized and compatible policy for the region. Developing a Dispute Settlement System. Another institutional requirement is the development of a regional dispute settlement mechanism which could be achieved by imitating the EU experience. The system could be encouraged to evolve, thus making business and commercial activities in the region more predictable. Facilitation Measures. The steps that could be considered have to do with institutional “infrastructure” developments which would facilitate steps towards the integration of the ASEAN economies in less dramatic

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but crucial ways. These could generically be called facilitation measures. The institutional formality of ASEAN, which follows the institutional developments in the EU, has been criticized as being distant from the people, bureaucratic, and elitist, but it is there to be put to use. Its imitation of the European institutions has given ASEAN policy-makers and officials the habit of constant consultations not dissimilar to what the EU has in place. Corporate Governance. Another crucial but often less obvious requirement, except during a crisis, is the need to strengthen the foundations of good corporate governance. This is critical for the health of the economic system and the competitiveness of the economy in the global economy. The process of encouraging better corporate governance might be more achievable if there is regional pressure to force the adoption of international standards of corporate operation.

There are other important steps in making the economic, business, and legal practices more harmonized and compatible with each other, while focusing on implementing best practices in all fields of endeavour. These “soft” integration efforts are not trivial. They are part and parcel of our modernization efforts and our search for global competitiveness. Summary of the “Soft” Option We have argued that most free trade areas and integration initiatives are economic in manifestation but largely political in motivation. However, if there is a strong political desire pushing for ASEAN integration, it should not be necessarily discouraged,

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even if the economic arguments are not fully persuasive, at least in the short run. Nevertheless, although the impetus is political, it must not be so devoid of supporting economic argument that it would be irrational to proceed. This study has argued that even if the trade volume produced from an integrated ASEAN is modest, the increasing harmonization of practices, rules, and modern norms of economic and corporate practices as well as the interdependence through the international financial system, would facilitate future regional economic interaction. In the interim, the ASEAN economies would be more efficient internationally by virtue of being more open and by adopting best international practices in every economic endeavour across the board. If it be the case that trade facilitation, as we have described above, could contribute to increasing efficiency, and deeper regional integration, and that trade facilitation is essential for trade expansion, then trade facilitation should not be treated lightly. It must be a focus of attention even if the conventional view of integration argues that successful integration is only present when the region becomes a common market and

integrated under a supranational authority, as is the case in the EU.

ASEAN AND THE MULTILATERAL SYSTEM: SEARCHING FOR AN “INSURANCE POLICY” What is the upshot of the arguments above? In the best of all possible worlds, an open and non-discriminatory trading system seems most desirable and, in view of the successful use by the ASEAN economies of the open world trading system, the region has been a beneficiary. The basis of the argument is that an open and nondiscriminatory trading system increases welfare and efficiency although sometimes the benefits might be seen to be politically inequitable. On the assumption that growth is necessary for even a semblance of development to take place, the developing countries are on the whole better off with the open trading system. Given the above proposition, how would ASEAN construct a policy which is coherent, taking the global reality above as a starting point, while accommodating the political requirements of regional integration?

NOTES 1.

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There is an interesting institutional dimension in ASEAN that should be noted as we deal with economic policy in the region. Initially, as a political initiative, ASEAN was the creation of the foreign ministries. As trade issues became important, trade ministries also entered the picture. Interestingly, however, there is another dimension to institutional development. When macroeconomic issues needed co-ordination, the participation of the ministries of finance and the central banks was required. However, they are accustomed to another forum, which is more longstanding, the IMF-World Bank annual meetings. Thus, finance ministries and central banks do not have the same “sense of ownership” of ASEAN. Southeast Asian central banks have their own forum, the SEACEN, which is the association of Southeast Asian Central Banks. But the ministries of finance and the central banks need a distinct forum if macroeconomic management is to have a sense of co-ordination. A different set of institutional practices needs to be developed. This is not just an ASEAN issue. At the broader level, co-ordination among the ministries of finance and the central banks of the G-7 has also received wide attention. See C. Fred Bergstein and C. Randall Henning, Global Economic Leadership and the Group of Seven (Washington, D.C.: Institute for International Economics, June 1996).

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At the broad policy level, economic integration requires macroeconomic discipline of some kind. Institutionally, the mechanism has yet to be considered. Serious political decisions must also be taken on how much common discipline the ASEAN governments are willing to commit on macroeconomic policy. For a discussion of these issues, see Hans Genberg and Francisco Nadale de Simone, “Regional Integration Agreements and Macro-economic Discipline”, Regional Integration and the Global Trading System, edited by Kym Anderson and Richard Blackhurst (London: Harvester Wheatsheaf, 1993), pp. 167–95. A constructive approach to competition policy without necessarily implying the need for competition law has been developed in the APEC study group by Kerrin Vautier and her associates, where the focus is on developing competition-driven policies by governments, while not adamant on the manner and mechanism in which such policies ought to be implemented formally. See Kerrin Vautier, PECC Competition Principles (Singapore: PECC Secretariat, 1999).

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Djisman S. Simandjuntak

71.

EU-ASEAN RELATIONSHIP

DJISMAN S. SIMANDJUNTAK

FORCES OF ‘COMPLEXIFICATION’ Regional integration or co-operation is not an end in itself. A preferential reduction of barriers to trade was originally designed as a fall-back position when in the early part of the twentieth century Europe was unable to push along progress in non-discriminatory liberalization, and unilateral liberalization was avoided for reasons related to freeriding. Had unilateral liberalization and multilateral liberalization worked effectively, regional integration would have lost much of its relevance. Co-operation of a functional type would also have replaced preferential trading arrangement as the core of regional integration. The 1980s and 1990s may be recorded in history as a golden period of liberalization. Since the announcement of Margaret Thatcher’s ‘big bang’ in the mid-1970s governments in nearly all corners of the globe have followed the basic policy direc-

tion in favour of greater openness. Crossborder barriers to the flows of goods, services, capital, and people were reduced, though the reasons vary from one country to another. Any time a major deregulation is announced in one country, other countries are affected and forced to come up with deregulation programmes of their own. This policy convergence across countries must have had a favourable effect on the completion of the Uruguay Round which in turn resulted in another major cut of trade barriers and, thereby, makes necessary a reassessment of regional integration. With lower barriers as a pull factor, international economic exchanges benefit further from technology changes that serve as a push factor or tail wind. Tradeability of goods and services increases as progress in transportation technologies allows a faster movement at affordable costs. A plethora of services which in the past were hardly

Reprinted in abridged form from Djisman S. Simandjuntak, “EU-ASEAN Relationship: Trends and Issues”, in ASEAN and the New Asia: Issues and Trends, edited by Chia Siow Yue and Marcello Pacini (Singapore: Institute of Southeast Asian Studies, 1997), pp. 92–117, by permission of the author and the publisher.

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tradeable can now be produced in one location to be marketed all over the world using information and telecommunication technology. Given an increasing diversity of manufactured products, large amount of resources devoted to research and development, and shortened life cycle, firms are increasingly forced to engage in global sourcing and distribution. In other words, technology change is a major force in global integration. It makes borders, national and regional alike, more and more permeable. Freer cross-border flows of goods, services, and factors cannot be uncoupled from domestic competition (Anderson, Bannister, and Neary 1995). The experience of the EU itself tells very clearly that integration is subject to a kind of law of escalation. Completion of customs union makes a common market an urgency. The escalation continues until an agreement is reached on the establishment of an economic union. A similar process occurs globally. As border protection is reduced, attention is drawn to domestic competition which in one way or another can distort international competition. With a view to minimizing such distorting effects, convergence in domestic policies is sought. International economic talks and negotiations have ventured into ‘behind-border protection’. Given the complexity of issue linkages and the sensitivity associated with domestic issues being addressed bilaterally, regionally, or multilaterally, negotiations on ‘behind-border protection’ are likely to proceed more slowly than negotiations on border protection. The agenda on ‘behind-border protection’ has yet to be drawn. However, priority seems to have been attached to a number of issues, as one can gather from the heated debates on social clause between developed and developing countries in the final days of negotiations in the Uruguay Round. The North American Free Trade Agreement (NAFTA) has also gone beyond

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the traditional form of free trade in that it integrates some provisions on domestic policies. Labour rights constitute an important element of what one may call ‘complexification’ in international economic relationship. EU-ASEAN relationship, too, is faced with this controversial issue. Those who are in favour of linking trade and investment issues with those of labour rights implicitly argue that developing countries have seized larger market shares in the developed countries in an unfair way by providing workers sub-standard treatment. As indicated earlier, the wage gap between most ASEAN countries and most EU countries is admittedly formidable. Labour unions in ASEAN today are also less free in pursuing their activities (including industrial actions and strikes) than their counterparts in Europe, though it may not be as distressing as what Europe experienced when it was at the level of development where ASEAN is today. Accusing ASEAN of social dumping for the simple reason that wages in ASEAN are only a mere fraction of EU’s wages is too superficial a conclusion. First of all Europeans seem to have overpriced their labour services, at least to a certain extent. Secondly, in an economy which has just entered the transition from a ‘primitive growth’ with a very large incidence of underemployment and a high growth of labour force, the reality of wages trailing behind economic growth is no surprise. This is not to deny the need for clear action against labour abuses. Government intervention in the form of minimum wages is an example of such an action. Thirdly, the experiences of Singapore, South Korea, and now even Malaysia with rapidly rising wages in the wake of a successful industrialization do suggest that a low-wage strategy in international competition is unsustainable, a passing phase. Successful economic catching-up sows the seed of wage

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catching-up with a certain time lag. Fourthly, worry about low wages in developing countries driving capital and employment out of developed countries is not confirmed empirically (Erickson and Kuruvilla 1994; Lawrence 1994). Another major issue which is likely to add to the complexity of EU-ASEAN relationship in the future is related to the environment. Distortion in international competition can also emanate from inferior environmental standards. The perceived costs associated with such lax environmental standards are not confined to lost sales and employment. Environmental degradation is in itself a cost with serious implications for the whole world. The area covered by ASEAN is in the centre of this debate, given the concerns for biodiversity in its forests and seas and the speed at which these forest and sea resources are being depleted. While the idea of sustainable development has gained popularity and compliance with internationally set standards is increasingly considered a necessity, friction is likely to worsen during the transition. In as much as developed countries accuse developing countries of environmental dumping in order to prevail in international competition, developing countries may increasingly accuse developed ones of using environmental standards as a mask for protectionism. Competition policy has frequently been mentioned as a priority item in the agenda of the next round of the World Trade Organization (WTO) negotiations. Many people in the United States are obsessed about integrating competition policy into the WTO as a way of making markets internationally contestable. The obsession is to an important degree an outgrowth of market-opening campaigns staged by the United States in Asia since the mid-1980s. Asians are accused of collusion in order to exclude foreign participation in certain businesses. The Japanese keiretsu, Korean

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chaebol, and widely diversified conglomerates in the rest of Southeast and East Asia are seen as fortresses of anti-competitive practices. This statement is difficult to verify. Members of the same conglomerate may have the tendency to grant each other a preferential relationship, making it practically impossible for non-members to access the businesses of this conglomerate. However, a conglomerate is not as impenetrable as it appears at first glance. In the case of ASEAN a conglomerate is very likely to include one or more, if not many, joint ventures with foreign companies. Besides, conglomerates are not the only players in business in ASEAN. In addition to business conglomeration there are other issues which are considered important in connection with competition policy. They boil down to discrimination between local companies and foreign companies. The United States, for instance, complains about discrimination with respect to government procurement and government administrative services in its relationship with Japan. Approval of U.S. investment in certain industries was said to have been delayed in order to give ample time to Japanese competitors to master the business in question. By the time the investment permits were issued, the market was said to have been controlled by the protected Japanese competitors. Some of these issues can be taken up in an investment agreement. ASEAN countries themselves may have great difficulties in addressing issues of competition policy, given some reluctance on their part to even enact such a policy domestically. The last source of ‘complexification’ in EU-ASEAN relationship which deserves serious attention is the recent rediscovery of regionalism. Practically the whole surface of the globe is currently covered by one or even two or more overlapping regional arrangements (Kirmani 1994). This resurgence of regionalism takes place

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irrespective of the progress made in unilateral and multilateral trade negotiations. Indeed, the link between current regionalism and Article 24 of GATT is spurious. In some cases sub-regional initiatives — for instance, growth triangles in ASEAN — are allowed to develop. In the case of NAFTA membership is possible for economies outside North America, at least theoretically. In the Asia-Pacific Economic Co-operation (APEC) regionalism is given a new interpretation, though one can still certainly argue whether or not all areas around the Pacific Ocean are part of a single region. Issues covered in regional schemes are now much wider than they were in the 1950s and 1960s. In a number of groupings, including the EU and ASEAN, enlargement occurred without certainty about where it would finally stop. In short, the world is currently witnessing a very colourful blossoming of regionalism. The extent to which this enthusiasm can last and how much of it will ever be translated into a real force of regional integration remain to be seen. A lot of politics is involved in regionalism (Grossman and Helpman 1995). Not so long ago regionalism of some kind was standard vocabulary in the relationship among developing countries. However, none of the groupings really took off the ground as far as the market integration component of co-operation was concerned. Even ASEAN has yet to show to the world its effectiveness in implementing AFTA and ability to enrich AFTA in a way which is commensurate with the rapid speed of world-wide integration. The EU is currently very busy with the issue of enlargement. Before it has fully digested the arrival of its three new members, it already has to deal with an eastward enlargement which may increase the number of EU members to twenty. ASEAN on its side has just admitted Vietnam as its

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seventh member. In the not too distant future it is further expected to be joined by Cambodia, Laos, and Myanmar. In that case ASEAN would cover the whole of Southeast Asia and enlargement would become a nonissue. However, Southeast Asians may one day find it necessary to be more flexible regarding the concept of regionalism and consider accordingly an enlargement of ASEAN eastward to Papua New Guinea or even southward in the direction of Australia and New Zealand. In addition to membership issues the relationship with their respective immediate surrounding is also high on the agenda of the EU and ASEAN. The EU is searching for a redefined relationship with former members of the Soviet Union. ASEAN on its part is faced with an unfinished business of a grouping covering the whole East Asia. Flexible interpretation of the concept of a region is not necessarily a bad idea. Yet, country coverage of a regional scheme is closely related with the complexity of issues it has to deal with. Complexity in intraregional relationship is bound to increase tremendously by the time the EU is enlarged eastward. By then the EU may find it unavoidable to opt for a differentiated integration in which members are allowed to proceed at different speeds with respect to certain aspects of the EU (Janning 1994). ASEAN has long discovered the merits of a less-than-full participation in certain aspects of co-operation, such as industrial complementation. It was called a formula of ‘Six-Minus-X’ and since the admission of Vietnam now becomes ‘Seven-Minus-X’. Given the growing complexity of issues confronting both the EU and ASEAN as a result of dramatic changes inside and outside the respective regions, the question arises as to the manageability of EU-ASEAN relationship in the future. What is it that one can realistically expect from EU-ASEAN co-operation when the number of countries involved increases to over thirty?

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THE ASIAN CRISIS SEEN FROM EUROPE

ROLF J. LANGHAMMER

EUROPE AND A JOINT PLAN OF ACTION FOR ASIA The crisis of Asian financial markets has been an exogenous shock to the AsiaEurope Meeting (ASEM). The meeting, with its various subsidiary conferences and forums, has been designed to cope with policy-induced economic and political impediments to bilateral transactions and to remove trade obstacles and investment barriers. Yet, it is fully unprepared to handle market-induced shocks such as those deriving from herd behaviour of commercial banks and private non-bank portfolio investors. ASEM may be able to stimulate inter-Europe–Asia transactions in trade and long-term real capital (foreign direct investment [FDI] as well as aid) but it has no great influence in private financial markets. It is true that indirectly a successful ASEM may contribute to improve confidence in investment conditions in Asia and induce investors to return to the region. In this respect a discontinuation of ASEM very

likely would have adverse effects. Yet, ASEM cannot stem the tide if asset bubbles and disorder in domestic financial markets induce foreign and local investors to let the chips fall and escape the Asian markets. Simply, ASEM has neither the funds nor authority to stabilize the capital account. If it had funds available, they would have been marginal in quantitative terms. The size of private financial flows from Europe to developing Asia relative to developing Asia’s revenues from exports to Europe or relative to European public flows illustrates how much the former flows have bypassed the latter. According to Bank for International Settlements (BIS) data, at end 1992 lending of European banks to developing Asia amounted to US$54 billion compared to developing Asian exports to the European Union (EU) worth US$94 billion. At end 1996 lending of European banks to Asia had increased to US$155 billion vis-à-vis revenues from Asian exports to Europe amounting to about US$145 billion (BIS

Reprinted in abridged form from Rolf J. Langhammer, “The Asian Crisis Seen from Europe: Can Newly Emerging Europe Help Newly Declining Asia?”, in Regional Co-operation and Asian Recovery, edited by Peter Petri (Singapore: Institute of Southeast Asian Studies, 2000), pp. 164–83, by permission of the author and the publisher.

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1998; UN 1997). In contrast, official development assistance (net disbursement) of EU member states (OECD 1997) to Central, South, and other Asia amounted to about USS$6 billion in 1994/95 along a declining trend. Hence, with regard to European public flows to Asia, it is quantité négligeable. In brief, current account flows (including revenues from factor and non-factor services) rose much slower than capital account flows, or, in other words, globalization in the context of bilateral Europe– Asia economic relations has become a phenomenon of private financial markets. In spite of such differences in magnitude, Asian political leaders (for instance, Singapore’s Prime Minister Goh Chok Tong) have called for a joint plan of action and invited Europe to play a prominent role. This chapter will first discuss the rationale behind this initiative which comes at a time when the EU is almost completely absorbed by its inner challenges, that is, Economic and Monetary Union, integration deepening and widening, budgetary problems, Common Agricultural Policy (CAP) and cohesion fund reforms, mass unemployment, social security financing, to mention just a few (section II). It will then dismiss hopes for effective support from “Public Europe” as a fallacy not only for political reasons but mainly for economic ones (section III). In spite of the fallacy, I see some possible lessons from European policy experiences worth discussing in relation to Asia (section IV) before some conclusions are drawn (section V).

THE RATIONALE OF REQUESTING SUPPORT FROM EUROPE Is it rational to request support from a seemingly declining region which for a long time had been labelled by Asian political leaders as sclerotic, inflexible, discriminatory, and inward-looking while Asia had

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been celebrated as dynamic, outwardlooking, non-discriminatory, and the new centre of economic growth? Is it possible that undeniably dynamic Asia exceeded a sustainable speed of growth, given the institutional disorder in domestic financial markets and weaknesses in political accountability while seemingly stagnant Europe slowly approaches its steady state growth just in line with the slow progress in deregulation and institution building? In the following, I suggest five reasons why it is rational to request support from the EU and its member states. They depart from both the state of bilateral relations and genuine characteristics and developments in Europe. 1. Among the triad, Europe is least affected in its growth (a) The Asian countries under crisis have become growing markets for European exports but they are still not yet major EU export markets The demand side mechanism that transmits the effects of drastically declining domestic absorption in Asia to Europe materializes via declining Asian demand for European products. The Asian ASEM countries, including Hong Kong and Taiwan, account for roughly one-quarter of EU’s external trade, that is, about 2.5 per cent of EU’s GDP. As regards Asia–Europe trade, it is evident that initially, the EU was a much more important export market for developing Asia than Asia was as an export market for Europe. This changed significantly in the 1980–95 period. During this period developing Asia became a more important export market for the EU relative to the importance of the EU as an export market for Asia. Obviously, trade-impeding factors seem to have worked especially against Asian exports to Europe. Taking only EU trade with Thailand, Indonesia, and South Korea plus Japan into

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consideration, this would be less than 1.5 per cent of EU’s gross domestic product (GDP). As a rough calculation, assuming an ex post income elasticity of developing Asia’s import demand for European products in the 1990s of about unity, a decline of Asian real GDP by 2 per cent, for instance, would be equivalent to a decline of EU’s GDP due to lower EU exports to Asia by 0.03 per cent. This is the same magnitude as the forecasts of the International Monetary Fund (IMF) and European research institutes, which in early 1998 assumed diminishing growth rates in Europe by around 0.1–0.3 percentage point (IMF 1997; Kiel Institute of World Economics 1998). (b) European sourcing in Asia is not predominantly in import-competing products The supply side mechanism that transmits the crisis to Europe runs via increased price competitiveness of Asian exporters after real devaluation and increases pressure on import-competing European producers. Yet, whether or not competition for Europe really materializes depends on a number of aspects, for instance, to what extent 1. nominal devaluation translates into real devaluation after adjustment of domestic prices to rising import prices; 2. individual Asian companies are not denied access to letters of credit and hence to foreign exchange to finance imported inputs; and 3. adjustment pressure on European import-competing companies is not outweighed by real income gains for consumers and terms of trade gains for European companies processing Asian inputs. The first two aspects are not Europe-specific and thus hold for all Asian export markets alike. As for the last point, it seems that

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while the share of final products in Asian countries’ exports to Europe is high, a large number of these products no longer compete with upgraded European products but rather with other third country products. An Organization for Economic Co-operation and Development (OECD) Trade Directorate paper (OECD 1998, p. 8) substantiates this point by arguing that the textile and clothing sector, the second largest two-HS-digit export sector of Association of Southeast Asian Nations (ASEAN) countries vis-à-vis Europe, has already undergone structural adjustment in the larger OECD countries and that therefore any import surge from Asia will affect other foreign suppliers (for example, Turkey, Poland, and Hungary) more than it will affect domestic import-competing industries. A macroeconomic balance sheet of gains and losses for three parties in the EU (import-competing industries, manufacturing industries processing imported intermediates, and consumers) would show offsetting results so that it might even turn out that Europe would enjoy gains due to more competitive Asian exports. (c) There have been no strong pre-crisis protectionist sentiments against Asia The 1997 World Trade Organization (WTO) Trade Policy Review on the EU (WTO 1997) confirms that the EU is slowly but steadily moving towards a more liberal trade regime. In particular, the combined effects of WTO implementation in the areas of tariff reductions, elimination of quotas and voluntary exports restraints (VERs), new multilateral agreements, and a decline in the initiations of anti-dumping procedures are mentioned as positive signals (WTO 1997, p. 44). This is not to say that the EU has become a champion of non-discrimination but the trend towards stronger compliance with multilateralism is accepted. Average applied EU tariff rates for all merchandise

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imports are far lower than the Asian countries’ applied tariffs (3.6 per cent compared to 23 per cent in Thailand, 17 per cent in Indonesia, and 10 per cent in Malaysia [OECD 1998] and EU peak tariffs for industrial products are usually equal to or only slightly above 10 per cent [WTO 1997, p. 45]). In analogy to U.S. bilateralism, one could speculate about a re-emergence of EU protectionism in the presence of large bilateral trade deficits. Yet, with both ASEAN and South Korea, the EU has a strong trade surplus and the Asian countries were applauded by the EU for having opened their markets unilaterally as well as multilaterally. In brief, the three arguments raised above do not suggest the re-emergence of a protectionist stance of the EU against Asian countries after the crisis. (d) European companies do not as yet have a substantial investment in the Asian countries European companies are latecomers in Asia relative to U.S. and Japanese companies but they are slowly catching up, especially since 1994 (Langhammer 1998, Table 7). Overall, the share of ASEM in investment outflows of European companies outside the EU amounted to 9 per cent in 1995. The probability that domestic market-oriented European investors in Asia will incur losses as a result of the crisis cannot be denied but given this low share, losses do not weigh heavily in the balance sheets of the parent companies. It is likely that losses will be taken and weighed against gains from cheap market entry due to declining asset prices. Because they are latecomers, most companies now seem to see chances of penetrating the market through FDI rather than from direct exports, which would be hampered if Asian currencies depreciate in real terms. This

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holds true because the crisis is still seen as temporary.

2. Europe is strongly affected through bank loans given to Asia Both Europe–Asia trade flows and the magnitude of European FDI in Asia provide some rationale for assuming Europe to be least affected directly relative to the United States and Japan. But indirect effects from income losses in Japan and the United States and world financial market turbulences lurk in the background and they are feared to become more substantial for Europe if support is denied. Requests for support could thus be raised by pointing to the risk of indirect effects. Beyond trade and FDI, there is an even better direct leverage to expect support from Europe. As in FDI, Europe has also been a latecomer in bank lending to Asia. At end 1995 only 25 per cent of total European bank lending was given to developing Asia. But unlike FDI, the speed of catchingup was high. Between mid 1995 and mid 1997, European banks were responsible for almost two-thirds of incremental bank lending to Asia. Among European banks, German banks had large outstanding loans, especially in Thailand and South Korea (Langhammer 1998, p. 11). Interestingly, these banks seem to have also been the first to pull out of the Asian market. Between June and September 1997 German banks (excluding their Asian branches and subsidiaries) reduced their outstanding loans, for instance, in Thailand by almost one-third. The fact that European banks have been latecoming and early withdrawing raises the question as to whether Asian borrowers have widely underrated the extent of risk aversion in European lending contrary to the high degree of risk-taking in Asian financing. Such discrepancies in mutual risk perception could have been

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instrumental to the depth of shock which Asian borrowers experienced after the exodus. 3. The European public is involved by shouldering parts of European company losses and bank losses in Asia Seen from a German perspective, the European public will not remain unaffected from the financial repercussions of the crisis. Given their strong engagement in recent years, some German banks, for instance, have immediately formed and displayed reserves for contingent liabilities from nonperforming loans. These reserves are fully deductible from gross revenues and thus reduce the tax burden in a probably DM2– 3 million range. Hence, private losses are somewhat “socialized” and taxpayers shoulder part of the burden. But this is only one way of bringing European taxpayers into the boat. The other way is through public money granted at concessional terms. The German Government through its development bank (KfW), for instance, has granted loan guarantees for Indonesian and Thai small and medium-sized companies to secure financing of Indonesian and Thai imports from Germany (hence tied aid). Additional concessional funds for Thailand are intended to stabilize import flows. Compared to the Bretton Woods aid packages, however, these bilateral aid packages have been negligible in quantitative terms. In addition, the Bundesbank contributed a loan of US$1.25 billion to the aid package for South Korea.1 This loan had no direct impact on the federal budget and taxpayers unless the loan would come under default and hence reduces the Bundesbank’s profits, which by a large part are paid into the budget. Yet, there is a third way for the European public to become a party in the burden-sharing, that is, public guarantees for EU exporters. German exports, for instance, are insured against political risks

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in destination countries through a public insurance scheme. In early 1998 the German Government took the maximum risk of about DM16 billion for its budget stemming from possible defaults in paying the bill to German suppliers from importers in Indonesia, Malaysia, the Philippines, South Korea, and Thailand (about 60 per cent of German exports to these countries). Economically, this scheme subsidizes home country exports in the difference in insurance premium between a private and a public scheme. As a result, there is some involvement of larger parts of the European electorate in the Asian crisis. This involvement, which is small on a per capita basis, adds to the low repercussions from Europe-Asia trade and European FDI in Asia. 4. Europe’s banking sector is at the centre of pressure for potential European support Theoretically, Asian expectations towards Europe to actively support the countries in coping with the crisis could strongly focus on a quid pro quo role of European banks. Traditionally, continental European banks play a significant role in both financing investment of companies, which are strongly inter-linked to their so-called “home banks” through mutual ownership, and consumption of private households. This differs from the Anglo-Saxon financial markets (including the United Kingdom) in which securities and company bond issues play a much larger role than financing through banks. European banks have strong political leverages through their representation in boards of trustees. Therefore, potential losses of European banks in Asia could have strong repercussions on lending behaviour at home and thus impact upon the domestic investment climate. There has also been the critique that German and French banks rather carelessly pumped short-term funds

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into non-transparent Asian markets and were responsible for even more chaos when they withdrew funds as soon as the first sign of dwindling credibility in the Asian governments’ policies emerged. Given the leverage and the critique, it does not come as a surprise that German banks, for instance, have been in the forefront of initiatives to co-ordinate a European-wide support for Indonesia in order to stop the decay of asset prices in the interest of banks holding such assets. However, such initiatives found a lukewarm response from the political side. The reason is simple. Continental European finance companies (including savings associations) are known for still being relatively healthy due to the very conservative savings behaviour of net savers (basically private households). The debt crises in Latin America and Central and Eastern Europe could be mastered and high hidden reserves could be accumulated in the meantime (see BIS 1996, Section V). Even if it is acknowledged by the political decision makers that massive challenges of adjustment in an overstaffed segmented European finance sector are in the offing as a result of technological innovations in electronic banking and a new generation of more risk-prone savers, politicians are not prepared to “socialize” bank losses beyond the three ways described above.2 Instead, politicians point to good prospects for European banks in Asia to swap loans into equity and expand their entire service range in domestic financial markets which are going to be opened to subsidiaries of foreign banks. 5. The EU is presumed to be critical towards the IMF prescription of cutting domestic absorption In many Asian circles the EU still enjoys the reputation of being prone to Keynesian recipes and strong public interference. While this reputation was frequently dis-

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missed as anti-market oriented and sclerotic in good times of Asia, it now gets a more human face in bad times. This reputation probably stems from the myriad of interventions into European labour markets, the spread of state-owned banks, including special banks for weak sectors, sizeable public funds for regional and industrial policies, and a high tax burden. Adjustment support by state agencies rather than adjustment control by opening markets is believed to still play a more important role than in the United States. In this way Asian political leaders stressing the need for state authority could see congenial European leaders as compatriots to avoid the bitter medicine of immediate bank closures, high interest rates, and cutting domestic absorption. What might also matter is that the EU, unlike the U.S. administration, has not been accused of using the International Monetary Fund (IMF) as an instrument to enforce U.S. private sector interests to penetrate into Asian markets. This is not to say that this allegation is well-founded but it certainly exists. THE FALLACY OF HOPE FOR DIRECT PUBLIC SUPPORT FROM EUROPE 1. Brussels has no concerted balance of payments support packages Responsibility for balance of payments support packages to non-members rests with the member states. While there is a single market, there is no single voice in this matter. EU member states contribute more than 30 per cent of the subscribed capital of the IMF and 40 per cent of the World Bank — more than the total for the United States and Japan combined. The ASEM meeting in London has shown that the EU Commission is considering integrating new targets into their co-operation programmes with Asian countries, such as technical assistance in

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financial market restructuring and supporting the social costs of the crisis. This is as yet negligible compared to the individual contributions of EU member states and depends on contributions from the member states to the Commission. 2. The EU budget has a binding cap The EU budget is small, about 1.2 per cent of its gross national product (GNP) in the 1990s. The ceiling on own resources was raised from 1.2 per cent of the GNP in 1993 to 1.27 per cent in 1999. Further increases have been strictly vetoed by Germany as the main net contributor. Within the budget, distributional conflicts have become sharper due to the start of reforms of the CAP and the Structural and Cohesion Funds. From an economic point of view, these reforms were overdue but they have now become indispensable with the beginning of accession negotiations with Central and Eastern European countries. 3. The pyramid of recipients of EU public funds is the same as the pyramid of trade preferences and is biased against Asia With regard to EU funds available for nonEU member states, the pyramid of preferences is the same as in trade concessions: associates from Africa, the Caribbean, and the Pacific (ACP), Mediterranean coun-

tries, and the forthcoming generation of European associates and partners (that is, in former Yugoslavia) enjoy first-class treatment. Within the budget cap, there is little left for Asia given the historically predetermined legalized preferences, and there is little hope that this pyramid will change in favour of Asia. The reason is that cross-border negative externalities for Europe mostly originate from the group of countries mentioned above. Such externalities arise from poverty in these countries and comprise inter alia the inflow of illegal migrants, drug trade, organized crime, and the risk of unsafe nuclear energy plants. The message to non-EU states with no colonial heritage nor a strategic leverage such as the Balkans is very clear for the next years to come: Europe needs public money for itself and its poorer natural trading partners in order to smoothen the effects of integration deepening and to support the process of Eastern enlargement in its own interest. Such prefixed political entitlements for expenditures are given at a time when the tax base becomes more mobile and revenues from direct taxation are structurally shrinking. Hence, in addition to competition among external recipients for EU financial support there will be increasing competition between internal and external recipients for diminishing funds.

NOTES 1.

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The same amount is contributed by France, Italy, and the United Kingdom, while the Netherlands, Belgium, and Sweden share almost US$1 billion among them. Total EU member participation to the “line of defence” for South Korea was almost US$7 billion or 12 per cent of the total. This has made the EU combined the second largest contributor to the package after Japan (US$10 billion or 17 per cent of the total) and ahead of the United States (US$5 billion or 8.5 per cent of the total).

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It is an interesting point to ask whether in “Euroland” the European Central Bank would be prepared to bail out a private bank in a member state without the possibilities of interference from a national central bank and in the absence of negative externalities (that is, a domino effect to other banks). It is unlikely that this will materialize because of the Asian crisis but it raises questions concerning lessons for Europe from the Asian crisis (Sachs 1998).

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73.

THE ASEM PROCESS AND CO-OPERATIVE ENGAGEMENT IN THE 21ST CENTURY K. S. NATHAN

ASEM, ARF AND COOPERATIVE SECURITY Asean regionalism — and for that matter, any broader coalition of forces at the intraregional and interregional levels — offers the best prospects for regional stability, development, security and prosperity for Southeast Asia. Despite recent setbacks ensuing from the Asian financial crisis, regional processes like Asean and ASEM tend to provide appropriate frameworks for the positive engagement of extraregional powers in economic, social and cultural exchange. ASEM as a broader process incorporating three major East Asian powers is best viewed as a complementor rather than a competitor to the EU-Asean paradigm. Neither can truly supplant the other as they are driven by similar yet different motivations and dynamics. In combination, both the EU-Asean relationship and ASEM can make a vital contribution in resource

pooling for mutually beneficial regional cooperation and development. ASEM clearly builds on Asean’s established networks of dialogue partner relationships with all major economic or political entities in the world: US, Canada, Australia, New Zealand, Japan, European Union, South Korea, China, India and Russia. These economic relationships serve to create a more conducive political atmosphere for substantive discussions of regional security in Asia-Pacific. Asean can now be regarded as an allinclusive regional organisation that incorporates all the ten states of Southeast Asia. With the inclusion of Laos and Myanmar in 1997, and Cambodia in 1999, Asean-10 does represent a major long-term political victory in terms of strengthening regional peace and security. A strengthened Asean is conducive towards a more substantive relationship with not only the EU, but also the US as well. Regional solidarity therefore aids rather than

Reprinted in abridged form from K. S. Nathan, “The ASEM Process and Cooperative Engagement in the 21st Century: Challenges and Prospects”, in The European Union, United States and ASEAN: Challenges and Prospects for Cooperative Engagement in the 21st Century, edited by K. S. Nathan (London: ASEAN Academic Press and the Malaysian Association for American Studies, 2002), pp. 347–68, by permission of the author and the copyright holder (MAAS).

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hinders the process of establishing a multilateral security framework for Southeast Asia and the wider Asia-Pacific. Nevertheless, the multilateralisation of security in Asia will continue to be problematic in the near and distant future for several reasons: (1) sharp differences in level of development within Asean, and amongst Asian states in general; (2) serious divergences in national perceptions of “common threats” to national and regional security; (3) the persistence of territorial disputes and maritime or resource-based conflicts; (4) divergent perceptions of the utility of the security role played by external powers through formal and informal alliance arrangements with Asian states; (5) the ambiguity of response governing perceptions by medium and smaller Asian states regarding the rise of two major Asian powers viz. China and India — and their strategic role and influence into the 21st century; and (6) disagreement over the need for, and modalities of intervention in crisis situations of an “internal political character” within Asean members, accompanied by a lack of capacity for collectively enforcing the peace — as evidenced by the East Timor Crisis of 1999. There is little doubt that existing bilateral and regional security structures have not been designed to cope with a post-Cold War situation. However, this problem was to some extent alleviated by the expansion of the Asean-PMC (Post-Ministerial Conference) mechanism into the Asean Regional Forum (ARF), which was officially inaugurated in Bangkok in July 1994. The ARF currently comprises 23 countries viz. the Asean Ten (Brunei, Burma, Indonesia, Laos, Malaysia, Philippines, Singapore,

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Thailand, Vietnam and Cambodia), Asean’s ten dialogue partners (Australia, Canada, European Union, Japan, South Korea, United States, New Zealand, China, India and Russia), and Papua New Guinea, Mongolia and North Korea. There are differing perceptions of the ARF mechanism — ranging from a more positive evaluation of its future role to sceptical views about its efficacy as a multilateral security instrument. A more optimistic position asserts that the ARF — with Asean as its core, and with EU as a key participant — is the most acceptable and least controversial lowest common denominator to manage pan-Asian security in the post-Cold War era. As cooperative engagement requires the participation of all actors on an inclusive basis, the ARF model of cooperative security invariably comprises of the following principal features: (1) it is a security dialogue inviting and engaging all interested and involved participants to express and moderate their security concerns; (2) it includes all the key Asian and Pacific actors: China, India, Russia, United States, Japan, Korea and Asean; (3) it is a process involving some informal procedures by which security issues are raised and discussed at annual meetings; (4) it is a non-threatening mechanism or security framework as the agenda for discussion is set by Asean, a regional grouping that is broadly acceptable to all extraregional actors in world politics; and (5) it is a confidence-building measure (CBM) in the sense that the security dialogue rests firmly on a foundation of economic and political consultations via the Asean-PMC, and builds on this foundation of promise and performance. The ARF is thus a loose structure of major and minor powers brought together

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by strategic circumstances that were unpredictable but which require concert to reduce uncertainties arising from major ideological, political, economic and territorial changes accompanying a major imperial collapse and the demise of Cold War confrontations. The ARF espouses all the fundamental principles of Asean’s Treaty of Amity and Cooperation (TAC) signed at its first summit in Bali in 1976 — principles of interaction which also constitute the basis of EU-Asean relations as well as the ASEM process. Article 2 of TAC outlines the basic framework for Asean security cooperation: (1) mutual respect for the independence, sovereignty, equality, territorial integrity and national identity of all nations; (2) the right of every state to lead its national existence free from external interference, subversion, or coercion; (3) non-interference in the internal affairs of one another; (4) settlement of differences or disputes by peaceful means; (5) renunciation of the threat or use of force; and (6) effective cooperation amongst themselves. Recent developments in Asia, however, have tended to give greater credence to the less optimistic view of ARF’s security role. Over the past few years, especially since 1995, China’s muscle-flexing in the Spratlys in the South China Sea has somewhat strained relations with other ARF partners such as the Philippines and Vietnam. Competing claims and construction activities in the Spratlys by Malaysia have of late also aroused concerns in Manila which has considered such bourgeoning threats to its national interests as sufficient ground to revive its special security relationship with the US. The 1998 Visiting Forces Agreement (VFA) which enables US naval visits and joint exercises has the effect of restoring

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enhanced military cooperation under the 1951 Mutual Defence Treaty although there will be no return to the pre-1992 arrangement permitting US bases and troops on a permanent basis on Philippine territory.1 Rising regional concerns over the Spratlys could well provide greater sustenance to the Five Power Defence Arrangement (FPDA) — established in 1971 by Britain, Australia, New Zealand, Malaysia and Singapore — into the 21st century. And most recently, the crisis in East Timor following the August 30, 1999 vote in favour of independence has exposed Asean’s and also the ARF’s inability to produce a collective response in Asean’s largest but crisis-ridden member of over two years standing. If cooperative engagement is to be realistically applied to the security field, the ARF incorporating all the Asean, EU and ASEM components must inevitably move with greater urgency on its 3-pronged agenda of confidence building, preventive diplomacy and conflict resolution. Nevertheless, effective cooperative engagement in the area of preventive diplomacy via the ARF, according to one analyst, is being constrained by at least four factors: (i) Asean’s insistence on the norm against non-interference in internal affairs; (ii) Asean’s cautious attitude, and perhaps scepticism with respect to supraregional institutions, and a preference for flexibility and informality; (iii) ARF’s own incipiency in terms of establishing common and effective ground rules; and (iv) the diverse and differentiated character of ARF members resulting in unequal contributive capacity as well as unequal treatment.2 A further argument in support of a more pessimistic view of Asean’s security role and its impact on prospects for ARFtype multilateral security in the Asia-Pacific pertains to the issue of enlargement. As more politically, economically and ideological diverse actors join the grouping, its unity of purpose and capacity for common

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action are bound to be compromised. According to a scholar, “Asean’s post-Cold War enlargement is a source of weakness

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because it threatens to undermine the Association’s cohesion, and widen its intramural differences”.3

NOTES 1.

2. 3.

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The Visiting Forces Agreement (VFA) between the US and the Philippines was signed in Manila on February 10, 1998 during the Presidency of Joseph Estrada, ratified by the Philippine Senate in May 1999, and entered into force on June 1, 1999. Simon S.C. Tay and Obood Talib, “The Asean Regional Forum: Preparing for Preventive Diplomacy”, Contemporary Southeast Asia, Vol. 19, No. 3, December 1997, pp. 260–261. Robyn Lim, “The Asean Regional Forum: Building on Sand”, Contemporary Southeast Asia, Vol. 20, No. 2, August 1998, p. 124.

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74.

ASEAN AND THE ASIA-EUROPE MEETING

TOMMY KOH

ASEAN’S ROLE IN LAUNCHING ASEM Why did Asean launch the ASEM process? My surmise is that the leaders of Asean decided in 1994–95 to convene the first Asia-Europe Summit in Bangkok for the following reasons. First, looking at the contemporary world, Asean’s leaders must have been struck by how much the world had changed. For example, in 1995, North America, EU and the Asia 10 accounted for 29.5%, 29.5% and 24.9% of the world’s GNP, respectively. However, assuming that Asia grows at an average of 5% per annum, and Europe and North America at 2.5%, the combined GNP of North America, EU and Asia 10, in the year 2020, at 1994 prices, would be US$14,587 billion, US$14,399 billion, and US$20,733 billion, respectively. In other words, by the year 2020, East Asia’s economy is likely to be significantly larger than those of North America and Western Europe. Because the world economy has three co-

drivers, its future therefore requires that we establish cordial and cooperative relations between those three regional economic centres. Second, when Asean’s leaders looked at the institutional ties existing between and amongst the three power centres, they were struck by the contrast. They observed that between North America and Western Europe, there existed a thick web of institutional and human ties, for example, NATO, OSCE, the Spoleto Festival of Two Worlds, etc. They also observed that, in recent years, the leaders of East Asia and North America have been building bridges across the Pacific, for example, APEC and ARF. However, in the case of the EU and East Asia, there was a paucity of institutional and human links. The decision of the leaders of East Asia and Western Europe to convene their first summit, in Bangkok, in March 1996, was therefore an important first step to fill this void. The success of

Reprinted in abridged form from Tommy Koh, “ASEAN and the Asia-Europe Meeting”, in ASEAN Towards 2020: Strategic Goals and Future Directions, edited by Stephen Leong (Kuala Lumpur: Institute of Strategic and International Studies, Malaysia; and London: ASEAN Academic Press, 1998), pp. 135–39, by permission of the author and the publishers.

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ASEM 1 has brought credit to Asean. Asean has a track record of coming up with wise and timely initiatives, especially in the postCold War world.

HOW TO REVITALISE THE ASEAN-EU RELATIONSHIP? ASEM is in the honeymoon phase. It is new and exciting. The Asean-EU relationship was started in 1978. It is a marriage which is almost 20 years old. Like some 20-year-old marriages, there is a danger that the spouses will begin to take each other for granted and that spouses will begin to look elsewhere! Our challenge is two-fold: (a) to keep the marriage fresh; and (b) to make the Asean-EU relationship and ASEM mutually reinforcing. The following are some suggestions on how to respond to the two challenges.

BROADEN AND DEEPEN THE POLITICAL DIALOGUE First, I support the recommendation of the Asean-EU Group of Eminent Persons to broaden and deepen the Asean-EU political dialogue. The dialogue should be broadened to include the private sector, universities, think-tanks, other nongovernmental organisations and representatives of young Asians and Europeans. The dialogue could be deepened to include such issues as: • • • • • • • • •

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the reform of the UN; peacekeeping; preventive diplomacy; human rights; nuclear non-proliferation; international crime; terrorism; piracy; health; and

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•

environment and sustainable development.

The two sides should aim to transcend dialogue and enter the world of cooperation. The Asean-EU dialogue is the best example of a North-South dialogue. The two sides should aspire to achieve a common action agenda which they could then pursue in the appropriate forum, such as, the United Nations.

DIALOGUE OF CIVILISATIONS Second, the Asean-EU cultural dialogue is a dialogue between several civilisations. Culturally, Western Europe is relatively homogeneous. West European values have their roots in the Judeo-Christian religions, the Renaissance and Reformation, and the Industrial Revolution. Unlike Western Europe, Southeast Asia is a region of great diversity. Buddhism, Islam, Christianity, Hinduism and Confucianism have significant followers. A successful cultural dialogue between Asean and EU would therefore constitute an important contribution to the dialogue of civilisations and reduce the danger that we are inexorably marching towards a clash of civilisations. The agenda could include: • • • •

the role of the individual in society; the rule of law and good government; the role of the state; and human rights.

EXCHANGE OF STUDENTS AND YOUNG PEOPLE Third, Asean and EU should expand the exchange of students and young people between the two regions. The new Asean-EU programme, Junior Executive Managers (JEMS), which brings young managers from

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Asean to work with companies in Western Europe has got off to a good start. The programme should be expanded to include the bringing of young European managers to work in the Asean countries. One feasible way of achieving this result would be to twin an Asean company with a European company. I would also like to explore with the officials in charge of the intra-European exchange of university students, called Socrates, the possibility of expanding the

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network to include the best universities in Asean. The EU should help Asean to strengthen and expand the teaching of European studies in Asean universities. Asean should help the EU to strengthen the teaching of Southeast Asian languages and studies in the EU universities. Journalists, artists and filmmakers can make important contributions to better mutual understanding between Western Europe and Southeast Asia.

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APEC AND ASEAN Complementing or Competing?

MOHAMED ARIFF

THE ROLE OF ASEAN IN APEC The establishment of APEC in 1989 itself was a testimony to the growing interdependence of the Asia-Pacific economies. Increased economic interdependence implies increased friction, and regional issues call for regional solutions. Hence the need for a Pacific body that would serve as a forum for airing grievances, discussing issues of common interest, seeking amicable solutions for bilateral problems without adversely affecting third countries, and undertaking studies for mutual benefits, exchanging information, and providing early warning signals. It is not difficult to sell such a loosely structured organization with such meaningful objectives. It is no wonder that APEC membership has grown from twelve intially to fifteen in 1991 with the admission of China, Hong Kong, and Taiwan, and subsequently to eighteen with the admission of Mexico and the PNG in 1993 and Chile in 1994. And, there are a few more in the queue, including Peru, waiting to be ushered in.

Will APEC and ASEAN compete with or complement each other as institutions? Will APEC render ASEAN irrelevant? Much will depend on how APEC will evolve itself and how ASEAN will play its cards. Without a doubt, the ASEAN countries have much to gain from APEC not only because the Asia-Pacific region is economically important for them in terms of trade and investment flows, as was seen, but also because ASEAN itself has lost some clout in the aftermath of the end of the Cold War. It is no secret that ASEAN was formed primarily for security reasons in the midst of the Cold War in 1967. It was for strategic reasons that ASEAN had received much attention and support from the major powers, including the United States. Now that the Cold War is over and geopolitical equations have changed dramatically, ASEAN faces the danger of being ignored by the key players. It is in this sense that APEC is timely for ASEAN, especially since APEC includes nearly all the Dialogue Partners of ASEAN. APEC provides a forum

Reprinted in abridged form from Mohamed Ariff, “APEC and ASEAN: Complementing or Competing?”, in APEC: Challenges and Opportunities, edited by Chia Siow Yue (Singapore: Institute of Southeast Asian Studies, 1994), pp. 151–74, by permission of the author and the publisher.

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for the ASEAN countries to take a common position on regional issues so that they can continue to enjoy the bargaining power of yester years. However, some caveats are in order. APEC will complement ASEAN only if the former will remain a loosely structured organization. A highly institutionalized APEC will be antithetical to the philosophical underpinnings of ASEAN. The real value of ASEAN lies in the non-economic sphere, and economic co-operation is seen only as a means but not as an end. ASEAN has carefully avoided tightly knit intra-regional trade and investment arrangements that would have caused severe distortions with serious cost implications. The ASEAN countries have traditionally been tradedependent, open economies. They owe much of their prosperity and progress to the open multilateral trading system. It is in their interest to ensure that multilateralism is not usurped by regionalism. Even the ASEAN Free Trade Area (AFTA) initiative1 is aimed not at increasing intraASEAN trade but at rendering ASEAN products internationally competitive. It is hoped that the AFTA exercise will strengthen ASEAN’s extra-regional economic ties. Intra-ASEAN trade accounts for only about one-fifth of the total trade of the ASEAN countries, It is of relevance to note that this share had declined from 19.7 per cent in 1985 to 17.7 per cent in 1990, despite preferential trading arrangements (Ariff 1993). The recent increase in the share of intra-ASEAN trade may be attributed mainly to unilateral trade liberalization undertaken by the ASEAN countries outside the ASEAN framework. It is noteworthy that these countries, AFTA notwithstanding, have their own agenda for unilateral trade liberalization. For example, tariffs in the Philippines are to be reduced under the Executive Order (E.O.) 470 to four levels of tariff rates, that is, 3 per cent,

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10 per cent, 20 per cent, and 30 per cent, by 1995 (Alburo 1994). Similarly, Thailand is implementing a reform programme, simplifying the escalating tariffs to six rates (Wisarn et al. 1994). In Indonesia, tariff range has shrunk from between 0 and 225 per cent in early 1985 to between 0 and 60 per cent, with unweighted tariffs falling by almost half from 37 per cent pre-1985 to 20 per cent in 1993 (Pangestu 1994). Malaysia had unilaterally abolished or slashed tariffs on over 1,600 items during 1988–93, so that about 14 per cent of the tariff lines receive duty-free treatment, while 33 per cent of them are subject to low tariffs of up to 5 per cent, with high tariffs of 40 per cent and above accounting for only 3 per cent of the tariff lines. The ASEAN countries have also committed themselves to significant tariff reductions under the Uruguay Round of multilateral trade negotiations. For example, Malaysia has offered to reduce and bind tariffs on 7,218 tariff lines, which cover some 79 per cent of the country’s total imports, including a 28 per cent tariff cut, on a simple average basis, on all agricultural items. At this pace of unilateral or multilateral trade liberalization, the chances are that AFTA will become redundant, if not irrelevant, well before completion. The point driven home here is that ASEAN countries are smart enough not to settle for the second best in the name of economic regionalism, and that they will find the APEC outfit extremely uncomfortable should APEC turn itself into a trade bloc of any sort. With the notable exception of Singapore, the ASEAN countries are wary of the APEC Eminent Persons Group’s four-part plan to transform APEC into an Asia-Pacific Economic Community. APEC can complement ASEAN if APEC continues to practise “open regionalism”, that is, regional efforts with a global orientation. In any case, it will be unwise to convert APEC into an economic community.

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For one thing, such an arrangement would be extremely unwieldy, given the large number of members and the high degree of heterogeneity in the grouping. For another, an economic bloc of APEC’s size would be highly trade-distorting with adverse welfare implications. The ASEAN countries will find comfort and profit in APEC if the latter opts to play a catalyst role by stimulating market forces to integrate the Asia-Pacific region quietly without much fanfare. It is pertinent to note that anonymous market forces are integrating the economies of the region through trade and investment linkages. APEC will do much harm to this informal integration process if it attempts to formalize this at the present juncture. An APEC agreement on trade and investment would be tantamount to killing the goose that lays golden eggs to the extent that it would generate complex rules and regulations, necessitating elaborate documentation and raising transaction costs. If APEC can project itself as a nondiscriminatory free traders club, the question of ASEAN being dominated by the more powerful members will not arise. Such an APEC will not undermine ASEAN. Instead, it will strengthen ASEAN’s commitment to economic openness. ASEAN may feel more secure in APEC if the proposed East Asian Economic Caucus (EAEC) can take off. The EAEC is now envisaged as a caucus within APEC. This would ensure that the EAEC will complement both ASEAN and APEC. This would mean that all members of the EAEC are also members of APEC. The ASEAN strategy will then be to promote itself as the core in a configuration of concentric circles, with the EAEC serving as the middle layer that would protect ASEAN interests from U.S. domination of APEC and U.S. trade interventions. The concept of concentric circles is borrowed from Physics; and in Physics this

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nexus will not hold unless the core is strong. In other words, it is not in the interest of ASEAN to let the EAEC or APEC be more institutionalized than itself. Be that as it may, it would be difficult to sell the EAEC to other East Asian economies on this basis. There is no incentive for them to join the caucus if it is meant to protect the ASEAN “core”. Indeed, every member would like to be part of the core, not the periphery. Nonetheless, the EAEC can help allay ASEAN fears of U.S. domination — fears shared by other East Asian economies — so that APEC can get on with its agenda.

CONCLUSION The Asia-Pacific economies are experiencing significant restructuring with considerable positive externalities in the form of “spillover” on their immediate neighbourhood. The ASEAN countries have benefited much from such industrial restructuring in Japan and the Northeast Asian NIEs. Indeed, shifts in ASEAN’s comparative advantage pattern are closely related to structural changes and industrial restructuring taking place in the Pacific Basin. ASEAN’s economic relations with other APEC economies thus exhibit considerable complementarity. Recent changes have not really altered the equation. Instead, they have tended to reinforce the ASEAN-APEC complementarity. This is not to ignore the fact that the format of this relationship is changing, with intra-industry trade increasingly replacing inter-industry trade. It is incorrect to view competition and complementarity as opposites. More often than not, they represent two sides of the same coin. For competition can lead to a new international division of labour. Thus, increased competition among APEC countries, resulting from unilateral trade liberalization, tends to bring about a new

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complementarity in the structure of production and trade. It is in this sense that ASEAN and APEC are competing and complementing with each other in a dynamic fashion. The compatibility of ASEAN and APEC as regional groupings will depend critically on the structure and degree of regional “cohesion” aimed at by APEC. ASEAN would find it uncomfortable if the APEC outfit is not loose enough. ASEAN will find APEC a very useful implement so long as the latter remains a forum for consultations and discussions on economic issues. It is clearly not in the interest of the ASEAN countries to hold membership in an inward-looking Asia-Pacific organization. Without a doubt, globalism is the first-best option. Anything short of that will be sub-optimal. The ASEAN countries owe their progress and prosperity mainly to the multilateral open trading system, and it will be a costly mistake on their part to let economic regionalism in the name of ASEAN or APEC undermine the multilateral trading system. ASEAN is too small and too weak to prop up the multilateral trading system, which is threatened by the rising tide of regionalism in Western Europe and North America. APEC is big enough and strong enough to champion the cause of free trade. APEC can and should broker or underwrite the next round of multilateral trade negotiations (MTN) under the auspices of the World Trade Organization (WTO) in 1995. The ASEAN economies will suffer should the world be divided into trade blocs. There are ominous signs that a tug-of-war between North America and Western Europe is in the offing. Any attempt by the United States to convert APEC into a trade-war arsenal against Western Europe or any other grouping will cause ASEAN to be uptight. Understandably, ASEAN countries are unwilling to be “used” in this manner.

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ASEAN will live with APEC comfortably if the latter would serve as a “free trade lobby” that would keep the multilateral trading system going. The term “open regionalism” will make sense in the APEC context, only if it remains non-discriminatory or nonexclusionist. However, any extension of privileges and concessions to non-members on MFN basis would give rise to the “freerider” problem and will not provide any incentive for members to stay on. The only way to solve this free-rider problem would be to bring others along to liberalize likewise through WTO. APEC can do this by acting as a “frontrunner” in the WTO system, setting the pace for others. As a frontrunner, APEC should be able to influence the WTO agenda. APEC may even underwrite or broker the next round of MTN. To begin with, APEC may take the lead in implementing the Marrakesh Agreement. It may even go further in a “GATT-plus” fashion, going beyond the Uruguay Round boundaries. The creation of the EAEC as a caucus within APEC may help allay ASEAN’s fear of “big-brotherly” domination by the United States. Much will, however, depend on how the EAEC will conduct itself. If it projects itself as an anti-U.S. coalition, it will create more problems than it can possibly solve within APEC. While the EAEC may help allay the ASEAN or East Asian fear of U.S. domination of APEC, it may also cause the United States to be wary of possible Japanese domination of the EAEC. The United States may then opt to either convert APEC into a formal arrangement to enclose East Asia or to make NAFTA more exclusionary through a widening and/or deepening of the bloc. It is therefore imperative that the EAEC play a confidencebuilding and conflict-resolving role that would facilitate, not frustrate, the APEC process.

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AFTA aims at reducing tariffs among ASEAN countries to between 0 and 5 per cent based on the Common Effective Preferential Tariffs (CEPT) formula. It will take seven to ten years for items on the fast track and ten to fifteen years for items on the normal track to complete the process. Although the ASEAN countries will not be moving in tandem they will reach the finishing line at about the same time. AFTA also calls for the immediate removal of all quantitative restrictions on these items and phased dismantlement of all other non-tariff barriers within eight years.

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76.

APEC AND ASEAN New Roles, New Directions

JANADAS DEVAN

T

he APEC Roundtable sessions were notable for the contrasting views of the two papers presented: while one set out the positive effects of a grouping like APEC, the other argued that all regional groupings were by definition sub-optimal. Discusssion at the sessions revolved around these contrasting perspectives on regional cooperation and other related issues: (1) the political versus the economic dimensions of ASEAN and APEC; and (2) regional versus global strategies of economic growth.

APEC: REDEFINING THE REGION? Dr Wendy Dobson, of the University of Toronto, in a magisterial survey of developments in the Pacific posited the necessity of APEC thus: had it not been created, we would have to invent it now to respond to the increasingly fluid situation in the region. Economic developments around the world were creating growing interdependence. Interdependence created not only closer economic links but spillovers from one

country to another as governments lose autonomy over their own economies. In this situation, interdependence needed to be managed if it was not to be a source of tension and uncertainty. What was urgently needed, then, was a framework of cooperation to manage the spillover effects of interdependence. APEC, Dr Dobson suggested, was that framework in the Pacific region. As it was, a number of developments in the region were already creating spillovers that threatened the economic stability of the region. Among those developments that required immediate attention were the following: U.S. Economic Policy U.S. trade policy now followed several tracks: multilateral in the case of the GATT negotiations; plurilateral in the case of the North American Free Trade Agreement (NAFTA) and bilateral rules-based, and unilateral “results-oriented” trade policies in the case of Japan. Fears that NAFTA will

Reprinted in abridged form from Janadas Devan, “APEC and ASEAN: New Roles, New Directions”, in Southeast Asia: Challenges of the 21st Century, compiled by Janadas Devan (Singapore: Institute of Southeast Asian Studies, 1994), pp. 56–71, by permission of the author and the publisher.

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turn into a trade bloc, with common discriminatory barriers to the rest of the world, were misplaced. Rather, the major source of uncertainty in U.S. trade policy was the management of its relations with Japan, which was in serious trouble. A harmonious and productive U.S.-Japan relationship was fundamental to the future of both countries, to the rest of the world, and to smaller countries which were closely integrated with one or both of the protagonists. However, instead of pursuing common goals of global leadership, bilateral relations were increasingly conducted as if they were a short-term zero-sum game that the United States must win in order to generate employment growth before the next presidential election. In response to U.S. demands, Japan had become more assertive, and the bilateral relationship more difficult to manage. Indeed, the U.S.-Japan relationship would become a larger source of conflict and uncertainty before current tensions ceased. The Clinton Administration’s preference for managed trade in its relationship with Japan, for example, was unlikely to stop there or affect only Japan. The same principle may well be applied to other successful Asian exporting economies. China Besides the tensions between the United States and Japan, the emergence of China as an economic powerhouse had added another source of uncertainty. China’s rapid growth was already spilling over into the region through export competition and through its import demand. In addition, the current explosion of credit and related inflationary pressures in China would have effects throughout the region. The pace of China’s growth was such that even in the United States, where China’s human rights record had been linked with most-favourednation (MFN) status, there was a growing realization of China’s importance: an

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estimated 171,000 U.S. jobs could be jeopardized if China were to retaliate for the withdrawal of MFN status. Economic Integration of the East Asian Region This integration had had both positive and negative effects which needed to be managed. Factors such as growth of trade and investment flows and deregulation of financial markets which had contributed to the rapid expansion of the Asian economies, had also reduced the importance of national borders even as they promoted integration. At the same time, the flows of trade and investment that erased national borders created channels for spillovers which could be economically destabilizing — involving unexpected inflationary pressures, for example, or unexpected changes in export flows — if governments continued to act independently. Furthermore, as firms did business in each other’s economies, differences in investment regimes — previously thought of as the exclusive domain of domestic policy — became subjects of scrutiny and pressures for harmonization. As it was, in independent pursuit of their own growth and development goals, governments had often bid for investments already headed for the region in economically wasteful ways. All these developments would mean that tensions and conflict would not be confined to the three giants around the Pacific — the United States, China and Japan — but would affect everyone in the region. When the external economic environment was a positive one the rising tide tended to lift all boats, for rapid growth allowed many objectives to be achieved, and spillovers tended to be positive and easily managed. When growth slowed down, however — as it would continue to do in the industrialized world — frictions would arise. It was precisely at those times that investments in institutional mechanisms for managing

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interdependence paid off. APEC, Professor Dobson said, was a useful institution to have around for a rainy day. Though the success of East Asian economies in managing macroeconomic policy suggested that if governments kept their own houses in order by pursuing prudent domestic policies there was little need for formal co-ordination of policies between states, it was doubtful that such informality could continue to be successful in the face of an increasingly complex international economy. The potential for conflict in microeconomic policy, for instance, remained considerable. APEC’s great potential rested on the fact that its membership included not only the small economies in the region, but also the three giants whose economic performance and triangular relationships would greatly affect all, regardless of any institutional configuration. In addition, APEC provided the United States — which remained a major source of dynamism in the region — a mechanism to focus its renewed interest in East Asian economies and involve it in Pacific affairs. APEC’s success in managing interdependence, however, would depend on two factors: firstly, the extent to which governments identified their own interests with the collectivity; and secondly, the extent to which they recognized that the sacrifice of some of their sovereignty could be offset by the advantages of influencing the policies and performance of other participants in the group. Noting that there was a wide spectrum from looser to tighter forms of co-operation, Dr Dobson urged that APEC co-operation be developed in stages. Co-ordination of macroeconomic policies on the model of the G-7, for instance, was difficult: not only would it require the monitoring of each other’s performance, and that of the group as a whole, it also required norms and standards to measure that economic per-

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formance in order for policy bargaining to take place. More crucially, Dr Dobson did not think a Pacific Free Trade Area (PAFTA) was likely any time soon. Firstly, APEC participants must find ways to strengthen co-operation and evolve towards the creation of disciplines and benchmarks to evaluate each other’s policies and performance before a free trade area could be envisaged. Secondly, the smaller countries in the region were unlikely to agree to spearhead a formal initiative of this magnitude and would be sensitive to such an initiative from one of the big three in the region. Moreover, because countries in the region were at different levels of economic development and competitiveness, the distribution of the costs and benefits of a free trade area would be uneven. And thirdly, the dominant countries in the region were themselves pre-occupied with economic competition and were therefore unlikely to achieve consensus on a Pacific-wide free trade area. Nevertheless, several steps could be envisaged in the meantime to promote cooperation among APEC countries. Including both large and small players, APEC must manage interdependence through a staged approach: in other words, it must learn to crawl before attempting to walk. In the economic sphere, this meant participating in co-operative information gathering and exchange to create a sound basis of understanding and fact on which subsequent normative discussions and bargaining could build. Towards this end, Dr Dobson listed the following steps: •

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understanding grows, and co-operative pursuit of mutually beneficial ways of tackling common objectives. Development of guidelines, in the light of existing knowledge about linkages between goals and policies, for the appraisal of economic performance. Bargaining and policy co-ordination, where governments modify national policies in recognition of international economic interdependence.

In conclusion, Dr Dobson spoke of the criteria to measure the success of the Seattle summit of APEC leaders. The very fact that the summit includes both the giants and the small players in the region created a common tent wherein the dominance of the giants could be reduced. Bilateral tensions among the giants could thereby be moderated in a multilateral

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context as small countries reminded the powerful of the spillover effects of tensions in U.S.-Japan and U.S.-China relations. The commitment of East Asian economies to an open trading regime could become a significant international “public good” in such a multilateral forum by promoting the successful completion of GATT negotiations. The APEC gathering could also focus U.S. attention on the region, and encourage prudent U.S. trade policy in return for welcoming U.S. investment and exports to the region. Beyond all this, however, Dr Dobson emphasized the necessity of the summit establishing a substantial APEC work programme — including measures to improve information gathering and policy analysis — so that steady progress could be made towards the transparencies that must govern future cooperation in the region.

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THE ASIAN CRISIS AND THE ADEQUACY OF REGIONAL INSTITUTIONS MICHAEL WESLEY

THE FUTURE OF REGIONAL INSTITUTIONS IN EAST ASIA If a case has been established that the East Asian financial crisis has produced an increased demand for more effective regional institutions, brief consideration should be given to factors that will influence whether regional institutions will be able to provide appropriate responses to meet this demand. One obstacle to the decisive restructuring of regional institutions to cope with future economic or political turmoil lies in the twin philosophies that underpinned the formation of East Asian institutions. One implicitly assumed that economic growth and stability were interrelated and would continue indefinitely, and that the task of regional institutions was to promote the conditions for their continuation. The other asserted that this or any other common regional endeavour was subordinate to national interests and independence. These twin philosophies explain both the minimalism and the consensuality of regional institutions. They also

meant that rapid economic development assumed greater importance as the glue that held the region together. APEC and AFTA were institutional innovations designed to liberalize trade to accelerate this process of development, attract foreign investment, and achieve greater complementarity among the region’s economies. There was little between the mid-1980s and the mid-1990s to suggest that institutional innovations should be made in case economic growth suddenly and catastrophically came to an end. Such moves seemed to threaten both the buoyancy and the inevitability of economic growth. Collective action to cope with economic crisis and political instability challenges the original twin philosophies of East Asian institutions, and will inevitably compromise the minimalism and the consensuality of regional institutions. More obstacles to decisive institutional change derive from a number of consequences of the financial crisis. The first is the political, economic, and social chaos that has overtaken Indonesia as a result of

Reprinted in abridged form from Michael Wesley, “The Asian Crisis and the Adequacy of Regional Institutions”, Contemporary Southeast Asia 21, no. 1 (1999): 54–73, by permission of the Institute of Southeast Asian Studies.

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economic collapse. Indonesia has always played a crucial role at the core of ASEAN, and by extension, of other regional organizations. Regional institutions have also lost a number of elder statesmen as a major source of drive and innovation. Regional institutions in East Asia are predominantly leader-driven: initiatives and agreements are reached at the highest levels of government while secretariats and support structures remain skeletal.1 The duration of the financial crisis has seen the loss or silencing of ASEAN’s prominent statesmen: Indonesia’s Soeharto, the Philippines’ Ramos, Malaysia’s Mahathir. The first was a casualty of the crisis; the second of a regular election cycle, and the third not deposed but internally focused on domestic political turmoil. More problems for institutional innovation derive from uncertainties over the appropriate scope for regional organization in East Asia. One of ASEAN’s difficulties in dealing with an Asian financial crisis was that the organization did not include all the economies affected by the crisis, which was crucial to its response. ASEAN found that it needed to rely on dialogue in broader contexts to co-ordinate its actions with such important players in the crisis as South Korea, Japan, and China. Other countries like Australia and New Zealand, which had wanted to become involved in the collective alleviation of the crisis, had to do so bilaterally or through other, less sensitive institutional mechanisms. But broadening its membership has also created great problems for ASEAN and its ability to respond innovatively. The process of “widening” its membership to include Vietnam, Laos, Myanmar, and eventually Cambodia, is an enormous task of digestion for the organization. These states have less open political systems, much lower levels of economic development, and are inexperienced in participating in regional institutions. ASEAN will expend a great deal

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of energy on absorbing its newer members for some time to come. APEC, at the other extreme, includes all of these relevant players, but its membership is too broad. It includes a wide range of development levels, from the United States with a per capita gross domestic product (GDP) of US$28,600 to Papua New Guinea with a per capita GDP of US$2,400. There are also broad differences in contemporary economic fortunes: while East Asian economies went into a free fall, the American economy was entering its fourth consecutive year of strong economic growth, low inflation and low unemployment. It is unsurprising that such a wide array of economic situations resulted in a great diversity of perspectives on the financial crisis. While nearly all recognized the need for both recovery and reform of the ailing economies, those economies immediately affected naturally prioritized defence, liquidity, and recovery, while those less affected advocated market and financial sector reforms. Overlaying these competing priorities is a long-standing culture of dispute across the Pacific over trade issues. The range of differently affected members and viewpoints within APEC generates an institutional inertia that will make innovation very difficult. These are very real difficulties for regional institutions trying to adapt in ways that will allow them to respond more resolutely to financial turmoil in the future. Yet they are no reason to discount regional measures and to concentrate on national and global responses. The contagion effect showed that East Asia as a region exists in the minds of currency speculators perhaps to a greater extent than in the minds of East Asian political leaders. A regional crisis of this extent may advance the concept of the region within East Asia, while forcing a rethink of regional institutional structures and practices formed in different circumstances.

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There is evidence of a growing body of opinion among younger regional leaders of the need for change. Former Malaysian Deputy Prime Minister Anwar Ibrahim proposed in July 1997 that ASEAN adopt a policy of “constructive intervention” designed to collectively oversee and advance electoral, legal and administrative processes in Southeast Asia.2 In September 1997, Thai Finance Minister Thanong Bidaya suggested that ASEAN include a commitment to a common regional currency in its ASEAN 2020 framework because single-country currencies were inherently unstable and open to speculative attack.3 Thai Foreign Minister Surin Pitsuwan proposed a policy of “flexible engagement” permitting constructive criticism and advice between ASEAN members in July 1998.4 Each of the proposals moves away from ASEAN’s traditional doctrine of non-intervention and avoidance of criticism and areas of disagreement. The Anwar and Surin proposals would entail the collective management of and responsibility for areas of domestic policy that have always been

viewed as the sovereign prerogatives of the Southeast Asian states; while the single common currency would need to be preceded by binding commitments to harmonize macroeconomic policy settings between the countries of the region. That all three proposals were rejected is not as significant as the fact that they were floated publicly and that they were supported by younger leaders — a “new generation” of ASEAN leaders, often from countries that had not played a significant directing role in the organization — and opposed by the older generation of leaders of the institution, well steeped in its traditions, practices, and inertias. The proposals and the proposers point to a new generation of leaders who are beginning to question methods of avoiding conflict and upholding sovereignty absolutely. As a newer generation of leaders rise to power in East Asia, it is not inconceivable that regional organizations will incrementally change their fundamental dynamics to respond to new realities in regional politics, and rising global challenges.

NOTES 1. 2. 3. 4.

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See Arnfinn Jorgensen-Dahl, Regional Organization and Order in South-East Asia (Basingstoke: Macmillan, 1982). Straits Times, 15 July 1997. “ASEAN Cool on Single Currency”, The Australian, 20–21 September 1997. “Thais Push for Radical Shift in ASEAN”, The Australian, 6 July 1998.

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AFTA AND NAFTA Complementing or Competing?

WISARN PUPPHAVESA and MAUREEN GREWE

COMPARISON OF AFTA AND NAFTA A first step in addressing the future relations between AFTA and NAFTA is to look at the similarities and differences between them. Their common membership in APEC is an important similarity in providing a forum for dialogue and setting joint priorities for trade relations. Both groupings have only recently formed free trade areas and thus will be somewhat absorbed in the restructurings taking place in their economies as a result. AFTA and NAFTA also place high priority on multilateral trade negotiations due to the U.S. historical commitment to a free and open world trading system, and the AFTA nations’ reliance on export-led growth to fuel their impressive economic expansion. There are also striking differences between the two groups. AFTA comprises developing countries, albeit at different levels of development, with Indonesia at the lower income end and Singapore at the upper end of the spectrum. The ASEAN

countries (except Singapore) have similar comparative advantages and little existing integration in trade, apart from entrepôt trade through Singapore. One of the primary goals of AFTA is to attract infusions of capital and technology. On the other hand, NAFTA includes two G-7 countries, the United States and Canada, and a developing country, Mexico. NAFTA is the first economic grouping that includes countries at such diverse levels of development. These countries thus have differing comparative advantages related to their natural resources, capital, and labour endowments. Securing markets in the more developed countries and locking in trade liberalization in the less developed countries is an important consideration of NAFTA. Given their geographical proximity and diversity of economic activity, the NAFTA economies were already heavily integrated prior to the formation of free trade area. It is likely that trade expansion in AFTA will come from specialization of production, resulting

Reprinted in abridged form from Wisarn Pupphavesa and Maureen Grewe, “AFTA and NAFTA: Complementing or Competing?”, in APEC: Challenges and Opportunities, edited by Chia Siow Yue (Singapore: Institute of Southeast Asian Studies, 1994), pp. 175–95, by permission of Wisarn Pupphavesa and the publisher.

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in increasing intra-industry trade, while NAFTA will capitalize on differences in factor endowments to increase inter-industry trade. TRADE AND INVESTMENT DIVERSION POTENTIAL OF NAFTA FOR ASEAN Major Trading Relationships For the ASEAN countries, the United States is by far the most important market, while Japan is its most important trading partner. The United States absorbed 19.0 per cent of total ASEAN exports to the world, and supplied 14.6 per cent of total ASEAN imports. In 1991 Japan bought 20.0 per cent of all ASEAN exports and supplied 21.0 per cent of total ASEAN imports. On the other hand, of total U.S. imports from the world only 5.9 per cent came from ASEAN, while it exported only 6.2 per cent of its total exports to ASEAN. ASEAN is a more important trading partner for Japan, taking 12.0 per cent of Japanese exports and supplying 13.4 per cent of its total imports. Canada and Mexico both rely on the U.S. market for 60 to 70 per cent of their imports and exports, but remain small markets for ASEAN and Japan. ASEAN accounted for just over 1 per cent of Canada’s exports and imports, and just under 1 per cent of Mexico’s trade. Trendwise, in the post-World War II period the share of U.S. trade remained stable over time with Canada, but declined with Latin America (Fishlow 1993, pp. 2–4). Also, U.S. trade has remained fairly stable with Europe but increased markedly with Japan and Asia. These trends point to a highly geographically diversified trading pattern, making the United States a “global rather than regional trader”. It is in U.S. interests, therefore, to maintain a strong global trading system, and to avoid allowing NAFTA to encourage the regionalization of markets into closed blocs.

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Conversely, Japan’s trade share with Asia has been constant in exports but increased markedly in imports, with Asian countries still having an import deficit with Japan but moving closer to parity. Japan’s trade surplus with Europe declined, but its surplus with the United States continued to grow. Despite the differences in trends and trade balances, Japan remains a global trading force as well, with strong incentives to promote an open world trading system. Over time, ASEAN trade with North America and Europe has been diminishing relative to the significance of other trade relationships. This decline is partially due to trade restraints imposed on ASEAN countries in these markets, forcing ASEAN to turn to alternative markets. A good example of this is the use of voluntary export restraints (VERs) by the United States and the European Community under the MultiFibre Arrangement (MFA) (Wisarn and Grewe 1994, p. 7). Nonetheless, in absolute terms, the volume of EC-ASEAN trade grew by 164 per cent from US$10.8 billion in 1985 to US$28.5 billion in 1990. During the same period, North America-ASEAN trade volume increased by 105 per cent from US$15.9 billion to US$32.6 billion (Wisarn and Stifel 1993, p. 1). Thus, the developed country markets of Europe and North America remain extremely important to the continued success of ASEAN’s exportoriented growth strategy. A strong and open world trading system should remain the primary focus of ASEAN members’ external trade policies. The Impact of NAFTA Within the context of these trading relationships, the impact of NAFTA for the ASEAN region can be assessed. The degree of trade and investment diversion that will be caused by a free trade agreement is usually the primary cause of concern to outsiders. Trade and investment diversions

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would foster the attitude of competing trade blocs if their effects are sufficiently large. These negative factors can be partially or fully offset by income growth feedback effects resulting in trade creation, which is a net gain for everyone, and would present a complementary outlook for AFTA-NAFTA relations. Trade diversion, which is the reorientation of imports from non-member to member countries of NAFTA, depends on a number of factors. Among these are the level of tariffs existing prior to the agreement, and the degree to which members and outsiders trade in the same products. The tariff levels of the United States and Canada are already very low, especially for countries utilizing benefits of the Generalized System of Preference (GSP), which include all of the ASEAN countries except Singapore. As tariffs are somewhat higher in Mexico, Mexican imports may increasingly be sourced from Canada and the United States. However, Mexico represents a very small market for the ASEAN countries, and the majority of Mexican imports already come from the United States. There is speculation that Canada and Mexico may act as export platforms to the U.S. market for Asian subsidiaries in certain industries, inducing foreign direct investment (FDI) flows that might otherwise have been invested in ASEAN. According to Urata: The magnitude of world FDI started to decline after reaching a peak in 1990. On top of the reduction in the availability of FDI, increasing efforts to promote FDI by a large number of economies in the world, with a hope that FDI would vitalize their economic activities, intensify competition for attracting FDI. (1993, p. 1)

Apart from NAFTA, the opening of China and Indochina is attracting the attention of the newly industrializing economies (NIEs)

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and Japan, just as the transformation of Eastern Europe and the former Soviet Union is occupying much of Western Europe’s attention. Thus, world-wide, the competition for scarce FDI is becoming more intense. In fact, the threat of investment diversion to China and Indochina represents a bigger obstacle to ASEAN than that to Mexico. The huge domestic market in China and the much smaller but still large domestic market in Vietnam, coupled with very low wages, provide an enticing prospect for manufacturers with margins dependent on competitive labour costs. FDI inflows are growing much more quickly in the emerging economies of Asia than in Mexico. Lower tariffs and secure market access under NAFTA might create incentives for further investment in Canadian or Mexican subsidiaries by Asian or other producers. Fears have arisen in ASEAN about FDI diversion away from Southeast Asia to capitalize on new opportunities under NAFTA. Investment diversion can occur for several reasons. Outsiders can invest in the free trade area to take advantage of export opportunities between members, or to produce for the domestic market in one of the member countries. However, investment location decisions are complex, and factors include the economic and political stability of the host country, the existence of well-defined property rights, the stability of the currency and the ability to repatriate profits, and not merely wage costs or tariff avoidance. Referring to firms considering relocation to Mexico, Schott states that “the trade agreement is only a small part of the package of reforms that is influencing the investment decision”.1 Given similar costs in alternative locations, Mexico may gain an advantage in attracting investment to the extent that NAFTA locks in the economic reforms undertaken during the 1980s in Mexico, by enhancing Mexico’s

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growth prospects, and by decreasing risk for investors. If it occurs, investment diversion to Mexico will likely originate from outside of NAFTA as non-members position investment to take advantage of Mexico’s enhanced stability and growth prospects, as well as its improved market access to the United States and Canada. Nevertheless, the lowered tariffs alone are not likely to cause large diversionary effects. In addition to the static trade and investment diversion effects, the dynamic impact of integration on economic growth and competitiveness in North America must be considered. To the extent that member countries’ incomes increase, exports from third countries will increase, resulting in trade creation and nullifying trade diversion effects. Trade diversion would increase for outsiders as membership in the free trade area expands. However, the most frequently cited dynamic effect of regional integration is the increase in exports from outsiders as income within the region rises. The determination of how much imports from outside countries will increase depends on the extent of increased gross domestic product (GDP) growth from the free trade area, the effect of the agreement on comparative advantages within the free trade area, changes in external barriers, and the prospects for future expanded membership in the free trade area (Anderson 1993, p. 43). These factors are likely to produce large trade creation effects, especially for Mexico. The Enterprise for the Americas Initiative (EAI), introduced by former U.S. President George Bush, has provided some expectation of the future expansion of NAFTA, possibly into a Western Hemisphere Free Trade Agreement (WHFTA). Countries outside of the Western Hemisphere are uneasy with this idea, as it will exclude the remaining outsiders from an even larger market. It is beyond the scope of this chapter to discuss the ramifications of such a devel-

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opment; however, a few issues related to the expansion of NAFTA will be mentioned. The accession clause of NAFTA requires unanimous approval for admission of new members, but does not specify any geographic limitation. Hufbauer and Schott have identified several flaws in the accession provisions (1993, pp. 114–16), including the lack of application procedures or explicit criteria, and the ability of each NAFTA member to form its own free trade or bilateral agreements with non-member countries, even those rejected for accession to NAFTA. Several industry-specific sectors of the agreement would also need extensive renegotiation to cover additional members. A “hub and spoke” system as described by Wonnacott is possible if member countries pursue separate bilateral agreements, rather than the expansion of the free trade area (ibid., pp. 9–15). One possibility is a U.S. hub with spokes comprised of NAFTA, the Caribbean Basin, and several South American nations. Wonnacott finds that this type of arrangement would be less beneficial to all the participants than an extended free trade area. While it might seem that the United States would benefit as the hub, having preferential access to all of the spokes, Wonnacott argues that such a system would be administratively costly and politically risky in that it could promote an imperialist image of the United States, which would damage its leadership role in multilateral circles. It is generally accepted that most of the Latin American countries are not developed sufficiently to meet NAFTA’s provisions, although negotiations have been proposed for framework talks with Chile. Thus the prospects of a WHFTA are long term indeed. Recently, Singapore and Korea have stated an interest in joining the grouping. Politically, it is unlikely that the U.S. Congress would agree to extend NAFTA to include any East Asian nation in the near future, especially those with which the

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United States has a large trade deficit. However, the likely effects on ASEAN if this were to occur will be considered later in the chapter. Another indirect effect of regional integration is the diversion of attention away from multilateral trade negotiations. The completion of the Uruguay Round has somewhat set to rest these fears in the case of NAFTA. While all of the objectives of the Round were not achieved, the agreement is comprehensive in nature, en-

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compassing previously unaddressed areas, including trade-related investment measures, intellectual property, agriculture, and textiles. The completion of the negotiations has dampened the doomsday predictions of a downward spiral into an anarchic world of trade wars and unilateral protectionism foreseen by some observers. However, the implementation of the European Single Market and NAFTA might divert the focus of policy-makers somewhat from multilateral issues in the near term.

NOTE 1.

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Jeffrey Schott in “Comments” on Carlos Alberto Primo Braga, “NAFTA and the Rest of the World”, in Lustig, Bosworth, and Lawrence (1992).

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REGIONALISM AND ECONOMIC INTEGRATION IN EAST ASIA

SUNG-HOON PARK

O

ver the last fifteen years or so regionalism has become increasingly prevailing in the world economy. After the first wave of regionalist tendency during the 1960s, the number of regional integration agreements (RIAs) has again surged especially since the mid-1980s. The WTO recently reported that of totally 184 RIAs notified to the GATT/WTO so far, 109 agreements are still in force.1 There are only few member countries of the WTO that are currently not participating in any kind of regional integration agreements. However, the East Asia region has so far been relatively immune from this increasing worldwide tendency towards regionalism. The ASEAN Free Trade Area (AFTA) comprising 9 (10 including Cambodia) countries in Southeast Asia and the South Asian Association for Regional Cooperation (SAARC) comprising 7 countries in South Asia are the only formal RIAs operating exclusively in the Asian region. In addition,

many Asian countries are members of a quasi-RIA called Asia Pacific Economic Cooperation (APEC), which also contains non-Asian, Pacific-basin countries. Compared to the long history, the diversity and the complexity of regional integration agreements in Europe and North and Latin America, economic integration in Asia is rather a new phenomenon.2 In contrast to the relatively belated consciousness on regional integration in Asia, a recent surge in Asian countries’ interest in the formation of regional economic grouping is remarkable. Korea started negotiations on free trade area (FTA) agreement with Chile in 1999, which was officially endorsed through the bilateral Summit meeting on the occasion of the 1998 APEC Summit in Kuala Lumpur. Japan also does consider an FTA agreement with East Asian trading partners as a policy option for the 21st century. A tripartite FTA agreement among Korea, Japan and China has also been

Reprinted in abridged form from Sung-Hoon Park, “Regionalism and Economic Integration in the East Asia: Current Status and Future Policy Options”, in Asia-Europe on the Eve of the 21st Century, edited by Suthipand Chirathivat, Franz Knipping, Poul Henrik Lassen, and Chia Siow Yue (Bangkok: Centre for European Studies; and Singapore: Institute of Southeast Asian Studies, 2001), pp. 133–48, by permission of the author and the publishers.

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discussed within academic and political circles recently. In short, after a long period of abstinence Asia has now become more interested in its own regionalism.

economy, mainly for the following reasons. First, regionalism by itself implies preferential trading arrangements that basically discriminate between members and nonmembers, not only in enforcing tariff barriers but also by erecting non-tariff barriers like rules of origin, regional content requirements, etc. As such, regionalism therefore results in trade diversion. Even though they also expect some trade creation effects as well, they argue that the trade diversion effect exceeds the trade creation effect in almost all cases, and thus results in inefficient allocation of production factors in the world economy. Second, if regional integration is at work, then countries will focus more on regional integration efforts and less on the multilateral trading order that is more desirable.4 Third, scholars who prefer multilateralism refer to historical experiences that the proliferation and strengthening of regionalism, in many cases, have resulted in a serious political or military conflict between regions or countries. Thus, they are concerned about an excessive proliferation or strengthening of regionalism potentially having negative geopolitical impact in the longer term. It is interesting to note, however, that many scholars, such as Young (1993) and Bergsten (1996 and 1997) are of an opposing view, arguing that regionalism has had positive contribution towards multilateralism. First, they regard regionalism as a building bloc to multilateralism, because they believe regionalism will expand horizons of ‘freer trade’ and thus will inevitably lead to strengthening multilateralism. In other words, in contrast to the former view, the scholars argue that there will be more trade creation than trade diversion. Second, these scholars point out that regionalism contributes to economic development of the under-developed economies, in that they are able to gain access to external control mechanisms to continue their domestic reforms, which is necessary

THE CO-EXISTENCE OF MULTILATERALISM AND REGIONALISM: BACKGROUND AND RELATIONSHIP Especially since the mid-1980s the increasing tendency towards regionalism coincided with the strengthening of the multilateral trading system which reached its triumphal moment in 1995, when the WTO was launched as a result of successfully completed negotiations. This seemingly contradictory development implies that countries were, on the one hand, making efforts to strengthen multilateralism under the auspices of GATT. On the other hand, they were at the same time resorting increasingly to regional economic integration.3 As a consequence, the co-existence of multilateralism and regionalism has become one of the main characteristics of the recent world economy. Even though such situation is expected to sustain for a while, a fundamental question arises as to whether or not regionalism has been and will be detrimental to the multilateral integration process of world economy. Two conflicting views exist for the relationship between regionalism and multilateralism. One is the view that regionalism has been (and will continue to be) a stumbling block to multilateralism. The other contends that regionalism has been (and will continue to be) a building block to multilateralism. The first view is well summarized by, ‘inter alia’, Bhagwati (1996) and Bhagwati and Panagariya (1996). They argue that regionalism is detrimental to the multilateral world trading order, and is thus an obstacle to the integration of the world

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for the development process. Third, they point to many cases in which liberalization measures adopted in regional economic blocs have been successfully transmitted to the multilateral trade negotiations.5 Fourth, liberalization initiatives on the regional level may have a demonstration effect to economic agents of a nation like bureaucrats, government, consumers, and entrepreneurs, etc., so that an environment to facilitate liberalization is easily created. Lastly, as can be conferred from regional integration arrangements such as the EC (Germany vs. France), MERCOSUR (Argentina vs. Brazil) and APEC (Japan vs. China and East Asia), many regional integration arrangements have been created to ease political or military tensions or have effectively generated such results. Thus, the scholars counter-argue against the concern that regionalism will increase geopolitical tensions. It is too early to make a definite decision in favor of one argument against the other. However, almost all scholars and policymakers are of the same position that multilateralism is more beneficial to the world economy than regionalism which divides trade systems according to regions. Also, it is generally recognized that even those who argue for the positive effect of regionalism do have in mind the ultimate contribution of regionalism to the strengthening of multilateralism.6

FUTURE PROSPECTS OF REGIONALISM IN EAST ASIA AND POLICY OPTIONS The idea to establish a formal agreement on East Asian regional economic integration is not new. After the formation of ASEAN in the late sixties some countries in Northeast Asia were pondering on the feasibility of joining ASEAN. In the wake of strengthening European and North American economic integration since the

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mid-1980s, more serious plans and proposals have been developed. The ongoing Asian crisis also revived to some extent the discussion on whether and how Asian economic cooperation and integration could be strengthened. Among the complexity of proposals concerning East Asian RIA, the idea to establish an East Asian Economic Caucus (EAEC), which was raised by the Malaysian Prime Minister Mahathir Mohamad, is one of the most prominent examples of such proposals. The EAEC, if it were successfully launched, would have practically implied an extension of ASEAN (AFTA) to Northeast Asian countries, including Japan, Korea, China, and Taiwan. Although the idea was not yet officially discarded, it faced strong resistance from the side of the US. 7 It should be noted that based on our previous observations, an inclusion of Northeast Asian countries, in one form or another, into any kind of regional economic grouping in East Asia is expected to provide an additional stimulus for economic development in the region. Another way to enhance regional economic integration in East Asia would be to provide Korea, Japan and China with individual membership to AFTA. This approach differs from the idea of EAEC in that membership is to be provided on an individual, and not on collective basis, so that any of these three countries can join AFTA whenever they want to. This of course pre-requires the accordance of all the existing member countries of AFTA, which seems not so easy. In the context of open regionalism pursued by APEC, a proposal has recently been raised to establish a Northeast Asian FTA (NEAFTA) among Japan, Korea and China. The idea goes as follows: If APEC continues to adhere to the concept of open regionalism, it does not have any other options than to liberalize unilaterally or to develop itself to an FTA. Considering the

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immense difficulties for APEC member countries to agree upon appropriate measures leading to unilateral liberalization,8 an alternative way of developing APEC into an FTA seemed plausible. In this respect, Park (1998) proposed a formation of NEAFTA as a first step toward an APEC-wide FTA agreement. Notwithstanding which of those proposals is to be adopted, it is imperative that East Asia needs at least some kind of cooperation and integration framework. This is all the more true in the light of overcoming the old and preventing the new economic crisis in

the region.9 A one-sided approach by East Asian countries to intensify regional integration in the region, however, will run the risk of fragmenting the world economy into three large trading blocs, Europe, North America, and Asia. Therefore, East Asia needs to adopt a balanced approach between regional integration and interregional cooperation. For the latter, East Asia has already been involved in APEC and ASEM, which provide excellent opportunities for the world economy not to be further fragmented regionally, but to be further integrated globally.

NOTES 1. 2. 3.

4. 5. 6.

7.

8.

9.

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Of these 109 RIAs 84 are notified under GATT Article XXIV, 14 are notified under the Enabling Clause, and the remaining 11 are notified under GATS Article V. See WTO (1999). It is also to be noted at this place that Japan and Korea, which are two of the most powerful economies in Asia, are the only two WTO member countries that are not participating in any RIAs. This seemingly contradictory posture can be explained by the following two reasons. First, European countries started to establish Single European Market in mid-1980s, and it motivated countries in other regions to form their own regionalism. Second, as UR negotiations at that time were not progressing very well, some countries wanted to reap the benefits of liberalization earlier at regional level. See OECD (1995). This is usually called ‘interest diversion’. See also WTO (1995). Studies conducted independently by the WTO (1995) and the OECD (1995) on the relationship between regionalism and multilateralism concludes also that regionalism has so far been complementary to multilateralism. The US opposition to the idea of EAEC can be summarized as follows. First, At the time when the idea was first raised, APEC was just to be launched, so that US feared of disintegration of APEC into several sub-regionalisms. Second, the US was unhappy because it would have led to a weakening of US influence on East Asia in economic as well as security affairs. However, the official launch of Asia-Europe Meeting (ASEM) in 1996 can be regarded as having practically established the EAEC within an intercontinental cooperation framework, as major potential members of EAEC are all included in ASEM, with the US remaining outside. The difficulties could be observed in last year’s APEC Summit in Kuala Lumpur, where the APECwide initiative of Early Voluntary Sectoral Liberalization (EVSL) could not reach any meaningful agreement, mainly due to hesitation of some member countries to unilaterally liberalize. The fact that the major European currencies were largely not affected by the Russian crisis in the mid-1998, thanks to the strong commitment signaled by the upcoming launch of EURO, to help each other among the EU member countries, reaffirms the need for East Asian economic to more closely cooperate and, if possible, integrate in economic affairs.

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ASEAN POLICY RESPONSES TO NORTH AMERICAN AND EUROPEAN TRADING AGREEMENTS GORDON P. MEANS

RISK ASSESSMENTS The initial concerns of Southeast Asian political leaders over the formation of SEM and NAFTA appeared to concentrate on the fear that the new trading blocs would raise tariff barriers against external trade. Under GATT rules, existing tariffs should not be raised when free trade areas are formed, but the highest tariff level of a joining member state could be adopted for the entire free trade bloc. In early Southeast Asian policy evaluations of the impact of trading blocs, attention focused on the possible consequences to Southeast Asia of higher tariff barriers protecting North American and European markets.1 Repeated assurances from North American and European leaders that the new integrated markets would not result in higher external tariffs shifted the attention of Southeast Asian policy makers to the other consequences of NAFTA and SEM. Even so, many Asian analysts saw NAFTA as designed to increase the competitive capacity of North America and, therefore, as being essentially protectionist

and potentially directed against the high levels of imports from Asia. They also saw it as a measure to reverse the high trade imbalance between the US and Japan, along with imports from other Asian economies, by improving the domestic competitive capacity of North America. Some accused Canada and the US of preaching free trade but of practising protectionist policies. From the ASEAN policy makers’ perspective, even if tariff barriers were not raised by the formation of NAFTA, there would still be ‘rules of origin’ for many products, anti-dumping rules, and other non-tariff barriers which would be imposed to the detriment of Asian exporters to the North American and European markets. As a result, the primary concerns of Southeast Asian policy analysts began to focus on the following issues: the prospects for a continuation of a general system of preferences (GSP) for market access; the impact of the new and proposed trading blocs on investment flows and the transfer of technology; the changing patterns of

Reprinted in abridged form from Gordon P. Means, “ASEAN Policy Responses to North American and European Trading Agreements”, in New Challenges for ASEAN: Emerging Policy Issues, edited by Amitav Acharya and Richard Stubbs (Vancouver: UBC Press, 1995), pp. 146–81, by permission of the author.

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competition arising from economies of scale and complementarity within trading blocs; and the changing conditions of trade created by the potential imposition of new non-tariff trade and investment barriers, including the linking of trade with nontrade issues such as social conditions, human rights, and environment policies. All the ASEAN countries (except Brunei) have enjoyed a GSP, extended to them by most OECD countries, providing substantially lower tariffs for imports from qualifying less-developed countries. Besides the US, the EC and twelve other countries (including Canada) extend GSP trading privileges to underdeveloped countries. The US GSP was established by the Trade Act of 1974 and was scheduled to expire on 4 July 1993 (McGovern 1986: 271–83), but the existing system was ‘rolled over’ for fifteen months to give the new Clinton administration time to study the issue and to come up with a new ten-year scheme. Although the US was expected to retain a GSP system, policy makers anticipated new ‘graduation’ rules to determine when countries have developed to the point where they no longer qualify for special trade advantages. Singapore lost its GSP status in 1989. Rising per capita income and rapid economic development in Malaysia and Thailand suggested that they would become the next ASEAN GSP ‘graduands.’ Therefore, policy makers in those states began planning for the potential loss of their GSP trade advantages. 2 They also anticipated that Europe, Canada, and other states giving GSP preferences would follow them with similar rules patterned after the new GSP regime promised by the Clinton administration for the end of 1994.3 Although there was much concern in Southeast Asia for the economic impact on the region of NAFTA and the EC’s SEM, there was very little local analysis of anticipated consequences. In part, this was because both SEM and NAFTA were still in

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flux throughout 1993, and there were many uncertainties over their final configurations. As far as can be determined, no detailed sectoral analysis was undertaken by Southeast Asian policy makers,4 but the views of European and North American economists and policy analysts were followed with much interest, and some prominent foreign scholars were invited to attend conferences in Southeast Asia on trade, investment/ economic planning, and forecasting. Foreign analysts came to rather diverse conclusions about the impact of NAFTA and SEM. For example, a Canadian study forecast that NAFTA would create trade diversion from East Asia to NAFTA but also increase North American import demands as well as competition for private foreign investment (including some diversion to Mexico). That study suggested that the trade diversion would be small, amounting to less than 0.5 per cent of East Asian exports to the US (Han and Weston 1993: 287–300). A study conducted for ASEAN by Michigan State University estimated the ASEAN trade diversion from NAFTA at US$484 million, which represented 4 per cent of ASEAN exports to North America in 1988. This study concluded that trade diversion could reach levels of 8 to 12 per cent for Southeast Asian exports, with food, chemicals, textiles, metals, and electronics most likely to be severely affected. A similar study by the East-West Center in Honolulu concluded that NAFTA would produce a trade diversion of less than 1 per cent for ASEAN, but it estimated an investment diversion of 3 per cent for Singapore and 8.4 per cent for Malaysia. Another study by the Institute of International Economics in Washington, DC, forecasted lower levels of trade diversion but also predicted heavy capital inflows into Mexico, which would affect investment diversion from ASEAN and East Asia. 5 Despite the potential depressing impact of NAFTA and SEM on East and Southeast Asia, the World Forecast

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Summary prepared by the WEFA (Wharton Economic Forecast Association) Group in 1991 predicted growth rates of 7.4 per cent of real gross domestic product (GDP) for the Pacific Basin during the years 1992–7, which was the highest rate of projected growth for any area of the world except the Arabian Gulf (Buczynski 1991: 25–7). Southeast Asian policy makers seemed to be well aware that the economic dynamism of the area could be retarded if appropriate policies are not formulated and coordinated responses are not devised for their negotiations with North America, the EC, and Japan. A reduction in the growth rate of 2 or 3 per cent below forecasts over the next decade would remove much of the lustre from Southeast Asian economic performance. For Southeast Asian policy makers, the future appeared fraught with potential hazards, requiring innovative policy responses. At the same time, the changes in the economic alignments of Europe and North America posed new opportunities for growth and continued economic dynamism. SOUTHEAST ASIAN POLICY OPTIONS The potential threat posed by the formation of large trading blocs forced Southeast Asian policy makers to consider four broad strategies: First, individual countries could give increased support to the GATT process and press for the completion of the Uruguay Round. If that failed, they could invoke the Most Favoured Nation (MFN) principle of GATT and seek extensions for the GSP system in order to gain access to tariff-protected markets. Second, measures could be taken to cushion their economies from shifting patterns of trade and investment by enhancing the competitiveness of their industries through diversifying imports, exports, and investment sources. New markets could be identified and ex-

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ploited to sustain economic growth. The economic changes and on-going market reforms in Eastern Europe and the Commonwealth of Independent States were frequently mentioned as offering potential new markets for ASEAN states. But, If properly cultivated, other markets were expected to expand or open in China, Vietnam, South Asia, the Middle East, Latin America, and Africa. Third, Asian countries could create regional economic ties which would provide some insulation from the impact of economic restrictions imposed by Western or world markets. They might also form their own trade bloc in order to promote alternative Asian markets and to gain leverage in bargaining with existing or newly created trade blocs. Fourth, Asian countries could seek closer collaboration with NAFTA, SEM, and other regional blocs in order to seek access to markets and investment sources, to become incorporated into them, and/or to obtain rights of consultation/participation in multilateral economic decision making. Within Southeast Asia, all these strategies were pursued or explored but not with equal enthusiasm. Most Southeast Asian policy makers expressed a preference for the GATT system of universal reduction of tariffs and trade barriers. But ASEAN states individually had little capacity to ensure the satisfactory conclusion of the Uruguay Round of negotiations. Consequently, as a practical necessity, the other three broad policy options were explored simultaneously, with somewhat different emphases and priorities from each country. Since public policies are formulated with multiple objectives and in anticipation of many eventualities, it is impossible to identify policy responses designed specifically to meet the challenge of the formation of the European and North American trade blocs. Instead, it is possible to examine specific policies, formulated with mixed motives and

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objectives, which were designed to shape international trade and monetary regimes and to increase opportunities for international cooperation in trade and investment. Such policies were formulated by

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each country, and each country varied with respect to what it anticipated from changing world market conditions, including the potential or likely consequences of the formation of SEM and NAFTA.

NOTES 1. 2.

3.

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Author interview with Ghazali Atan, Institute of Strategic and International Studies, Kuala Lumpur, 23 July 1993. In 1991, 11.3 per cent of total Malaysian exports valued at M$14.4 billion (US$5.6. billion) were exported under the GSP to three primary markets: the US, the European Community, and Japan. Singapore Business Times, 13 August 1993, 3. Author interview with Merlyn Kasimir, Deputy Director, International Trade, Malaysian Ministry of International Trade and Industry, 22 July 1993. In Canada, the tariff preference system for lessdeveloped countries is called General Preferential Tariffs (GPT) rather than GSP. For an evaluation of the impact of NAFTA on the ASEAN region, see Mohamed Ariff, ‘How NAFTA Affects ASEAN Exports,’ Star (Kuala Lumpur), 31 March 1994, 20. Chwee Huay Ow-Taylor, ‘Facing the Challenge from NAFTA/ Singapore Business Times, 28 July 1993, 23; Robert McCleery, ‘NAFTA and Its Effects on Other Regions: US Trade Policy and Asia’s Concerns in a Global Context,’ paper prepared for the Regional Integration and Its Impact on Developing Countries Project, East-West Center, Honolulu, Hawaii, 1993, cited in Michael G. Plummer and Pearl Imada, ‘NAFTA and Malaysia: Problem or Opportunity,’ Private Investment and Trade Opportunities, Special Report, June 1993, 6–7.

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SIGNIFICANT OTHERS: ASEAN AND NATION-STATES

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n the globalizing world of the twenty-first century, characterized, as it is, by the proliferation of multilateral agencies, institutions, commissions, organizations, associations and communities, we tend to forget that nation-states are still important actors on the international stage. Certainly this is true for the Southeast Asian stage, where Big Power rivalries have been a feature of regional political, trade, and security dynamics for decades (if not centuries). It is obvious that in the past fifteen years we have seen major shifts in the relative power of the major players in Southeast Asia. The United States of America has become the predominant global power, and, more than ever, its military, economic, and political clout in the region must be calibrated against its global vision and commitments. The United States is more important to Southeast Asia, than Southeast Asia is to the United States. The Soviet Union is no more, but Russia, it should not be forgotten, still plays a significant role in the larger Asian region, and future developments in Asian Russia (as opposed to European Russia) will certainly be monitored closely in Southeast Asia. China is the rising star of the new century, and is certainly set to make an impact on the

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region, and the world. Developments in China, and its perceptions of Southeast Asia in security, political, economic, and social arenas are one of ASEAN’s primary preoccupations at the dawn of the new century. Other states sharing borders with Southeast Asia also have distinct, and shifting, priorities regarding their interaction with ASEAN, and the relative importance which they attach to regional security, economic, and political relations. Japan’s fortunes appear to have waned during the past decade, and with them, Japan’s regional influence. But Japan as Number One, and its pivotal role as the lead goose in the “flying geese” development patterns of the 1960s, 1970s, and 1980s should not be dismissed. Japanese economic interests in ASEAN are still significant. India has always loomed as ASEAN’s giant neighbour to the south, via the Indian Ocean. Since Myanmar joined ASEAN, India also shares a long and strategic land border link with ASEAN. Australia’s national interest in its evolving relationship with ASEAN was highlighted in the pivotal role it played in the birth of Southeast Asia’s newest country, Timor Leste. This highlights Australia’s role as leader of the South Pacific region. In order to understand the ramifications

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of the involvement of these nation-states in regional developments, another important factor is their intense and intertwined relations with each other. Sino-Soviet rivalries, which played such a dominant role in Indochina in the 1960s and 1970s, no longer exist in a world without competing Communist Superpowers. This has been reinforced by the fact that both China and Russia now aspire to be significant players in the global capitalist market place. The demise of the Soviet Union has of course also led to major security realignments between the United States and Russia. U.S.Soviet proxy clashes in the region are felt by their absence. U.S.-Japan relations revolve around the central question of Japan’s role as leader of an emerging “yen block”. This was illustrated by the U.S. reluctance to support the call for an Asian Monetary Fund, following the 1997 Asian economic crisis. All states are preoccupied with managing their evolving relationships with China, which has emerged as a giant on the global stage. Certainly the new linkages between China and Japan, the two dominant Asian players, will be critical for positioning Southeast Asia. Finally, in the shrinking world of geopolitics, there is a need to focus on events outside of Southeast Asia, which can have ricochet or ripple effects in the region. The U.S.-led War on Terrorism is such an example. Australia’s active involvement in the American–British coalition that invaded Iraq in early 2003, has strengthened the

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perception that Australia views its future quite differently from the ASEAN states. But ASEAN also has been drawn into the War on Terrorism. Southeast Asia, with its significant Muslim population, has been designated by some analysts as a new center for Al Qaeda operations. This perception has been reinforced by the Bali and Jakarta bombings and the attacks on Christian churches in Indonesia, and the arrests and/ or detention of members of the Al Qaedalinked JI (Jemaah Islamiah) in Thailand, Malaysia, Philippines, Singapore, and Indonesia. Nevertheless, the epicentre of the War on Terrorism, and America’s main preoccupation, will remain the Middle East, and Southeast Asia will continue to feel the ripple effects. Evolving relations between India and China, which between them have a total population of 2.5 billion people, will certainly be a focus of concern for Southeast Asia, and here there are historical precedents. A cursory glance at the world map shows that geographically, Southeast Asia is exactly that: the land between South (India) and East (China) Asia. This has had political, security, economic, and cultural dynamics through the centuries, and in today’s rapidly changing geopolitical landscape, it behooves us to remember that there are continuities as well as changes. Living with giant neighbours requires a great deal of sensitivity, finesse, and sophistication. Hopefully ASEAN has inherited these characteristics.

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CHIN KIN WAH

ENGAGING THE US There is a general recognition in post-Cold War Southeast Asia that the United States as a benign superpower or least unacceptable external power (depending on one’s perspective) has a crucial strategic role in maintaining a favourable balance of power and external influence in the wider AsiaPacific region, the stability of which is equally important to the security ambience of Asean. Indeed, in the years since the American military disengagement from mainland Southeast Asia with the end of the Vietnam war in 1975, and again, following the closure of Clark air base in June 1991 and the transfer to the Philippines government of Subic Bay naval base in September 1992, the regional concern has been to keep the US which has higher strategic priorities elsewhere beyond Southeast Asia, strategically engaged. An Asean background document of the Asean-US

dialogue notes that it “has also focused more and more on political and security discussions over the years, particularly with the end of the Cold War. The principal (sic) focus of the Asean-US security dialogue has been the role of the US in maintaining stability in the region”.1 The US is valued as a stabilising factor in the wider Pacific Asia where the rise of China with much enhanced capacity for force projection in the coming century, will have a major impact on the regional equation offerees. The American strategic presence also makes any rise in the military profile of Japan less politically unpalatable to regional states. Hence while there is an expectation that the sharing of burdens will change within the US-Japan security relationship, the hope remains that the US-Japan alliance (more so than perhaps the US-Korea alliance) will endure and continue to play an underpinning role in Pacific Asia.

Reprinted in abridged form from Chin Kin Wah, “ASEAN’s Engagement with the EU and the US in the 21st Century: Political and Strategic Dimensions”, in The European Union, United States and ASEAN: Challenges and Prospects for Cooperative Engagement in the 21st Century, edited by K. S. Nathan (London: ASEAN Academic Press and the Malaysian Association for Academic Studies, 2002), pp. 69–98, by permission of the author and copyright holder (MAAS).

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Within Asean, there is a view most consistently articulated by Singapore’s political leadership that a smooth management of the US-Japan-China triangular relationship is critical to wider regional peace. In an interview published in May 1999, Singapore’s Senior Minister, Lee Kuan Yew, expressed the opinion that peace in East Asia in the new millennium will depend “primarily on relations between the US, Japan and China. If the relationship is stable, there will be a measure of calm. If there is competition for support on various issues between the US and Japan on one side, and China on the other, there could be greater friction. It’s really a question of whether the relationship has its main emphasis on economic development and cooperation, or whether, underlying that, the competition is for political influence, or as the Chinese would call it, hegemony.”2 Such a regional perspective leaves much room in the new century for an American military presence and political role in the region. This presence is further underlined by the reality of very substantial American economic stakes therein. All the old Asean states (namely, Singapore, the Philippines, Thailand, Brunei, Indonesia and even Malaysia despite the occasional anti-American rhetoric) have in their own ways, sought to keep the US strategically engaged in the region well into the new century. Many of them, less unobtrusively in the case of Singapore and the Philippines, have entered into military and naval access arrangements with the US. As former US Secretary of Defense, William Cohen, observed in early 1998, most of the regional countries, which already had a military relationship with the US, wanted to expand the links. He added, “We’ve a great deal of cooperation, joint exercises, training, sharing of military doctrine, techniques, technology”.3 A vocal advocate of continued US military presence in Asia, Singapore has sought

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through a Memorandum of Understanding (MOU) signed with Washington in 1989, to facilitate the hosting of a small logistical support group as well as a rotating US air and naval presence. A 1998 addendum to an MOU signed two years previously provides the US access to Singapore’s new Changi naval base (with facilities that can accommodate aircraft carriers), which became operational in 2001. The Philippines, despite the winding up of American bases in the early 1990s continued without much publicity to hold joint military exercises with the US until December 1996 when the Philippines Justice Department pointed out the absence of a legal framework covering visiting American troops. 4 By May 1999, with Manila increasingly alarmed over China’s construction and expansion of facilities around the disputed Mischief Reef, the Philippine Senate ratified a Visiting Forces Agreement signed the previous year with Washington, paving the way for a resumption of naval visits by and joint military exercises with the US. As a long-time ally of the US, Thailand has provided Washington with access to facilities, including refuelling and transit arrangements, although it refused in 1996 to enter into an agreement that would enable the US to pre-position military supplies in the Gulf of Thailand. But more significantly, it participates in annual large-scale joint military exercises, codenamed “Cobra Gold”, with US forces. And although these exercises were scaled back in 1997 and 1998 on account of Thailand’s financial difficulties, it is noteworthy that Singapore was invited to participate in the exercises from year 2000, thus paving the way to a gradual multilateralisation of these activities.5 In more unobtrusive ways Brunei has limited periodic exercises with the US at its jungle warfare training school and facilitates aircraft transits as well as naval and personnel visits. Closer defence ties with

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Indonesia had included joint naval exercises and the provision of training under the International Military Education and Training (IMET) programme. However, these ties were suspended as a sign of disapproval over Jakarta’s handling of militia violence and military abuses in East Timor following the August 1999 referendum vote for independence. At the time of writing, these military linkages had not been fully restored. Malaysia, despite being a vocal critic of the US over other political and economic issues, remains nevertheless supportive of a continued US presence in Asia and makes available to the US navy, maintenance and repair facilities at its Lumut naval base. And despite the vicissitudes in relations with Singapore, the Malaysian government has not made an issue of the US logistical presence on the island. Indeed, Malaysia itself had in 1991 revealed through its Defence Minister, Najib Tun Abdul Razak, a hitherto undisclosed MOU with the US, which established in 1984 a US-Malaysia Bilateral Training Consultative Group. Najib also indicated that Malaysia was ready to expand the range of defence cooperation with America, including joint exercises, visits and ship repairs. Interestingly the announcement was made days before the Philippine Senate’s rejection of the renewal of leases on Clark air base and Subic Bay naval base to the US.6 These developments suggest that many Asean states are not averse — though some remain more cautious and sensitive — to sharing some of the burdens with the US. These are largely modest but politically tolerable efforts to facilitate the continued projection of American power in the region. There is no harking back to big and costly foreign bases of the past, which in any case have become less essential for sustaining American forward deployments. In a sense the American military presence of sorts, provides a psychological re-

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assurance to a region whose external strategic environment remains generally benign despite the prevalence of uncertainties. The American forward presence, however, is also bolstered by military exercises with regional states. An example was the announcement in early August 1999 by the Philippines Armed Forces Chief, General Angelo Reyes, of combined USPhilippines military exercises scheduled in February and March of the following year near Palawan, the closest major Philippine island to the disputed Spratlys chain. The announcement triggered a Chinese warning to the US to maintain its policy of neutrality regarding the conflicting claims in the South China Sea.7 It was subsequently reported that the tri-service exercises codenamed “Balikatan 2000”, resumed after a hiatus of nearly five years, would be conducted at the Fort Magsaysay army camp in northern Nueva Ecija province and near the former Clark air base and the Subic Bay naval base.8 A show of American naval power in the South China Sea — following the rising tensions in East Asia sparked by former President Lee Teng-hui’s comment that Taiwan and China should have “special stateto-state relations” — was also attempted in August 1999 when two American battle carrier groups engaged in a “passing exercise”. While American officials in the region sought to play down the event, a forthright statement from the commander of one of the carriers left less room for doubt about US intentions. He said, “China will know if they attempt to undertake any kind of operation, whether it’s Taiwan or anything, that they are going to have the US Navy to deal with”.9 Such show of force, quietly welcomed though it may be, remains very much a unilateral exercise. These developments should also be viewed in perspective. First, Asean governments would generally not want to use China as the overt point of reference to

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their strategic engagement of the US.10 Indeed, there are those in Asean who would wish to distance themselves from the US — some like Myanmar, out of necessity on account of its ostracism by the US itself (and also it might be added, the EU) because of Yangon’s human-rights violations and refusal to acknowledge the domestic demands for political change; and others like Vietnam, out of a deference to Chinese sensitivity. In the latter case it has been reported and subsequently confirmed by William Cohen himself, that Hanoi had twice in 1999, called off a planned visit by the US Secretary of Defense (a development which set back America’s plans to widen military contacts with its erstwhile enemy) so as not to complicate relations with China which were in the process of being normalised after almost 13 years of conflict.11 The Cohen visit did materialise in February 2000 but not before Vietnam had concluded a comprehensive land border treaty with China.12 Even those who are most supportive of an American forward presence and the strengthening of US-Japan defence links would be wary of China’s sensitivities to the enhancement of such American-centred alliance linkages. A case in point was provided by the unusually strong editorial reaction of the Straits Times in Singapore to the decision by Japan and the US to conduct joint research on theatre missile defence (TMD). Describing the development as likely to fuel a destabilising arms race and as an “example of ... adventurism”, the paper commented pointedly that, “in Asia, the US and Japan are strengthening their military alliance, frightening China needlessly”. More significantly, it called on the Asean countries to ask Japan and the US to stop the undertaking, which it described as “madness”.13 Secondly, it should be said in retrospect that whatever strategic engagement with

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the US which Asean governments would contemplate, there is no unrealistic expectation that the US would “go it alone” in the very region which has given it the “Vietnam syndrome”. As NATO’s military intervention in Kosovo indicated, America would in the new century be increasingly attracted to fighting “clean” wars from the air that it could win cleanly. Lee Kuan Yew has drawn attention to Bosnia and Kosovo: “I don’t think the US has the stomach to go it alone, not unless it is free of body bags and even of prisoners”.14 Indeed, the reluctance of the US to commit ground forces even for peace — peacekeeping in East Timor reflects not only this aversion but also perhaps the persistence of the “Vietnam syndrome”. Ultimately the Asean states would have to shoulder the primary responsibility for their own defence. Thirdly, it should be noted that the region’s strategic engagement of the US is pursued not only for the purpose of benefiting from some degree of extended deterrence and reassurance but also with a view to promoting wider confidencebuilding on a multilateral basis through the Asean Regional Forum (ARF) — a process that parallels but does not supplant existing deterrent alliances. For a region which recognises the importance of the Sino-US relationship to the stability of its security environment, and which would rather not have to make invidious choices between the two external powers, the preferred scenario is one in which the US and China continue to engage in confidence building instead of strategic competition.15 Finally, the region’s strategic engagement of the US could parallel a process of political distancing as well as a propensity to take issue with the superpower on other matters of rice-bowl politics, human rights and democracy. The development of a defence relationship between Malaysia and the United States has taken place side-by-side

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with its sharp differences with Washington over the East Asia Economic Caucus (EAEC) originally conceived by Malaysia as a grouping or bloc, which the US strongly opposed and about which even some regional states had reservations. EAEC was perceived to “exclude” the US (and Australia and New Zealand as well) from the Asia-Pacific. On the eve of the 1999 APEC summit in Auckland from which he absented himself, the Malaysian Prime Minister, Mahathir Mohamad, complained in a contribution to a Japanese newspaper, that “it would seem ... Asian countries cannot form their own grouping without the supervising presence of the US, Australia and New Zealand”. He pointedly noted that APEC (which includes the US) has come to dominate the East Asian economy, yet was either unwilling or powerless to help the East Asian countries during the economic and financial turmoil.16 Indeed, the regional economic and financial crisis of 1997–98 had considerably sharpened political differences between Malaysia on the one hand and the US and what were perceived to be US-dominated international financial institutions such as the IMF and the World Bank on the other. In this respect, it is the US rather than the EU (despite the EU’s larger contribution to the IMF) which was “cast in the villainous role as the controller of the IMF”. This came about partly “because of the Asian perception that the Europeans do not act together as a concerted force”.17 Referring to the domestic Indonesian turmoil, Mahathir had also pointedly criticised the IMF for its insensitivity to “the social cost of all this economic restructuring (as demanded by the IMF economic recovery package).” Referring to the IMF’s insistence that Jakarta remove fuel and electricity subsidies, Mahathir remarked, “... when people have become poorer and you pull back the subsidies, then you are

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deliberately agitating the people — almost wanting them to react violently”. 18 Mahathir’s own unique strategy of getting the Malaysian economy out of the crisis by raising a firewall of capital and exchangerate controls was a rejection of the medicine prescribed by the IMF. The political fall-out of the economic crisis on the region had other consequences on relations with the US. In Malaysia’s case, the crisis brought to the forefront internal differences between Mahathir and Anwar Ibrahim, Mahathir’s Deputy and Finance Minister who was known to be supportive of the IMF way of credit squeeze, corporate reform and economic restructuring. Anwar’s subsequent rallying call against “corruption, collusion and nepotism” — the very same slogan used by the opponents of former President Suharto — masked an underlying contestation for control over the political and economic direction of the country. Such a movement for reform which later developed into a movement for democracy with Anwar’s arrest and subsequent trial on charges of corruption and sexual misconduct, struck a chord of sympathy in Washington given its support for the forces of democratisation in the region. The illtreatment of Anwar while in detention and his subsequent conviction triggered strong reactions from both the US and the EU. The latter, whose rotating presidency was held by Germany at the time, expressed deep concern and questioned the fairness of Anwar’s trial while the then US Vice President, Al Gore, suggested that Malaysia’s economy would suffer in the long run if it failed to pursue democratic reform and tolerate dissent.19 But what really brought on Malaysia’s ire against the US was Al Gore’s speech at a function on the eve of the APEC summit in Kuala Lumpur on November 16, 1998, when he publicly endorsed the “reformasi” movement started by Anwar and snubbed Mahathir by leaving

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precipitately. The subsequent furore in Malaysia was a stark reminder that the manner in which American influence is exercised in the region could have its political downside. A sense of American “pushiness” had also clouded Thailand’s political relations with Washington over the protracted and heated contest between then Thai Deputy Prime Minister, Supachai Panitchpakdi, and former New Zealand Prime Minister, Mike Moore, for the post of DirectorGeneral of the WTO. American backing for and perceived political manoeuvrings on behalf of Moore during the later stages of the contest in 1999 resulted in widespread resentment in Thailand. A former Thai Deputy Prime Minister, Meechai Ruchupan, even called for a review of relations with the US, saying, “We have to see who are our real friends and who are our real enemies”.20 In other spheres too, America’s political influence is not embraced unquestioningly. On the contrary, in the wake of perceived

American “triumphalism” following the end of the Cold War, the debate in the early 1990s on Asian values and democracy — a debate entered vigorously by Singapore — shows that regional states do lay claim to alternative models and justifications for their political legitimacy. Singapore’s Foreign Minister, S. Jayakumar, also observed that Asians and Europeans living in a globalised world did not want to be dominated by the values and lifestyle of one culture.21 His cabinet colleague, Teo Chee Hean, the Minister for Education and Second Minister for Defence, observed that the EU had a role in tempering American influence in a globalised world. Addressing an audience at the French Institute of International Relations, he pointedly remarked: “The role played by the United States in international affairs today is overwhelmingly preeminent. This role is, by and large, uniquely benign and constructive. But this unipolarity has caused unease and discomfort and elicited negative reactions in some quarters.

NOTES 1. 2. 3. 4. 5.

6.

7. 8. 9. 10.

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Asean-US Dialogue (http://www.Asean.od.id/dialog/mus.html). Asiaweek, May 21, 1999, p. 30. Straits. Times, January 17, 1998. Far Eastern Economic Review, June 3, 1999, p. 27. A small contingent of 29 Singapore officers participated for the first time in the 19th annual Cobra Gold exercises, which were held in Thailand’s southern province of Nakhon Sri Thammarat, in May 2000. The US and Thailand contributed 13,000 and 5,000 troops respectively. In anticipation of future East Timor-like scenarios, the exercise objective was modified to focus on peacekeeping (including non-combatant evacuation) rather than conventional war-fighting). (Straits Times, May 10, 2000 and http://www.straitstimes.asia1.com.sg/asia/sea10_0524_prt.html) Donald K. Emmerson, “Indonesia, Malaysia, Singapore: A Regional Security Core?”, in Richard J. Ellings and Sheldon W. Simon (eds.), Southeast Asian Security in the New Millennium, Armonk, New York and London: M.E. Sharpe, 1996, p. 77. The Chinese Ambassador to the Philippines expressed the hope that “this sensitivity to the disputed area will be respected.” (Straits Times, August 4, 1999.) Straits Times, January 28, 2000. Straits Times, August 14, 1999. Equally, the US for its part would not wish to be too specific in publicly articulating the sources of threat in the long run. Secretary of Defense, William Cohen, expressed it thus during a visit to

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11. 12. 13. 14. 15.

16. 17. 18.

19. 20. 21.

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the region in early 1998, “If the US is not here, then another country would fill the vacuum ... It could be China, Japan, India, Pakistan or an Asean country and it might not necessarily be friendly to our interests, triggering conflict.” (Straits Times, January 15, 1998.) See Nanyan Chanda, “Pulled Two Ways”, Far Eastern Economic Review, August 26, 1999, p. 24. As Cohen put it, “I think they are cautious... They wanted to make sure their moves are not misunderstood.” (Far Eastern Economic Review, March 23, 2000, p. 22.) Straits Times, August 16, 1999. The editorial elicited a strong reaction from the Japanese Ambassador to Singapore who sought to clarify Japanese policy towards TMD. Newsweek, May 21, 1999, p. 32. In September 2000, at the launch of the second volume of his memoirs, Lee Kuan Yew, in an offthe-cuff but prescient comment said, “At the moment, we are friends, many of us in East Asia are friends with both (the US and China), or at least we try to be. If that does not work out and we have to choose sides, it’ll be a very different world. So we hold our breath.” (Sunday Times, September 17, 2000.) Straits Times, September 7, 1999. Brian Bridges, “Europe and the Asian Financial Crisis: Coping with Contagion”, Asian Survey, Vol. XXXIX, No. 3, May/June 1999, pp. 456–7. Sunday Times (Singapore), May 17, 1998. For its part, the US State Department closed ranks with the IMF and declared through it spokesman, “We continue to believe that a key component in restoring economic growth in Indonesia will be a vigorous program of economic reform as proposed by the IMF and political reform shape through dialogue between the government and its citizens”. (Ibid.) Straits Times, April 16, 1999. Straits Times, May 8, 1999. http://www.straitstimes.asial.com.sg/singapore/sin10_04l5_prt. html

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IS THERE A U.S. STRATEGY FOR EAST ASIA?

SHELDON W. SIMON

SECURITY RISKS IN THE ASIA-PACIFIC Imminent security risks in the Asia-Pacific are concentrated in Northeast Asia where the United States deploys most of its western Pacific armed forces and where its most unambiguous defence treaties apply. North Korea’s defiance of nuclear nonproliferation norms in 1994 and China’s provocative naval exercises over Taiwan in 1996 raised the prospect of direct U.S. military intervention, which, in turn, had the potential to shatter an unprepared U.S.– Japan alliance. If the United States had intervened at that time in Korea, and Japan had refused to assist because of its constitutional constraints, U.S. officials and analysts believed that the Japan–U.S. Security Treaty would have unravelled.1 This close call instead led the Clinton Administration to modernize the alliance to make it more effective in the event of future challenges. The China–Taiwan confrontation has also challenged the Clinton Administration’s dominant strategic belief that economic

engagement and the privatization of the PRC economy would strengthen the political position of moderates within the country, who would promote a policy of peaceful relations with neighbours to elicit even more trade and investment on China’s road to prosperity. The basic lacuna in this vision, however, was that it ignored China’s irredenta, particularly with respect to Taiwan. The PRC–Taiwan imbroglio and North Korea’s growing missile capabilities have led to a modification of U.S. East Asian strategy so that economic engagement, represented by promises of aid to the Democratic People’s Republic of Korea (DPRK), or North Korea, and World Trade Organization (WTO) membership for China, are now balanced by talk of building a regional missile defence, ostensibly directed at Pyongyang but interpreted by Beijing as also designed to neutralize its pressures on Taiwan. The Asian financial crisis of 1997–98 was also fraught with security risks. Economic

Reprinted in abridged form from Sheldon W. Simon, “Is There a U.S. Strategy for East Asia”, Contemporary Southeast Asia 21, no. 3 (1999): 325–43, by permission of the author and the Institute of Southeast Asian Studies.

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turmoil led to political instability in Indonesia and considerable political tension in Malaysia, South Korea, and Thailand. Concern arose over the ability of Japan and the Republic of Korea (ROK) to fund their share towards the new North Korean nuclear power plants as well as their ongoing cost-sharing arrangements for U.S. forces stationed in their countries. Despite domestic opposition in the United States Congress, the Clinton Administration achieved an expansion of International Monetary Fund (IMF) lending, emergency back-up financing, and export credit guarantees for all the Asian crisis-stricken states that asked for assistance. The United States proffered particular support, via the IMF, to South Korea and Indonesia. Equally important, the United States kept its markets open to the region’s exports despite record-setting balance of payments deficits. The economic crisis also slowed Asian military modernization, reduced operations and exercises, and led to requests for the reduction of host nation financial support for U.S. forces. The ASEAN countries which had focused on resolving South China Sea conflicts co-operatively have recently been so involved with reviving their economies that little attention has been paid to regional security.2 While external security concerns in Southeast Asia take a back seat to economic recovery, in the rest of Asia a more proactive shift is taking place as Washington designs new types of military co-operation with traditional friends, including Japan, South Korea, Australia, and even Taiwan. Although the primary deterrent target is North Korea, new capabilities could also be directed at China; and the PRC has responded angrily. Typical is a 3 June 1999 commentary in the People’s Liberation Army’s (PLA) Liberation Army Daily castigating revisions in the U.S.-Japan Defense Guidelines as “speedily strengthening the integration of Japanese and American

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militaries. Japan’s policy of self-defense and its constitutional article giving up war are turning into mere scraps of paper.”3 China is concerned, too, about Japan-U.S. co-operation in theatre missile defence (TMD). Ostensibly directed against North Korea, Beijing has argued that a TMD umbrella in the region is also meant to neutralize China’s forces, thus encouraging independence advocates on Taiwan. North Korea’s own missile launching has clearly not benefited PRC policy either. The more Japan and U.S. forces in the region appear vulnerable to a DPRK strike, the more probable Tokyo and Washington will proceed to develop a TMD system. Moreover, under heavy congressional pressure, the Clinton Administration in April 1999 agreed in principle to the sale of an early warning radar system to Taiwan which, from Beijing’s perspective, can be seen as a deliberate link in bringing Taiwan under a regional TMD umbrella. Taipei has already acquired advanced Patriot missiles from Washington. Despite growing military co-operation among the United States, Japan, and South Korea, the war in the former Yugoslavia and a dedicated U.S. naval and air presence in the Persian Gulf have negatively affected the military balance in Northeast Asia. An East Asian carrier battle group was sent to the Mediterranean to replace one that had been redeployed to the Adriatic Sea, leaving only modest U.S. naval capability off the Korean peninsula. The use rate of U.S. combat aircraft over Kosovo and Serbia seriously concerns the U.S. Air Force because spare parts inventories have been depleted. As a result, the tactical fighter fleet is reportedly at its lowest readiness level in decades.4 Even under optimal conditions, the U.S. naval presence in the western Pacific is premised on continued deployments from Japan. If the Navy had to sustain a fully deployed carrier battle group from U.S. ports rather than Yokosuka, four more carriers would have to be added to the fleet.

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This is because every U.S. Navy ship operates on a 24-month cycle, only one sixmonth segment of which is spent on station. Similarly, if the Air Force lost its bases in Japan, in order to maintain the same level of air power, the United States would have to deploy an additional aircraft carrier to the region with annual costs in excess of US$10 billion.5 In Southeast Asia, after the U.S. exit from the Philippine bases in 1992, there has been no concentrated U.S. presence. While a number of bunkering and repair arrangements have been made with Indonesia, Malaysia, Singapore, and Thailand, these provide for co-operative engagement opportunities but no significant deterrent presence. Should a major military contingency arise in Southeast Asia requiring a substantial operational commitment of U.S. forces, the supporting infrastructure in the region would be inadequate.6 In effect, U.S. strategy calls for an ongoing presence of 100,000 troops forward deployed in the Asia-Pacific region but at the same time identifies no strategic challenges, such as the rise of China as a great power. For the first time in this century, China is unimpeded by its two traditional security preoccupations: Russia and Japan. While the United States hopes for the PRC’s co-operation in Northeast Asia to restrain North Korea’s belligerence, in Southeast Asia the situation is more complex. The Asian economic crisis and the political crippling of Indonesia have rendered ASEAN virtually helpless in coping with PLA actions in the South China Sea. Japan has also lost stature in the wake of its ineffective response to Asia’s economic difficulties and its own persistent recession. The lack of a common strategic focus for Asia has meant that U.S. policy has become a magnet for every domestic group with a foreign policy agenda. 7 With respect to China, for example, the U.S. Congress has served as a sounding board for conservative

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Christian organizations concerned with oppressed co-religionists, and for Republicans who charge Democrats with accepting political donations from PRC fronts as well as failing to protect American nuclear weapons secrets from Chinese spies. With no consensus on a strategy towards East Asia, centrifugal forces dominate the debate.

SOUTHEAST ASIA IN U.S. STRATEGY Southeast Asia finds itself in a new strategic environment. Though still prominent, the U.S. military presence has been reduced; and the roles of China and Japan as major regional powers have increased. Strategic stability for Southeast Asia, then, depends on cordial relations among the United States, Japan, and China. In times of stress, by contrast, the SLOCs could be threatened, Japan could increase its military presence, and China could respond in kind. To reduce these negative prospects, the Southeast Asian states support close Japan–U.S. military relations, provide bunkering opportunities for the U.S. Seventh Fleet, and engage China in a way that acknowledges its stature as a regional great power, and has involved Beijing in conflict management. In short, the ASEAN-10 desire friendship with all the great powers but domination by none. Opportunities for a sustained U.S. military presence are provided not to engage in coalition warfare as a partner of the United States (those times are over) but to balance a growing Chinese presence and to ensure that Japan has no need to assume the United States’ protector role.8 There remains, nonetheless, an ASEAN ambivalence towards these limited military arrangements with the United States. Temporary port and airfield visits have been approved; but the permanent prepositioning of military supplies is not, as indicated by the 1994 Thai refusal to permit

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the United States to station six supply ships in the Gulf of Thailand. This ambivalence towards the United States reflects several considerations: on the positive side, a belief that the U.S. military presence is both necessary and benign but, on the negative, a concern over heavy-handed American interference in the region’s domestic politics. A recent example of the latter was Vice President Al Gore’s blunt condemnation in Kuala Lumpur of Prime Minister Mahathir Mohamad’s treatment of his former deputy, Anwar Ibrahim. Postulating a link among economic success, American liberal values, and U.S. structural power in world politics, Gore seemed to threaten that unless regional governments promoted liberal change, the United States might turn its back on the region’s future. The Vice President’s diatribe, though playing well in Washington, proved a disaster in Southeast Asia for it lent credence to Mahathir’s complaints against the United States: that it was unwilling to treat Asians as equals and that it was seeking to subvert the region’s economic and political institutions.9 U.S. strategy concerning the intransigent Spratly Islands dispute has consistently appealed for a peaceful resolution and has urged China to avoid actions that increase tensions in the region, citing continued PRC construction on Mischief Reef. The Philippine Senate’s June 1999 ratification of the Visiting Forces Agreement with the United States has reopened opportunities for joint exercises and the provision of some U.S. military equipment. However, none of these developments alters the basic U.S. policy of neutrality towards the dispute. Within Southeast Asia, Washington’s

passivity towards the Spratlys is seen as part of its engagement policy towards China and may partly account for ASEAN’s lack of interest in taking a strong stand against Chinese encroachments at the December 1998 ASEAN meeting in Hanoi. By taking advantage of ASEAN’s preoccupation with economic recovery and Washington’s general passivity, Beijing indirectly calls into question the utility of the U.S. presence in the region. This situation also supports China’s argument that U.S. bilateral alliances are relics of the past.10 Nevertheless, under the U.S.– Philippine Mutual Defense Treaty, the United States may arguably be obligated to come to Manila’s assistance in the event of a confrontation with PLA forces in the Spratlys. While the treaty does not cover the contested islets, it does stipulate that the United States will assist the Philippine military if it is attacked — without specifying the location. Should there be a Philippine–China military confrontation over the Spratlys, Manila could call on Washington to fulfill its treaty obligations. Some Chinese analysts have even alluded to this possibility. And Philippine President Joseph Estrada has publicly reminded Washington about it.11 At the most recent meeting of the ASEAN Regional Forum (ARF) in July 1999, the United States urged the group to devise ways of relaxing military tensions in the South China Sea. Clearly, Washington hopes that the Spratly claimants and their neighbours can devise ways to cool both rhetoric and the competitive occupation of Spratly features before military escalation occurs.

NOTES 1. Michael Mastanduno, “Economics and Security in Statecraft and Scholarship”, International Organization 52, no. 4 (Autumn 1998): 849. 2. Sheldon W. Simon, “The Economic Crisis and Southeast Asian Security: Changing Priorities,” NBR

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3. 4.

5. 6. 7. 8.

9.

10.

11.

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Sheldon W. Simon Analysis 9, no. 5 (December 1998); and Statement by Admiral Dennis Blair, U.S. CINCPAC, before the U.S. House of Representatives Appropriations Subcommittee on Defense for the Fiscal Year 2000 Posture Statement, 4 March 1999. Cited in Shawn Crispin and Susan V. Lawrence, “In Self-Defense,” Far Eastern Economic Review, 1 July 1999, p. 22. Michael Vatikiotis, Shawn Crispin, Shim Jae Hoon, and Julian Baum, “Playing by New Rules?”, Far Eastern Economic Review, 22 April 1999, pp. 18–19; and Elizabeth Becker, “Needed on Several Fronts U.S. Jet Force is Strained,” New York Times, 6 April 1999. Michael O’Hanlon, “A New Japan-U.S. Security Bargain,” Japan Quarterly, October–December 1997, p. 16. Marvin Ott, “Policy Without Strategy” (Paper prepared for the 1999 Pacific Symposium, 1–2 March 1999, Washington, D.C.), p. 5. Ibid. p. 9. Guy Pauker, “One Southeast Asia and the Great Powers: The Case of the United States”, in One Southeast Asia in a New Regional and International Setting (Jakarta: Center for Strategic and International Studies, 1997), pp. 187–88. Jurgen Haacke, “The Principles of Quiet Diplomacy in the International Politics of ASEAN in the late 1990s: What is Really Changing?” (Paper presented to the 40th annual meeting of the International Studies Association, Washington, D.C., 16–20 February 1999), pp. 25–26. Sheldon W. Simon and Mark W. Frazier, “China Tests the Waters” (Unpublished paper distributed by the National Bureau of Asian Research, Seattle, 15 April 1999), and Michael McDevitt, “China and the South China Sea — A Conference Summary Report,” PacNet #15 (Honolulu: CSIS/Pacific Forum), 16 April 1999. Wenqing Xie, “Sino-U.S. Relations and Security and Stability in the Asia-Pacific Region,” International Strategic Studies, No. 2 (Beijing: China Institute for International Strategic Studies, 1999), pp. 43–44. See Estrada’s statement in the Manila Philippine Daily Inquirer (Internet Version), 25 May 1999, in FBIS, Daily Report — East Asia, 26 May 1999.

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THE UNITED STATES AND THE ABORTED ASIAN MONETARY FUND

RICHARD HIGGOTT

T

he abortive exercise, in the wake of the Thai and Korean currency crises, to set up an Asian Monetary Fund (AMF) is instructive. While it drew material and rhetorical support from a range of regional states, the United States refused to support it. To be capitalized initially at $100 billion, the AMF was to provide emergency regional support and avoid what many leaders saw as the humiliation of the IMF telling them how to readjust to the new circumstance. A proposal for an AMF made up only of East Asian states was in many ways an exercise in ‘thinking East Asian’ not dissimilar to the setting up of the East Asian Economic Caucus (EAEC) within APEC.1 Interestingly, and in contrast to the development of the EAEC proposal, Japan was willing to lead the proposal for an AMF. It took the initiative in trying to persuade the United States that it was additional to, not incompatible with, the IMF. But the proposal was insufficiently thought out and, with the benefit of hindsight, destined to

fail. It was underwritten by, and verbally accompanied by, a large dose of ‘Asian Way’ hubris among its ASEAN supporters. Regional leaders had still not understood the power of the global financial markets, but the proposal’s most naive failing was to underestimate the strength of the opposition from the United States and the IMF, which felt it would not only undermine their ability to impose tough conditionality on loans but also act as a veritable threat to American interests and influence in Asia. Of course, other factors were salient, but the US desire for the IMF to control adjustment funding prevailed and its dominant role in the process was endorsed at the Vancouver APEC summit in November 1997. This may, however, be a turning point for APEC. By opposing the proposal (more) seeds of polarization in the relationship between the Asian and Caucasian members of APEC were sown. The exhortatory liberalization rhetoric of the Vancouver APEC meeting only superficially concealed a

Reprinted in abridged form from Richard Higgott, “Regionalism in the Asia-Pacific: Two Steps Forward, One Step Back?”, in Political Economy and the Changing Global Order, 2nd ed., edited by Richard Stubbs and Geoffrey R. D. Underhill (Ontario: Oxford University Press, 2000), pp. 254–63, by permission of the author.

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deeper schism between the two edges of the Pacific. The economic turmoil reinforced the notion that the Asia-Pacific is an artificial construction of region, the longterm salience of which may well have been affected by the economic downturn and regional resentment at the US- and IMF-led responses to the crisis. The euphoric expectation of the 1993–6 period — that APEC would provide firm institutional ties to mitigate interregional tensions between Asia and the United States — was clearly wishful thinking of a high order. Advocates of APEC championed ‘open liberalism’ in the region, assuming that it was benign and its enhancement uncontested. Much of the discussion on APEC throughout the first half of the 1990s saw only the benefits of free trade and none of the pitfalls of dramatic increases in deregulated, unrestricted capital mobility. APEC always found its strongest intellectual and political support among the American, Australian, and Canadian members. During the heyday of Asia-Pacific growth, the Asian members were willing to go along with its emerging program, although not necessarily at the pace the Caucasian members wished. In the post-crisis era things have changed. Thus, APEC — rather than being a potential instrument for trade liberalization at the Asia-Pacific level in which a harmony of interest developed between the member states — is seen in some policy communities of East Asia as but another forum in which the United States can hammer home its claim for further capital market liberalization. Added to the problems now facing APEC, the failure of the AMF leaves us with an open question. Is it more or less likely that there will be further initiatives to provide some kind of regional economic cooperation, in general, and financial policy coordination, in particular? The answer is twofold. In the short run, no grand regional

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strategies are likely to be proposed. In the longer term, however, the international responses to the Asian crises may make the prospect for the increased management of East Asian (as opposed to Asia-Pacific) economic affairs all the more likely. Indeed, both short-term practical and longer-term conceptual avenues of regional financial cooperation are being explored. Even the AMF idea has not died. At the practical level, ASEAN finance ministers (meeting in Manila in December 1997) inspired and agreed to a framework whereby member states would engage in the mutual surveillance of each other’s economies. Such an agreement, unthinkable prior to the crisis, demonstrates a desire to enhance regional policy-making capabilities — especially in a period in which regional states will provide financial aid to each other’s reform processes. This is an exercise in the recognition of the ‘East Asianness’ of the region. The crisis has been a spur to it. While it is anchored within the existing international financial institutional context, the Manila Agreement, as its full title indicates, is intended to ‘Enhance Asian Regional Co-operation to Promote Financial Stability’. The framework will offer a process of enhanced mutual IMF-style surveillance and Asian-style ‘peer pressure’. In short, it represents a contribution to the regional institutional economic architecture that does not currently fit with any existing model. The Manila Agreement is very much part of the wider exercise of soul-searching now taking place both within ASEAN and between ASEAN and its other East Asian partners. ASEAN, especially is facing an identity crisis so that it might be necessary to reconsider some aspects of the ASEAN way of ‘non-interference’ in the affairs of member states. At a more exploratory and conceptual level, the idea of an AMF continues to

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resurface, as do other ideas, as regional states seek ways to stabilize their currencies. For example, there is the Malaysian proposal for local currency-based settlement of trade within ASEAN. In April 1998 a South Korean delegate to the Asian Neighbours Forum in Tokyo raised again the idea that Asian countries needed to think about an AMF, led by Japan, to maintain currency stability in the region. Similarly, the head of the Asian Development Bank Institute, Jesus Estanislao, has suggested that a system not unlike the European monetary system — in which Asian currencies would move against a currency basket consisting of the dollar, the yen, and the Euro — is not impossible in Asia.2 The crucial point of these avenues of exploration is not their immediate significance. Nor is the point to underestimate the difficulties of such regional policy co-ordination. Rather, it is to suggest that we would be naive to ignore the possibility that at some stage Asians will introduce greater regional institutional mechanisms for the common management of financial questions. Those willing to deny the possibility of a common currency in Asia would do well to remember the fate of those similar analyses, emanating from the United States in the 1980s, that ridiculed the idea of a common European currency. The status of regional co-operation in Asia and Europe is, of course, very different. Interregional trade in Asia (at about 40 per cent) is not as concentrated as in Europe (at over 60 per cent): there is no free movement of peoples in Asia as there is within the European Union, and levels of institutionalization are not comparable. But there is a growing recognition in the region that Asian currency fluctuations do not accurately, or fairly, reflect economic fundamentals. Asian policy communities are now fully sensitized — in a way that they were not prior to 1997 — to the degree to which small open economies

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are vulnerable to the global financial markets and the need to guard against this vulnerability. This, of course, is one of the reasons why the Malaysian government introduced exchange controls in September 1998. Whether endeavours to secure greater regional financial policy co-ordination are contested or supported by the global financial markets will depend on the nature of the institutional architecture envisaged. It will require a major Japanese leadership role, both intellectually and by the internationalization of the yen. This, in turn, will depend on the successful restructuring of the Japanese financial system. It will also need support from the United States, which is not currently forthcoming, and from Europe, which, while less important, is more likely if the Asia-Europe Meeting Process can develop and the Euro becomes an important international currency. These discussions are for the realm of future policy analysis. But whether the Asians will be successful or not in their endeavours, there can be little doubt that the exploration of some form of AMF-style cooperation as a way to combat vulnerability will be an item on the regional policy agenda in the twenty-first century. Given Asian desires to enhance regional surveillance and co-ordinating capacity, it might be worth considering the nature of US objections to the AMF. They offer insights into not only US policy but also the wider relationship between global liberalization and regionalization. US policy towards an incipient AMF reflects a privatesector desire for continued financial liberalization, on the one hand, and, on the other, domestic and international political/ bureaucratic institutional desire not to cede the power of the international financial institutions — in which the United States is dominant — to regional institutions over which they would certainly have less

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ideological/philosophical and practical control. This two-prong rationale emanates from a wider policy context — what Jagdish Bhagwati calls the ‘Wall StreetTreasury Complex’.3 Bhagwati provides a compelling demonstration of how the actors, values, and interest of the group he identifies have been at the heart of the US and IMF policy response to the recent crises in East Asia in general and in opposition to an AMF in particular. This should comes as little surprise to the student of modern policy analysis. In the application of values to policy, the Wall Street-Treasury complex, as with many other issue-oriented policy networks, exhibits the now well-understood epistemic characteristics of a public- and private-sector policy community with strong shared normative values and common causal, problem-solving methodologies. The Asian crisis, more than any other recent example, demonstrates the influence of Washington over the international financial institutions. Wall Street’s concern was that an AMF-style organization would slow down the liberalization of Asian financial markets. The US response to the crises, inherent in IMF policy, has been to liberalize trade, deregulate financial markets, and enhance disclosure rules. All, by happy coincidence, coincide with the broader aims — both before and after the crises — of US economic diplomacy in the region. As President Bill Clinton’s first Secretary of Commerce, Jeffrey Garten, noted, the ‘worsening financial flu will lower Asian immunity to US business’.4 There were also more general foreign policy reasons for the United States not wishing to see an AMF realized. Most importantly, notwithstanding the declining share of its quota in the organization, the United States is still the dominant actor in the IMF. The development of viable

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alternative organizations would diminish its influence. Moreover, US policy towards Asia over the last decade, in both the economic and security domains, has seen a gradual shift from a hub-and-spoke pattern of relations towards a greater multilateralism. These evolving regional relationships were initially resisted by the United States but gradually came to be accepted in the context of a broad definition of region as the AsiaPacific, as opposed to the narrower definition of East Asia. APEC, in the economic domain, became acceptable as a vehicle for US interests. Similarly, the ASEAN forum was acceptable in the security domain because it was always secondary to the still dominant bilateral security structure. Viewed through American eyes, then, a successful AMF was not consistent with overall American interests. For many in the US foreign economic policy-making community the AMF seemed like a potential first step towards a yen zone. With hindsight, US fears that an AMF would have weakened the American hold over the policy process in Asia, especially vis-à-vis the Japanese, appear grossly overstated. The AMF was never viewed by the Japanese as a competitor to the IMF, although it may have been by others such as Malaysian Prime Minister Dr Mahathir Mohamad. Japanese unwillingness to push the AMF in the face of US opposition represented a failure to break the ‘occupation psychology’5 in its relationship with the United States and, as a consequence, left other, more desperate regional elites no alternative but to acquiesce to the conditions imposed by the IMF programs. However, such is the perversity of international politics that US opposition to the proposal may well make a further attempt to initiate such a body — in less frenetic times — all the more inevitable.

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NOTES 1. 2. 3. 4. 5.

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See Richard Higgott and Richard Stubbs, ‘Competing Conceptions of East Asian Regionalism: APEC versus the EAEC in the Asia Pacific’, Review of International Political Economy 2, 3 (1995). Nikkei Weekly, 23 Mar. 1998, 12; 25 May 1998, 23. Jagdish Bhagwati, The Capital Myth: The Difference Between Trade in Widgets and Trade in Dollars’, Foreign Affairs 77, 3 (1998): 11. New York Times, 14 Jan. 1998. Walden Bello, ‘East Asia: On the Eve of the Great Transformation’, Review of International Political Economy 5, 3 (1998).

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TRENDS IN U.S. POLITICS AND THEIR IMPLICATIONS FOR AMERICA’S ASIAN POLICY WILLIAM J. BARNDS

THE CHALLENGES AHEAD It is clearly impossible to consider all the important developments that might occur in Asia or in U.S. politics that could influence America’s Asian policy. The 1988 presidential election and the implications of the turmoil in world financial markets beginning in the autumn of 1987 add new uncertainties to the scene. Therefore certain key trends and general propositions will be set forth based upon an interpretation of past American experience in Asia, and of recent public attitudes and government policies. Then a few important specific issues which the United States faces or might face will be considered briefly. And in conclusion the broad issue of American ability and willingness to continue to play a major role in Asian affairs will be examined. It is clear from carefully designed surveys of public opinion that support for greater involvement in international affairs had increased significantly between the mid1970s and the early and mid-1980s.1 Yet

attitudes of Americans ranging from citizens and elites to policymakers will be influenced not only by developments and events in Asia but also by those occurring elsewhere — such as in the Persian Gulf, where the administration’s policy of military involvement has at least initially been broadly supported despite the damage done by the Iran-Contra affair. One development warranting mention is the impact that the rapid growth of AsianAmericans is likely to have on U.S. policy toward the region. Extrapolating from the data of the 1970 and 1980 censuses, there probably are about 5 million AsianAmericans in the United States today, although many are not citizens. They are clearly having a growing impact on American life, and add to American awareness of Asia. These trends are likely to continue. Some Asian ethnic groups have acquired sufficient resources and knowledge of the American political system to be able to create publicity for causes involving their

Reprinted in abridged form from William J. Barnds, “Trends in U.S. Politics and Their Implications for America’s Asian Policy”, in Regional Dynamics: Security, Political and Economic Issues in the Asia-Pacific Region, edited by Robert A. Scalapino, Seizaburo Sato, Jusuf Wanandi, and Sung-Joo Han (Jakarta: Centre for Strategic and International Studies, 1990), pp. 227–72, by permission of the publisher.

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former homelands, including congressional hearings to consider conditions in these countries and their relations with their neighbors. Nonetheless, the ability of AsianAmericans to influence U.S. policy on basic issues of Asian policy is still quite limited, and likely to expand only slowly. The major reason is that Asian-Americans are not a single group but a series of groups with few interests in common. The largest of these — the Chinese — are themselves divided between native Taiwanese, Chinese from Taiwan who originally came from the mainland in the late 1940s, Chinese from Hong Kong, and those from the PRC; these groups often have sharply divergent views on issues involving China and Taiwan; Pakistanis and Indians have different viewpoints, as do Sikhs and Hindus from India. The same is true for most other communities. The Vietnamese-Americans are strongly anti-communist, but as recent arrivals, most of them are still struggling to succeed in America. There are no strong domestic political pressures to make any substantial changes in the broad thrust of American security and political policies in Asia which will confront whoever is elected president in 1988. The problems of balancing U.S. security and economic interests on the one hand and human rights concerns on the other will remain and be complicated by the reforms being attempted in Leninist societies. If South Korea continues to move successfully toward democracy, the dilemma will be eased regarding that country, but (as discussed later) the issue may become more acute in the Philippines. The House of Representatives probably will remain Democratic for the indefinite future given the steady rise in the rate at which incumbents are reelected,2 but its orientation on Asian issues is less clear. And the Democrats will remain divided on important aspects of foreign policy as a result of Vietnam.

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Yet it is essential to recognize that the relatively strong support for present policies is contingent on the cost of such policies not increasing significantly. Support for (real) increases in the U.S. military budget has declined substantially in the past few years, although there is broad support for not letting spending decline sharply. Support for economic and military aid has been relatively weak for many years among the public, although support among “leaders” or “elites” has been stronger.3 A major accomplishment of the Reagan administration was persuading Congress to raise the level of foreign economic and military aid (especially the latter) from $10.6 billion in FY 1981 to $20.2 billion in FY 1985.4 Yet because of the increasing pressures to cut the budget deficit, and President Reagan’s stand against any significant tax increases, the amount of foreign aid voted by Congress declined to about $15 billion in FY 1986 and will fall by approximately another $1–2 billion in FY 1988. Thus the Guam Doctrine’s requirement that Asian countries carry a greater share of the security burden is likely to become more important once again, and at a time of growing U.S.-Asian economic tensions and the continuation of the tougher stand on trade issues already adopted by the Reagan administration. The reluctance to pay heavier costs to carry out our Asian policies and commitments probably applies even more strongly to America’s willingness to engage in largescale and prolonged military action in the region, in effect, to engage in anything resembling the Korean or the Vietnam wars. Obviously much would depend upon the particular circumstances of the case: how the conflict began, who was involved, and so forth. One can make a case for a different judgment on this matter and cite several supporting arguments. The United States has treaty commitments (although not ironclad ones) to a number of countries in the region, such as Japan, South Korea,

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Thailand, and the Philippines, and would realize that the costs of not honoring such commitments would be heavy and lasting. (No one cites the “domino theory” in public debate today, but the general underlying conviction it was expressing probably is still widely held.) In 1986 majority opinion favored sending troops into action if the Soviets invaded Japan (although the likelihood of such an attack is very low), and a majority of leaders (but not the general public) favored using U.S. troops if North Korea invaded South Korea.5 U.S. political leaders would be aware of all these considerations, and the impulse to intervene militarily would be strong. Yet such leaders would also be aware that public support for past conflicts eroded as time passed without a clearcut victory. They would also remember that no postwar president who involved the country in an Asian war has been reelected, and this would have some effect on their actions. U.S. policies will also be influenced by the course of Soviet policy in Asia and in the world. Mikhail Gorbachev is making major efforts to revitalize the Soviet economy and (partly to help him realize his domestic goals) to project a new and more dynamic and flexible posture in international affairs. In his speech on Asian affairs at Vladivostok on July 28, 1986, he sought to gain Asian acceptance of a greater Soviet role in the region, as well as to stress Moscow’s desire for better bilateral relations with the countries of the region, especially China and Japan. Gorbachev faces a number of basic problems, however, in attempting to realize his goals. The Soviet Union has little to offer the region economically, even if a SinoSoviet summit takes place sometime in 1989. A more basic obstacle is that there are few indications to date that he is willing (or able) to change basic Soviet policies toward China or Japan or to reduce Soviet support for Vietnam or North Korea, all of which have placed the USSR in a somewhat

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isolated position. Soviet willingness to remove its SS-20s from Asia has eased Asian anxieties that the United States would strike a bargain with Moscow on intermediaterange nuclear forces that reflected greater U.S. attention to European than Asian security concerns.6 (The troop withdrawal from Afghanistan, absent other actions more directly involving China or Japan, will have only a moderate impact on East Asia unless followed by other measures.) Gorbachev may simply not have had time to undertake major policy initiatives, or it may be that the Soviets think that concessions would weaken Moscow’s position with its allies and friends more than it would win enhanced cooperation from presently hostile nations.7 The United States can do little directly to influence Soviet policy on most issues, however, and its efforts must be directed primarily to doing what it can to maintain its relations with its allies and friends. In assessing U.S.-Soviet influence in Asia, moreover, one should keep in mind that the United States has extensive private links with most Asian countries which the USSR lacks. Probably the most dangerous Asian situation facing the United States today in Asia east of the Persian Gulf in terms of possible involvement in war concerns the Korean Peninsula, and awareness of this danger — even though the probability of war is low — has been behind periodic U.S. efforts to work with other powers to restrain Pyongyang. It may not be appropriate to describe Kim II Sung as “reckless” since it has been thirty-seven years since he launched a war across the 38th parallel. Yet North Korea has attempted to assassinate both Presidents Park and Chun, killed many of Chun’s cabinet ministers in Rangoon in 1983, and its agents put bombs aboard an ROK airliner that resulted in the deaths of 115 people in November 1987. Pyongyang is also aware that trends in economic strength, and with it military potential, increasingly

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favor South Korea. Kim might be prepared to take some risks to realize his dream of national unification if political conflicts in the South seemed to be leading to widespread unrest. And even if South Korea continues its encouraging moves toward democracy, which will be difficult in view of the lack of tradition of compromise in Korean political life, there are likely to be periods of instability. Anti-American sentiment, moreover, has risen both because of trade disputes and the belated U.S. support for the ROK’s move toward democracy.8 If such action by the North escalated to a full-scale war, U.S. troops would be caught up in the fighting, given their location north of Seoul. The North Korean forces might be quickly repelled and the conflict ended. The United States would try to hold its involvement to air strikes and perhaps modest reinforcement of its ground forces. If this were not enough to prevent a North Korean victory, however, U.S. political leaders would be sorely tempted to resort to nuclear weapons — at least tactical ones — rather than accept either a North Korean victory or the need for large-scale U.S. troop reinforcements for a war of uncertain duration. Fighting a long conventional war to protect a country strategically important to Japan (even if Tokyo did not object to the United States carrying out air strikes from its bases in Japan) would add a new and dangerous element to a presently strained U.S.-Japan relationship. The implications of a resort to nuclear weapons (especially against another Asian nation) on the American position in the world as well as on U.S. relations with Japan, the PRC and the USSR are beyond the scope of this chapter, but they would surely be profound, as would the turmoil such action would cause inside the United States. The most ominous challenge involves the Philippines. The government of President Corazon Aquino made progress in reestablishing democratic political insti-

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tutions, restoring public trust in government, and reviving the economy in her first year-and-a-half in power. But after mid1987 the heterogeneous array of forces that united to oust Marcos splintered, and important elements of the military and the old political elite as well as right-wing vigilantes and the communist New People’s Army threatened the government from several directions. Given past FilipinoAmerican ties, the United States has a major stake in the success of a moderate, proWestern government in the Philippines. This would be true even if there were no U.S. military bases there, but in view of the important of these bases — especially now that Vietnam allows the Soviets to use Cam Rahn Bay and Da Nang — a communist victory in the Philippines would represent a major setback to the United States, and probably would result in a major shift in the balance of power in the region. Thus the stakes are high. It is clear that the outcome of the struggle inside the Philippines will depend overwhelmingly on the Filipinos themselves, and on Manila’s ability to promote a measure of economic and social justice, keep corruption in check, and gradually gain the upper hand in dealing with the communist guerrillas. However, the United States should be willing to expend considerably greater resources to help influence the outcome of events, and press Japan to do the same, provided the Filipinos demonstrate the ability to utilize such resources, for the cost of relocating the bases would run into the billions of dollars. American conservatives probably would urge continued aid to a right-wing government that took over as a result of an anticommunist military coup, but liberals would be dubious that such a regime would attack the social and economic conditions underlying the communist insurgency. With regard to other political and security issues facing the United States in Asia, domestic political considerations are

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unlikely to shift policies much from the broad course they have followed in recent years. Dramatic events such as an IndoPakistani or a Sino-Indian war, a nuclear arms race in South Asia or the spread of New Zealand’s antinuclear policies to Australia, an extensive improvement in Sino-Soviet relations, or a serious deterioration of Sino-Japanese relations, could pose new and difficult problems, but the U.S. response would be determined largely by perceptions of U.S. national interests rather than by domestic political pressures. These perceptions would inevitably be somewhat different among different groups, but it seems unlikely that there would be basic and enduring differences within the U.S. body politic over how to respond to such situations. One possible exception may involve how to respond to Pakistan’s continued efforts to expand its nuclear capabilities. Many liberal Democrats have pushed to curtail or halt military aid to Pakistan because of Pakistan’s present course, while conservatives argued that such a cutoff would not stop Pakistan’s nuclear program but would undercut U.S. ability to support the Afghan guerrillas. Congress appeared to resolve this issue late in 1987 when Pakistan was granted a new four-year waiver from the Symington amendment, but the United States will continue to face the complicated task of providing support to Pakistan sufficient to maintain U.S.-Pakistani cooperation without supplying such advanced weapons as to basically alienate India, which is becoming an important power in its own right. Other possible exceptions involve Afghanistan on the one hand and Vietnam and Cambodia on the other. The USSR’s agreement to withdraw from Afghanistan represents a stunning setback for Moscow and resulted from prolonged worldwide opposition to the Soviet occupation of its neighbor and a recognition by Soviet

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leaders that there was no significant chance of breaking the prolonged military stalemate in Afghanistan. The steadily expanding U.S. arms supply program for the guerrilla forces was largely a bipartisan policy begun in the Carter years and steadily expanded under President Reagan. Yet the Reagan administration’s expanded program — especially the critical decision to supply Stinger antiaircraft missiles — was due partly to pressures from an unusual mixture of conservatives and liberals in Congress and within the executive branch. Similarly, both parties in Congress raised such on uproar over the planned cutoff of U.S. arms to the guerrillas once the Soviet troop withdrawal began that the administration, in signing the April 14 accords providing for the Soviet troops to leave, felt compelled to reserve the right to continue to provide such arms if Moscow did not end its arms supplies to the Kabul regime. (Congress had supporters in parts of the administration, apparently including the White House when it finally focused on the specific terms of the agreement.) Even assuming the Soviets do withdraw their troops by early 1989, the fluid nature of the situation in mid-1988 and the interrelated complexities of the issues, which involve domestic Afghan affairs, regional implications, and great-power relationships, make it impossible to spell out the many decisions that could face the United States, much less how different U.S. political forces would try to deal with such matters. Much will depend upon whether the anticommunist forces give top priority to ousting the communist regime in Kabul and establishing a government acceptable to most of the country, or whether they turn to a struggle among themselves over who holds power or over the Islamic or tribal orientation of a new government. In any case, a few points warrant mention. Maintaining a relatively united U.S. stance

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could become much more difficult once the focus shifts from getting the Soviets out of the country to which Afghan forces control it. Morever, U.S. support for Pakistan may diminish significantly once the Soviets are out, particularly if Pakistan proceeds with a nuclear weapons program. These developments would create more problems for liberals than conservatives, but they would have an impact on both groups. Moscow might try to take advantage of U.S.-Pakistani difficulties by improving its own relations with Islamabad. However, it probably will move cautiously lest it damage its ties to India. The death of President Zia and several top military men in an airplane crash of unknown causes complicates all these matters. Democracy may come to Pakistan, but its survival will depend on its untried politicians satisfying the powerful military establishment. Regarding Vietnam, any administration would find it politically costly to normalize relations with Hanoi unless a withdrawal of Vietnamese troops from Cambodia was a part of the arrangement, and/or there was a prospect for ending Soviet use of Vietnamese bases. (The willingness of Hanoi to move on either of these issues is more a function of its view of the prospects for Sino-Vietnamese relations than of its hopes for improved relations with the United States.) Americans today generally take a calmer view of matters involving Vietnam than they did a few years ago, but any administration, especially a Democratic one,

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would still need to move cautiously and to prepare the public for any change in U.S. policy in order to avoid a costly domestic dispute. Yet any administration that helped secure the withdrawal of Vietnamese troops from Cambodia or of Soviet forces from Vietnamese bases would score a substantial political victory at home as well as abroad — as long as the Khmer Rouge did not return to power. The Vietnamese announcement in May 1988 that it would withdraw 50,000 soldiers from Cambodia, perhaps partly due to Soviet pressure and partly to Vietnamese domestic economic troubles, could be the first move toward a Cambodian settlement. However, in view of the uncertainty of Hanoi’s ultimate intentions, the complexities of the situation in and around Cambodia and the fact that the United States was much less involved in supporting the Cambodian resistance than it has been in aiding the Afghan guerrillas, the U.S. government is likely to move cautiously no matter which party is in power. In any case, given the importance the United States places on its relations with ASEAN, the views of these countries would carry considerable weight, especially if their policies remain united. This is true even though ASEAN countries have reduced their reliance on the United States regarding security matters, as they recognize that China and the Soviet Union are the key players in Vietnam.

NOTES 1.

2.

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See William Watts, The United States and Asia: Changing Attitudes and Policies (Lexington, Mass.: D. C. Heath, 1982), esp. ch. 6. A more recent study confirming this trend is John Reilly, ed., American Public Opinion and U.S. Foreign Policy 1987 (Chicago: Chicago Council on foreign Relations, 1987), esp. ch. 2. This trend toward reelecting House incumbents (but not incumbent Senators) has continued for fifty years, and in the1984 and 1986 election less than one-eighth of the contests were decided by

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3. 4.

5. 6. 7.

8.

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William J. Barnds a vote of 55 percent or less. In 1986 over 98 percent of the incumbents running were victorious. These developments offer bleak prospects for a Republican majority. New York Times, June 15, 1987. See Reilly, American Public Opinion, pp. 25–29; and Watts, United States and Asia, p. 19. Agency for International Development (AID), Congressional Presentation: Fiscal Year 1983, Main Volume, p. 480; and AID, Congressional Presentation: Fiscal Year 1987, Main Volume, p. 664. This overstates the trend somewhat, as FY 1985 saw a special $2 billion additional program for Israel. Reilly, American Public Opinion, p. 32. For an analysis of the complexities of arms control issues in Asia, see Paul Kreisberg, “The Prospects for Arms Control in Asia,” Far Eastern Economic Review, December 24, 1987, pp. 32–33. For an analysis of Gorbachev’s moves, see Gail Lapidus, “The U.S.S.R. and Asia in 1986: Gorbachev’s New Initiatives,” Asian Survey 27(1) (January 1987): 1–9; and Gerald Segal, “The U.S.S.R. and Asia in 1987: Signs of a Major Effort,” Asian Survey 28(1) (January 1988): 1–9. For an analysis of these matters, see Korea at the Crossroads: Implications for American Policy, a Study Group Report by the Council on Foreign Relations and The Asia Society, New York, 1987; and Han Sung-Joo, “South Korea in 1987: The Politics of Democratization,” Asian Survey 28(1) (January 1988): 52–61.

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ASEAN-CHINA RELATIONS TURN THE CORNER

MELY CABALLERO-ANTHONY

A

SEAN-China relations have come a long way in the past decade and there have been remarkable advances in economic, political, and security cooperation this year. Relations between China and ASEAN were initiated only in July 1991 when Beijing began to attend the ASEAN Post-Ministerial Conference (ASEAN PMC) as a consultative partner. This was significant since until 1990 some ASEAN members did not even have formal diplomatic ties with China. At the 24th Asean Ministerial Meeting in Kuala Lumpur, then Chinese Foreign Minister Qian Qichen expressed China’s interest in strengthening cooperation with ASEAN. This was received warmly by ASEAN and a series of milestones have followed. They include: •

The establishment of the ASEAN-China Joint Committee on Economic and Trade Cooperation and the ASEANChina Joint Committee on Science and Technology in July 1994;

•

•

•

China became a member of the ASEAN Regional Forum (ARF) upon its launch in July 1994 and ASEAN and China agreed to have consultations on political and security issues of common concern; China become a full dialogue partner of ASEAN in July 1996 and attended the PMC for the first time; China participated in the ASEAN Plus Three summit upon its inauguration in July 1997 paving the way for ASEANChina summits.

The ASEAN-China summit has become an annual event since the first informal meeting in Kuala Lumpur in 1997. This provided the framework for both sides to discuss economic as well as political and security issues of common concern. The ASEAN-China summit held after the Eighth ASEAN summit in Phnom Penh in November was particularly productive. During the meeting, several landmark agreements were signed. The most import-

Reprinted from Mely Caballero-Anthony, “ASEAN-China Relations Turn the Corner”, PacNet Newsletter, no. 52 (12 December 2002) , by permission of the author and the Center for Strategic and International Studies, Washington, D.C.

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ant was the Framework Agreement on ASEAN-China Economic Cooperation, which would lead to the creation of an ASEAN-China Free Trade Area in 10 years. China is the first dialogue partner to sign such a pact with ASEAN. In addition to the FTA, ASEAN and China signed a memorandum of understanding on agricultural cooperation. In the political and security field, ASEAN and China signed two important declarations: one on the Conduct of Parties in the South China Sea, the other on Cooperation in Non-traditional Security Issues. Moreover China expressed interest in acceding to the ASEAN Treaty of Amity and Cooperation in Southeast Asia, and to work toward signing the Southeast Asia Nuclear Weapon-Free Zone (SEANFWZ). These initiatives that have emerged in the last two years reflect the increased commitment to deepen cooperation and closer consultation between China and ASEAN. These are major advances in what was once a trouble-ridden relationship between the region and China; they therefore merit closer analysis to see the extent of rapprochement between the two political and economic entities. These initiatives that have emerged in the last two years reflect the increased commitment to deepen cooperation and closer consultation between China and ASEAN. These are major advances in what was once a trouble-ridden relationship between the region and China; they therefore merit closer analysis to see the extent of rapprochement between the two political and economic entities. ASEAN has been eager to engage China on political and security issues in the region. This is despite past mistrust and animosity between the two parties, largely a product of China’s support for communist parties in ASEAN countries. For its part, China has been receptive to ASEAN initiatives. Hence developments on political and economic

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issues need to be carefully watched, particularly those relating to potential areas of friction or conflict. A good example is territorial disputes in the South China Sea. These disputes remain the single largest issue in ASEANChina relations, even though ASEAN as a corporate entity is not a party to the disputes — only some of its members. Despite China’s previous adamant stance that such issues could only be discussed bilaterally with claimant states, ASEAN was finally able to convince China to discuss South China Sea problems on a multilateral level. Thus, the signing of the Declaration on the Conduct of Parties in the South China Sea was no mean feat. It signaled a mutual desire to move forward after three years of futile discussion on a code of conduct. Some observers have dismissed the Declaration for falling short of expectations and not addressing the question of sovereign jurisdiction. In addition, they claim that ASEAN has been divided by China’s bilateral talks with claimant parties and Beijing’s insistence on the exclusion of territorial jurisdiction in the document. These criticisms do not take account of fundamental issues. First, it was never the intention of ASEAN or China to include the question of sovereignty or territorial jurisdiction in negotiations for a regional code of conduct. It would be unrealistic to expect states to budge on issues of sovereignty, let alone negotiate them with multiple parties. Had this been the objective, China as well as other claimant states would have refused to even agree to talk. Second, territorial disputes are not handled multilaterally; these are always resolved bilaterally, particularly if international legal arbitration is required. Third, it is not within the means of ASEAN to resolve territorial disputes; it does not have mandate to do so.

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Finally a code of conduct promotes trust and confidence; it is a confidence-building measure, a norm-setting exercise that modestly aims to encourage self-restraint in activities that could spark disputes. This relies greatly on the good faith of parties and cannot be binding. Weighed against these considerations the fact that a Declaration was finally created, a signal of the parties’ intention to work toward a regional code of conduct. This is a breakthrough for all concerned. Even the Philippines, which initiated the idea of a regional code of conduct in 1998, was relieved that an agreement was finally reached. In doing this, ASEAN and China have agreed to put sovereignty issues aside in order to tackle the intractable multiple claims in the South China Sea. This has also been the basis for promoting the idea of joint development zones (JDZ) as a practical approach to manage territorial disputes, to advance profitable economic uses of maritime resources, and to promote peace and security, discussions that started in the early 1990s upon China’s initiative. When considering current security challenges confronting the region, one must also note the collaborative efforts between

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China and ASEAN to address new security issues. In this regard cooperation in fighting illegal production and trafficking of drugs has intensified under the ASEAN-China Cooperative Operations in Response to Dangerous Drugs (ACCORD). Since it was established in 2002, there have been ministerial conferences on drug control cooperation between China, Laos, Myanmar, and Thailand, and bilateral cooperation between ASEAN member countries and China. The ASEAN-China Joint Declaration on Cooperation in the field of non-traditional security issues builds on this mechanism. The new agreement would serve to coordinate efforts in addressing, in addition to illegal drugs, the growing problems of smuggling people and arms, sea piracy, money-laundering, international economic crimes, cyber crime, and terrorism. While difficult issues confront China and ASEAN, one needs to take a broader view of the unfolding events. In taking stock of the progress and prospects of ASEAN-China relations, one could see the glass as half full rather than half empty. Then, we can identify opportunities for advancing mutual interests while being mindful of the challenges that exist.

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86.

ASEAN’S ROLE IN THE CHINESE FOREIGN POLICY FRAMEWORK

JOSEPH Y. S. CHENG

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n an era of economic reforms and its opening up to the external world, China wants to secure a peaceful international environment to concentrate on economic development. Its strategy in the Asia-Pacific region has been consistent: to stabilize China’s periphery, and treat the region as China’s base. Chinese leaders accept that regional cooperation is an irreversible trend in global economic development and in the evolution of the contemporary international power configuration. As the largest developing country in the Asia-Pacific region, China has to participate and promote regional economic co-operation enthusiastically in order to strengthen its influence in the region. This activism since the 1990s has been in sharp contrast to the aloofness and lack of a regional policy in the 1970s. The Chinese authorities understand that only through active participation, will China be able to benefit from the regional economic cooperation process, and direct the flows of capital, technology, and commodities in

directions favourable to China’s development. They certainly hope to influence the orientation and development of the organizations for regional co-operation, and at the same time enhance China’s position to oppose hostile blocs and organizations. It has been with such intentions that China has participated in the Asia-Pacific Economic Co-operation (APEC), Pacific Economic Co-operation Council (PECC), ASEAN Regional Forum, and so on. In the past two decades or so, China and the countries of Southeast Asia have been concentrating on strengthening their economic base. In their pursuit of economic development and prosperity, economic linkages between them in the areas of trade, investment, finance, and technology have been strengthening. At the same time, China and ASEAN share very similar stands on issues such as Asian values. The discourse on Asian values emerged in the early 1990s, articulated most prominently by the then Prime Minister of Singapore, Lee Kuan Yew, and Prime Minister Mahathir Mohamad of

Reprinted in abridged form from Joseph Y. S. Cheng, “Sino-ASEAN Relations in the Early Twenty-first Century”, Contemporary Southeast Asia 23, no. 3 (2001): 420–51, by permission of the author and the Institute of Southeast Asian Studies.

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Malaysia. 1 They argued that the ethical foundations of Asian societies rest on values that emphasize consensus and harmony, loyalty to family and community, hierarchy and deference to authority, as opposed to Western ideals which stress individual rights, civil liberties, and competitive politics. The consensus on Asian values between China and ASEAN was best symbolized by the Bangkok Declaration, which embodied their agreement on the common human rights position to be articulated at the World Conference on Human Rights, held in June 1993 in Vienna. The Bangkok Declaration emphasized economic growth, community interests, non-interference in other countries’ domestic affairs, and respect for each other’s different socio-economic, historical, and cultural backgrounds.2 The Chinese leadership and China’s Southeast Asian experts are aware that serious problems face the development of Sino-ASEAN relations in the future. They acknowledge that the regional dynamics among the ASEAN states still take priority over their relations with China. For example, Singapore had to wait for Indonesia to normalize relations with China before doing so itself. In fact, in the eyes of the ASEAN states, China does not have to cultivate close ties with them. Its economic integration with Hong Kong and Taiwan may create a trading group in keen competition with ASEAN. These considerations, however, do not seem to have eroded the Chinese leadership’s determination and optimism in developing better relations with the ASEAN states. Such optimism admittedly may well lead to an underestimation of the potential problems and obstacles. In the early 1990s, when China was attempting to improve relations with its neighbours, to ensure that it would enjoy a peaceful international environment, the ASEAN states were also considering how to meet the challenge of integrating China into the Asia-Pacific community by offering

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it a reasonable stake and a constructive role in the region. In this mutual engagement process, both parties broadened their respective concepts of security to include not only the military, but also the political and economic aspects as well. Chinese leaders were also aware that China’s declared ambition to become a global power would mean that its Southeast Asian neighbours would be carefully analysing the intent and meaning of every move on its part. China’s contribution or threat to the overall peace and stability of the Asia-Pacific region would be the key variable determining the ASEAN states’ support, or at least tolerance, of China’s ambition. Chinese leaders appreciated that they had to demonstrate an awareness of the needs of the ASEAN states, and endorse their idea of a security equilibrium and the promotion of regional economic integration. The strengthening of SinoASEAN relations in the early 1990s was partly a result of China’s active responses to the ASEAN proposals on regional confidence-building measures and preventive diplomacy. Both parties were eager to establish multilayered channels of consultation on a bilateral and multilateral basis, as they realized that security cooperation would conform to their mutual interests. The peaceful resolution of the Cambodian issue through the Paris Peace Conference of 1989–91 reinforced SinoASEAN trust at the end of the Cold War. In the eyes of the ASEAN states, they could then approach all major powers involved in the region without alienating any of them. The Cambodian settlement also contributed to the normalization of relations between China and Vietnam in November 1991. Therefore, China’s push for multipolarity coincided with ASEAN’s promotion of a regional security equilibrium. The ASEAN states were proud of their diplomatic achievements in the Cambodian settlement,

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and they appreciated that such achievements would have been impossible without China’s co-operation. Indonesia, especially, realized that it could not act as co-chairman of the Paris Peace Conference without at least a working relationship with China. The latter also exercised considerable selfrestraint in facilitating the peaceful settlement. China pushed the Khmer Rouge to accept the United Nations peace plan in 1989–90 when its leaders were inclined to resist diplomatic pressure from the Western countries. In August 1990, Chinese premier Li Peng declared in Jakarta that China would not support a dominant role for the Khmer Rouge in Cambodia and would not push it into power.3 Chinese military support for the Khmer Rouge also ceased at that time. Hence, Chinese leaders went a considerable way to remove the suspicion and resentment which had gathered among the ASEAN states in relation to Beijing’s support for the Khmer Rouge. Improvements in Sino-ASEAN relations in the early 1990s were perhaps reflected in the following: in 1993, some mass media in ASEAN capitals called it “the ASEAN year” in Chinese diplomacy because of the frequent visits of ASEAN leaders to Beijing.4 The strengthening of dialogue and mutual trust between China and the ASEAN states established a good foundation for the parties concerned to avoid the subsequent disputes over the Spratly Islands from seriously damaging their relations.5 Chinese leaders quickly attempted to defuse the Mischief Reef incident in early 1995. In March 1996, China and the Philippines held their first annual vice-ministerial talks to resolve problems caused by the conflicting claims to the Spratlys.6 Earlier, at the ARF meeting in August 1995 in Brunei, the Chinese Government had indicated for the first time that it would abide by international law in sovereignty negotiations with the claimants to the Spratlys. This was a

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significant concession on the part of Beijing which had hitherto simply insisted that the Spratlys were Chinese territory. The fact that the Chinese Government allowed the issue to be brought up in a multilateral forum, though only in an informal consultative session, was another notable concession because it had previously insisted on tackling the territorial dispute on a bilateral basis.7 Both China and the concerned ASEAN states do not expect their territorial disputes over the Spratly Islands to be resolved in the foreseeable future. However, they believe that they share a common interest in maintaining a peaceful, stable environment in the region so that they can all concentrate on economic development. From the United States’ point of view, the likelihood of armed clashes over the Spratly Islands on a scale that might prompt American involvement is low, and as long as peace and stability prevail and freedom of navigation is respected, it has no reason to be involved in the complex negotiations.8 The Chinese Government’s limited concessions, however, have not been able to put the ASEAN states entirely at ease. There is still a serious concern with what is perceived as China’s policy of gradual expansion in the South China Sea. This policy has been depicted as “creeping assertiveness”, and recently as “talk and take” by the Philippine Defence Secretary.9 “Creeping assertiveness” is a gradual policy of establishing a greater physical presence in the South China Sea without recourse to military confrontation.10 The perception of “creeping assertiveness” is related to that of the China threat. Subscribers to the view of “creeping assertiveness” believe that the Chinese military does not have the capability to dominate the South China Sea yet, and that China at this stage does not want to provoke the United States into adopting a more assertive stand in Southeast

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Asia and push ASEAN closer to the latter. Those who are concerned about the China threat also consider that at present it is not yet a serious threat to ASEAN because of its limited military projection capabilities, but the threat will become significant in two to three decades when it becomes much stronger economically and militarily, and when its economic development generates a huge demand for resources, especially energy resources, pushing China onto the road of expansionism. Those in ASEAN who are concerned about China’s “creeping assertiveness” and the China threat naturally welcome the renewed American efforts to revitalize bilateral security ties with Japan, South Korea, Australia, Thailand, and the Philippines, as well as a more conspicuous forward deployment of U.S. forces in the Asia-Pacific region. Many in the Philippines and the hardliners in the United States have urged both the Clinton and Bush Administrations to strengthen the U.S.Philippines military alliance, as the Philippines is the ASEAN state with the most recent record of active maritime clashes with China. They propose this as part of a comprehensive campaign to deter China’s increasing regional influence. Before the Asian financial crisis in 1997– 98, ASEAN élites had been much encouraged by the spectacular economic development in the region and the relative economic decline of the West. They considered that the next century would be the Asia-Pacific century. Today they have become more sober and have a more realistic assessment of the region. Catching up with the West is a more strenuous effort; and regional economic co-operation has become all the more important in view of the negative aspects of global capitalism. China’s financial support for ASEAN during the regional economic crisis has enhanced mutual trust between them. China’s relative economic health has also won considerable

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admiration in ASEAN. In August 1997, China offered Thailand US$1 billion to help it to overcome its financial difficulties. Similarly, China provided assistance to Indonesia. In December 1997, at the summit among ASEAN, China, Japan and South Korea in Kuala Lumpur, President Jiang Zemin pledged US$4–6 billion for the International Monetary Fund’s programme to support Southeast Asia, and to take part in other assistance programmes. Chinese leaders also promised not to devalue the renminbi so as to avoid another round of competitive devaluations among Asian currencies. Chinese leaders considered this an important contribution to stabilize the financial markets in Asia and a sacrifice on China’s part, a view that is shared within ASEAN.11 In the wake of the Asian financial crisis, Chinese foreign policy researchers have maintained their optimism regarding ASEAN’s significant international status, although this optimism may have been unduly influenced by the official line. They believe that political stability will be maintained among the ASEAN states, although the situation in Indonesia is worrying. The serious political turmoil in Indonesia has, fortunately, not triggered a chain reaction in the region. The ASEAN governments will be more concerned with domestic problems, with economic recovery accorded the top priority. They will also handle domestic contradictions carefully. Chinese foreign policy researchers note that difficulties have emerged in the relations between Singapore and Malaysia, as well as those between Malaysia, on the one hand, and the Philippines and Indonesia, on the other. However, these countries have exercised self-restraint and avoided major fissures. The established mechanisms within ASEAN and its members’ respect for the principle of non-inter ference in each other’s domestic affairs will succeed in

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preventing frictions among them from getting out of hand. The major powers in the region also share a common interest in maintaining regional stability. Since the ASEAN states are acutely aware that their solidarity has been weakened since the Asian financial crisis, and their influence in the international arena has thus been affected adversely, they will appreciate the importance of strengthening their unity and consensus. The Hanoi Declaration and the Hanoi Action Plan resulting from the ASEAN summit in 1998 were seen as a reflection of this awareness. Nevertheless, Southeast Asian experts in China are closely monitoring the factors for instability in the region, especially the exacerbation of ethnic, religious, and social contradictions.12 China is obviously concerned with the military modernization plans of the ASEAN states, which reached a peak before the Asian financial crisis, and which have been much handicapped by their financial difficulties in recent years. China’s major foreign policy journals noted that in 1993, military expenditures among the ASEAN states, on the average, increased by 13.5 per cent; and in the following year, the military expenditure of the then seven ASEAN states amounted to US$13.65 billion, twice as much as that in the late 1980s.13 The Chinese view tends not to regard this as an arms race. In the postCold War era, the ASEAN states have had to strengthen their defence capabilities in response to the reduction in security commitments to the region on the part of the United States and Russia. To varying degrees, there was also a concern with the rising influence of regional powers, including China, Japan, and India. China, therefore, recognized that the ASEAN states were worried about the uncertainty

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of their security in the future, as well as the emergence of potential threats. At the same time, the strategic focus of many ASEAN states had shifted from domestic political stability to external defence, and the emphasis on force structure had correspondingly shifted from the army to the navy and air force. In this connection, these states had to purchase modern military equipment to enhance their naval and air force capabilities. Their efforts were facilitated by the keen competition between cheap Russian supplies and Western arms manufacturers. Economic development among the ASEAN states also prompted them to strengthen national defence to safeguard their maritime resources. China’s Southeast Asian experts were quick to point out that the ASEAN members which had spent more on military modernization before the Asian financial crisis were those less concerned with the China threat; Singapore, Malaysia and Thailand spent relatively more simply because they were more prosperous and had the financial resources to do so. These experts liked to indicate that territorial disputes also existed between the Philippines and Malaysia (over Sabah in the earlier decades), between Malaysia and Indonesia (over the islands of Sipadan and Ligitan), between the Philippines and Indonesia (over the delimitation of the territorial seas between Mindanao and Sulawesi), and among Vietnam, Cambodia, and Thailand (over the delimitation of the territorial seas in the Gulf of Siam).14 In sum, China and the ASEAN states have been closely monitoring each other’s military modernization programmes. They do not see such programmes as immediate threats, but they are concerned with the potential danger of getting into a vicious cycle of an arms race.

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NOTES 1. See Fareed Zakaria, “Culture is Destiny: A Conversation with Lee Kuan Yew”, Foreign Affairs 73, no. 2 (March/April 1994): 109–26; and Mahathir Mohamad, A New Deal for Asia (Kuala Lumpur: Pelanduk Publications, 1999). 2. See Leonard C. Sebastian, “Southeast Asian Perceptions of China: The Challenge of Achieving a New Strategic Accommodation”, in Southeast Asian Perspectives on Security, edited by Derek da Cunha (Singapore: Institute of Southeast Asian Studies, 2000), p. 174. 3. Straits Times (Singapore), 9 August 1990. 4. See, for example, Chen Fengjun, ed., Lengzhan Hou Yatai Guoji Guanxi [International Relations in the Asia-Pacific Region in the Post-Cold War Era], (Beijing: Xinhua Chubanshe, July 1999), pp. 228–29. 5. See the author’s “China’s ASEAN Policy in the 1990s: Pushing for Regional Multipolarity”, Contemporary Southeast Asia 21, no. 2 (August 1999): 189–93. 6. South China Morning Post (Hong Kong), 5 and 16 March, 1996. 7. Ibid., 3 August 1995. 8. See, for example, Avery Goldstein, “U.S. Policies Toward Asia” (Foreign Policy Research Institute, Philadelphia, 17 April 2001), at . 9. “Erap orders blockade of Mischief Reef”, Philippine Daily Inquirer (Manila), 11 November 1998. 10. See Ian James Storey, “ASEAN and the Rise of China: The Search for Security in the 1990s”, (Ph.D. thesis submitted to the Department of Public and Social Administration, City University of Hong Kong, March 2001), pp. 150–53. 11. Ming Pao (Hong Kong), 18 April 1998. 12. See, for example, Zhu Zhenming, “Dongnanya Zhengzhi Jingji Xingshi de Bianhua ji Fazhan Qushi” [Changes and Development Trends of the Political and Economic Situation in Southeast Asia], Dongnanya (Kunming), No. 65 (March 2000), pp. 1–7. 13. See Quanyi, “Lengzhan zhihou Dongnanya Anquan Xingshi yu Anquan Baozhang” [The Security Situation and Security Protection in Southeast Asia in the Post-Cold War Era], Dongnanya Yanjiu (Guangzhou) 95, no. 3 (1995): 37; and Yan Xuetong, “Yatai Diqu Anquan Qushi” [Security Trends in the Asia-Pacific Region], Xiandai Guoji Guanxi (Beijing) 93 (July 1997): 6. 14. See Wang Xiaomin, “Luelun Lengzhan hou Dongnanya Diqu Nicaijun de Yuanyin” [Brief Analysis of the Reasons for Arms Expansion in Southeast Asia in the Post-Cold War Era], Dongnanya Xuekan (Guangzhou), No. 26 (December 1999): 10–15.

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87.

ASEAN–CHINA TRADE AND INVESTMENT RELATIONS

CHIA SIOW YUE

ASEAN–CHINA TRADE ASEAN and China are not each other’s main trading partner, but the bilateral trade has been growing rapidly in the past decade. ASEAN-China trade grew at 20% a year during the 1990s and by over 30% in 2002. ASEAN is China’s 5th largest trading partner and account for 8.3% of China’s total trade in 2000. China is ASEAN’s 6th largest trading partner and accounted for 3.9% of ASEAN’s total trade in the same year. There is also considerable unrecorded border trade between China and Laos, Myanmar and Vietnam. For some countries strapped of foreign exchange, barter trade is still fairly important. The composition of ASEAN-China trade has changed significantly, with the declining importance of trade in commodities and the rising importance of trade in manufactures, particularly machinery and electrical equipment. In the early 1990s, China’s leading exports to ASEAN were machinery

and electrical equipment, oil and fuel, cotton, and tobacco. By the end of the decade, machinery and electrical equipment continued to be top exports, but their share jumped to nearly 50%. Likewise, in the early 1990s, ASEAN’s leading exports to China were oil and fuel, wood, vegetable oils and fats, machinery and electrical equipment. By the end of the decade, such exports had shifted away from primary commodities to manufactured products. In particular, machinery and electrical equipment grew from 12.4% to 38.2% share of ASEAN exports to China. A substantial part of this comprises electronic components and devices. The strong two-way trade in machinery and electrical equipment reflects the rapid growth of intra-industry and even intra-firm trade by foreign MNCs in the electronic sector. China appears to have joined the main ASEAN countries in the production networks that have emerged in East Asia over the past decade.

Reprinted in abridged form from Chia Siow Yue, “ASEAN and the China Challenge”, Singapore Institute of International Affairs Reader 3, no. 2 (July 2003): 27–39, by permission of the author and the Singapore Institute of International Affairs.

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ASEAN–China Trade and Investment Relations

There is growing concern in many ASEAN countries that their labour intensive industries such as textiles, garments, footwear, toys, processed foodstuffs and machinery and equipment cannot compete with cheap imports from China. They fear the early demise of domestic small and medium industries and enterprises and growing unemployment, particularly as many businesses are still struggling to recover from the 1997–98 financial crisis. Such industries and enterprises are seriously challenged to improve productivity and quality and lower costs to meet the price competition from China.

CHINA INVESTMENTS IN ASEAN China’s outward direct investments have been less dramatic in volume and growth as compared to its inward direct investments. Nevertheless, average annual outward direct investments rose from around US$54 million a year in the early 1980s to US$2.4 billion by the late 1990s. Total outward FDI flow grew to US$7.1 billion in 2001. The largest concentrations are in Hong Kong, US, Canada and Australia. The Chinese government is encouraging Chinese companies to venture abroad to serve several purposes — get Chinese firms used to international competition in the new WTO environment; secure supplies of natural resources, particularly oil, to feed China’s economic growth; and to support China’s trade role in counterbalancing the economic presence and power of the US, EU and Japan. China investments in ASEAN are small relative to China’s total outward investments and ASEAN’s total inward FDI. In fact, ASEAN is a net investor to China. Cumulative China investments in ASEAN-5 in the 1990s amounted to US$1.9 billion, with Singapore and Thailand each

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accounting for about one-third, followed by Malaysia and Indonesia. As with trade, China’s investments in ASEAN have also undergone a compositional change. In the earlier years, investments in ASEAN-4 (Thailand, Malaysia, Indonesia, Philippines) were largely motivated by the need to expand overseas market shares as well as secure a stable supply of energy and raw material resources. Resource-seeking investments were usually targeted at products such as rubber, timber, and paper. Thailand attracted investments in fertilisers, chemicals and rubber production. Malaysia attracted investments in rubber, base metal products, and pulp and paper. In recent years, China’s investments in ASEAN-4 have concentrated on labour-intensive manufacturing and assembly, particularly electrical and electronics in Malaysia and Thailand. China investments in Singapore are much more service-oriented and reflect Singapore’s role as a regional hub for financial services, trade and commerce, logistics and transportation. Singapore’s Economic Development Board is wooing more Chinese enterprises to set up base in the city-state to be a springboard to overseas markets. The Singapore stock exchange is also actively seeking China corporate listings. Currently there are about 160 Chinese companies in Singapore and EDB wants to attract at least 100 more over the next three years. With China actively seeking outward investments and ASEAN actively wooing inward FDI, prospects of more China investments in ASEAN are good. ASEAN’s attractions will increase as the ASEAN economies recover, as ASEAN economic integration widens and deepens through the ASEAN Free Trade Area and the ASEAN Investment Area, and as the ASEAN-China economic cooperation agreement gets underway.

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ASEAN-CHINA COMPREHENSIVE ECONOMIC COOPERATION A proposal from Chinese Premier Zhu Rongji for ASEAN-China cooperation in November 2000 led to an Expert Group Report on Forging Closer Asean-China Economic Relations in the Twenty-First Century. The Report made the following major recommendations: •

• •

•

Establishment of an ASEAN-China free trade area (FTA) within 10 years. It will provide for special and differential treatment and flexibility for CLMV countries and also for an “early harvest” package of mutually agreed list of goods to be liberalised without having to wait for a full FTA to be finalised. Wide range of trade and investment facilitation measures. Technical assistance and capacity building to ASEAN members, particularly to the less developed ASEAN countries of Cambodia, Laos and Myanmar. Expansion of cooperation in areas such as finance, tourism, agriculture, human resource development, small and medium enterprises, industrial cooperation, intellectual property rights, environment, forestry and forestry products, energy and subregional development.

The Framework Agreement on ASEAN-China Comprehensive Economic Cooperation (AC-CEC) was signed in November 2002. It commits ASEAN and China to start negotiations on a FTA that will cover trade in goods and services and investment liberalisation and facilitation, as well as other areas of cooperation. •

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•

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(CLMV) with flexibility on sensitive commodities, and special and preferential tariff treatment to CLM. Negotiations start in March 2003. With a 10-year time frame for completion of the ASEAN-China FTA, China offered an “early harvest” package, that is, the earlier opening up of certain agriculture sectors. The package will be implemented in 2004. China also offered the CLMV countries more preferential treatment. China agreed to participate in the accelerated implementation of subregional development cooperation arrangements in the Greater Mekong Subregion and the ASEAN Growth Triangles. China also confirmed its co-financing towards the completion of Singapore-Kunming Railway Link.

An ASEAN-China FTA will have a combined population of 1.7 billion people, a combined GDP of about US$2 trillion and combined trade of US$1.2 trillion. It will be the world’s largest economic grouping in population size, though not in economic size. An ASEAN Secretariat study predicts the FTA will increase ASEAN’s exports to China by 48% and China’s exports to ASEAN by 55%. China’s motivations in offering economic cooperation and integration with ASEAN are both political and economic. Politically, China wishes to remain on friendly terms with its neighbours on its southern front. To allay ASEAN concerns that China poses a threat with its economic ascendency. China offers the CEC as part of political confidence building. In addition, closer economic relations with ASEAN will enable China to build its geopolitical clout in Southeast Asia and counterbalance the influences of Japan and US. Even if an FTA takes 10 years to negotiate, the ongoing process means that Japan and US cannot squeeze China out of Southeast Asia.

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Economically, China is eyeing the ASEAN region for its markets as well as its various natural resources, especially oil. ASEAN governments welcomed the China initiative for a number of reasons. First, China is a huge and dynamic economy and its growing demand for ASEAN goods and services and its tourists could serve as a new engine of growth. Chinese tourists are already a key factor in the growth of tourism in the region. ASEAN looks forward to more Chinese investments as well. China’s WTO entry will also mean a trading partnership based on international rules and discipline. Closer ASEAN-China economic ties would enable ASEAN to reduce dependence on the US, EU and Japan. Second, China’s offer of special treatment and development assistance for the CLMV group as well as the extension of WTO most-favoured-nation benefits to the non-WTO members of ASEAN (Cambodia, Laos and Vietnam) help them to accept the China initiative more readily. Third, China and ASEAN will be able to go further than the WTO in liberalising agricultural trade, because China’s temperate agriculture and ASEAN’s tropical agriculture are complementary in many product areas. Thailand,

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in particular, looks to accelerating agricultural exports to China. The ASEAN-10 members represent economies at different stages of economic development and different levels of competitiveness, as well as varying natural resources and production structures. Given these differences, it would be difficult for ASEAN countries to maintain a common position in negotiations on trade liberalisation with China. There is a strong possibility of some individual ASEAN countries entering into bilateral arrangements with China. Thailand is reported to be already going ahead with bilateral negotiations. How such bilateral initiatives will affect the overall ASEAN-China negotiating positions remains to be seen. Notwithstanding the China offer, ASEAN countries remain deeply concerned over China’s competitive strengths and advantages, its magnetic attraction for FDI, and the competitive effect on ASEAN’s domestic industries. There is fear that many domestic industries producing labour intensive and low value goods cannot compete with China on economies of scale, wage-cost and price.

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CHINA–ASEAN FREE TRADE AREA

SHENG LIJUN

THE DEVELOPMENT OF THE CHINAASEAN RELATIONS SINCE THE 1990S Before the 1990s, there was no official relationship between the ASEAN as a grouping and China, although China had official relations with certain individual ASEAN member states on a bilateral basis. From the late 1980s, China intensified its efforts to establish diplomatic relationship with all the remaining ASEAN states as the final step, leading to its eventual official relationship with the ASEAN grouping. In his visit to Thailand in November 1988, Chinese Premier Li Peng announced four principles in establishing, restoring and developing relations with all the ASEAN states. After establishing diplomatic relations with the last ASEAN country — Singapore — in late 1990, China pushed for official ties with the ASEAN grouping. On 19 July 1991, Chinese Foreign Minister Qian Qichen attended the opening session of the 24th ASEAN Ministerial Meeting (AMM) in Kuala Lumpur as a guest of the Malaysian

Government, where he expressed China’s interest in cooperating with ASEAN, particularly in the field of science and technology. The latter responded positively. In September 1993, ASEAN Secretary-General Dato’ Ajit Singh visited Beijing and agreed to establish two joint committees, one on co-operation in science and technology, and the other on economic and trade cooperation. An exchange of letters between the ASEAN secretary-general and the Chinese Foreign Minister on 23 July 1994 in Bangkok formalised the establishment of the two committees. At the same time, ASEAN and China agreed to engage in consultations on political and security issues at senior officials level. In July 1996, ASEAN accorded China full Dialogue Partner status at the 29th AMM in Jakarta, moving China from a Consultative Partner, which it had been since 1991. By early 1997, there were already five parallel frameworks for dialogue between China and ASEAN. China participated in a

Excerpted from Sheng Lijun, “China-ASEAN Free Trade Area: Origins, Developments and Strategic Motivations”, ISEAS Working Papers on International Politics and Security Issues no. 1, (Singapore: Institute of Southeast Asian Studies, 2003), by permission of the author and the publisher.

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series of consultative meetings with ASEAN. In December 1997, Chinese President Jiang Zemin and all the ASEAN leaders had their first informal summit (ASEAN Plus One) and issued a joint statement to establish a partnership of good neighbourliness and mutual trust oriented towards the 21st century. ASEAN-China trade has expanded rapidly, at an annual growth rate of about 15 per cent since 1995, and it jumped by 31.7 per cent in 2002 to US$54.77 billion. ASEAN is now the fifth largest trade partner of China while China is the sixth of ASEAN.

CHINA PROPOSED AN FTA China’s open push for the formation of a free trade area (FTA) embracing China and all the ten ASEAN members came at the ASEAN Plus Three Summit1 in November 2000, where Chinese Premier Zhu Rongji proposed: “In the long term, China and the ASEAN countries can also further explore the establishment of a free trade relationship.” 2 He also proposed the creation of an expert group under the framework of the China-ASEAN Joint Committee of Economic and Trade Cooperation to study the feasibility of the FTA. At a meeting of senior ASEAN and Chinese economic officials in Brunei in midAugust 2001, China made a strong push, proposing tariff reduction and other measures to be phased in over seven years from 2003–09. ASEAN responded cautiously, proposing a 10-year phase-in period without specifying a starting date.3 At the ASEAN-China summit in November 2001, Premier Zhu formally made the proposal for the formation of a China-ASEAN FTA (CAFTA) in ten years. China offered to open its own market in some key sectors to the ASEAN countries five years before they reciprocate. It would

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also grant special preferential tariff treatment for some goods from those less developed ASEAN states, i.e., Cambodia, Laos and Myanmar. ASEAN accepted this proposal and held several rounds of consultations with China on the CAFTA before they jointly announced, at the ASEAN-China Summit in Cambodia in November 2002, the Framework Agreement on ASEAN-China Comprehensive Economic Co-Operation as a legal instrument to govern future ASEAN-China economic cooperation. This Agreement covers cooperation in goods, services and investment and other relevant areas. It lists guidelines, principles, scope and modalities for the FTA, including early harvest and special and differential treatment (S&D) of new ASEAN members, Laos, Cambodia, Myanmar and Vietnam, allowing them five more years to join the FTA. China accorded the three non-WTO ASEAN members — Vietnam, Laos and Cambodia — the most-favourednation status. Formal talks on the CAFTA would begin the next year, with the inception year 2010 set for China and the six original ASEAN states — Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand — and 2015 for the less de-veloped ASEAN members of Cambodia, Laos, Myanmar and Vietnam. But an “early harvest” programme of tariff cuts on 600 agricultural products would be launched immediately. This includes live animals, meat, fish, dairy produce, other animal products, live trees, vegetables, fruit and nuts. The Chinese proposal of the CAFTA is both strategically and economically motivated. Faced with the uncertainty of the reorientation in the U.S. global and regional security policy after the 9/11 terror attacks, China feels a pressing need to improve its relations with its neighbours through ASEAN Plus Three and CAFTA, and use this new regionalism as a precautionary measure to dilute potential U.S.

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unilateralism in the region. It is important to note that this East Asia integration is not an anti-U.S. united front. It is not a sole Chinese product. Actually, ASEAN countries and South Korea are among its earlier advocates, pathfinders and supporters. The economic and security interests of China and other big powers, like the United States, are not inevitably incompatible with each other. The recent improvement in China-

India relations, as demonstrated in the historical visit to China in June 2003 by Indian Prime Minister Atal Behari Vajpayee, shows that big powers may have more to cooperate than conventional strategic thinking takes for granted. Therefore, caution should be made against the excessive zero-sum interpretation of one big power driving the others away from the region.

NOTES 1. 2. 3.

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ASEAN Plus Three Summit is an informal summit of the ten ASEAN states, China, Japan and Republic of Korea. Carlyle A. Thayer, “ASEAN Ten Plus Three: An Evolving East Asian Community?”, Comparative Connections (Pacific Forum CSIS), . Carlyle Thayer, “Developing Multilateral Co-operation”, in Comparative Connections (Pacific Forum CSIS), .

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THE RHETORIC OF AUSTRALIA’S REGIONAL POLICY

JAMES COTTON

THE IMPLICATIONS OF THE EAST TIMOR INTERVENTION From a realist perspective, Indonesia is the key to Australia’s defence. It commands the nation’s northern approaches from which or through which any conventional military attack on Australia would be launched. A stable and friendly Indonesia is therefore crucial for Australia’s security. From a common security perspective, there are added (or perhaps alternative) reasons for fostering good relations with Jakarta. Indonesia is the key to any wider multilateralist strategies for creating regional order. Indonesia is the dominant power in ASEAN, and this group is both the core of the ASEAN Regional Forum and the pioneer of the modalities for cooperation adopted by APEC. From this perspective, the negotiation of the 1995 ‘Agreement on Maintaining Security’ with Indonesia was widely regarded as reconciling two potentially different conceptions of regional security and thus finally resolving the most

important issue in Australia’s strategic neighbourhood (Hartcher 1996). If there is one policy that has had broad bipartisan support in the last 25 years it has been Indonesia’s forcible annexation of East Timor (Cotton 1999). In acquiring the territory, Indonesia violated the international norm against aggressive and forcible action and also denied the right of the inhabitants to self-determination, these transgressions being reflected in the censure of Jakarta by the UN Security Council and the refusal of the UN to recognize the acquisition as legitimate. Nevertheless, Australia under a Coalition government extended de jure recognition to the annexation in February 1979, a position reaffirmed by the Hawke Labor government. The reasons for this policy were an uncertain and variable mix of the perceptions of Indonesia noted above. The decision by the Howard government to overturn this bipartisan legacy was the most significant development in policy towards the Asia-Pacific region since the Vietnam War.

Reprinted in abridged form from James Cotton, “The Rhetoric of Australia’s Regional Policy”, in Asia-Pacific Security: Policy Challenges, edited by David W. Lovell (Singapore: Institute of Southeast Asian Studies; and Canberra: Asia Pacific Press, 2003), pp. 29–46, by permission of the author and the Institute of Southeast Asian Studies.

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Global changes constituted the background to (or preconditions for) this policy shift. These included the rise in the post Cold War era of the doctrine of intervention and also the fact that a democratizing Indonesia in economic crisis was more amenable than in past times to international pressure. But a novel understanding of Australia’s regional role was undoubtedly a factor in the government’s calculations. As the Prime Minister was reported to have said in a widely quoted magazine interview: [The East Timor operation] has done a lot to cement Australia’s place in the region. We have been seen by countries, not only in the region but around the world, as being able to do something that probably no other country could do; because of the special characteristics we have; because we occupy that special place — we are a European, Western civilization with strong links to North America, but here we are in Asia (Brenchley 1999, 24).

Australian leadership of the INTERFET (International Force East Timor) intervention in the territory in October 1999 was a watershed event. The impact of the East Timor commitment had nothing less than a profound effect on many aspects of Australia’s regional security and defence posture. Australian-Indonesian relations were placed on a new footing, past and future regional engagement became the subject of vigorous debate, and defence priorities were re-ordered. Relations with Indonesia took a wholly new course with the intervention. Prior to 1999, there were expectations that the emergence of democracy in Indonesia, especially in the context of Australia’s US$1 billion contribution to the International Monetary Fund relief package provided as a response to the regional financial crisis, would put relations with Jakarta on an entirely new basis. Australian support for the infrastructure necessary to stage the 1999 parliamentary elections was indicative of the

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awareness that the progress of democratic consolidation was vital for Australia’s national interests. But this support counted for very little in the balance as against what was widely represented in the Indonesian media as Australia’s ‘arrogance’ and ‘betrayal’ over East Timor. This perceived hostility stirred passions. A vehicle carrying the Australian Ambassador was shot at in Dili. After the Defence Minister stated that all bilateral defence contacts with Indonesia were suspended, Indonesia announced on 16 September that the 1995 bilateral Agreement on Maintaining Security would be abrogated. The agreement was then dismissed by the government as of little consequence, but its demise marked the end of a defence relationship painstakingly constructed from the 1960s. As the INTERFET operation began, demonstrators gathered outside the Australian embassy and there were violent incidents. And President Wahid himself described Australian policy as ‘infantile’ (Antara, 30 September 1999; Hill and Manning 1999; Bhakti 1999). Despite strenuous diplomatic efforts, including a visit to Jakarta by Foreign Minister Downer in February 2000, relations with Indonesia remained in an awkward phase. Ironically President Abdurrahman Wahid was personally very familiar with Australia and was also extremely fond of overseas travel, yet he could only be tempted to visit the country in the twilight of his presidency. It was therefore something of a surprise that Prime Minister Howard was invited to meet his successor, Megawati Sukarnoputri, immediately upon her taking office. The two leaders met again in 2002 when they agreed to measures of bilateral cooperation in the international campaign against terrorism. In an area of great concern to Australia, the transit through Indonesia of people smuggling networks, much work however remained to be done.

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Finally, Australian intervention in East Timor was seen as a possible harbinger of future interference in Indonesia’s internal affairs, especially in connection with West Papua. Despite strenuous denials from the Australian government, this suspicion was encouraged by statements from Colin Powell, shortly after being nominated by President-elect Bush as the new US Secretary of State. In remarks he made during confirmation hearings, he signalled a new scepticism of humanitarian interventions, and indicated that more reliance would be placed on allies, specifically referring to Australia’s decision to ‘take the lead’ regarding Indonesia (Sydney Morning Herald, 19 January 2001). These remarks found an attentive audience in Jakarta. If there was uncertainty in Indonesia regarding Australia’s intentions in the region, this was a consequence not only of the nation’s role in UNAMET and INTERFET, but also a reaction to the very public debate that the latter engendered. While Australian forces were committed to Timor with the undoubted expectation that there would be loss of life, the success of the operation led to statements from political and military figures that seemed to imply a larger if indeterminate commitment to similar undertakings in the future. For a short period the ‘Howard doctrine’, by which this position came to be known, depicted Australia as playing a role as a ‘deputy’ to the US in keeping the regional peace (Lyons 1999). According to the government’s account, the objectives of the East Timor intervention were threefold. First a perennial problem in Australia-Indonesia bilateral relations was being addressed. It was incontrovertible that the perception of Indonesia’s human rights record in East Timor had been an obstacle to a more favourable public assessment of that country for a generation. Second, and in light of the

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fact that the UN still held Indonesian occupation to be illegitimate, a new status for East Timor would remove perhaps the major obstacle to Indonesia playing a positive role in the world, commensurate with its size and potential. Third, the intervention was a response to the very strong reaction in the Australian public that was prompted by the violence and suffering experienced by the East Timorese in the aftermath of the ballot. It was the fate of the Timor issue, despite the very particular circumstances that led both to the Australian policy change and also to the INTERFET intervention, to tend to be generalized into a novel and pathbreaking national approach to the region. In the parliamentary debate of 21 September 1999 on the issue, the Prime Minister used the opportunity to outline some ‘home truths’ regarding Australia’s position in the region. Though not as outspoken as the putative ‘Howard doctrine’, this statement represented the most distinctive and considered contribution by the Prime Minister to foreign policy discourse since he assumed office in 1996. The first of these truths was that foreign policy must be based on a clearer sense of ‘national interest’ and ‘values’. The national interest requires Australia to pursue relationships on the basis of mutual interest and to recognize ‘where they exist, differences in values and political systems.’ Secondly, Australia occupies ‘a unique intersection — a western nation next to Asia with strong links to the United States and Europe’ and therefore commands ‘unique assets.’

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We have stopped worrying about whether we are Asian, in Asia, enmeshed in Asia or part of a mythical East-Asian hemisphere. We have got on with the job of being ourselves in the region. In turn, the region has recognized that we are an asset and have a constructive role to play in it (Commonwealth Parliamentar y Debates 21 September 1999, 10029).

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The assets listed include the ANZUS and Five Power security alliances, and also bilateral defence cooperation programs. However, the alliance with the US was then identified as a separate (third) truth, and was described as functioning ‘very effectively’, having helped deliver a significant US contribution in this instance. Adequate defence resources were the fourth truth, and as the prevailing security climate was ‘uncertain’, these resources were apparently insufficient, and additional expenditure was thus foreshadowed. The fifth and final truth was the need to take account of ‘the values of the Australian community’, and the inference to be drawn from this was that Australia should not seek ‘a good relationship with Indonesia at all costs or at the expense of doing the right thing according to our own values.’ In each one of these ‘truths’ may be detected a statement of the distinctiveness, by comparison with the region, of Australia’s identity and interests. Returning to the issue of Australia’s regional assets, John Howard contrasted his approach with that of some commentators who maintained that under his tenure Australia would be excluded from regional frameworks and thus would never be accepted in Asia. This underestimated Australia’s capacities and institutions, especially as demonstrated by the nation’s positive performance during the Asian economic crisis: …our economic, military and other credentials are respected and give us a capacity to help and constructively participate in the region. Just as we were in a position to assist our neighbours during the Asian economic crisis, so also on East Timor we have shown that we have the capacity under the United Nations to work with our regional partners in putting together a multinational peacekeeping force. It is an example of both our commitment to the region and our

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capacity to make a constructive and practical contribution to its affairs (Commonwealth Parliamentar y Debates 21 September 1999, 10031).

On this understanding of Australian foreign policy, the Timor commitment was consistent with the national interest in two respects. Australian forces were being used in the service of international institutions and with Indonesian consent to assist the East Timorese to realize the choice they had made in an internationally supervised ballot. And these forces, by suppressing violence, would restore regional order and end uncertainty. But the issue of whether Australia’s putative ‘assets’ were entirely welcome in the region was not considered. Moreover, the enhanced military preparedness that would allow Australia to embark on a similar intervention in the future might conceivably be seen as a threat rather than a positive contribution to regional order, and was certainly represented as such by Australia’s critics. Indeed, Malaysia’s Prime Minister Dr Mahathir was forthright in his criticism of Australia’s regional designs, though other criticism expressed in Southeast Asia was more muted (South China Morning Post, 27 September 1999). However these developments are to be interpreted, Australia’s willingness to employ military force marked virtually the end of the policy of ‘regional engagement’ principally by way of participation in multilateral institutions and the practice of consensus diplomacy. Finally, the East Timor experience had a powerful impact on security perceptions. Australian forces performed well during the crisis of 1999, especially given the immensely difficult logistics involved in inserting and supporting in a potential hostile theatre a multinational force the components of which had no prior experience of working together. Yet the commitment revealed potential lack of

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capacity, and as a result the 2000 Defence White Paper stated a commitment to significant increases in expenditure, albeit over a ten year period (Department of Defence 2000). Such expenditure increases were already expected, given the problem of block obsolescence in much defence equipment. What was unprecedented in the White Paper was the clear statement that after the defence of continental Australia, ‘lower level operations’ including peacekeeping are the next most important priority for the ADF (Australian Defence Force), and that other features of the East Timor experience may recur: This might require the ADF to contribute to regional peacekeeping and humanitarian relief operations and help evacuate Australians and others from regional troublespots. We should be prepared to be the largest force contributor to such operations. Our planning needs to acknowledge that we could be called upon to undertake several operations simultaneously, as we are at present in East Timor, Bougainville and the Solomon Islands (Department of Defence 2000, 39).

What scenarios are anticipated here? The White Paper underlines the strategic primacy of Indonesia, and states that Australia’s security would be threatened by ‘adverse developments’ inside Indonesia, whether internally or externally generated (Department of Defence 2000, 22). On East Timor, the White Paper signals nothing less than a continuing security commitment: Within a short time East Timor will pass from UN authority to full independence. Australia will seek to develop an effective defence relationship with East Timor ... East Timor faces formidable security challenges. Our aim will be to provide, with others, an appropriate level of help and support for East Timor as it builds the capabilities and national institutions that it will need to ensure its security and thereby

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contribute to the security of its neighbourhood (Department of Defence 2000, 37).

A week before the document was released to the public, the Defence Minister announced a $A26 million aid program to help train and equip a defence force, the core of which was being drawn from FALINTIL, the guerrilla resistance army that was for a generation the Indonesian military’s most dogged opponents (The Australian, 24 November 2000). Nor will relations with independent East Timor necessarily be harmonious on this account or even in light of the A$150 million of aid promised by the government in 2000 for a four-year period. (Australian Agency for International Development 2001) In short, Australia is now committed to the protection and development of a country the birth of which constitutes Indonesia’s greatest policy reversal in all of its history as a nation. In this context it should be acknowledged that the message of the intervention for the region was decidedly mixed. Some ASEAN states participated in the INTERFET operation, but there were also some expressions of dismay and distrust at what was presented as the humiliation of Indonesia and its armed forces by an external power. In retrospect, this shift in policy is in part testimony to the weaknesses and limitations of those multilateral institutions that had been the preferred mechanisms for regional engagement prior to the 1997 regional crisis. Since 1967 ASEAN has been committed to principles of non-interference in the affairs of other states, the pacific resolution of disputes, and an avoidance of external power entanglements. Indonesia’s invasion of East Timor violated all of these principles not least because the Indonesian military became dependent thereafter on US military matériel and assistance. Yet East Timor was never a matter raised within ASEAN; indeed, the ASEAN countries

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maintained a united international front on the issue (Inbaraj 1995). The reasons for this solidarity are not far to seek, but this episode may be taken to illustrate that such principles are only as determining of state conduct as power relations permit. Even in September 1999, when faced with the most significant regional security crisis since Vietnam’s invasion of Cambodia, the ASEAN role was marginal, the group’s foreign ministers initially even resisting discussing East Timor at the APEC summit in Auckland. If this was a non-subject for ASEAN, then it was never likely to appear on the agenda of the ASEAN Regional Forum. Without pursuing this issue too far, it may even be argued that these institutions were part of the problem, since they legitimized the Indonesian regime as a credible actor and made its cooperation vital to regional order. The inability of the ASEAN Regional Forum even to discuss the Taiwan issue, despite the fact that (in some scenarios) it may lead to a major East Asian war, is a further illustration of the limitations of such diplomatic mechanisms (Lim 1998). Now these arguments are not the kind that any government spokesperson is likely to articulate publicly, but their logic supports the realist turn that became evident in foreign policy pronouncements from 1996.

THE REGIONAL BURDENS OF ALLIANCE The East Timor commitment constituted a significant test of the alliance with the United States, while also appearing to underline the necessity for realist calculations in an environment where multilateral mechanisms are ineffective. Despite some anxious moments in Canberra, the United States agreed to join the INTERFET coalition and in announcing this policy President Clinton specifically cited the alliance with Australia as a major

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consideration in his decision (Cotton 2001). It should be recalled that US arms supplies were indispensable in facilitating the pursuit by the Indonesian military of the East Timorese resistance army, and the US was associated from the very beginning with the annexation by virtue of (then) Secretary of State Henry Kissinger’s encouragement of the policy (National Security Archive 2002). And despite the relatively small number of US personnel involved, Washington’s role in 1999 was crucial. US diplomatic leverage (not least within the Bretton Woods institutions) impelled the Indonesian government to sanction the INTERFET operation. In the uncertain and potentially hostile environment of East Timor, US intelligence assets and heavy lift capability were vital (Schwartz 2001). Indeed, in 2000 and into the Bush administration, US spokespersons were willing to cite the Australian role in East Timor as an example of the more self-reliant alliance model they wished to see worldwide, with the local partner in the alliance relationship taking the initiative and providing many of the forces (and footing much of the bill) while Washington provided diplomatic, intelligence and logistics support. Comprehensive cooperation with Washington however requires ‘interoperability’ of platforms and systems, and in anticipation of further regional crises Australia now faces some difficult choices if it is to remain a full member of the alliance. The Revolution in Military Affairs (RMA) promises to transform conflict into a contest in which superior technologies deliver mastery (Cohen 1996). Australia had traditionally relied upon the possession of advanced armaments and information technologies to offset the disadvantages of its small population and immense territory. As part of the UKUSA network Australia has engaged in intelligence sharing with the United States since the early years of the

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Cold War (Richelson and Ball 1985). To participate in the RMA, according to some specialists, not only must Australia source its most advanced systems exclusively from the United States but it must also be unambiguously part of a global partnership centred upon the United States, the framework of which derives from the bilateral alliances forged during the Cold War. If realist calculations are presently influential in Canberra, then this outcome may have its attractions. However, realism also may prescribe the maintenance of the current regional strategic balance which might, in some interpretations, be prejudiced by the development of such new systems as National Missile Defence. In addition, Australia’s policy-makers may be convinced that bans on devices such as chemical weapons, biological weapons, or landmines may enhance global security, but may come under pressure to abandon their criticisms of them in the interests of alliance solidarity. These and other concerns were the context for the 2001 Australian-United States Ministerial talks, conducted in Canberra in late July 2001 (Pearson 2001). Setting aside questions involving specific security decisions made by the United States, there is some room for the argument that close security cooperation with other US strategic partners in the Asia-Pacific

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region is not necessarily in the national interest. Both Japan and the Republic of Korea are important economic partners of long-standing, and (at least on paper) Australia is still a guarantor of Korean security by virtue of its participation in the Korean War. Greater cooperation with these partners would be consistent with many national objectives. But if the United States is to revive its security relationship with the Philippines, then, as part of a regional network of states, Australia may find itself embroiled as part of a coalition in a conflict over territorial claims in the South China Sea. Similarly, the informal alliance that binds the United States to Taiwan may draw Australia into a dispute between the major regional powers. Again, Taiwan is an important trading partner and is now a prominent example of a regional democracy, but direct conflict with China cannot enhance Australia’s national security (Blackwill and Dibb 2000; McDonald 2001). Commentators in China were not slow to point this out, in response to the outcome of the July AusMin proceedings (Dwyer 2001). Australia’s role in the post-September 11 ‘war against terrorism’, though undertaken to serve security objectives, has increased further the potential risks associated with the prevailing alliance strategy.

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90.

THE ASEAN-10 AND JAPAN

TAKANO TAKESHI

A

reform-oriented China should be wel comed not only by ASEAN but also by Japan. If, as Hans Maull puts it, “reconciling China with international order represents the biggest political challenge that the world is facing today” (1997, 466), then engaging China in regional as well as international affairs peacefully and incrementally benefits enormously both ASEAN and Japan. Both must take the lead in engaging China with the world, thereby building stable and constructive relationships not only in the bilateral context but also among all the Asia Pacific nations. China is now well integrated into the security structures of the Asia Pacific region. Without China’s participation, no major decision can be made regarding the future course of events in the region. In this respect, it is necessary to view Japan’s role in an enlarged ASEAN in the much broader context of regional affairs. Moreover, Japan’s relations with the United States — and the problems between the

two — have significant implications for ASEAN and its enlargement because the security arrangements between the two countries are the keystone in the Pacific, especially after the U.S. withdrawal from the Philippines. Japan now faces a difficult situation. With the economic downturn, Japan needs a new paradigm of national life. Relations among economic, political, bureaucratic, and social institutions, once thriving, have been structurally strained and are virtually on the verge of collapse. Therefore, Japan must recognize that coexistence and sharing the fruits of prosperity with neighboring countries are the keys to its revival. Meanwhile, Tokyo must eventually deal with the “Okinawa question” and the reduction of the U.S. military facilities there. Moreover, the U.S.-Japan Security Treaty itself — its reinforcement and the scope of its application — may prove to be a big source of concern for Beijing. The treaty could produce distrust or even outright

Reprinted in abridged form from Takano Takeshi, “The ASEAN-10 and Regional Political Relations”, in Road to ASEAN-10: Japanese Perspectives on Economic Integration, edited by Sekiguchi Sueo and Noda Makito (Tokyo: Japan Center for International Exchange; and Singapore: Institute of Southeast Asian Studies, 1999), pp. 16–36, by permission of the author and the Japan Center for International Exchange.

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hostility in Beijing. However, looking at the politics and security of the region as a whole, it is clear that some positive developments have emerged for Japan. By contributing to ASEAN-led preventive diplomacy — despite shortcomings yet to be overcome — Japan will certainly win over the diverse members of ARF to promote mutual understanding on regional security. A successful formulation of the doctrine could even help Japan fulfill its aspiration for reform of the U.N. Security Council. In the coming new century, the ASEAN10 could become an experimental field — or possibly even a breakthrough — for Japan’s diplomacy, which so far has been used mainly to extend financial and technical assistance to developing nations. Japan’s participation in ARF causes little concern with regard to its determination to play a more active role in regional security. Together with ASEAN, Japan can allay the fears of its neighbors, even China and South Korea, which are also members of ARF. Meanwhile, a continued constructive engagement approach toward some of the regional states, especially Myanmar and Cambodia, is essential. Japan, though it basically follows ASEAN’s policies, has its own position in dealing with these countries. For example, Tokyo decided in 1998 to resume financial assistance to Yangon after ten years of suspension. Financial assistance of approximately US$20 million will be extended to Myanmar, criticism from inside and outside Japan notwithstanding. The financing is intended for repairs to the Yangon international airport to ensure safety and to bring it up to International Commercial Aviation Organization standards. The airport is antiquated, and the Japanese government once promised to have it repaired before suspending official aid in 1988. Japan’s decision invited criticism from Washington, but Foreign Ministry officials

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in Tokyo today seem to exhibit a strong defiance toward the inconsistencies and double standards the United States applies to issues concerning human rights. Although the impact of the aid might be small, it surely provides Japan with more possibilities to pursue an independent foreign policy. For Cambodia, Tokyo played an active role in implementing the general election in July 1998 and in assisting the national reconciliation along with it. Japan offered a four-point proposal at the Manila conference on Cambodia in February 1998 that was supported by the countries present. The conference committed Japan to dispatching an envoy to mediate between then Second Premier Hun Sen and Prince Ranariddh, although the mediation was not quite successful. The Japanese proposal focused on the due process that would enable Prince Ranariddh to participate in the election, without whose participation the international community was unlikely to accept the result. In this process of mediation, not only Foreign Ministry officials and the ruling Liberal Democratic Party figures had personal contact with both Hun Sen and Prince Ranariddh but also politicians, including Inoue Kazunari, a social democrat (Mainichi Shimbun 1 March 1998). Thus, Japan’s diplomacy toward Cambodia has been nonpartisan. Moreover, it was Cambodia during the late 1980s and early 1990s that made Japan somewhat confident in its foreign policy implementation with its firstever, full-scale dispatch of noncombatant Self-Defense Forces, and by its successful contribution to what U.N. Special Representative Akashi Yasushi called “peacemaking [beyond just peace-keeping] operations” in the country. Japan will at least continue its efforts to engage Cambodia constructively with the countries of the region and the world, especially with the cooperation of ASEAN.

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91. OUTLOOK FOR JAPANESE FDI IN ASEAN

SEIICHI MASUYAMA

A

ccording to the survey by the EXIM Bank, the motivation of Japanese corporations to undertake FDI in the medium term (up to fiscal 2001) has declined (Table 1). The proportion of respondents who see investments increasing in Asia in the medium term has declined, and the decline is particularly steep for investments in ASEAN. The reasons for the decline in ASEAN, according to the same

survey, are the near-term uncertainty of Japanese corporations about the recovery of local demand and the outlook for ASEAN currencies and the deterioration in the political and social condition in some countries (Table 2). These reasons are in addition to the fact that they have more or less completed a cycle of new investment. Moreover, Japanese corporations’ evaluation of their operations in ASEAN countries has

TABLE 1: Areas of Increasing Investment by Japanese Firms in the Medium Term Percent of respondents expecting to increase investment in: Survey Year

China

ASEAN

NIEs

Rest of Asia

Asia total

North America

EU

Latin America

Other

FY1994 FY1995 FY1996 FY1997 FY1998

29.5 24.0 21.1 18.5 17.4

24.7 23.9 24.0 21.3 16.4

10.3 11.2 9.4 9.5 8.1

7.9 10.1 10.6 10.0 7.7

72.4 69.2 65.1 59.3 49.6

11.4 13.4 13.8 14.2 18.5

8.6 9.3 9.9 10.9 15.1

4.4 4.7 6.3 8.7 7.3

3.3 3.4 4.9 7.0 6.8

SOURCE: Export-Import Bank of Japan. “EXIM Japan FY 1998 Survey”. Table III-2-3, p. 23.

Reprinted in abridged form from Seiichi Masuyama, “The Role of Japan’s Direct Investment in Restoring East Asia’s Dynamism: Focus on ASEAN”, in Restoring East Asia’s Dynamism, edited by Seiichi Masuyama, Donna Vandenbrink, and Chia Siow Yue (Tokyo: Nomura Research Institute and Tokyo Club Foundation for Global Studies; and Singapore: Institute of Southeast Asian Studies, 2000), pp. 213–58, by permission of the author and the publishers.

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TABLE 2: Reasons for Expected Decrease in Investment by Japanese Companies, by Area Percent reporting this reason for expected decrease in investment to:

Completion of a round of investment Contraction of market due to economic downturn Unsatisfactory results of existing operations Uncertain prospects of local currency Reorganisation of existing investments Weakening financial condition of parent company Political and social uncertainty in recipient country

All areas

ASEAN

57.6 24.0 14.8 14.4 10.5 10.0 8.3

50.0 50.0 13.0 33.3 11.1 11.1 16.7

NOTE: Multiple responses permitted. SOURCE: Export-Import Bank of Japan. EXIM Japan FY 1998 Survey. Table III-3-1, p. 25.

TABLE 3: Japanese Companies’ Average Evaluation of Investment Results, by Area Sales

ASEAN China NIEs Latin America North America EU

Profitability

Localisation

Overall Evaluation

1996

1997

1996

1997

1996

1997

1996

1997

3.28 2.70 3.42 3.11 3.15 3.23

2.89 2.74 3.30 3.15 3.50 3.20

3.21 2.65 3.31 3.16 3.07 2.99

2.76 2.67 3.31 3.05 3.14 2.99

3.28 2.94 3.49 3.11 3.58 3.46

3.15 2.89 3.54 3.2 3.63 3.47

3.35 2.85 3.40 3.13 3.25 3.31

3.04 2.81 3.42 3.15 3.34 3.22

NOTE: Fiscal year. Evaluation scores range from 1 (unsatisfactory) to 5 (satisfactory). SOURCE: Export-Import Bank of Japan. “EXIM Japan FY 1998 Survey”. Table V-1-1, p. 49.

deteriorated on every measure, particularly on profitability (Table 3). Such a low evaluation should discourage Japanese investments in ASEAN across-the-board, although the survey does not differentiate between export-oriented investments and domestic market-oriented investments. The 1998 EXIM Bank survey indicates that the short-term strategies of Japanese corporations on investment in ASEAN are mainly defensive, with an element of retrenchment. Over one-third (34.1 percent) of respondents answered that they would invest to support existing operations. Some are taking this opportunity to enhance their

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control over management.1 Almost one in ten respondents (9.8 percent) said that they would increase their equity ownership to more than 50 percent to gain control of management. About one-fourth (24.3 percent) of respondents said that they would reduce their scale of investment by limiting investments to maintaining existing facilities, and 16.6 percent said that they would not implement new investments. An additional 2.0 percent said that they would withdraw their existing investments. 27.4 percent said that they would stick to existing plans. Only 5.1 percent said that they would increase investment to expand their existing

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facilities. Although this survey does not differentiate between export-oriented and domestic market-oriented investments, it is probably safe to say that responses are more positive among export-oriented investments. In contrast to the short term, Japanese corporations have a generally more positive outlook for medium- and long-term investments in ASEAN, while they also see the necessity for restructuring. Of the 290 responses to the EXIM Bank’s questions concerning medium- and long-term investment strategy, over half (53.1 percent) said that they would treat ASEAN as a major investment area and would keep current production systems. 2 At the same time, 41.5 percent answered that they would restructure current production systems while continuing to treat ASEAN as a major investment area. Only 2.7 percent answered that they would shift investment from ASEAN to other areas. Again, this question does not differentiate between export-oriented and domestic market-oriented investments. AGENDA FOR PROMOTING INWARD FDI TO ASIA The lowering of local input costs in ASEAN has given companies an incentive to locate more facilities there as they restructure global production based on comparative advantage. On the other hand, some remaining structural problems in ASEAN could deter such a shift. Table 4 lists the problems the Japanese companies cite most often regarding investing in individual countries in East Asia other than the NIEs. Foreign exchange instability is one of the most important problems, particularly for companies investing in the countries most affected by the Asian crisis. That problem is more cyclical and shortterm, while other problems are likely to be more significant for medium-term investment. Shortage of managerial talent is the most important long-run problem for the

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relatively more advanced developing economies such as Thailand and Malaysia, while insufficient infrastructure is one of the most significant problems for the relatively less developed economies such as Indonesia, the Philippines, Vietnam, and China. Inadequate legal and tax systems are serious deterrents to medium-term investment particularly for transitional economies such as Vietnam and China. Moreover, because of developments during the currency crisis, political and social instability is found to be a particularly serious issue for investing in Indonesia, and to a lesser extent, in Thailand. These countries need to undertake extensive administrative reform in order to attract more Japanese investments. We can relate these problems to the factors that affect Japanese FDI discussed earlier. The future agenda for promoting Japanese FDI in East Asia can also be summarised in that framework (Table 5). Diversification of export markets, particularly to Japan, is the major demand-side factor apt to promote export-oriented FDI, especially because of the possibility of trade friction with Europe and the United States. Future economic growth is the most important demand-side factor to attract domestic market-oriented investment to both China and ASEAN. For ASEAN, the implementation of AFTA will be a demandside pull. From the supply side, the major steps to attract both export-oriented and domestic market-oriented FDI are: infrastructure development, particularly for Vietnam, China, and Indonesia; upgrading legal and accounting systems, particularly for China, Vietnam, the Philippines, and Malaysia; and development of human resources. As a strategy to attract upgraded Japanese investment East Asian countries should develop human resources, infrastructure, and supporting industries in order to foster technology transfer. As the information age proceeds, the mode of wealth-creation is

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• Exchange rate volatility (59.5)

• Exchange rate volatility (50.0)

• Inadequate infrastructure (73.2)

• Inadequate legal system (58.3)

Philippines

Malaysia

Vietnam

China • Inadequate infrastructure (55.8)

• Inadequate legal system (56.1)

• Shortage of managers (28.6)

• Inadequate infrastructure (41.9)

• Exchange rate volatility (65.3)

• Shortage of managers (29.4)

Second most-frequent

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SOURCE: Nomura Research Institute.

• Profitability in Japan • Stability of exchange rate

• Development of infrastructure (esp. Vietnam, China, and Indonesia) • Improvement of legal and accounting system (esp. China, Vietnam, Philippines, and Malaysia) • Development of supporting industries • Development of human resources

Financial

• Access to distribution system (ASEAN and China) • Development of product models for Asia

• Development of AFTA (ASEAN) • Economic growth (ASEAN and China

• Improvement of tax system (esp. China and Vietnam)

• Stability of currencies (ASEAN and China)

• Diversification of export markets (to Japan)

Domestic Market-oriented FDI

Profitability

Supply side

Demand side

Export-oriented FDI

Both Export- and Domestic Market-oriented FDI

• Tax system (51.5)

• Tax system (43.9)

• Inadequate infrastructure (14.3) • Inadequate legal system (14.3)

• Inadequate legal system (23.3)

• Inadequate infrastructure (30.6)

• Political and social instability (25.0)

Third most-frequent

TABLE 5: Future Agenda for Promoting Japan’s FDI in East Asia

NOTE: Multiple answers permitted. Percent of responses in parentheses. SOURCE: Export-Import Bank of Japan. “EXIM Japan FY 1998 Survey”. Table III-5-5, p. 38.

• Exchange rate volatility (69.1)

• Political and social instability (73.5)

Thailand

Indonesia

Most frequent response

TABLE 4: Most Frequently Cited Deterrents to Medium-term Investment in Selected Asian Economies

Outlook for Japanese FDI in ASEAN 455

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becoming less and less labour-intensive and more and more knowledge-intensive. In this environment, if ASEAN continues to be short of highly educated and skilled human resources, it will have a smaller role to play, and countries with more highly educated populations, such as Korea, which is opening up to inward FDI, may play a more useful role for Japanese FDI. Moreover, the extent of innovation and competitive advantage of Japanese corporations will be a key. If Japanese corporations lead in innovation and establish competitive advantage, they will have more technologies to transfer and more financial resources to facilitate investment. Japanese corporations seem to have had some difficulties in adapting to information technology compared with their American counterparts in recent years. This has constrained their ability to continue to invest aggressively in East Asia. It remains to be seen whether Japanese corporations will reestablish their competitive advantage and regain their traditional position. In either case, East Asian economies need to diversify their sources of investment geographically. The major supply-side factor to influence domestic market-oriented Japanese FDI will be access to local distribution systems. Although domestic markets have shrunk as a result of the currency crisis and mediumterm investment oriented to these markets has been curtailed, in the longer run local markets will become increasingly important as the economies recover. Strengthening of local marketing capability is an important agenda item for Japanese corporations. In order to stimulate demand, Japanese producers need to introduce Asian models specifically designed to meet local needs. In the past when local markets were not large, Japanese corporations simply modified products originally developed for American, European, and Japanese markets. Now, however, leading companies such as Toyota

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and Canon have begun to develop Asian models. Strengthening local research and development capabilities in East Asia is a requisite for continuing this trend. Other supply-side factors that would influence both export-oriented and domestic market-oriented FDI include tax systems, particularly China’s and Vietnam’s. Financial factors applicable to both exportoriented and domestic market-oriented FDI include corporate profits in Japan and exchange rate stability of recipient countries. ASEAN countries will probably need to pursue a foreign exchange rate policy that is more in line with their trade structure rather than sticking with a single international currency. In other words, they will not be able to rely on the strategy of keeping their currencies weaker against the Japanese yen to attract Japanese exportoriented investment in the long run. To reduce exchange rate risk for investments in East Asia, individual Japanese corporations need to balance their foreign currencydenominated credits and liabilities. A broader based strategy for reducing exchange rate risk is for Japan’s political leadership to promote internationalisation of the yen. Economic logic, which is based on efficiency and innovation, should become a more prevailing force in FDI decisions for both host countries and Japanese corporations. In an earlier, less-competitive, pre-globalisation world, countries and enterprises could afford to permit socio-political considerations, such as national champions and local-content requirements, to override economic logic. Even in the past, however, such non-economic considerations could not apply to export-oriented investments, which had to compete in international markets. In the present, the global scale of markets works against a country’s adopting an industrial policy to develop a national automobile firm, for example. To capture

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economies of scale, the automobile industries throughout ASEAN need to be integrated by such means as the ASEAN Industrial Co-operation (AICO) scheme. Rather than through national champions, socio-political considerations should be satisfied in ways that are more consistent with economic logic, such as by efficient regulatory systems, high educational standards that accommodate technological transfer and innovative capabilities, efficient infrastructure, and well developed supporting industries.

Economic logic has generally prevailed over investments oriented to the export market, but not for investments oriented to ASEAN’s domestic markets. With the changes in corporate governance structure and the introduction of international accounting standards in Japan, Japanese corporations will need to base their decisions more firmly on pure economic considerations. This means that in the future, the orientation of Japanese FDI in ASEAN will be less clearly demarcated between domestic markets and the export market.

NOTES 1. 2.

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Amado M. Mendoza, Jr.

92.

ASEAN’S ROLE IN INTEGRATING RUSSIA INTO THE ASIA-PACIFIC ECONOMY AMADO M. MENDOZA, Jr.

THE POSSIBILITIES OF RUSSIAN ASIA1 Whenever Asia Pacific observers contemplate engaging Russia economically, attention invariably veers toward Russian Asia. Since three-fourths of the former Soviet Union’s territory was located east of the Ural Mountains, it was both a European and an Asian state. Most of its economic resources were concentrated on the European side and, despite great economic potential in terms of extraordinary mineral, energy, and timber resources, much of Soviet Asia was underdeveloped for various reasons. For one, much of the area was underpopulated. Second, the region lacked transportation facilities, housing and urban amenities, power supplies, and other support industries and inputs. Third, being desert, taiga, and tundra, huge portions of the region were not suitable for agriculture. Such factors are interconnected and become mutually reinforcing in that low population densities, low economic activity levels, and harsh climates and

terrains all imply that infrastructure and construction costs are abnormally high. Limited urban amenities made it difficult to attract people from the European side of the Urals, while the small agricultural base made it hard to attract labor because food sufficiency was not assured (Campbell 1982, 229–234). Given inferior economic resources and weak political appeal, Soviet assets in Asia were predominantly military in nature. These military resources were concentrated in Northeast Asia. Ironically, although they grew fast during the last two decades of the Soviet Union, Soviet military assets in Asia were still inferior to those of its Asian theater adversaries. This is doubly ironic, Scalapino (1982, 89) notes, considering that the anti-Soviet Asian states were galvanized into alliance with the West precisely because of Soviet military power. Retaining much of Soviet Asia and the Far East, Russia is the only Soviet successor state that stretches to the Pacific. Yet it

Reprinted in abridged form from Amado M. Mendoza, Jr., “ASEAN’s Role in Integrating Russia into the Asia Pacific Economy, in Engaging Russia in Asia Pacific, edited by Watanabe Koji (Tokyo: Japan Center for International Exchange; and Singapore: Institute of Southeast Asian Studies, 1999), pp. 125–53, by permission of the author and the publishers.

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ASEAN’s Role in Integrating Russia into the Asia-Pacific Economy

appears weak and vulnerable relative to other powers in Asia Pacific and, with only small sticks and carrots at its disposal, it has been content to play in the regional sidelines. The breakup of the Soviet Union substantially transformed the character and disposition of Russia’s Asian assets with even its disadvantaged military position being whittled down. Soviet military resources there largely comprised ground troops deployed against China, and improved SinoChinese relations mean these troops may either be deployed elsewhere or be demobilized. The Russian Far East, with the key cities of Vladivostok and Khabarovsk, used to house the Soviet Pacific Fleet, including submarine-launched strategic missiles in the Sea of Okhotsk, but it is now being demilitarized to attract foreign investment and aid. Nevertheless, Northeast Asia is the area where Russia plays an important strategic role, because of the Northern Territories dispute, the Korean peninsula question, and the new Sino-Russian relationship. The Northern Territories issue between Russia and Japan remains unresolved and may not progress meaningfully until both sides retreat from previous positions and internal Russian opposition to a hand-over weakens. The Japanese should be mindful of Russia’s great-power pride, which was piqued when the Japanese earlier offered a raw moneyfor-islands deal, while Russia has to assure the Japanese that its hesitance over the islands is not caused by a retention of Soviet military doctrine. The 1990 normalization of relations between Moscow and Seoul has led to a corresponding cooling of MoscowPyongyang ties and a significant South Korean economic presence in the Russian Far East. Bilateral trade has grown from US$116 million in 1985 to US$1.2 billion in 1991. Yet further progress was made during Yeltsin’s November 1992 state visit to South Korea. In addition to promising to hand

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over the flight data recorder of the Sovietdowned Korean Air Lines plane, Yeltsin also assured Seoul Moscow would try to make Pyongyang accept bilateral nuclear inspections and would stop supplying it with arms and technology to produce MiG-29s. He also dealt with unfinished business from the Korean War by promising to open archives on Soviet involvement to South Korean historians. In return, South Korea promised to release US$1.5 billion of trade credits. Several agreements were also signed. These included a basic relations treaty providing the legal framework for closer economic, political, and cultural ties; a military agreement on exchanging visits; and a tax treaty (Far Eastern Economic Review 3 December 1992, 15–16). Some Russians hope that South Korean capital will help reduce Russian reliance on Japanese investments so that economic development will not be held hostage to the Northern Territories dispute. It remains to be seen however whether “capitalist” Russia retains enough clout to restrain socialist fundamentalist North Korea. Booming arms sales and cross-border trade has fueled Russia’s new friendship with China. In need of hard currency and hoping to preserve the high-tech end of its industrial base, Russia is very pleased to be selling arms to China. A maturing of SinoRussian military relations since the early 1990s now includes technological cooperation on a wide range of defenserelated projects, regular interaction between their military establishments, and intelligence exchanges. Both countries also share similar security concerns. These include worries about the U.S. role in the post-cold war world, the volatile situation in Central Asia, and Japan’s enhanced military posture. The two countries signed a joint declaration on “Multipolarization of the World and the Establishment of a New International Order” in April 1997 and, together with

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Kazakhstan, Kyrgyz, and Tajikistan, the two also signed agreements in April 1996 and April 1997 to reduce military forces on their common borders. The Russian military command planned to slash the three-million strong Soviet military it inherited to around two million by 1995, and ultimately to 1.5 million by the year 2000. While troop levels are declining, the number and quality of the weapons systems in Asian Russia has grown. A number of factors are behind this redeployment. Demobilization is concentrated in European Russia in accordance with arms reduction treaties with NATO countries. As the Russian government’s resources are already fully stretched finding work and housing for hundreds of thousands of soldiers west of the Urals, cutbacks in the Russian Far East are going to have to wait a little longer. Along with a major exodus of non-Russian conscripts and widespread draft-dodging in the late 1980s and early 1990s, local military commanders report that almost one-third of the troops in their regions have returned home to non-Russian republics. Drastic reductions in defense spending have also led to a major scaling back in troop training and military exercises in the Far East. In terms of weapons systems, since the implementation of the Conventional Forces in Europe Treaty in 1990, more than 16,000 tanks, 16,000 armored fighting vehicles, and 25,000 artillery pieces have been transferred east of the Urals. About half of the armor, mostly T-72 and T-80 main battle tanks, were used to reequip military units in Central Asia and the Far East, while the rest were mothballed. This weapons upgrade might be alarming to other countries, but it should be seen for what it is. Improving the Far Eastern military units is actually the consequence of Russia’s weakness — namely, its inability to demobilize rapidly its huge and expensive military — and it is not the result of a

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deliberate anti-Japan or anti-China strategic doctrine. Rather, it is a rational response to an uncertain security situation. Russia may not have an apparent enemy nor face an evident military threat. However, a long border and a huge but underpopulated territory must be safely protected, even though upkeep of this military force will continue to drag down the Russian economy and public purse. The situation thus presents an excellent opportunity for peacemaking and confidence building. Since the movement of Russian war material into Asian Russia was the result of arms reduction agreements in Europe, the security challenge is for a counterpart Helsinki process to unfold in Asia Pacific, especially Northeast Asia. Russia-Asia Pacific economic relations will take a while to blossom fully and will depend to a large extent on the resolution of the region’s outstanding security issues. Just as internal economic actors must build mutual trust, so must nations. For its part, Russia has apparently counted on engaging Asia Pacific countries to revitalize its Far Eastern economy. The break-up of the Soviet Union, with the resulting curtailed access to the Baltic and Black seas, highlighted the importance of the Russian Far East as the bridge to the Pacific and the world’s most dynamic economies. The Russian initiative in opening up Vladivostok and its environs, previously one of the most militarized Soviet regions, to civilians and foreigners (including businessmen) is a notable confidence-building measure. Moscow also opened this area to engineers, businessmen, and laborers to cope with shortages in manpower, capital, and technology. Chinese joined the ranks of North Korean and Vietnamese seasonal workers in forests and factories, and on farms and construction sites. Posyet, near the North Korean and Chinese borders, was also declared an open port. River steamers

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again ply the waters between Khabarovsk and Harbin, China, while ferry service between Sakhalin and Hokkaido was reestablished. Flights were also opened from the Russian Far Eastern cities to China, South Korea, Japan, and the United States. By 1993, there were more than 1,000 joint ventures and companies with foreign capital in the Russian Far East, including restaurants, hotels, computer dealers, and sausage plants. Amur timber, Yakutia coal, and Sakhalin offshore oil and natural gas have come under joint development. Special economic zones to attract foreign investment, mulled over since 1987, are materializing in Sakhalin, Magadan, and Nakhodka. Most ambitious among the planned enclaves is the Tumen Free Economic Zone, which would embrace contiguous parts of Russia, North Korea, and China, and also involve Japan, South Korea, and Mongolia (Stephan 1993, 336). Until the early 1990s, Japan was the Russian Far East’s most important international partner, accounting in 1991 for half of the joint ventures, 60 percent of regional exports, and, on Sakhalin, 70 percent of foreign commerce. 2 But the nonresolution of the Northern Territories dispute has meant that planned investments were put on hold and that Russo-Japanese trade has stagnated. However, recent improvement in Russo-Japanese relations suggests a possible upturn in economic relations. Japanese interest in energy development in Sakhalin and Eastern Siberia has been revived, and the Hashimoto-Yeltsin Plan for economic cooperation represents “a qualitative shift in Japanese policy toward positive engagement in the Russian economy” (Watanabe 1998, 5). China seemed poised to overtake Japan in economic influence in the area. With Beijing and Moscow’s blessing, provincial authorities in China have set up “border economic cooperation zones.” Bolstered by

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all sorts of barter arrangements, regional trade has flourished. So far 80 percent of the 1,500 Chinese companies in Russia are located in the Russian Far East and the majority of China’s nearly US$200 million investments in Russia is invested in the region’s raw materials (Li 1998, 17). For its part, Moscow removed a vestigial irritant by acknowledging Chinese sovereignty over Damansky Island in the Ussuri River, the scene of bloody clashes in 1969. The internationalization of the Far Eastern economy does, however, face stubborn — though not insurmountable — obstacles: weak infrastructure, inflation, regulatory and legal confusion, political uncertainty, and a different business etiquette. As many joint ventures have already failed, the necessity of first-hand acquaintance with local conditions and the development of strong local contacts must be stressed. It would also be a mistake to assume that Far Easterners welcome all economic development. National sensibilities and environmental concerns have fed opposition to special economic zones and other joint ventures. Political question marks about regional economic developments also extend across borders. For example, realizing the ambitious Tumen Free Economic Zone project may depend largely on the mood in Pyongyang. Clearly though, economic integration and reducing regional security tensions are mutually reinforcing. Along with the rest of the world, ASEAN is interested in Russia maintaining its general post-cold war behavior and not reverting to Soviet-style bellicosity and militarism. Engaging Russia economically is one of the keys to this overall objective. Toward this end, ASEAN should offer support for the following: •

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with due consideration to social costs and Russian national sensibilities. The stabilization of Russian politics and the institutionalization of appropriate democratic rules and processes. Demilitarization, disarmament, and the conversion of military-oriented enterprises to civilian industry. Continued exchanges in culture, sports, education, and the like to facilitate mutual learning. ASEAN could explore the possibility of offering study grants to

Russians from the Far East in critical areas to help effect its transformation from a planned, authoritarian society. There is a huge need for learning in law, economics, business management, accounting, banking and finance, public administration, and hotel and restaurant management. Offering such opportunities would constitute relatively lowcost investments that could reap benefits in terms of good will and mutual learning.

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This section is based on Mendoza (1995, 28–38). A Japanese assessment of more than two decades of Japanese economic cooperation with the Soviet Union on developing Siberia suggests that it has not been spectacular, given the time, cost, and efforts involved. For one, the Siberian natural resources in which Japan is interested are for the most part situated in remote areas to which access is costly. Another important factor is the difference in priorities between the two. In the overall strategy of Siberian development, the Soviet Union emphasized West Siberia, an area closer to the Soviet industrial heartland, whereas Japan had wanted to develop the natural resources located east of Lake Baikal, an area closer to Japan. For a complete discussion, see Kinbara (1987).

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ASEAN IN INDIA’S FOREIGN POLICY

AMITABH MATTOO

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lowly but surely, ASEAN is emerging as central pivot in the Indian view of Asia and its future, and essential to the construction of a security order that will be in India’s interests. This is not only because the view of the Asia-Pacific as a zone of increased threats, potential turbulence and unbridled great power rivalries, is gaining increasing currency in India. But also because ASEAN is seen as potentially sharing a range of common military and non-military threats and concerns, including those related to issues as diverse as energy, economics and sustainable development. With ASEAN’s eastward expansion to include Myanmar, India and ASEAN are no longer just maritime neighbours, but also share over 1,600 km of a land boundary. Deeply concerned about the uncertainties of the future, including China’s role, India’s elite1 would like to fashion a multilateral security order in the Asia-Pacific in partnership with ASEAN. This view is not only an expression of Indian concern about potential instability in Asia, but also demonstrates a willingness to adopt a more active role in the future.

Foreign Minister Jaswant Singh’s speech, in Singapore in June 2000, is particularly revealing and illustrative. He began by identifying the ‘uniqueness’ of the region, and the threats faced by it: It is in this region that we find the presence of almost all major global players: the United States of America, Russian Federation, People’s Republic of China, Japan, ASEAN and India. The security scenario, the Asian security environment is unique. ... Our scenario is marked by the presence of seven of the ten most populous countries of the world; some of the largest standing armies; four declared and one undeclared nuclear weapon states, the presence of a US nuclear armed fleet and several missile manufacturing and exporting countries. ... Notwithstanding the economic dynamism displayed in the region, or the expanding avenues of bilateral and regional cooperation, many traditional sores of conflict remain: assertive nationalism, internal political transitions, unfinished agendas of national consolidation, territorial disputes, historical antagonisms,

Reprinted in abridged form from Amitabh Mattoo, “ASEAN in India’s Foreign Policy”, in India and ASEAN: The Politics of India’s Look East Policy, edited by Frédéric Grare and Amitabh Mattoo (New Delhi: Manohar Publishers & Distributors, 2001), pp. 91–118, by permission of the publisher and the copyright holder, Centre de Sciences Humaines.

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internal conflicts all of such nature as could draw external powers into the resultant gaps. ...

water resources, food security, protecting the environment, security of energy resources and so many more.

Jaswant Singh went on to specifically focus on Indian and Indian-ASEAN security concerns:

And, finally Singh sought to articulate a possible framework within which these concerns could be addressed:

India’s parameters of security concerns clearly extend beyond confines of the convenient albeit questionable geographical definition of South Asia. South Asia was always a dubious framework for situating the Indian security paradigm. Given its size, geographical location, trade links and the EEZ, India’s security environment and therefore potential concerns range from the Persian Gulf to the Straits of Malacca in the West, South & East, Central Asia in the North-West, China in the North-East and South East Asia.

India, like some other Asian powers, has tended towards a more independent security paradigm but this approach does not exclude regional cooperation in security matters, in a cooperative framework, as India’s participation in the ASEAN Regional Forum demonstrates. We see in the ARF, an experiment for fashioning a new, pluralistic, cooperative security order, in tune with the diversity of the Asia-Pacific region, and in consonance with transition from a world characterized by balance of power and competing military alliances. Though the ARF covers a broader region, we believe that its nucleus is ASEAN that is why ARF should be ASEAN driven. Our participation in the ARF reflects India’s increasing engagement, both in politicosecurity and economic spheres contributing to the building of greater trust, confidence and stability in the region. Our discussions in the ARF highlight the need to evolve a conceptual security paradigm that reinforces dialogue and cooperation, based on consensus.

... India and ASEAN face a complex, postcold war environment where relations among the great powers, most of whom are either Asian maritime powers, or powers from the continental landmass, are in a f|ux. We search for definitions and certainties in a period that is itself struggling to find answers. What will be the influencing factors? Critical will be the results of the reform process in Russia; concomitant political and economic changes in China; Japan’s rediscovery of a more assertive political role; the ongoing tussle between unilateralism and cooperative multilateralism in the US and the challenge and opportunity of a European economic and politico-military integration. What will also contribute is the whole process of globalization — the questions that it has thrown up and our ability to answer them. ... It is not possible that security be viewed in military terms alone. Both India and ASEAN face the challenge of tackling new, non-military threats. Amongst others, like food or water, the principal are economic, environmental and energy security. ... Other challenges that we will need to deal with relate to migration of populations, and as earlier mentioned — sharing of

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India’s involvement in ARF (an article on the relationship is included in the volume), its increasing defence cooperation with individual ASEAN countries (including Vietnam, Malaysia, Indonesia and Thailand), and particularly the cooperation between the coast guards and the navies will grow, but it is the larger element of a comprehensive strategic dialogue and a broader strategic understanding that may fashion itself in the future. ASEAN AS A ZONE OF ECONOMIC OPPORTUNITY The image of ASEAN as a zone of economic opportunity is still a strong one, despite the

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ups and downs in the economic relationship since 1991, the financial crisis that affected most of the ASEAN countries and India’s own sluggish pace of economic reform. Official documents suggest a relationship with tremendous potential and with great complementarity: There is ... mutual recognition of a complementarity-competitiveness continuum between the emerging ASEAN and Indian economies. India’s assets include its large diversified and liberalized economy, huge reservoir of manpower and of scientific talent, natural resources, industrial base and one of the largest, rapidly growing markets. Similarly, ASEAN with its rich natural resources, know-how, infrastructure, social sector development, investible capital, elaborate regional and global linkages in trade and industry and large market, emerges as an indispensable partner for India in its quest for new global opportunities and a 7–8% growth rate over the next decade.2

India is cooperating with ASEAN countries in various fields including trade and investment, science and technology, tourism, human resources and infrastructure development. Such linkages are expected to intensify in the coming years. According to official sources, ‘through the institution of dialogue partnership, attempts are being made to identify areas for focussed interaction, including formulation of work programmes and action plans’. PROGRESS IN SPECIFIC SECTORS OF COOPERATION Trade and Investment The total trade between India and ASEAN has increased tremendously from about US$2.5 billion in 1993–4 to US$6 billion mark in 1997–8. India has set a target of US$15 billion in trade with the ASEAN by the year 2000. However, the last two years

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have seen the depression of the ASEAN markets and a decrease in trade between the two partners. But the worst of the ASEAN crisis is already over and with signs of growth of the ASEAN economies showing up again, India hopes to increase trade both in terms of quantity and value with the ASEAN countries. The target of US$15 billion, is quite achievable under these circumstances. India’s overall trade with ASEAN registered a marginal decline of about 0.2 per cent during the year 1997–8. While its exports declined (17 per cent) because of the currency turmoil faced by some of the countries in the region, its imports registered some growth (16 per cent). Countries to which India’s exports declined were Singapore, Indonesia, Malaysia, Thailand and Brunei. Preliminary estimates indicate similar trends for the year 1998–9. Potential sectors for further imports from the ASEAN countries are vegetable oils, data processing machines, natural rubber, transport equipments, organic chemicals, textile yarns and wood and wood products. There is little doubt that vast scope exists for increasing Indian exports to the ASEAN region countries. In relation to the large and rapidly growing imports by these countries, Indian exports to their markets have been meagre. This is despite the physical proximity and the various complementarities that exist between India and these countries. In-depth market studies for specific products will indicate large opportunities for expansion of Indian exports. There are also substantial opportunities for increasing Indian exports of services and projects. Scope for future exports from India to the ASEAN countries lies in the following sectors: • • • •

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Pharmaceuticals Metal Scrap Leather Goods Textile Machinery Components

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• • • • • • • •

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Animal Feed Coffee & Spices Alcohol Distillieries Computer Software Groundnut Agro Products Rubber Manufacture Gems & Jewellery

India’s economic relationship with ASEAN encompasses an active investment component. Increasingly, ASEAN businesses are undertaking Foreign Direct Investment (FDI) in India in crucial infrastructural sectors such as roads and highways, telecommunications, ports and airports and tourism. ASEAN has indeed become a major player in the FDI stakes in India with Singapore, Thailand and Malaysia in the lead. Singapore’s Information Technology Park in Bangalore has already been commissioned, while the Philippines have made a beginning with the San Miguel Project commencing operations in India. The San Miguel Project is a 100 per cent foreign equity proposal valued at approximately US$74.2 million and involves manufacturing, distribution and sale of glass containers, plastic crates, metal closures, etc. ASEAN countries are increasingly investing in priority infrastructure sectors in India. From a negligible investment in 1991, ASEAN investment approvals today total over US$2.5 billion, which is no mean achievement. However, both sides are conscious that efforts need be made to speedily implement the approved projects. ASEAN accounts for a large volume of India’s investments abroad. Major areas of Indian investment are software development, gems and jewellery, manufacturing, textiles, chemicals, minerals and metals, etc. During the period from December 1995 to March 1998, 74 proposals of joint ventures/wholly owned subsidiaries with an amount of US$124.50 million were approved by the Government of India. Indian businessmen are

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being encouraged to acquire available equity and corporate assets and position themselves more advantageously in the region. Besides the cost advantage that India has vis-à-vis South-East Asian countries in terms of considerably lower manpower costs, there are other strengths in terms of industrial experience, technological capabilities, and availability of intermediate inputs and raw materials. This indicates that substantial complementarities exist between India and the South-East Asian countries, which can be utilized for mutual commercial benefit by entrepreneurs in India, and in the ASEAN countries. The South-East Asian region is host to a number of Indian joint ventures. The sectors in which Indian joint ventures are operating successfully are: • • • • • • • • • • •

Vegetable Oils Auto Ancillaries Manufacture of Environment Equipment Paper and Pulp Textiles Dyes Textile Machinery Components Pharmaceuticals Manufacture of Cotton Yarn Steel Wire Nylon Tyre Cord

The aggregate value of these ventures is marginal in relation to total foreign investment in the Asian region. The same is true of the ASEAN investment in India. There are also opportunities for Indian investment in the services sector in these South-East Asian economies as the development of the services sector has not matched the extent of industrialization which has taken place in these economies. As a result, the services sector is a growth area for the future. The areas which are opening up for investments are health care, education, leisure activities, hospital management and banking.

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The first meeting of the Working Group on Trade and Investment was held at New Delhi between 25–6 May 1998. An important outcome was the recommendation to conduct a study on AFFA-India linkages for enhancement of trade and investment. The study would identify critical areas of cooperation, product groups to be promoted, mechanisms for information sharing, as well as, ways and means to increase products of ASEAN and India in each other’s markets. Science and Technology India’s Science and Technology cooperation with ASEAN has made considerable progress under the dialogue partnership in the mutually identified fields of Advanced Materials, Information Technology and Biotechnology. Technology, Information, Forecasting and Assessment Council, under the Ministry of Science and Technology, has been providing overall coordination for India-ASEAN Science and Technology projects. Under Advanced Materials, two projects have been approved on a costsharing basis, at a total cost of US$2,29,000 to be borne by the Indian side over a period of two years. India has also funded the attachment of eight ASEAN research scientists to Indian research laboratories under the Advanced Materials Project. Under Information Technology, an ‘ASEANIndia Digital Archive’ project has been jointly proposed on a cost-sharing basis between India and ASEAN. An amount of US$1,12,500 has been released to ‘ERNET India’ under the Department of Electronics, which is the nodal agency. Under Biotechnology, projects having training and Research and Development components are being finalized. The Department of Biotechnology is the nodal agency on the Indian side. The ASEAN-India Working Group on Science and Technology met in November

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1997 in Kuala Lumpur. The Working Group reviewed the on-going ASEAN-India Science and Technology cooperation and agreed on future cooperation in this area of high promise in ASEAN-India partnership. In the ASEAN-PMC in Manila in July 1998, India had offered to train 100 ASEAN nominees under the ASEAN-India Informatics Training Programme (ITP) in the ‘state-of- the-art’ IT applications. This project reflects India’s desire to share with ASEAN its expertise in an area of its recognized strength. The project proposed has since been reformulated in consultation with the ASEAN sub-committee on Microelectronics. Tourism Tourism is an area where India is keen to link up with ASEAN to promote two-way tourist traffic, as well as leverage its complementarities to ASEAN tourist circuits in international tourism markets. Specific Indian destinations for joint marketing with ASEAN are being identified, addressing related tourism infrastructure needs involving ASEAN investors and taking other promotional and familiarization measures. Pursuant to the decision taken at the Second ASEAN-India Joint Cooperation Committee meeting held in Singapore in April 1998, the First Consultation Committee Meeting (CCM) on ASEAN-India Tourism Cooperation took place at Chiang Rai, Thailand on 12 July 1998. The meeting discussed at length and formally adopted the Terms of Reference (TORs) for the ASEAN-India Consultation Committee on Tourism. The TORs include broad parameters of Common Marketing Strategy; Travel Industry Networking; and Human Resource Development. The matrix of these broad outlines of cooperation cover programmes for awareness creation and image-building, joint promotional pro-

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grammes, study of investment opportunities, networking of information and facilitation services, organizing familiarization tours for tourism media and travel trade executives, networking of tourism training institutes, and training programmes on tourism with emphasis on new job skills and technologies.

Exchange Programmes; India Study Centres in ASEAN; ASEAN Study Centres in India; arrangements between ASEAN and Indian Institutes with specific focus on South-East Asian Studies; linking Indian Universities with the ASEAN university network; possibility of ASEAN placements at the Indian Institutes of Technology, etc.

Human Resource Development

People-to-people Contacts

Recognizing that economic development objectives cannot be fully realized without improvements in the Human Resource Development (HRD) sector, ASEAN and India are jointly committed to conducting an expert study on Indian and ASEAN capabilities and complementarities in this sector. Detailed terms of reference for the study have been identified and will essentially encompass initiatives to set up HRD enhancement measures such as Academic

An ASEAN-India Eminent Persons Lecture Series was launched with the objective of promoting awareness about the reality and potential of ASEAN-India partnership. Under this programme, eminent leaders and opinion makers, senior academics and media personalities, technologists and captains of trade and industry are invited to give public lectures on different aspects of economic, political, cultural and security ties between ASEAN countries and India.

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It should be noted that India’s elite does recognize the limits to which New Delhi can unilaterally balance a potentially belligerent Beijing and contain other security challenges. Ministry of External Affairs, Annual Report, 1998–9, Government of India, New Delhi, 2000.

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Section

VIII

THE CHANGING LANDSCAPE: ASEAN GOING FORWARD

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hat type of institution will ASEAN become? It is clear that, over the past three decades, ASEAN has insisted on the principle of organic growth. ASEAN leaders have resisted following a model. They have repeatedly stated that ASEAN will not be a Southeast Asian EU. And there is little reason to assume that this will change in the near future. It will retain its Southeast Asian character. Some directions have been established. For one, there is an aversion to the creation of an ASEAN-crat bureaucracy that would take on a life of its own, or become more than the sum of its parts. Rather, the ASEAN model has seen the proliferation of meetings and committees and study groups composed of member-state bureaucrats coming together to forge an ASEAN perspective on such diverse topics as health care and tariff reduction. ASEAN states appear to be content with incremental strengthening of the ASEAN Secretariat, a process that was set in motion in 1992. This incremental strengthening is sectoral and targetspecific — for example, the creation of an ASEAN Security Community or an ASEAN Economic Community. These recently conceived visions illustrate another key feature of how ASEAN organizes itself. First a goal is set, and subsequently, the

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mechanisms and initiatives necessary to achieve the goal are put in place. An illustration of this was the formulation of the goal to achieve an ASEAN Free Trade Area (AFTA). When it was first mooted, it was also known by another AFTA acronym — Act first, Talk after. If ASEAN is not destined to evolve into anything more than the sum of its parts (its ten nation-state members), this begs the question of what sort of regional identity it will acquire. The dynamics of an internal regional identity are quite different from the external ASEAN face that is presented to the outside world. Differences can be much more easily downplayed. The policy of noninterference in the affairs of other member states is deeply ingrained in the ASEAN psyche, and national sovereignty is carefully guarded. But in order to achieve the goal of the ASEAN Vision 2020, the issue of the limits of national sovereignty will eventually have to be addressed. It must also be said that the evolution of an ASEAN identity has been both retarded and enhanced by the expansion from ASEAN-6 to ASEAN-10. It has been retarded because of the diverse political and economic systems that must be accommodated. Levelling the disparities in economic prosperity between Singapore

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and Laos, for example, will be challenging, and a common identity must rest in part on some sort of economic parity. But the evolution of an ASEAN identity has also been enhanced because for the first time the entire geographic spread of the Southeast Asian region is encompassed in one organization. This lends a certain legitimacy to the evolution of a truly ASEAN identity, which can encompass all the rich diversity of Southeast Asia’s multi-cultural, multi-ethnic, and multi-religious heritage. Some scholars have argued that regional economic development will be the glue that binds the member states. During the euphoric years of double-digit growth, there was a belief that the region could soon graduate into the developed world, with all the attendant rewards associated with success. ASEAN’s “prosper thy neighbour” approach worked very well until the 1997 Asian economic crisis. Many bold initiatives were undertaken, not least of which was AFTA. ASEAN is still struggling with AFTA, but now there is a renewed emphasis on the need for an even more ambitious ASEAN Economic Community (AEC). Certainly ASEAN enlargement has made the whole question of the AEC more complex, as has the issue of free labour migration across borders — even among the original ASEAN-6. The urgency to formulate the goal of an ASEAN Security Community appears to be propelled more by external factors than an internal desire for intra-ASEAN cross-border security co-operation. ASEAN needs to articulate a cogently formulated role in the larger, emerging Asian security region, if it is to remain a relevant player in the changing global security equation. The ASEAN Regional Forum (ARF) has been an instructive dialogue and confidencebuilding body. The question now is whether

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or not ASEAN can evolve a security position that is more than the sum of its parts (the security interests of its member states). If this is possible, then ASEAN will cross the barrier of being a talk shop, into the as yet unexplored territory of “selling” its own unique brand. Certainly ASEAN will also have to traverse many new global imperatives as it fits itself into emerging webs of multilateral organizations. ASEAN must refine its complementary role within APEC, and be a relevant member of other emerging organizations, such as FEALAC and the AsiaEurope Meetings (ASEM). Globally, ASEAN will cope with sweeping pressures from the World Trade Organization (WTO). Similarly, ASEAN will have to continue to expand and deepen its dialogue sessions with countries that matter — such as the United States, China, Russia, Japan, and Australia. ASEAN will have to deal with China and Japan if it is to play a significant role in an emerging Asian economic, security, and political region. In terms of external power relationships, ASEAN’s interface with the United States is perhaps the most critical. As the United States surveys Asia, where will it perceive its strategic interest? And which countries and regional organizations will it consider to be allies? How will the United States view the emergence of a strong China? Or a Japanese oriented economic “yen zone”? Finally, how will U.S. relations in the Middle East impact on Muslim parts of ASEAN? The answers to these questions will be found in the future. But given the resilience of the region, and the storms which ASEAN has successfully navigated in its thirty-five years of existence, one can be optimistic that ASEAN will be around to see its Vision 2020 become a reality.

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ASEAN TOWARDS 2020 Strategic Goals and Critical Pathways

NOORDIN SOPIEE

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he founding fathers of Asean who met in Bangkok a generation ago had a vision for our region, which was called ‘Southeast Asia’, which hopefully in the decades ahead will be called ‘the Asean Community’. Their vision was: • •

•

a Southeast Asia at one, safe and secure, living in peace and prosperity; residing not in isolation from each other but working together and in the fulsome spirit of mutual respect; building not a system of peaceful coexistence but a community of collaborative peace and harmony; and

a region that was: •

•

insulated from outside strategic interference and left in peace by the Big Powers to pursue its own internal development; and but fully plugged into the international grid, hooked on to the dynamism of the global engines of growth, reaping all the

benefits that a full economic engagement with the rest of the world could bring. This Vision of 1967 sounds almost trite today. But it was novel, bold and revolutionary at the time of its birth. It was quite without precedent and not without risk. The historic art of regional reconciliation it engendered 30 years ago and the statesmanship it inspired over the last generation changed the course of Southeast Asian history. Our world will never be the same again. Thirty years on, as we celebrate the 30th anniversary of Asean, as we move to complete the unprecedented and historic uniting of Southeast Asia, it is appropriate to dream again: to craft an equally inspirational but realistic vision — Asean’s 2020 Vision. Indeed, at the end of this year, at the informal summit of Asean leaders, a 2020 Vision for Asean is to be adopted. Hopefully, our discussion today can contribute, how-

Reprinted in abridged form from Noordin Sopiee, “ASEAN Towards 2020: Strategic Goals and Critical Pathways”, in ASEAN Towards 2020: Strategic Goals and Future Directions, edited by Stephen Leong (Kuala Lumpur: Institute of Strategic and International Studies, Malaysia; and London: ASEAN Academic Press, 1998), pp. 21–28, by permission of the author and the publishers.

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ever modestly, to the process of reaching a strong consensus.

•

GETTING THE VISION RIGHT Obviously, it is critical to get the Vision right. In trying to do so, the following considerations appear to be critical: •

•

•

•

•

•

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Asean’s 2020 Vision must be comprehensive and multidimensional in scope; it must not only be a political vision, an economic vision, and a diplomatic vision but all three — and perhaps above all, an immensely human and an immensely humane vision. And because Asean has always had an internal and an external agenda, Asean’s 2020 Vision must deal with what must be done within the Asean Community and with that Asean must do with regard to the rest of Asia, the Asia-Pacific and the world. Asean’s 2020 Vision must be a vision capable of ‘grabbing’ the masses as well as the elites. It must be inspirational yet realistic and achievable, striking a responsive chord of hope and anticipation. There is also a need to ‘step out’ of our time. 2020 is almost a quarter century from now. Many of assumptions and limitations of the present will no longer prevail. A great deal of lateral, nonlinear, thinking will be necessary. A full consensus is of course essential. The Vision must be a force for unity and cohesion on our long journey to 2020. A brilliant Vision that divides is not a good one. Yet a watered-down, un-inspirational Vision to which no one has the slightest objection and for which no one has the slightest enthusiasm, would also be a most unfortunate mistake. A Vision must decide the destination and the objective. It is not a strategic

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•

•

•

•

•

plan. It is not a Plan of Action. It is not a road map, setting out the route. Rather, a Vision must set the end point, the place to be reached. The central idea or ideas must be simple and crisp and the number of key ideas mut be small. A ‘Vision’ which cannot be easily or orally articulated and whose content can only be discerned from detailed reading of the ‘Vision’ document is not a vision. At the same time, it must have substance and ‘meat’, or it is merely a slogan. Art is required in finding the appropriate balance. There is often wisdom also in a degree of constructive ambiguity. The devil is almost always in the details. For example, we may all agree on an integrated Asean regional economy but to seriously talk of customs union or common market with complete mobility of all the factors of production is probably to torpedo the entire idea. Twenty five years is a long time. Given that a surprise-free future would be entirely surprising, elements of flexibility must therefore be built into the Vision. To ensure durability, Asean’s 2020 Vision must ‘be owned by’ the widest range of forces, institutions and leaders in Asean. It must not be the proud possession of any single personage, or of the ‘Asianists’ or the sacred preserve of the ‘Aseancrafts’, off limits to those who are non-keepers of the sacred texts. Asean’s 2020 Vision must not only not be short on imagination. It must not be found wanting with regard to courage.

STRATEGIC OBJECTIVES FOR AND CRITICAL PATHWAYS TO 2020 I believe the leaders of Asean should declare in December their determination to work

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over the coming quarter century for four strategic objectives: • • • •

A Community of Progressive States, characterised by: Peace, Prosperity, and EmPowerment.

In other words, they should express their determination for and devotion to the four P’s: an Asean Community that is progressive, peaceful, prosperous and empowered. Asean’s Vision should be to see — fully and firmly in place — by 2020: • •

•

•

A dynamic, robust and resilient Asean Community of Progressive States; The Pax Aseana — an Asean Peace of undefended frontiers, of secure nations living in common and collaborative peace; The Asean Commonwealth — a regional economic community of prosperity, bigger than the United States and more than three times the size of present-day Japan; and Fully empowered nationally, regionally, continentally and globally — capable of confronting all national and challenges, empowered to shape East Asia (to the east of Vietnam) and West Asia (to the west of Myanmar), able to contribute to the course of mankind and the flow of human history.

Progressive States and Nations To be truly progressive, the states of Asean must be fully and firmly democratic, in possession of political systems where governments are chosen by the people, where governments are subservient to the people and where governmental decisions are made for the benefit of the people. To be truly progressive, the states of Asean must be fully and firmly caring and sharing societies that care especially for

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those in need of help without in any way holding any one back. The primary focus of all good governance in Asean must be the welfare and the dignity of the human person. To be truly progressive, there must be the fullest social justice, requiring the rule of law, the closing of income gaps, the equal advancement of women, the fullest empowerment of every citizen, the marginalisation of none. To be truly progressive, there must not only be the most dynamic political development but also the most dynamic economic, social, scientific, cultural, spiritual and environmental development. Our Asean community must see massive and sustained economic growth, massive and sustained social advancement, an incredible flourishing of science, technology, culture and the arts. Our best values and ways of life must be secured, strengthened, fortified and augmented. Our physical environment must not only be protected and preserved. They must be enhanced and enriched.

The Asean Peace Our Pax Aseana of Asean Peace must be a Pax without an imperium; it must be a democratic, egalitarian peace propelled by mutual respect and concerned to ensure mutual benefit. It must be an Asean Peace founded on the bedrock of: • •

national resilience and harmony; and regional resilience and fraternity.

We must fully and firmly be a family of friends, a joint venture of equal and productive partners concerned not only with our own peace and security but also with the peace and security of all in the family. In the journey to the Asean Peace of 2020, Asean must work on six fronts, and succeed in all six strategic circles of peace

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and security: at home, in Southeast Asia, in East Asia, in West Asia, in the Asia-Pacific and at the global level. The first and the most critical strategic objective must be peace at home, which cannot be imposed from outside, which must be made at home. At the same time, however secure we individually are at home, our doctrine of security in depth tells us that no Asean nation can be truly secure unless it is cradled in an Asean environment of warm and collaborative peace, unless our region nestles in an East Asian environment of warm and cooperative peace, unless East Asia itself is enveloped in an Asian and Asia-Pacific environment of warm and cooperative peace. We must also contribute to a new world order more productive of peace, prosperity and justice. This doctrine calls for not only national and regional resilience and the global contribution but also an active, proactive and productive Northpolitik (with regard to the building of an Asia-Pacific community of peace), and an active, proactive and productive Eastpolitik (with regard to the building of an Asia-Pacific community of peace). Our vital security interests demand that Asean play a key role in East Asian, West Asian, Asia-Pacific and global communitybuilding.

The Asean Commonwealth By the year 2020, we must also put securely in place the Asean Commonwealth, an Asean community of collaborative prosperity, weaved together by the richest web of productive and synergistic interdependence, propelled by enormous economic vitality and resilience, and massive and sustainable economic growth. From now to the year 2020, Asean should commit itself to growing at 7% each year, thus doubling our gross regional product

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(GRP) every ten years. By 2020, our GRP will thus be six times larger than it is at present. In purchasing power parity terms, the gross regional product of the Asean 10 stands today at US$1,676 billion, Japan’s at US$2,662 billion, the United States’ at US$7,991 billion. The Asean 10 is already almost two-thirds the size of Japan. Our per capita income will remain modest; but if we do succeed at growing by an average seven percent per year, a most difficult but not impossible task, the GRP of the Asean Community will be US$10,056 by 2020. We will be more than three-and-a-half times bigger than today’s Japan and one-and-a-quarter times the size of present-day America. Again, the critical strategic imperative is domestic economic vitality and resilience, and massive and sustainable domestic economic growth. To achieve these results, our economic systems will have to be fully liberated. They have to be free, independent and open market systems, allowing the fullest play to the most enterprising in our economies to profit from the fruits of their enterprise, providing the fullest incentives to human effort and contribution. This does not mean that the market can be left entirely unguided. It does not mean a smaller role for government. Indeed to achieve these economic results, governments too have to be more empowered, made more capable, efficient and effective. They will have to play the most active and powerful role to ensure the public good, to produce unprecedented results especially with regard to human resource enrichment, the building of information-rich societies, and the achievement of sustainable development and growth. To achieve these results, all the governments and peoples of all Asean countries will also need to ensure a fundamental and forceful mindshift to ‘prosper-thy-

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neighbour’ strategies, policies, and actions. For much too long, we have, like the rest of mankind, been in grips of ‘beggar-thyneighbour’ attitudes. The mindshift to ‘prosper-thy-neighbour’ will be like the rising tide that will raise all ships in the Asean sea. Regionally, there will obviously be need to go beyond AFTA-Plus, to pragmatically adopt all productive forms of economic cooperation (many of which will be novel) which will be evolved over the coming quarter century. What these are at any point in time or stage of Asean’s development will be a function of that time and that stage. East Asia will remain the fastest growing regional economy in the world by far. By

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2020, the majority of the world’s biggest economies will be residents of East Asia. West Asia will in the coming decades join the run of the dragons and tigers. The AsiaPacific will be three quarters of the wealth of the world will be generated. We must obviously contribute to and take the fullest advantage of East Asia, of West Asia, of the Asia-Pacific, indeed of the Global Commonwealth which we must help to build. Our vital economic interests demand that Asean play a key role in the building of the East Asian economic community, the West Asian economic community, the Asia-Pacific economic community and the global economic community.

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THE EVOLVING REGIONAL ROLE OF ASEAN

MICHAEL LEIFER

PROSPECT During the three decades which have passed since its formation, both ASEAN and its regional context have changed. In that period, the Association has demonstrated a facility for adaptation. The decisive point of adaptation occurred with the entry of Vietnam which marked a qualitative change in composition. Further enlargement will sustain that trend but, with membership beset by a much greater diversity in political identities, a working consensus will become more difficult to attain as well as making convergence in targets for economic cooperation more problematic. The Cambodian coup has also pointed up the difficulty of completely separating domestic from regional agendas. More intractable also will be the problem of addressing the most fundamental challenge to regional order arising from China’s rising power and extensive irredentist agenda.1 There remain a host of bilateral tensions among ASEAN states

which have the potential to disturb working relationships. But they would not seem to be of the order of casus belli, including contending claims in the Spratly Islands. Moreover, any limited changes in the territorial and maritime status quo among individual ASEAN states would not necessarily have a radical effect on the regional environment. China’s claims fall into a different category, however, because of their far more extensive scope and also because their full realisation would be truly revolutionary in geopolitical terms. China has maintained a steely rectitude in asserting its claims to sovereign jurisdiction which the ASEAN states have not been able to persuade Beijing to address with a view to any compromise, so far. Within an enlarging ASEAN, however, a greater mixture of interests exist in addressing the problem of a rising China. The government in Bangkok, for example, appears comfortable in its current relationship with that in Beijing which it has no interest in prejudicing over

Excerpted from Michael Leifer, “The Evolving Regional Role of ASEAN”, unpublished paper submitted to the Institute of Southeast Asian Studies, Singapore, 1997.

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the South China Sea. The same may be said for Myanmar and Laos as newest members of the Association as well as for Cambodia whose government, in power through a violent coup, has looked to China to endorse its legitimacy. Although the defence of limited island holdings is within the military competence of some individual member states, ASEAN is not organized to defend the regional territorial and maritime status quo in the South China Sea; nor can it expect much support from the ARF despite the diplomatic centrality enjoyed by the Association. The ARF is based on ASEAN’s security model, while China exercises an effective veto on its security agenda. Moreover, it was left to individual governments to protest to Beijing when in May 1996, following ratification of the United Nations Law of the Sea Convention, it employed the archipelago principle in drawing baselines around the Paracel Islands which are claimed also by Vietnam. China reserved its right to declare base-lines for the more contested Spratly Islands with the implication that it would also employ the archipelago principle for that group which, under International Law, is valid for mid-ocean archipelago states only. In the case of the South China Sea, ASEAN has been able to adopt a collective position only on the question of modalities as expressed in its Declaration of July 1992. Its inability to move effectively beyond that position is indicative of its corporate limitations. That said, ASEAN has shown itself to be a factor of a kind in China’s calculations in the context of its differences with the United States and Japan and in the light of its interest in promoting multipolarity within Asia-Pacific in its own interest. For example, in March/April 1997, a dispute between Vietnam and China over the right of one of the latter’s oil exploration rigs to operate at the margins of coastal waters in the South China Sea was

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defused after Vietnam’s Foreign Ministry called in heads of resident ASEAN missions in Hanoi for a briefing. All in all, however, ASEAN has not been able to do any more than secure a measure of accommodation of China’s part in its persistent pursuit of territorial and maritime claims in the South China Sea. The regional role of ASEAN has evolved in a substantive sense over the decades through the ability of member governments to contain and manage tensions among themselves. That signal achievement contributed also to an ability to project a collective diplomatic voice which became of some account partly because of the regional credentials of the Association in the special circumstances of the Cambodian conflict during the 1980s. Those credentials have rested in important part on a high degree of success in individual economic accomplishments which have served to support the “cooperative security” structure. Indeed, it was that achievement and incentive represented as “the economic underpinnings of security” which was much in mind when the ARF was conceived and established. At issue in that context is whether or not ASEAN has reached the limits of its evolution in its regional role. In one important respect, the Association has not evolved since its formation; namely, in its commitment to dialogue as the sole instrument for addressing regional security. The ARF has been established on the same premise but its formation was also an acknowledgement that ASEAN was not competent on its own to manage the security problems of its region which has been called into question as discrete strategic category as a consequence. Enlargement has been embarked upon, in part, to protect ASEAN’s separate political identity and prerogative regional position. That process has been shown to contain seeds of discordant diversity which could have adverse con-

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sequences for corporate decision-making on regional issues and, therefore, for the Association’s role as a diplomatic community. The point has been well made that “There is nothing preordained about the future survivability of ASEAN”.2 That said, ASEAN has been able to create collective diplomatic strength out of individual weakness through promoting a corporate culture of close consultation and cooperation underpinned over time by economic accomplishment. It has attained a notable international standing which is exceptional among regional groupings of post-colonial states. It has also begun to undertake more systematic economic cooperation, although there is every reason to believe that its plans for an ASEAN Free Trade Area (AFTA) will be superseded by the work of the World Trade Organisation (WTO) as applied by APEC. In its most recent phase of evolution, however, ASEAN has also been obliged to come to terms with its evident limitations. Indeed, ASEAN’s initiative in promoting the ARF has served to acknowledge them. Accordingly, for the Association, evolution has involved a pragmatic abdication of an exclusivist doctrine for regional order and a willingness to join in security cooperation beyond Southeast Asian bounds but on the

basis of the same model of “cooperative security”. It may be argued, therefore, that ASEAN may have reached the limits of its evolution in its regional role and that it will need to reinvent itself or suffer from institutional decay. Its main most recent development, namely enlargement, does not in itself address that problem because consensus-building has been made more difficult. Moreover, its assumption of responsibility for addressing the crisis arising from the coup in Cambodia is a reflection of differences within the ARF rather than a display of renewed competence in undertaking a regional role. Indeed, the exercise of that responsibility may well test that competence in a political embarrassing way. The dilemma for ASEAN as a security organisation is that any disposition to reinvention will be constrained by the restrictiveness of employing only one model which contains fundamental inherent weaknesses. The fact of the matter is that in an ungoverned world, the vehicle of dialogue can only be effective up to a point which has been ASEAN’s salutary experience in seeking to respond, with effect, to the coup in Cambodia. ASEAN cannot move beyond dialogue which means that the Association is condemned to suffer from the defects of its qualities.

NOTES 1.

2.

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See Michael Leifer, “China in Southeast Asia: interdependence and accommodation”, in China Rising, edited by David S. G. Goodman and Gerald Segal (London and New York: Routledge, 1997). Chin Kin Wah, “ASEAN in the New Millennium”, in ASEAN in the New Asia: Issues and Trends, edited by Chia Siow Yue and Marcello Pacini (Singapore: Institute of Southeast Asian Studies, 1997), p. 161.

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THE FUTURE OF ASEAN

JULIUS CAESAR PARRENAS

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he trend towards the deepening of ASEAN’s co-operation in a wide variety of areas including the security and economic fields, expansion of its membership, and its increasing role in Asia-Pacific affairs will most likely continue in the years leading to and beyond the turn of the century. Change and uncertainty in the global and regional environment, a factor that has spurred the growth of ASEAN co-operation, will continue in the next few years as the restructuring of international relations in the wake of the end of the Cold War continues. The uncertain future of Chinese politics, given the economic and social changes currently taking place, and China’s role in the region, will continue to exert pressure on ASEAN to strengthen itself by intensifying economic, political, and security cooperation and by expanding its membership to include Laos, Cambodia, and as circumstances allow, Myanmar. Given the relative decline in the United States’ security role in the Asia-Pacific and the pressures from Japan, Australia, Canada, and possibly,

Russia, for greater multilateral security dialogues, ASEAN, through the ARF, will assume a larger importance in shaping regional security affairs. The increasing importance of trade and other economic issues in international relations will also encourage ASEAN to further deepen the process of economic integration by including more areas, such as services, in AFTA and by embarking on closer consultations regarding macroeconomic policies. This will be pushed by external and internal factors: the threat of ASEAN being diluted by APEC and global trade liberalization within the WTO framework and the rapidly growing infrastructure and financial linkages and trade and investment flows among its member countries. Parallel to these external factors, the process of co-operation being constantly pushed forward by institutionalized ASEANlevel meetings of senior officials and ministers will provide a much slower but constantly moving engine for the advancement and marginal improvement of regional co-operation in various fields. This

Reprinted in abridged form from Julius Caesar Parrenas, “The Future of ASEAN”, in The New Asia-Pacific Order, edited by Chan Heng Chee (Singapore: Institute of Southeast Asian Studies, 1997), pp. 186–219, by permission of the author and the publisher.

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will pave the way for the success of more ambitious regional integration schemes that may not yet be currently acceptable but which could become realities in the early part of the next century. Thus, ASEAN will most probably move forward significantly in the areas of economic integration as well as political and security co-operation in the years ahead. It will also play a more active role in shaping regional security through the ARF. The extent of ASEAN’s influence will be determined by the extent of economic development and military strength it will attain within the next few years relative to its other neighbours in Asia. If current trends continue and if political integration can follow economic integration, ASEAN will eventually join the United States, China, Russia, and Japan as a major power in the AsiaPacific in the first quarter of the twenty-first century. The challenges that ASEAN will face in the coming years are of a different nature from those it had faced until now. One is the management of its growing regional role vis-à-vis the major powers, especially China, with which several of its member countries have overlapping territorial claims in the South China Sea. If the past is to be taken as a key to understanding the future, one could say that ASEAN would try to take a neutral or “honest broker” position in the conflicts arising between and among the major Asia-Pacific powers and encourage the peaceful resolution of such conflicts. ASEAN would build up its security role in Southeast Asia with a view to keeping access to the region’s trade and sea lanes open to all other countries. It would also deal with China’s claims to the South China Sea in a non-confrontational way and push for a solution that would satisfy the claimants’ requirements for security and access to maritime resources. While ASEAN has taken initial steps through the informal meetings on the South China Sea issue and the

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Manila Declaration, much will also depend on how China’s post-Deng leadership will respond to these initiatives in the coming years, which at this point remains uncertain. Another challenge that ASEAN will face is the management of leadership succession and possible regime change in some of its member countries. The case of the Philippines in the 1980s points to the negative impact of political instability that can accompany such developments. Economic growth, social change, and advances in technology pose challenges to states whose political systems still rely to a large extent on control over the flow of information and restrictions on activities of citizens. Transitions brought about by these pressures need to be managed well in order to avoid economic disruptions and long periods of political instability. There is yet no consensus among analysts on whether the various ASEAN countries would succeed in meeting this challenge. The prospects for Indonesia, which could face such a challenge sometime in the future as President Soeharto relinquishes political control, are viewed differently by optimists and pessimists.1 Expanded public participation in the political process brings with it some problems for inter-state relations in a culturally and politically diverse region such as Southeast Asia. This is illustrated by the strains on the Philippines’ relations with Indonesia as a result of the holding of a conference on East Timor by a private group and the public clamour in the Philippines to downgrade relations with Singapore in early 1995 as a result of the execution of a Philippine overseas worker. This aspect of international relations will need greater management in the future as public opinion, pressure groups, and the mass media acquire greater influence in the political process. A third challenge is related to the expansion of ASEAN membership. One

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aspect of this challenge is how to integrate these new countries into ASEAN in a way that would strengthen the organization as well as overall regional security and economic development. Vietnam’s entry will most likely do both, as it will enlarge ASEAN’s population, add what appears as a potentially economically dynamic new member to the organization, and reduce insecurities on the part of both Vietnam and China, which in the past had led to military conflict between both countries. The eventual inclusion of all the Indochinese countries and Myanmar will put greater pressure on these countries to adjust to ASEAN rather than the other way around. This is due to the fact that AFTA and its acceleration have been agreed upon before their entry, and there is very little likelihood that ASEAN will reverse these decisions. Thus, the new entrants will have to shoulder the burden of catching up with the rest of ASEAN in order to become full members of AFTA as well. The other aspect of the challenge arising from ASEAN’s expansion will probably be more problematic: the management of political change in the new member states. The problem of leadership succession and regime change would be even more acute in these new countries, since they have weaker economies that may not withstand the onset of political instability. Most of them will also have to move from a highly centralized political and economic decisionmaking process to one characterized by greater pluralism and participation, such that the extent of change will have to be much farther than in the case of the present ASEAN countries.

There is much cause for optimism about the future of ASEAN in the post-Cold War era. External and domestic pressures will most likely lead to the continued strengthening of co-operation and integration efforts, although much of the latter will be occurring in the economic rather than the political arena. The progress of APEC will likely spur, rather than inhibit, the development of ASEAN integration. Obstacles to progress in security cooperation will likely diminish, but whether ASEAN will evolve into a formal security organization will probably depend on how useful the formalization of already existing and progressing co-operation in this field will be. ASEAN will also become an even more important player in regional affairs as its co-operation deepens, its membership expands, and its member states’ economic and military capabilities grow. The ASEAN process, which emphasizes consensus and non-confrontation, will influence the regional order through the ARF, thus underlining ASEAN’s positive impact on regional politics and security. Nevertheless, ASEAN has new and more formidable challenges to confront. It will have to deal with the possibility of political instability in some of its member countries and in those which will join ASEAN in the years ahead. It will also have to deal with the issues arising from the end of the Cold War, including the possibility of regional conflicts involving outside powers and member states. ASEAN has responded to challenges in the past by seeking security in greater unity. It would do well to remember this in facing the challenges of the future.

NOTE 1.

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M. Din Syamsuddin gives a more optimistic scenario in his article “Political Stability and Leadership Succession in Indonesia”, Contemporary Southeast Asia 15, no. 1 (June 1993): 12–23. For a more pessimistic long-term scenario, see Harold Crouch, “Indonesia: An Uncertain Outlook”, Southeast Asian Affairs 1994 (Singapore: Institute of Southeast Asian Studies, 1994), pp. 121–45.

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PROSPECTS FOR INTRA- AND EXTRAREGIONAL RELATIONS

SEKIGUCHI SUEO

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he ASEAN-10 have the potential to form a unified market with a population of 480 million. Unity takes time, however, because not only the leading members but also the followers face a variety of tasks in constructing sound economies. As of early 1999, Cambodia had managed to establish the Hun Sen government after prolonged political confrontation between two prime ministers and to dissolve the military power of the Pol Pot group. Construction of the economy is just starting. Myanmar needs to democratize its political system and develop its economy. Vietnam, though it has successfully introduced free market mechanisms to revitalize its economy, still has to solve a number of problems. Laos’ economy has been stagnant for many years. For these newcomers, the ASEAN-10 will have to slow its economic integration. Human rights and democracy issues remain serious political controversies among the ASEAN members and Western

nations. East Asians and Westerners view these issues differently. South Korea and Taiwan have gradually shifted toward Western-style democracy after decades of military dictatorship. Political factors have sometimes forced leaders to keep militaryled governments, particularly when confronting rivals. Economic development was the top priority among these leaders. Despite the military shadow, South Korea and Taiwan have achieved rapid progress in democratization. Even ASEAN’s leading members have not achieved full democracy by Western standards. Although these countries could encourage more active public participation in policy making in accordance with democratic processes, foreign pressure to do so might spark regionalism. It is important for the ASEAN members to move steadily toward democracy based on human rights. The core members of the ASEAN-10 are in financial difficulty, and the causes differ by country: failure in supply-demand man-

Reprinted in abridged form from Sekiguchi Sueo, “Prospects for Intra- and Extraregional Relations”, in Road to ASEAN-10: Japanese Perspectives on Economic Integration, edited by Sekiguchi Sueo and Noda Makito (Tokyo: Japan Center for International Exchange, and Singapore: Institute of Southeast Asian Studies, 1999), pp. 195–217, by permission of the author and the Japan Center for International Exchange.

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agement, hasty and partial deregulation, and nepotism between political leaders and business circles. Enthusiasm for regional integration has shifted to regional protectionism. Such a trend is evident in Mahathir’s statements. However, regionalism is unlikely to solve the current problems. The East Asian economies are in trouble. Japan has been stagnant for a few years. South Korea suffered a currency crisis. Taiwan has been relatively stable, but its prospects are dimming. China has thus far avoided any balance-of-payments difficulties, partly owing to strict regulations and direct government control over foreign trade and exchange transactions. Thus, in general, the East Asian economies have lost their luster. In contrast, economies in North America, and to a lesser extent in Europe, have revived or have continued to grow in the mid-1990s. Currency crises in many East Asian countries, including some ASEAN economies, have provided good opportunities for Western enterprises to acquire assets in the region. Financial firms throughout the region have become favorite takeover targets. Although self-reliance is important for the ASEAN economies in overcoming recent hardships, a combination of currency devaluation and strict supply-demand management is not enough to strengthen their industrial bases. Regional currency depreciation does not change relative prices among East Asian nations, though it does make East Asian products less expensive than products from other regions. Thus, depreciation does not necessarily promote intraregional trade. Tight supply-demand management will reduce imports as well as demand for domestic products. This, in turn, will decrease intraregional trade as well as imports from outside the region.

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There are good reasons for East Asian economies to promote regional financial cooperation to facilitate external balance of payments. Stable currency values and credible financial systems are needed. Because Japan and Taiwan have the means to extend financial assistance, they can provide emergency loans to countries trying to overcome short-term difficulties. Japan has already joined an international consortium to provide emergency assistance. In accordance with some ASEAN economies’ requests, Taiwan is participating in such assistance, but China is not. Regional financial cooperation is a test case for solidarity and friendship among East Asian economies. Financial cooperation should not be limited to East Asia. Broader cooperation through APEC is desirable and feasible. As a matter of fact, financial assistance to Thailand, Indonesia, and South Korea has been promoted through broad cooperation with other industrialized countries. Nonetheless, East Asian countries must take the initiative and explore ways to put their economies on the right track. This is in contrast to an inward-looking approach that protects insiders against outsiders. By analogy, trying to switch international trade to intraregional trade contradicts the idea of broader financial cooperation. In all aspects of regional cooperation, Japan is in a position to play active roles in trade, investment, and finance. The Japanese government has, in fact, been promoting financial assistance. A more important task for the government, however, is the revitalization of Japan’s economy. A stagnant Japan with shrinking imports cannot stimulate production in ASEAN. A long-term recession would prevent Japan from investing in ASEAN and from extending financial assistance.

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SURIN PITSUWAN

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ut looking into the future, what do we have to do? We have to make ARF both meaningful and attractive. We have to make all ARF participants feel that it is worthwhile. I am not quite sure that they will be feeling that as we move into the immediate future. Henry Kissinger argued in Does America Need a Foreign Policy? Toward a Diplomacy for the 21st Century (Simon and Schuster, 2001) that Asian nations view each other as strategic rivals even though at the same time they co-operate on many economic matters. He further argues that wars between them are not likely, but neither can they be excluded. The international order of Asia therefore resembles that of Nineteenth Century Europe more than of the Twenty-First Century North Atlantic. We need a security structure that would dispel those notions. A structure that will allow us to mediate, negotiate and settle the conflicts and differences among countries in the region. The ARF must be more proactive, effective, and relevant. Since 1994, the ARF has been talking about confidence-building

and the second phase of ASEAN diplomacy that came to be known as “Preventive Diplomacy”. But the process got stuck on this phase, as several members became concerned that “Preventive Diplomacy” would be taken to mean external interference in domestic affairs of member countries. I do not know how long we have to wait until we can go into the crucial phase, i.e. the conflict resolution phase. The current situation requires us to move forward to the conflict resolution stage. Then and only then can we dispel the view that Kissinger has of the region, which is to say that we are not like Europe of the Nineteenth Century. We are a region, and an organization, of the late Twentieth Century, if not, the Twenty-First Century. Somehow, ASEAN leaders must try to find a formula to make the ARF much more effective. We cannot get away from the democratization process, it is inevitable. Without transparency, confidence, exchange, openness, and confidence in each other’s programmes and activities, we would not have a sense of

Excerpted from Surin Pitsuwan, “Future Directions for ASEAN”, Trends in Southeast Asia no. 10 (Singapore: Institute of Southeast Asian Studies, 2001), by permission of the author and the publisher.

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security and stability within the region. Professor Amitav Acharya got it right when he suggested that democracy will bring about more stability in the long term, although countries may have to go through a transitional period of instability, insecurity and tension. But there is no way we as a region could avoid the road to democratization. When we were preparing for the ASEAN Vision 2020 blueprint in Thailand, we wanted to introduce the phrase “ASEAN as an Open Society” into the Vision 2020, but even this proved to be difficult because many members felt that this phrase could create confusion in the region as it could imply the creation of an openly democratic ASEAN. I asked my then Prime Minister, Chuan Leekpai, to convince our ASEAN colleagues that “open society” is not a threat, but a way for ASEAN. When this was raised at the Kuala Lumpur ASEAN Summit, members were very much divided. Some argued that “open societies” must be consistent with the traditional ways of each ASEAN country while others suggested “plural, open societies” as an alternative. If one looks at the ASEAN Vision 2020 statement, the phrase “open societies” was eventually included but it is understood to be consistent with the Indonesian spirit of gotong royong [mutual assistance]. So one understands how difficult it is to bring in something new to the ASEAN process but we must keep on trying. And I am glad to say that we are moving in that direction, even though there is a lot of hesitation and reservation on the part of many members. ASEAN was also suffering from a bubble economy, which has very clear and obvious characteristics. One, the capital investments that propelled development and industrialization in the past three decades came mostly from outside the region — Japan,

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western Europe, the US, and Australia. Secondly, the technology to propel industry established by outside capital came from outside. The management for these factories was also “imported” from the outside. In the end, whatever we produced, we exported to third markets. This puts us in a vulnerable situation. ASEAN needs to develop its own science and technology, and Singapore can be the centre of this development. That is what our ASEAN colleagues are discussing in Hanoi now. Unless we have our own “homegrown” science and technology, ASEAN will not progress. I told Keizo Obuchi, the late Prime Minister of Japan, that what ASEAN needs is the development of contending centres of excellence. Singapore can be best in one area; Malaysia can be best in another; Thailand can be best in food processing, if nothing else. In this way, ASEAN could have its own homegrown science and technology and then nobody can pull the plug on us, and ASEAN can maintain growth. Our leaders must get together to find a way to encourage research and development here. The World Bank and the Asian Development Bank (ADB) could also help. Multinational companies could assist by bringing some of their research development work to Singapore, to Bangkok, to Manila, to Jakarta whenever we are ready to receive it. Or bring some of our people into their laboratories. They should not be afraid that we will take over, as there will be room for everyone. Only this way can there be sustainable growth for all of us in the region. ASEAN must accelerate its AFTA (ASEAN Free Trade Area) process. AFTA has been a mockery. ASEAN has kept moving the deadlines and we still cannot open our markets to each other. Our target of a free trade area was originally scheduled to be fully realized by the year 2002 and by then, ASEAN will be an integrated single market

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with 500 million consumers but at current projections we are unlikely to achieve this. We will not be able to attract foreign investments if we cannot guarantee an integrated common market. I have asked our dialogue partners: Australia, New Zealand, Canada, the European Union, the US, Japan and South Korea, to help us develop our human resources so that that we can become consumers of their goods and services in the near future. We need to remind them that technology transfer is not a one-way street, neither is it social welfare, but it is a strategy to help develop ASEAN to become their lucrative market. The conditions in ASEAN now are much like what Yeats described in the second coming of Christ. There is a lot of confusion, conflict, tensions and in some cases, breakdown and disintegration. Yeats said: Turning and turning in the widening gyre. The falcon cannot hear the falconer; Things fall apart; the centre cannot hold; Mere anarchy is loosed upon the world,

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The blood-dimmed tide is loosed, and everywhere. The ceremony of innocence is drowned; The best lack all conviction, while the worst are full of passionate intensity. (William Butler Yeats, The Second Coming)

We cannot leave the future of ASEAN in the hands of just the leaders anymore. Academics, journalists, businessmen, inter alia, must also try to take charge of the future directions of ASEAN. Unless we speak up as the peoples of ASEAN and try to analyse the malice that is affecting the organization, some of our leaders will not feel the necessity to mend their ways or change their course. They will talk about cooperation but they will always punctuate it with the phrase, “no interference in domestic affairs”. In the world of the Twenty-First Century, the line between cooperation and interference is very thin. There are problems of a purely domestic nature, but internal conflicts have implications and a strong spillover effect on all of us in the region.

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ASEAN’S PAST AND THE CHALLENGES AHEAD

JUSUF WANANDI

FUTURE CHALLENGES Significant internal changes within countries and external, global, and regional changes, particularly in the last decade, have created extreme and dramatic pressures for ASEAN as a whole and for each of its members. The greatest impact on ASEAN has been the pressures resulting from globalization. Its influence is allencompassing, as the financial crisis in East Asia has shown since 1997. The ASEAN members cannot adjust to these external pressures by themselves. Even developed nations cannot cope with these changes on their own. That may be one of the reasons for the European Union to deepen their co-operation. The second global event affecting ASEAN was the end of the Cold War. That has altered the security and stability of the region and has opened new horizons in strategic developments. It has also put pressures on existing mechanisms and institutions to adjust and to change, or risk the

possibility of perishing. Thus, the big question is whether ASEAN can adjust and change in the medium term and cope with these changes. The task will not be easy as it seems almost impossible for ASEAN to undertake fundamental changes, given the constraints that it is now facing. Because of the financial crisis, the ASEAN members have tended to become more inward-looking. In addition, because of leadership changes in some of the older members, personal relations are no longer as critical for ASEAN co-operation as in the past. The new members have also brought difficulties of all sorts because of great differences in experience, political systems, and levels of economic development. Many of the old principles on which ASEAN has functioned for the last thirty years are no longer adequate for coping with the fundamental changes in ASEAN, and in each of its member countries. For example, the personal, non-legalistic, and informal system of co-operation between

Reprinted in abridged form from Jusuf Wanandi, “ASEAN’s Past and the Challenges Ahead: Aspects of Politics and Security”, in Reinventing ASEAN, edited by Simon S. C. Tay, Jesus P. Estanislao, and Hadi Soesastro (Singapore: Institute of Southeast Asian Studies, 2001), pp. 25–34, by permission of the author and the publisher.

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states or their bureaucracies has proved inadequate, not least because of the change of leaders in some of the states. Domestic problems, such as the financial crisis, drug-trafficking, environmental hazards, migration problems, transnational crimes (for example, piracy) are also regional problems. They call for regional, and in some instances, even global co-operation and solutions. The new challenges no longer recognize the divide between domestic and external aspects. Therefore, ASEAN as a regional entity can only maintain its relevance if it can get its act together by undertaking fundamental changes. To achieve this, ASEAN members must have a common vision of the future. The first step has been taken. ASEAN heads agreed on a Vision 2020 almost three years ago in Hanoi. However, the ASEAN members also need to develop new principles of co-operation. Based on these principles, rules have to be established to guide the organization, and to make cooperation viable. These rules have to be based on an acknowledgement that the many problems ASEAN is facing cannot be solved individually. Therefore, the principle of nonintervention” is passé. As a last resort, “intervention” can be done in a more acceptable way. Examples where beneficial intervention might have worked in past experiences in ASEAN include the surveillance of macroeconomic indicators, the haze problem, and some policies on migration, drug-trafficking, and transnational crime. For the implementation of the rules, institutions would have to be established. ASEAN heads should meet annually and empower this meeting as the highest decision-making body. A council of ministers also has to be formed with the task of deciding on programmes and directives. The dominant role of the foreign minister in ASEAN is no longer relevant. ASEAN problems have become all encompassing

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and complex, and other ministers have to get directly involved in working out the answers. The office of the Secretary-General has to be strengthened and prepared for all the decisions that the council of ministers and heads of ASEAN have to make. The workload of the existing rotating Senior Officials Meetings has to be taken over by the Secretariat with very few exceptions. Last but not least, the public, thinktanks, non-government organizations (NGOs), and the society at large who have a stake in the co-operation should have their say and should be allowed in some instances to take the initiative towards ASEAN functional co-operation. What are the future challenges in the politico-security field? The first task is to strengthen co-operation among the ASEAN countries. As has been explained earlier, cooperation in this field has been most critical to ASEAN’s success and remains vital to ASEAN. However, changes have to take place if ASEAN wants to be relevant in future politico-security co-operation. Most important for ASEAN is to decide how the principle of “non-intervention” can be overcome, and in so doing upgrade and intensify co-operation. As has been said earlier, state-to-state relations alone will no longer be adequate because internal and domestic instabilities and a stagnation of national development could result. With these new challenges, old ways of co-operation such as border patrols against insurgencies and infiltration are no longer sufficient. There are now domestic disturbances and conflicts, such as those in the Moluccas, Irian Jaya, and Aceh in Indonesia, and support and assistance should be given if needed by and at the request and invitation of Indonesia. This principle of non-intervention is now being adjusted by ASEAN using such euphemisms as “deeper co-operation” or “enhanced interaction”, because the word

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“intervention” is “loaded” and politically “incorrect” in the ASEAN jargon. Whatever the word used, Indonesia’s case is one example where active support may be called for. Another is how the region can constructively engage in assisting Myanmar. Myanmar is in a stagnant situation where it is unable to develop politically, socially, and economically, creating a danger of turmoil and instabilities in the future, and possibly becoming a “failed state” as a result. ASEAN has to assist Myanmar, but that can only come about if ASEAN has total engagement with the new members, especially with Myanmar. Here, economic assistance and support are vital, but political relations are also important. This should involve extending assistance to the regime for promoting a peaceful and democratic transfer of authority. This can be done through the establishment of a transitional authority over a certain transition period. This can happen only if ASEAN can fully engage the Myanmar Government. This may happen gradually and second track efforts can be useful to promote exchanges initially. Otherwise there is a real danger that Myanmar may lose everything that it has struggled for over more than fifty years. The example of Indonesia’s political stagnation until it exploded should be a lesson to be learned by all other ASEAN countries. For, despite national differences, the basic factors of change are similar everywhere. In the case of domestic turbulences, Simon Tay, chair of the ASEAN Institute of Strategic and International Studies (ISIS), has suggested that ASEAN should have a peacekeeping capability, for instance in assisting Indonesia. This suggestion should be examined seriously and be worked out into a more complete and realistic undertaking. It does make sense for a regional entity such as ASEAN, supported by the UNSC and the global community, to give assistance in peacekeeping and peace-

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building whenever required in the region. The case in mind is East Timor, where on hindsight a more active and immediate engagement by ASEAN could have prevented much of the havoc through preventive security measures. Of course, these should be made only with the consent of Indonesia. An early engagement as a matter of regional support and assistance would have been relevant and acceptable. For these activities to take place, more rigorous changes have to be made in ASEAN’s mechanisms. Introducing the “Troika” idea alone will not be adequate. What are the concrete actions that ASEAN has to take for such development and its future policies? The existing co-operation among diplomats and defence officials should be continued. This consists of exchanges, dialogues, and training (at military academies, and staff and command, or defence universities). In fact, most of these activities are undertaken bilaterally, although training and intelligence exchanges are also undertaken multilaterally. Part of these activities are being postponed because of the financial crisis. In fact, to be more effective and efficient, more dialogues and exchanges as well as training should be conducted multilaterally. For instance, exchanges of future strategic developments could be arranged by policy planning staffs in the foreign and defence ministries. This could be assisted by second track think-tanks like the ASEAN ISIS with Staff and Command Colleges and Defence Universities, as well as Foreign Affairs Colleges and Training Institutes. Joint training and education activities for defence and military officers have to be continued and expanded. A peacekeeping training centre for ASEAN is a must if the Association is to be able to cope with future challenges in the region. If financing is the main problem, part of aid programmes such as that from Japan could be used, as long as it is not used for hardware purchases or

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direct military operations. For this type of co-operation to be effective in the near future, a special Senior Officials Meeting (SOM), consisting of foreign and defence officials should be established. In all these instances, second track activities and support are crucial because of the limitations that officials have in terms of being able to sit back and reflect on policies and to think beyond the official policies. In relation to ASEAN’s external cooperation in the politico-security field, ARF activities should be the main focus. Here, ASEAN should be bold enough to open up the process to outside participation. That has already happened at the second track level, namely, the Council for Security Cooperation in the Asia-Pacific (CSCAP), and it should now be possible to do it also at the ARF level. Only then can the ARF become more effective. This means that a co-chair from a non-ASEAN member could

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be elected among the other non-ASEAN members as an ASEAN “Troika” alone cannot fulfil the need. A small ARF Secretariat should also be established. This can be part of the ASEAN Secretariat, but functionally separate and staffed by both ASEAN and non-ASEAN personnel. In addition, the ARF should be more active in implementing the many agreements on CBMs, such as publishing annual defence white papers, exchanges of military/defence officials and teachers and students from training institutes, sending observers to military exercises, strengthening non-proliferation regimes at the regional level, and establishing search and rescue (SAR) as well as peacekeeping centres for training purposes and possible co-ordination. Again, to be able to implement them, ASEAN should first get its act together to stay as the driving force within the ARF. Second track support will be critical to ASEAN in this endeavour.

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ASEAN VISION 2020 AND THE HANOI PLAN OF ACTION

SIMON S. C. TAY

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midst the most serious crisis that has faced the region, ASEAN declared its Vision 2020 on 15 December 1997. This broad vision aims to see ASEAN as a concert of nations, outward looking, living in peace, stability and prosperity, bonded together in partnership in dynamic development, and in a community of caring societies. In December 1998, the sixth informal ASEAN summit was followed by the Hanoi Declaration and the HPA. The HPA set out specific and concrete steps and goals to be implemented in the six years from 1998 to 2004. The HPA tries to set realistic goals. Yet, it is both ambitious and wide in scope, covering diverse and complex areas of policy-making: macroeconomic and financial co-operation; economic integration; science, technology, and information technology; social development and the social impact of the crisis; human resource development; the environment and the promotion of sustainable development;

regional peace and security; ASEAN’s role in the world and the Asia-Pacific region; and the structures and institutions within ASEAN. The HPA is an attempt to spell out how the broad ASEAN 2020 Vision can be implemented. In this, there is a role for a regional institution — such as the ASEAN Secretariat — to co-ordinate and review government actions on the plan, and to point out shortcomings. This would enhance the impartial review of national efforts to further the HPA. The process for review has begun, albeit somewhat inauspiciously with the mere listing of various meetings held and plans drawn up. There will have to be increased scope for a central institution to review more strictly and evaluate national plans. Otherwise, the HPA is likely to remain more a plan than action. The ASEAN Secretariat could serve as such a central institution, if it is given the mandate and sufficient resources. There are lingering suspicions among some

Reprinted in abridged form from Simon S. C. Tay, “Institutions and Processes: Dilemmas and Possibilities”, in Reinventing ASEAN, edited by Simon S. C. Tay, Jesus P. Estanislao, and Hadi Soesastro (Singapore: Institute of Southeast Asian Studies, 2001), pp. 243–72, by permission of the author and the publisher.

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ASEAN member states, however, against having stronger regional institutions. As such, perhaps a Council of Ministers with special powers to oversee implementation might be more acceptable. It is essential, however, that such a Council should have strong powers to review, analyse, and cajole. The model should not be the usual meetings where general statements are issued, but along the lines of the peer review process in the area of financial co-operation. How does the ARF and the HPA impact on ASEAN as an institution? The impact at present should not be overstated. As acknowledged, much more remains to be done. The plans have generated expectations of implementation. It can therefore be argued that some forms of increased institutionalization is needed and must come about. If not, ASEAN may continue in the old “ASEAN way”, and face the danger of becoming increasingly irrelevant. These brief discussions of the ARF and the HPA point to a need for ASEAN to review and strengthen its forms of cooperation and interaction, and its modes for making and implementing foreign policy. This arises from functional needs and ambitions. If ASEAN wants to lead the ARF to the next stage, it must itself move to a next stage. If ASEAN wants to implement the HPA as a source of unity and strengthened co-operation, it must ensure timely review and implementation of the HPA. In so doing, institutions and processes in ASEAN will need to be strengthened. Given the preference for working within the framework of co-operation rather than confrontation, how can ASEAN proceed meaningfully? Given the negative sentiment against the model of union and the Brussels bureaucracy, how can ASEAN be united and institutionalized? There are some priorities and principles that can be suggested. Firstly, there would be the need for members to agree to certain rules of be-

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haviour and commitment to principles of justice and the rule of law. Ideally, this would require the members to commit to putting their houses in order and to bring about greater transparency and accountability where necessary in their respective governments. The financial crisis has exposed certain fundamental weaknesses in the economic and political systems of member states which made them vulnerable to external forces, and which also accelerated and exacerbated the devastating effects of the crisis. Secondly, areas of co-operation have to be clearly identified. In this regard there are already several suggestions on how cooperation in ASEAN can be enhanced. Many of these suggestions are reflected in the HPA, which has detailed the areas of cooperation, particularly in strengthening macroeconomic and financial co-operation, and in enhancing economic integration.1 The problem of ensuring compliance by member states to economic measures adopted can be approached by putting in place the right institutions to monitor the implementation of these measures. For example, ASEAN should institutionalize regular meetings among its finance ministers, and governors and officials of central banks and financial bodies. These meetings will facilitate consensus on concrete measures to be taken and agreement on the types of information to be exchanged. Frank discussions can take place during these meetings and in the process, peer pressure is generated for members to comply, and commitment is reinforced. Decision-making can also be hastened. In this regard, the proposal for ASEAN to adopt a majority rule instead of consensus can be considered since this practice has been applied to less fundamental issues. Thirdly, and closely related to the point above is the need to strengthen the ASEAN Secretariat and improve its capabilities to

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take on various tasks. Against increasing demands, the Secretariat’s role cannot be minimal. The Secretariat has to have sufficient professional and competent staff to support and monitor the various initiatives introduced by ASEAN’s top officials, otherwise these initiatives may never be implemented. Having regional experts in specific issue areas within the Secretariat also facilitates its role as a co-ordinating body in the region. Moreover, it enables the Secretariat to effectively work with various regional institutions which have been set up to deal with regional problems such as the haze, migration, etc., and to assist in monitoring the progress of the programmes as well as assess the performance of these bodies. Finally, the efforts at strengthening the Secretariat can be complemented by greater participation and involvement of non-government organizations, think-tank groups, and academics. Their expert and impartial participation in the review process can be one way of strengthening the central institutions without making the ASEAN Secretariat large, expensive and unwieldly. Moreover, if ASEAN ultimately aims to be a community in and of Southeast Asia, as envisioned in the ASEAN 2020 document, then grass-roots participation and people-topeople relations are essential. ASEAN can no longer remain a regional body based on state-to-state relations.2 Getting non-officials involved in regional issues also facilitates co-operative measures to deal with problems that can only be solved on a regional scale, such as environmental degradation and pollution, illegal migration, and some transnational crimes like trafficking of drugs, arms, women, and children. Their participation and inputs are valuable and they play the meaningful role of being conduits between the people and the state. Moreover, nongovernmental meetings are excellent

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forums where sensitive issues can be openly debated which in a way puts pressure on states to respond to urgent problems. These possibilities point to ways to evolve ASEAN co-operation on the environment, and to develop the necessary institutions for such co-operation. The range of suggestions set out in this chapter may seem too little for some and too much for others. What is politically possible in ASEAN and what might be effective in addressing issues are matters of judgement, and individual judgements might differ. Some essential characteristics of these suggestions can, however, be offered in closing. Three principles that may be evolving in ASEAN, and perhaps should be encouraged, may be summarized as follows: 1. From co-existence to co-operation: While ASEAN’s original mission was to build confidence and ensure peaceful coexistence among its members, the emerging need is to foster co-operation. Such co-operation is needed in different spheres, such as economics, environment, security, and other issues. The nature of co-operation is also changing to one that is not simply between states because it increasingly affects domestic policies. 2. From national resilience to regional resilience: While ASEAN has long emphasized national resilience, it must be increasingly seen that regionalism is not a contradiction of nationalism. Instead, it is a way of managing globalization and the increased interdependence between economies, ecologies, and peoples. 3. From unanimity and consensus to coalition of the willing: While ASEAN unity and consensus continues to be important, there is an increased need to emphasize the legitimacy of some member states to pioneer new initiatives and/or proceed at a faster pace than others. This is

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necessary, given the divergence among the ASEAN members in their capacity and their inclinations. These “coalitions of the willing” should not be a source of disagreement in ASEAN, provided that the general direction of such initiatives is welcome and the coalitions remain open for all to join. ASEAN, and the “ASEAN way” too, is not really old or fixed. While the Association is now more than thirty-three years old, many of its members and initiatives are very recent. There is therefore a real prospect and a need for ASEAN, its norms, and institutions to change to be relevant to the times and needs. The mode of ASEAN cooperation, known as the “ASEAN way”, does not serve well in dealing with many of the challenges it now faces. Yet, efforts to foist international approaches and principles onto ASEAN have so far failed. As such, perhaps the best hope is that the “ASEAN way”, without either being ossified or abandoned, can be evolved and changed.

Such evolution and change has implications not only for the environment, but also for the future shape of ASEAN. ASEAN has not been static and inwardlooking. It has instead been dynamic and outwardly engaged with Asia, the AsiaPacific, and other regions. In these engagements, it has not blindly adopted European or other ways and institutions. It has espoused an “ASEAN way”. Yet this “ASEAN way” is itself not static. It has responded and is still responding to new needs, recognizing that something must be done. This has impacts on institutions, institutionalization, and indeed on institutionalism. The questions of how much, speed, and sufficiency remain unresolved. No end point is in sight. There is no final vision of integration or another goal. What is more certain is that ASEAN is evolving and that more can and will have to be developed in terms of institutions both within the Association and in its dealings with others in Asia and the Asia-Pacific.

NOTES 1. 2.

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See Hanoi Plan of Action, . This point has been strongly argued by ASEAN scholars. See, for example, Jusuf Wanandi’s article “Rethinking ASEAN”, Newsweek, 30 April 1998.

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OVERVIEW OF THE POLITICAL DIMENSION OF ASEAN’S SECURITY

C.P.F. LUHULIMA

THE NON-CONVENTIONAL SECURITY ISSUES On November 5, 2001 ASEAN leaders in their Joint Action to Counter Terrorism unequivocally condemned the terrorist attacks of September 11 as an “attack against humanity and an assault on all of us.” They viewed terrorism as a “direct challenge to the attainment of peace, progress and prosperity of ASEAN and the realization of ASEAN Vision 2020,” while rejecting “any attempt to link terrorism with any religion or race.” ASEAN was further committed to “counter, prevent and suppress all forms of terrorist acts in accordance with the Charter of the United Nations.” All joint efforts to combat terrorism at the regional level should consider “joint practical counter-terrorism measures in line with specific circumstances in the region and in each member country.” The leaders also acknowledged the ASEAN regional framework for fighting transnational crime and its ASEAN Plan of Action to prevent and

control transnational crime. ASEAN’s leaders issued a nine point action plan ranging from strengthening national mechanisms, deepen cooperation among front-line law enforcement agencies, enhancing information/intelligence exchange, regional capacity building, all of them to combat terrorism in the region strictly under the U.N. umbrella. A special ASEAN Ministerial Meeting on Transnational Crime (AMMTC) on terrorism, which was held in May 20–21, 2002 in Kuala Lumpur, was also a follow-up on the U.N. call to enhance coordination of national, sub-regional and international efforts as part of a global response to this serious challenge and threat to international security. The fight against terrorism in the region is integrated into the complex of the fight against transnational organized crime. The distinction between terrorism as a political crime and any other form of organized crime as an economic one is conveniently ignored.

Reprinted in abridged form from C.P.F. Luhulima, “Overview of the Political Dimension of Asean’s Security”, Indonesian Quarterly 31 (Forthcoming 2003), by permission of the author and the publisher.

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ASEAN’s Seventh Summit in Brunei Darussalam tasks the ASEAN Ministerial Meeting on Transnational Crime comprising the Ministers of Home Affairs of the member countries to continue to focus, next to transnational crime, on “terrorism and deal effectively with the issue at all levels and endorse the convening of an Ad Hoc Experts Group Meeting and special sessions of the SOMTC and AMMTC focussing on terrorism.” Non-conventional threats seem to the ASEAN Heads of Governments a task of the AMMTC rather than that of the Foreign Ministers. However, with the introduction of terrorism in the ASEAN Regional Forum, Foreign Ministers will have to deal with that issue in that forum. It will thus be a coordination problem in fighting terrorism in ASEAN. The ASEAN Ministers of the Interior/ Home Affairs convened for the first time in Manila (18–20 December 1997) to cooperate in combating transnational organised crime, including terrorism. They decided that they would be the highest policy-making body on ASEAN cooperation in combating transnational crime (ASEAN Ministerial Meeting on Transnational CrimeAMMTC) and convene once in every two years to coordinate activities of relevant ASEAN bodies, such as the ASEAN Senior Officials on Drug Matters, ASEAN Chiefs of National Police (ASEANOPOL), ASEAN Directors-General of Customs, and ASEAN Directors-General of Immigration and Heads of Consular Division, Ministry of Foreign Affairs. They would also cooperate and coordinate on matters of transnational crime with other ASEAN bodies such as the ASEAN Senior Law Officials’ Meeting and the ASEAN Attorney Generals’ Meeting. They referred, however, to the 29th ASEAN Ministerial Meeting (AMM) in Jakarta in July 1996 on the need to focus attention on such issues as narcotics, economic crimes,

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including money laundering, environment and illegal migration which transcend borders and affect the lives of the people in the region, and the urgent need to manage such transnational issues so that they would not affect the long term viability of ASEAN and its individual member nations; to the First Informal ASEAN Summit in November 1996 in Jakarta to request the relevant ASEAN bodies to study the possibility of regional cooperation on criminal matters, including extradition; to the decision of the 30th AMM in Kuala Lumpur in July 1997 which stressed the need for sustained cooperation in addressing transnational concerns including the fight against terrorism, trafficking in people, illicit drugs and arms and piracy; and to the agreement among Heads of Government during the Second Informal Summit in December 1997 in Kuala Lumpur to take firm and stern measures to combat such crimes as drug trafficking and trafficking of women and children, as well as other transnational crime. ASEAN’s collective fight against terrorism and other transnational crime would be seriously constrained by the strong emphasis AMMTC placed on the principle that “the sovereignty, territorial integrity and domestic laws” of each member country should be “respected and upheld in undertaking the fight against terrorism” and other crimes. Terrorism and other transnational crimes never recognized national borders and territories; their reach is global. The work programme of exchange of information and development of bilateral and multilateral legal arrangements to facilitate apprehension, enhancing cooperation and coordination in law enforcement and intelligence sharing, and development of regional training programmes, strongly emanated from the sovereignty and territorial principles.

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AGREEMENT ON INFORMATION EXCHANGE AND ESTABLISHMENT OF COMMUNICATION PROCEDURES The Indonesia, Malaysia and the Philippines Agreement on Information Exchange and Establishment of Communication Procedures (May 7, 2002) to counter terrorism and crush a militant network allegedly bent on turning all three countries into a single Islamic state went considerably further. Kumpulan Mujahidin Malaysia was singled out by Dr. Mahathir as the organization to overthrow his government in its effort to set up the Islamic state in the three countries. So was the Jemaah Islamyah in the three countries taking the initiative. The formalization of formal contacts in one umbrella agreement extends beyond terrorism into other areas of transnational organized crime: money laundering, smuggling, piracy, hijacking, all the way to drug trafficking, marine pollution, and arms trafficking. All these forms of crime were carefully defined in the meeting and put in the agreement. This made the measures to fight terrorism and other forms of crime in the three countries a little more advanced in comparison to the agreement of the special AMMTC. Exchange of information, strengthening national and sub-regional capabilities to manage border and security incidents, establishing mechanisms for immediate response and assistance, sharing airline passenger lists, providing access to each other’s computerized fingerprints databank, sharing blacklists and undertaking joint efforts in combating terrorism were the building blocks for the cooperative mechanism in this effort. The sustained cooperation in addressing the combat against terrorism and transnational organised crime indicate that ASEAN’s fight is conducted on intensive exchange of information rather than in pursuing terrorists and other criminals

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across national borders. The emphasis on mutual respect for the independence, sovereignty, equality, territorial integrity and national identity of all nations within and without the region will remain ASEAN’s credo in regional endeavours. However, terrorism and transnational organised crime is primarily a crime against human beings. The principle of noninterference in each other’s internal affairs should hence — in the light of the globalisation process — be interpreted broadly to allow genuine dialogue and cooperation on some universal concerns. This trend requires a new way of thinking by shifting the focus of security from defense of national frontiers to that of human beings. This approach does not suggest that the defense of national sovereignty has become less important. Respect for national sovereignty and territorial integrity is vital to most Asian countries considering their historical circumstances. The defense of human security only means that national frontiers are not the absolute defense — that the international community — in line with the amendment of the UN’s security concept — should take action to halt the gravest crimes against humanity. The concepts of “constructive intervention”, “flexible engagement” have been introduced in ASEAN as early as 1998 since the dividing line between domestic affairs and external of transnational issues have become less clear. The debate still continues. ASEAN states, acting individually or collectively, should be entitled to take diplomatic, economic or other actions towards any other state within the Community of Southeast Asia Nations, which has violated the principle of human dignity, provided such measures are permitted under international law and do not involve the use of armed force in violation of the Charter of the United Nations.

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ASEAN IN A NEW ASIA

TAN KONG YAM

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he competition for scarce capital, particularly in the form of FDI with its employment creation, wage increase, transfer of industrial technology, managerial expertise, and marketing know-how as well as stimulus to the development of local supporting and domestic industries, is likely to intensify in East Asia, particularly between Southeast Asia, Vietnam, and China. This is particularly so as the legitimacy of both democratic and authoritarian governments in the region has increasingly become dependent on delivering the goods to the people, especially in comparison with neighbouring countries. This competitive pressure in sustaining the ‘mandate of heaven’ is a key factor driving the process of unilateral liberalization in trading and investment regime in the region. In a way, the growing impetus of AFTA can be seen as the economic and security response on the part of ASEAN to the perceived competition and threat from China. This competitive dynamics among the developing East Asian countries has also significantly enhanced the

bargaining power of Taiwan, a government with tremendous financial and business resources but weak diplomatic and political muscle. The diversion of direct foreign investment from ASEAN towards China has not yet significantly affected Singapore directly as its per capita income (US$24,000) and wage, skill, and technology levels are substantially above those of China. Like the other NIEs with per capita incomes of US$8,000–20,000, it is more complementary than competitive with the rapidly expanding Chinese economy, though segments of the rapidly developing cities and coastal region in China have begun to compete head-on with the NIEs. However, with GDP per capita comparable to that of China (US$370–2,000, depending on the region or statistical methodology used), Indonesia (US$700), Thailand (US$2,000), and Malaysia (US$3,000) are at wage, skill, and technology levels that are more competitive with various regions in China. The diversion of Japanese, Western, Taiwanese, and Hong Kong capital

Reprinted in abridged form from Tan Kong Yam, “ASEAN in a New Asia: Challenges and Opportunities”, in ASEAN and the New Asia: Issues and Trends, edited by Chia Siow Yue and Marcello Pacini (Singapore: Institute of Southeast Asian Studies, 1997), pp. 1–33, by permission of the author and the publisher.

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has consequently been more severe for them. In addition, the overseas Chinese capital in these ASEAN countries has also been flooding into China, largely through companies located in Hong Kong. The simultaneous decline in FDI and local investment as a result of competitive pressure from China has generated some uneasiness, particularly in Indonesia. Consequently, the southward strategy of Taiwan since 1994 has come as a godsend to ASEAN. This could have moderated potential anti-Chinese feeling, particularly in Malaysia and, to a lesser extent, Indonesia. More significantly, the substantial surplus labour to be released from the agricultural sector in China over the next two decades as China industrializes would likely sustain China’s comparative advantage in labourintensive products for a much longer period than Japan or the other NIEs had sustained during their earlier period of labourintensive industrialization. This could mean that real wages for unskilled and semi-skilled workers in the East Asian region or even globally, would likely remain depressed for a sustained period. As real wages increase in the coastal region of China, labour-intensive industries would migrate inland, just as they have migrated from Japan to the NIEs to ASEAN over the past thirty years. For a country at a similar stage of development with surplus labour like Indonesia, it could mean that real living standard might remain depressed for a sustained period. Income and regional inequality could also worsen. This would have significant implications for social and political stability as well as ethnic Chinese and indigenous Indonesian relations. Again, the deliberate diversion of Taiwanese capital from China to Southeast Asia would help to sustain the industrialization process in Southeast Asia. More significantly, as the bulk of the Taiwanese investment is still in the labour-intensive industries, the employment and wage stimulus would have a major income-

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equalizing effect, more so when Taiwanese capital flows away from major cities like Jakarta, Bangkok, and Penang into regional areas in these countries. This would assist in spreading development across ethnic groups and regions, thus contributing to social and political stability in these Southeast Asian countries. On the other hand, the southward strategy of Taiwan could increasingly create a network of overseas Chinese businesses in Southeast Asia linked to Taiwanese investors. Like the Taiwanese, a substantial proportion of overseas Chinese businessmen in Indonesia, Malaysia, Vietnam, and the Philippines are of Fujian province origin and speak the same Fujian dialect. The small and medium enterprises from Taiwan are able to form joint ventures with the local overseas Chinese businessmen who have intimate knowledge of the local political leadership, complex bureaucratic procedures, as well as opaque rules and regulations. These network of relationships substantially reduce the business and political risks and significantly facilitated Taiwanese capital’s penetration into Southeast Asian economies. However, in view of the sensitive dominant economic position of overseas Chinese businesses in Southeast Asia, this linkage could lead to a greater aggravation of inter-ethnic relationship in Southeast Asian countries. On the other hand, the active collaboration of large corporations owned by the Taiwanese Government with state-owned and nonethnic Chinese enterprises in Indonesia, Malaysia, the Philippines, and Vietnam would go a long way to reduce the ethnic sensitivity of Taiwanese investment in Southeast Asia. The competitive industrial and trade structure between China and Southeast Asian countries like Indonesia, Vietnam, Thailand, and to a lesser extent Malaysia as well as the strategy of Japan in integrating Southeast Asia into its regional industrial

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division of labour in order to sustain its global competitiveness despite the high yen could lead to intensifying Japan–China rivalry playing out in Southeast Asia. Japan’s capital-surplus status, strong industrial and technological base as well as its dependence on energy and raw materials make it very complementary with the ASEAN economies. While Japan’s interest would be in maintaining its position as the head goose in the harmonious flying-geese pattern, with Southeast Asian countries like Thailand, Vietnam, Indonesia, and Malaysia subsumed under an informal regional trade and investment grouping, China is bound to contest this pyramidal industrial structure and possibly use the powerful and pervasive overseas Chinese business groups in these countries to integrate Southeast Asian economies to the expanding China market to moderate the Japanese influence and prevent Japan from keiretsuing the ASEAN economies. The active cultivation of the Malaysian and Thai political and business groups by China could be an indication of this emerging trend. Looking beyond East Asia, ASEAN faces a different set of challenges. Realistically, ASEAN is too small, too competitive in economic structure as well as too dependent on extra-ASEAN investment and trade to be a regional grouping of any consequence. The Malaysian proposal of East Asian Economic Caucus (EAEC), on the other hand, would generate too much conflict across the Pacific and undermine the U.S.

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market of East Asia to be acceptable to a large number of East Asian countries. Aside from anchoring the United States in East Asia through Asia-Pacific Economic Co-operation (APEC), ASEAN has a strategic interest in drawing the EU to have a major stake in the prosperity of the East Asian region and not see the region’s dynamism as a threat. The increasingly independent growth momentum in East Asia could prove to be a boon for EU corporations, whose technological level and design and engineering expertise as well as strength in infrastructural development would be highly demanded by the developing countries in East Asia to fuel their rapid process of industrialization. Closer East Asian and EU linkages would also allow East Asia to diversify its dependence on technology and capital from Japan and the United States, particularly the former. With its political imperatives in preventing the past cycle of warfare, containing Franco– German rivalries, and restoring itself as a global player by pooling national strength, the EU would obviously have its own imperatives to maintain its momentum in closer economic and political integration. In proposing the Asia–EU Summit for March 1996, Singapore had used the ASEAN platform in drawing the EU to East Asia. Aside from fostering EU business interest in the region, it would close the other leg of bilateral relationship among the three regional groupings of the United States, the EU, and East Asia.

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TOWARDS AN ASEAN ECONOMIC COMMUNITY

HADI SOESASTRO

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he significance for ASEAN to make a timely move towards deeper economic integration is without any doubt. ASEAN members have realized that they have a much greater chance to maintain their international competitiveness if they work together towards the creation of an integrated market. This led to the historic decision in 1992 to form AFTA. A decade later, with the AFTA project already implemented in the older ASEAN members, it has become all the more important for the group to deepen and accelerate regional economic integration. ASEAN’s position in the regional and global stage had been adversely affected by internal and external developments during the past few years. The challenge faced by ASEAN is not simply to restore its position or to catch up with the rapid progress in the region and the world. It needs to stay ahead of the curve. Deepening and accelerating regional economic integration will significantly elevate ASEAN’s attractiveness as a global production base.

Economic integration will also contribute to regional cohesion. This will strengthen ASEAN’s bargaining power and geopolitical influence. Deeper economic integration has been a key element in the grouping’s growing trade and economic ties with extraregional countries. These ties will be further strengthened by the development of closer economic partnerships, including free trade agreements, between ASEAN and a number of its trade partners. The ASEAN-China Comprehensive Economic Cooperation Framework Agreement is the first such initiative that will be followed by similar ones with Japan and other countries or group of countries. In East Asia, ASEAN may even be placed in the position of becoming a “hub”. This is a very strategic and potentially powerful position. It will gain this position perhaps by default as none of the other East Asian economies can gain such a leadership position. The study by the ASEAN Secretariat, Towards a Single Economic Space, made the point that ASEAN’s closer economic partnerships and free trade

Reprinted in abridged form from Hadi Soesastro, “ASEAN Economic Community: Concepts, Costs and Benefits”, Paper prepared for the ASEAN Roundtable 2003 on “Roadmap to an ASEAN Economic Community”, Institute of Southeast Asian Studies, Singapore, on 20–21 August 2003, by permission of the author and the Institute of Southeast Asian Studies.

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arrangements with key trade partners are expected to accelerate ASEAN’s own economic integration towards a single economic space in the global economy. The creation of an ASEAN Economic Community in 2020 is a feasible proposition. As stated before, the AEC should be seen as a logical extension of the various initiatives taken and implemented by ASEAN thus far towards greater economic integration. It is the next logical step for ASEAN to take. However, this next step requires strong and firm commitments by ASEAN members to move forward in a credible and timely manner. This can be aided by a clear articulation of the ultimate form of integration as well as the appropriate path to achieving it. Equally important is a commitment by ASEAN members to embark on greater institutional integration. The following discussion on those main elements in the development of an ASEAN Economic Community is based on the ASEAN ISIS Report referred to earlier (ASEAN-ISIS 2003). This Report has also benefited from the ISEAS study (ISEAS 2003). The Report began with a discussion of the ultimate form of integration. It then examined the path towards deeper integration and the institutional design to successfully carry it out, taking into consideration the political factors that are likely to be at play. The Report noted that in a sense ASEAN members have already committed themselves to deeper economic integration. The ASEAN Vision 2020, adopted by ASEAN leaders in 1997, envisaged the creation of “a stable, prosperous and highly competitive ASEAN Economic Region in which there is a free flow of goods, services and investment, [and] a freer flow of capital .....” The ultimate form of integration as proposed in the ASEAN ISIS Report is the creation of a fully integrated market (a Common Market) in 2020 but takes into account areas where members reserve

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deeper integration for a later stage (beyond 2020). It suggests that ASEAN adopts a “Common Market minus” approach. An alternative approach, as proposed in the ISEAS study, is to adopt the “FTA plus” arrangement, namely an FTA that includes some elements of a Common Market. The former approach can be more liberalizing. Its additional advantage is in the explicit formulation of some kind of a “negative list” that can be brought under the umbrella of the integration project. A Common Market is understood to be an arrangement in which there are complete free flows of trade, including internal trade — as in a Customs Union, as well as free mobility of labor and capital. Full mobility of labor involves the right to reside and accept employment in all member countries, and mutual recognition of professional and technical qualifications. Full capital mobility requires lack of exchange controls, and full rights of establishment for firms in all countries. It has been suggested that credible removal of tariffs may require policy harmonization or common policies on taxes, wages, prices, etc. It may even require common rules governing competition and monopoly, as well as in environmental regulations. However, it is still a matter of controversy whether a full Common Market requires a single currency and a common system of prudential regulations of banks and other financial institutions. ASEAN has no problems in achieving completely free flows of trade and investment in 2020. Under the AFTA program the region will achieve completely free flows of goods by 2020 already. The older ASEAN members (ASEAN-6) have adopted a target of zero-tariff AFTA by 2010. The newer ASEAN members have also adopted zero-tariff AFTA, initially by 2018, but subsequently they have advanced the deadline to 2015 for most products. Under the ASEAN Investment Area (AIA)

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agreement, by 2020 there will already be free flow of investments, not only amongst ASEAN members but globally. In fact, by 2020 most intra-ASEAN liberalization in trade and investment will be multilateralized. ASEAN members of APEC may have introduced zero MFN (most favored nations) tariffs by 2020. Other ASEAN members may have already brought down many of their MFN tariffs to zero. In view of this, ASEAN has the potential to embark of a program to harmonize its external tariffs. This can be undertaken through progressive reduction of MFN tariffs by subsets of ASEAN members, especially those with higher tariffs. In the context of the WTO round, ASEAN members can develop common strategies to reduce their MFN tariffs. These efforts help accelerate the free flow of internal trade (as in a Customs Union) and will significantly reduce transaction costs due to the progressive elimination of rules of origin (RoO) requirements. The liberalization of trade in services in ASEAN is pursued under the ASEAN Framework Agreement on Services (AFAS). The intention is to move more progressively than under the GATS (General Agreements on Trade in Services) of the WTO. Hence GATS Plus. This has yet to be demonstrated by the ASEAN members. In the area of services liberalization ASEAN members need to examine two questions of policy importance. First, ASEAN should give serious attention on the sequencing of its services liberalization, giving priority to cooperation in strengthening the regulatory environment and institutional capacity. Second, ASEAN should seriously examine whether in the liberalization of services is more beneficial for ASEAN to adopt a policy of global opening. The ASEAN Vision 2020 proposes to accelerate the free flow of professional services. In the meeting of ASEAN Ministers

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of Labor (or Manpower) held in Indonesia last May, some ASEAN members have raised the possibility of a free flow of labor in the region. It should be noted that significant flows of unskilled labor are already happening in the region. Regularized flows can be a means to creating a progressively liberal environment in this area. A common policy approach to regularize these flows should be brought under the umbrella of the integration project. The agreement reached at that meeting was to give priority to the free flow of skilled professionals. ASEAN members agreed to begin to develop standards of quality for professionals. Rather than developing a common standard, it seems that ASEAN members will develop national standards and later adopt some kind of a mutual recognition agreement (MRA). The free flow of professionals and skilled labor is an important element of investment liberalization in the region. The ISEAS Study recommends the removal of work permits for ASEAN skilled and creative workers that are employed in an ASEAN country outside their home country. The McKinsey Study proposed the introduction of special visas for skilled labor to ensure a balance between demand and supply. Free mobility of capital in ASEAN is another important element of investment liberalization in the region. Financial sector liberalization in the region should be focused on its appropriate sequencing. Accordingly, in this area as well priority should be given to strengthening the regulatory environment and institutional capacity. With a few exceptions the region already has liberal exchange regimes. Concerns over the volatility of short-term capital flows are legitimate and can be addressed also through the development of a common policy approach. In determining the appropriate path towards deeper integration it is important to assess the region’s “initial conditions” for

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integration. In the case of ASEAN it is obvious that simultaneous trade and investment liberalization should be its main vehicle for integration. ASEAN has appropriately embarked on trade and investment liberalization through AFTA and AIA. In view of the gaps that exist among ASEAN members, particularly between ASEAN-6 and the newer members, it appears that intra-regional investments can play an important role in building regional cohesion. Therefore, the AIA needs to move more progressively. ASEAN should also take measures to seriously eliminate all non-tariff barriers (NTBs). Fast tracking of trade and investment liberalization in specific sectors or areas may help build capacity and constituency for further liberalization. The main recommendation of the McKinsey Study is the fasttracking of liberalization of selected sectors, namely consumer goods and electronics, and possibly adding on other high-potential sectors such as tourism, agro-biotechnology, and automotive industry at a later stage. In needs to be noted, however, that ASEAN’s economic integration project, which is driven by a deepening and acceleration of trade and investment liberalization, might have to introduce safeguard (or recourse) mechanisms that are based on clear principles. It is important to ensure that such safeguard mechanisms do not become obstacles to longer-term liberalization efforts. Attempts must be made to achieve some overall balance of gains for members. This is the first principle. Experience elsewhere has shown that trade-offs can be made between net economic costs and political benefits for members. If this cannot be achieved, some flexibility can be adopted. This principle is known as ASEAN minus X (or 10-X). Perhaps it is more appropriate to formalize a two-speed ASEAN, which can involve different subsets of ASEAN members for

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different areas of cooperation. As the consensus-based approach becomes more difficult to utilize in ASEAN there have been proposals to introduce “qualified majority voting” for technical policy matters (the McKinsey Study) or even “coalitions of the willing”. ASEAN should also consider introducing the principle of redistribution of income or resources, which can be formalized in the form of either compensation schemes or joint efforts to provide regional public goods that would be mostly beneficial to the less developed members of ASEAN. The above helps ensure the political feasibility of the integration project. In addition to the above, there may be a need to exclude, temporarily or even permanently, some sensitive sectors from the liberalization objective. However, ASEAN members must come to an agreement to bring these sectors under the umbrella of the integration project through a common policy approach. Such common policies can focus on managing production and trade. The use of domestic policy instruments (e.g. subsidies) as a substitute for trade policy should also come under some common discipline. Another important element of the integration project is the adoption of a common external trade policy. ASEAN as a group and individual ASEAN countries have embarked on a series of preferential, discriminatory free trade agreements (FTAs). ASEAN needs to develop a common framework so as to ensure that each of these initiatives can become a building block (and not a stumbling block) for wider regional agreements. It also should ensure that ASEAN as a group can drive the process. Otherwise ASEAN will become a spoke to arrangements that are determined by the trade partner. This will make it difficult to later amalgamate the different initiatives towards a wider regional arrangement. It should also be noted that uncoordinated

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proliferation can lead to increased tensions between ASEAN members. Some ASEAN countries that are not in the position to participate in the game of forming FTAs may be left out. It is important to keep in mind that the production networks in ASEAN have become more complex. A common framework helps ensure that business transaction costs are minimized. Rules of Origin (RoO) that are restrictive constrain sourcing of inputs. RoO that vary across products and agreements add to the complexity and costs. ASEAN members should also promote the concept of an ASEAN cumulative RoO. Singapore has entered into different bilateral agreements with different RoO. This may not matter for Singapore because it has no sectors (textile, automobiles) where restrictive RoO applies. In the area of electronics (IT) its bilateral agreement with the US has introduced a new rule, the socalled Integrated Sourcing Initiative (ISI), which is potentially beneficial for the region. In fact, a common policy approach can help define the role for the first mover(s) such as Singapore to strategically engage major partners in the Southeast Asian region as a whole. The common policy framework for ASEAN may also involve harmonization of external tariffs. Subsets of ASEAN can do this by forming separate Customs Unions that will help accelerate the reduction of MFN tariffs. Finally, a critical element of the integration project is the establishment of a credible dispute settlement mechanism (DSM). With the adoption of the Protocol on Dispute Settlement Mechanism in 1996, ASEAN has begun to move to more formalized dispute settlement mechanisms. However, dispute settlement within ASEAN should be taken out off the political realm (involving ministers or senior officials) and be brought into the legal realm. The ISEAS Study recommends the establishment of a

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high-level judicial body to enforce the DSM. This proposed court should be staffed by judges from every ASEAN member country. In the McKinsey Study a Dispute Settlement Bureau is to be established within the ASEAN Secretariat to process claims and to manage a roster of panelists. Ruling of disputes would be made by independent panelists who are nominated by ASEAN member countries. The study also recommends that private firms be given access to the DSM for limited types of dispute. Under the existing 1996 DSM Protocol, only member governments can bring a dispute before the DSM. In addressing the important issue of institutional design, the ASEAN ISIS Report believes that for ASEAN to be able to move ahead it must be transformed from being an inter-governmental cooperation structure into a regional institution. This process can only be gradual. The Report proposed the “strategic introduction” of “regional units” into the existing structure. The creation of “regional units” is a first step towards regional institutional development. Regional units, or independent regional bodies, are staffed by nationals who are formally independent of governments. The regional units should initially be given charge of areas where common policy approaches have been adopted. This would include, for instance, the management of development collaboration (e.g. implementing the IAI — Initiative for ASEAN Integration) and the monitoring of progress of various other initiatives. A stronger ASEAN Secretariat, working together with the “regional units”, can function as the driver and guardian of the integration objective. The institutional design, consisting of the ASEAN Secretariat and the “regional units” may eventually be “amalgamated” into a kind of ASEAN Commission. However, this need not be the case. The Secretariat and the “regional

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units” can continue to co-exist in a decentralized but synergistic fashion, with the national units given the responsibility to managing various functional cooperation projects as well as to overseeing specific tasks entrusted upon them, as described above. National level political

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oversight continues to be provided by the AMM (ASEAN Ministerial Meeting) aided by the SOM (Senior Officials Meeting) and the AEM (ASEAN Economic Ministers Meeting) aided by the SEOM (Senior Economic Officials Meeting) or eventually by an ASEAN Council of Ministers.

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INSTITUTIONAL REFORMS TO ACHIEVE ASEAN MARKET INTEGRATION NARONGCHAI AKRASANEE and JUTAMAS ARUNANONDCHAI

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o far, the ASEAN Dispute Settlement Mechanism has failed to resolve trade disputes due to its inability to enforce agreements. Currently, the ASEAN institution also lacks well-defined regulations to safeguard the interest of producers, investors and consumers. This is likely to become more problematic as economic integration deepens. ASEAN needs an effective jurisdiction process. Moreover, it needs investment regulations, competition and consumer protection rules to provide a transparent framework for conflict resolutions. While trade dispute cases should be resolved through a jurisdiction process, with the help of the AFTA Council, non disputerelated cases should be left to the ASEAN Secretariat. Thus in addition to its role as a facilitator and coordinator for the implementation of ASEAN agreements and plans, the ASEAN Secretariat should be

given the power to caution members who fail to implement the necessary reforms. We concentrate on two ASEAN institutions that play a key role in the implementation and coordination of ASEAN agreements, namely the Dispute Settlement Mechanism and the ASEAN Secretariat. We take a look at each of these in turn in this section. There are several reasons why the EU institutional arrangement provides a particularly useful reference for ASEAN in its quest for a successful economic integration: — Firstly, apart from the EU, no other regional trade agreement has tried to achieve as deep an economic integration as what ASEAN is aiming for. — Secondly, unlike ANCERTA and NAFTA where there are obvious economically dominant members in the agreement,

Reprinted in abridged form with slight amendment from Narongchai Akrasanee and Jutamas Arunanondchai, “The Minimum Institutional Reform to Make ASEAN Economic Integration a Reality”, Paper prepared for the ASEAN Roundtable 2003 on “Roadmap to an ASEAN Economic Community”, Institute of Southeast Asian Studies, Singapore, on 20–21 August 2003, by permission of the authors and the Institute of Southeast Asian Studies.

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several countries in ASEAN are of similar sizes and stages of development, e.g. Malaysia, Thailand, Philippines and Indonesia. This characteristic also applies to the EU bloc, with Britain, France and Germany being in the league. While embracing all aspects of the EU institution is politically unfeasible and is unnecessary, a supra-national ASEAN Court is the one thing that the ASEAN economic integration process cannot do without. ASEAN DISPUTE SETTLEMENT MECHANISM It is well known that the WTO Dispute Settlement Mechanism is extremely weak as an enforcement mechanism. The WTO Dispute Settlement Mechanism as modeled in NAFTA and used by ANCERTA is more suitable for a smaller trade bloc. This is because sanctioned retaliation, the ultimate penalty in these agreements, hurts most when the trade bloc is small and trade is concentrated between a few members. As mentioned earlier, the ASEAN Dispute Settlement Mechanism has been unable to uphold formerly ratified agreements. This is partly due to the tendency of the AEM, which has the highest authority on economic matters, to accommodate political interests of member states. This points to the need for a supra-national body who is prepared to exercise jurisprudence over ASEAN and to uphold agreements signed by ASEAN members. In addition, a centralized judicial body has the ability to organize a concerted effort to impose more severe penalty on the country that is found guilty of failing to fulfil its commitment. For example, it could enlist other ASEAN countries to suspend preferential trade arrangement for the nonconformist member. Although, this would

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not be credible if the cost on the enforcers of imposing such penalty is too high. The supra-national ASEAN court could thus learn from the Court of Justice of the EU. The latter has the authority to ensure that Community law is effectively applied, i.e. it solves disputes involving Member States, EU institutions, businesses and individuals. There are several categories of proceedings under the European Court of Justice, namely: (i) the preliminary ruling procedure; (ii) the proceedings for the failure to fulfil an obligation; (iii) the proceedings for annulment; and (iv) the proceedings for the failure to act. The preliminary ruling is a cooperation between the National Courts and the Court of Justice. If a member state fails to fulfil his obligation under the Community law or if a dispute should arise, the proceedings for the failure to fulfil an obligation and the proceedings for the failure to act are followed respectively. Any request for the annulment of Community Provision and Legal Acts follow the proceedings for annulment. This type of process should ensure consistency in AEM’s actions and reduce the influence of politics on economic matters. Currently the AFTA Council supervises the implementation and elaboration of the ASEAN Free Trade Agreement. In this way, AFTA Council could play a useful and complementary role to the ASEAN Court. In particular, it could use its expertise to aid in resolving disputes arising from the interpretation of ASEAN agreements. As ASEAN progresses towards integration in other areas, e.g. investments and services, the role of the AFTA Council should also be enhanced to cover these other areas. To ensure that investment and service sector liberalisation bring about the greatest improvements in resource allocation, rules on investment, competition and consumer protection should be agreed upon by

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ASEAN members prior to the liberalisation. The complexity of the task of drawing a regulatory framework for ASEAN members should not be understated. This is because ASEAN members have different levels of development, in terms of market development and trade negotiation capacity. The latter implies that the negotiators from member states frequently have insufficient and different understanding of the negotiating approach and its objective. To accommodate for the different stages of market development among ASEAN members, “core principles” for competition policy may be implemented in the short to medium run instead of competition rules. This is the stance of the OECD and PECC and gives domestic government the choice of competition measures that would best solve the market distortions in its country.1 Even if an agreement can be reached on the regulatory framework, the failure to fulfil an obligation, e.g. on investment facilitation, may stem from human and financial resource constraints. In this way, contributions and technical assistance for capacity building in training, human resource and institutional development from the more advanced members of ASEAN, and where possible international organizations, would be necessary for the economic integration process to move ahead. Once the investment and competition regulations are in place, supported by an effective enforcement mechanism, foreign producers would benefit from the certainty of ASEAN government policies and actions. This would in turn reduce the risk and cost of entry into ASEAN making ASEAN more attractive. ASEAN SECRETARIAT Although the reforms on the ASEAN Secretariat in the past decade (such as the

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introduction of open recruitment process, the upgrading of the Secretary General of ASEAN Secretariat to the Secretary General of ASEAN) have succeeded in bringing a more corporate feel, greater work continuity and more respectability, the functions of the ASEAN Secretariat remains subservient to politics. This is because the ASEAN Secretariat continues to lack the power to enforce implementation. Thus, while it has the task of initiating plans and cooperation programmes, coordinating, facilitating and monitoring the approved projects and activities, it cannot penalize contracting parties who fail to uphold their commitment. Currently, the best that the ASEAN Secretariat can do in this circumstance is to alert the contracting parties who fail to uphold their commitment and report to the Heads of Government. Given the non-interventionist stance of the ASEAN governments, typically nothing is done to discipline such members.2 The list of tasks that the ASEAN Secretariat is currently responsible for is rather similar to the task of the European Commission who is the driving force in the European Union’s institutional system. However, European Commission has the rights to implement the European legislation, budget and programmes adopted by the European Parliament and Council. The ASEAN Secretariat could usefully function in this way, particular on economic affairs or matters pertaining to ASEAN economic integration. It may be that an ASEAN Economic Secretariat — a subset of the ASEAN Secretariat — could be entrusted with the power to enforce the implementation of agreements under the ASEAN cconomic integration framework. This reform would overcome the noninterventionist stance of ASEAN Heads of Government by assigning a formal institution to enforce the members’ obligation towards economic integration. It

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is important to note, however, that the ASEAN Economic Secretariat would be able to fulfil its role properly if an effective judicial institution exists to support it. Only until ASEAN can keep its house in order can it conduct international dialogues with much weight. Housekeeping is likely to become a big issue as economic integration progresses and more demands are made upon the ASEAN members, e.g. customs reform and modernization; customs harmonization; the implementation of the ASEAN Sectoral Mutual Recognition Arrangement; and the finance work programme, etc. In a similar way, Tay (2001)3 acknowledges the problem of ASEAN’s preference for non-interference, non-binding plans, and the lack of compliance. However, he falls short of suggesting supra-national institutions for ASEAN. Instead, he suggests that ASEAN should encourage the use of ASEAN-X principle, whereby members who are ready to implement certain reforms earlier are able to do so. This principle is likely to help to hasten the process of ASEAN economic integration through two channels: firstly it has a “demonstration effect” which can help to assure members who are uncertain of the impact of the liberalization measures; secondly it creates peer pressure. Nonetheless, it does not address the problem of non-compliance that is pervasive in the current institutional set up. TIMING FOR A MORE CENTRALIZED ASEAN STRUCTURE If AFTA is not a binding agreement, how can AIA and AFAS be taken seriously by those outside of ASEAN? Although a reform on Dispute Settlement Mechanism that enforces economic agreements on members goes against ASEAN social norm of nonintervention and the practice of “brushing things under the carpet”, the reforms of the

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Dispute Settlement Mechanism is of paramount importance for the credibility of ASEAN. As new agreements come into force, the number of conflict cases will increase. If nothing is done to remedy the Dispute Settlement Mechanism, the number of dispute cases that are left unresolved is also expected to rise. Each additional unresolved case destroys the credibility of ASEAN economic integration. At some critical number of failures, ASEAN will become irrelevant to the international community. At this point, the opportunity cost of allowing an additional failure in the Dispute Settlement Mechanism would be so great, and it may be here — if ASEAN leaders value ASEAN economic integration at all — that ASEAN leaders would finally agree to a supra-national judicial system with the authority to enforce penalties. The past major economic agreements, such as AFTA, have been achieved as a reactive response from ASEAN to external changes. During the 1990s, the rise in regionalism created an impetus for ASEAN to form a free trade area. In this way, it would not be surprising if a major reform on the ASEAN judicial system were to occur in response to changes in the perception of non-ASEAN economies. If this is true then the opening up of China, which is being seen to sideline the ASEAN economies, will be an important factor amongst other things that hastens a major reform of the ASEAN way. How to move ahead with the consensusbased decision-making? There is a need to realign the conflicting objectives of ASEAN members. One possibility is to use transfer payment, particularly to narrow the development gap between CLMV and the original members. Up until now, ASEAN has relied heavily on funding from partner countries, e.g. Japan, Australia and China. Thus the major source of development assistance to CLMV does not come from ASEAN but from outsiders. By raising the

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level of development assistance from ASEAN to CLMV, this helps to strengthen the ties between ASEAN members, which can bring about greater compliance.4 It is obvious that ASEAN needs a more centralized structure, after having made several agreements all of which are in need of effective and efficient implementation. ASEAN thus needs to make the decision to become more centralized as soon as possible. It is fortunate that Indonesia is hosting the 2003 ASEAN summit, to be held in Bali in October. As Indonesia is considered to

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be the “Big Brother” of ASEAN, ASEAN should choose this occasion of the Bali Summit to make the big decision. In sum, at the Bali Summit ASEAN should make the decision to move towards the ASEAN Economic Community (AEC) by setting up two supranational bodies: 1. ASEAN Court, to be responsible for dispute settlements; and 2. ASEAN Economic Secretariat, to be responsible for economic affairs pertaining to ASEAN economic integration.

NOTES 1.

2.

3. 4.

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See Vautier K.M., Lloyd P.J. and Tsai I.W., “Competition Policy, Developing Countries and the WTO”, . World Bank, July 1999. Although the surveillance process has been stepped up in various areas of cooperation (e.g. measures to increase transparency and improve information flows), which should increase incentive towards compliance through peer pressure, the process is still in its infancy. See “Institutions and Process Dilemmas and Possibilities”, in Reinventing ASEAN, edited by Simon S.C. Tay, Jesus P. Estanislao and Hadi Soesastro (Singapore: ISEAS, 2001). EU social assistance is the main source of funding in this area for many less advanced members. This is one of the attractions of joining the EU for many less advanced countries in the region, despite the need to observe the Community law.

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REGION, SECURITY AND THE RETURN OF HISTORY

ANTHONY MILNER

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t is true that ASEAN faces important practical tasks today, and that the builders of ASEAN have given a lot of attention to the slow and complex process of establishing common norms, and a sense of community, in the Southeast Asian region. And in setting out to defend such processes as being of vital and current importance, I can almost sense one of my colleagues in Canberra in security studies tapping his foot with impatience. But the fact is that there are tough reasons for taking talk seriously in regional relations, especially security relations.

THE CONVERGENCE ERA The first observation that can be made is that to use ‘talk-shop’ in a dismissive manner is in one sense anachronistic. It expresses an attitude that was more appropriate in an earlier era. Impatience with ASEAN and its culture-sensitive, dialogue processes was relatively understandable a decade ago. In retrospect, the early and

mid-90s was an optimistic period for globalizers: think of the heady language then about the prospects for APEC’s open regionalism, with its commitment to tariff reduction and the implementation of international standards, international norms and international regimes.1 The mid-1990s was still the time of the miracle economies of Asia, and many commentators believed that such economic progress would necessarily be accompanied by liberal political change. Unlike Raffles, the former Hong Kong Governor Chris Patten thought the link between trade and ideas did not need to be promoted by government. It was automatic, irresistible. You “cannot compartmentalize freedom,” he said. “You may build walls between economics and politics, but they are walls of sand.”2 According to Francis Fukuyama, history had come to an end: there was, he said, “no ideology with pretensions to universality”,3 not even ideology based on Islam, that could possibly challenge liberal democracy. In Australia, the respected Foreign Minister of the time, Gareth Evans, assured us that just as eco-

Excerpted from Anthony Milner, Region, Security and the Return of History (Singapore: Institute of Southeast Asian Studies and Department of History, National University of Singapore, 2003), by permission of the author and the publishers.

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nomies were being transformed so English was spreading as a lingua franca in the region, and a cultural convergence was being consolidated around such liberal principles as multiculturalism and democracy. 4 From the perspective of such a convergence paradigm — for some a very optimistic vision — there were two prominent spoilers: Prime Minister Mahathir and the eminent American commentator, Samuel Huntington, who opposed the convergence vision with his own dark spectre of a ‘clash of civilisations’.5 In the convergence era it was easy to be neglectful of history. Even historians sensed the danger. In the 1994 edition of his popular history of Southeast Asia, Milton Osborne in fact found “so much evidence of modernity” that, as a professional historian, he felt obliged to warn that we could not necessarily conclude that the “countries and peoples” of the region had “lost their individual identities and succumbed to western and global norms”.6 With such a devaluing of history — such faith in the momentum of liberal convergence — it was understandable that many of the preoccupations of ASEAN were viewed with impatience. The very way in which ASEAN builders described their task would cause irritation. The repeated stress on the “patience, tolerance, non-aggressive attitudes” said to be necessary in order to create “common value systems”;7 the perceived need to identify cultural elements which are “congruent with some values of each of the member states”;8 the oftdeclared ambition to create a “true understanding and appreciation of each other’s cultures and each other’s interests”;9 the objective that all the “relevant actors” in ASEAN should “continuously be exposed to one another”;10 the declared desire to build more than a “mere organisation”, and to cater also for the “spiritual life”11 of the Southeast Asian community — these are the types of aspirations that frustrated the

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critics. The common value system itself, which the builders of ASEAN carefully assembled — the shared elements that the ideologues identified and reconstructed; the extensive talk about ‘Asian values’ — added to the irritation of the convergenceminded critics. People who were certain of a rapid consolidation of an international, liberal convergence of value systems could only respond with annoyance when they read of the so-called “ASEAN Way” — the intended common value system that stressed not formal structures but a dependence on “kinship, kinlike relations”,12 and that placed a high premium on the careful process of consensus making and consensus decision, and a strong emphasis on the sensitive refusal to interfere in the affairs of a member state. The ASEAN Way, furthermore, included an ethos that took pride in “sublimating and diffusing conflicts” as well as resolving them.13 To the critic of the 1990s, a period when the liberal convergence of value systems was widely judged to be as unstoppable as the rising economic prosperity, all this sensitivity — all this talktalk — seemed a waste of time. Today, however, the context has changed greatly. The giant state of the region, Indonesia, has been beset with separatist demands from groups claiming longestablished historical identities; an opinion poll taken this year showed the Sultan of Jogjakarta — the ‘feudal’ sultan, let us remind ourselves — to be the most popular leader among young Indonesians.14 The Asian Economic Crisis, to take a further example, provoked a degree of anti-Western sentiment fuelled in part by memories of an anti-colonial past;15 and, in addition, certain Islamist groups are said to have been planning an Islamic state which would reach across the post-colonial borders of island Southeast Asia.16 On top of these developments we are today, I think, increasingly sensitive to the long-term mistrust between Thailand and Myanmar17 and Thailand and

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Cambodia,18 and a fair number of other intra-regional tensions, including that between Singapore and Malaysia. Beyond the Southeast Asian region, there is the critical, historical rivalry between China and Japan. Following the September 11 attacks, and the Southeast Asian attacks in Bali and elsewhere, some have begun to take more seriously Samuel Huntington’s spectre of a ‘clash of civilisations’.19 Such commentators are right to observe that a new era has arrived and the formulations of Fukuyama, ex-Governor Patten, and ex-Foreign Minister Evans are no longer so relevant. But the expression “clash of civilisations” simply does not capture the fact that a great deal of contest is taking place within civilizations (including Islam and the West); and the idea of ‘civilisation’ tends to disguise the degree to which people and cultures change, and the extent to which members of a community (the Japanese in the late nineteenth century constitute an excellent example)20 can reformulate their own civilization. Rather than a ‘clash of civilisations’, it seems to me one might more sensibly speak of a ‘return of history’ as a way of conveying the character of this new era. The phrase ‘return of history’ specifically counters the 1990s observation of Francis Fukuyama that we have come to the ‘end of history’, and to stress ‘history’ or, better still, ‘histories’ is a way of acknowledging that the globalizing sweep of liberal economic and value change has by no means swept away the whole range of local

perspectives and narratives in this region. National, religious, ethnic, subregional and numerous other perspectives, including those of Southeast Asian regionalism itself, have proved more stubborn than the convergence thinkers anticipated. Furthermore, in using the term “history” rather than “civilisation”, or even “culture”, I think it is fair to say that we are underlining the fact that all these national, religious, and other perspectives are themselves dynamic and subject to extensive refashioning and reinvention. Separatist movements in Indonesia, and even so-called Fundamentalist Islam, are themselves not static but in motion — shaped by the encounters and struggles of the twenty-first century, as well as by their own pasts. In speaking of the return and potency of history, there is no need to go from one extreme to another and neglect the role of globalizing forces. The point to stress is that globalizing technologies and economies do not necessarily bring cultural homogeneity. They can foster multiple and competing viewpoints. Today, then, a tough-minded view of this region is likely to be an historical rather than a convergence view. And in this era of the return of history, it would be fair to say, there is good reason to take a more patient view of the talk of the region. I will return to this point, but looking across this troubled region today few would insist that the task of achieving consensus — of establishing shared norms and understandings — has been accomplished. The regional conversation is fortunately ongoing — and it should be listened to, and contributed to, by historians.

NOTES 1. See, for instance, the Asia-Pacific Economic Cooperation Ministerial Meeting, 11–12 November 1994, Jakarta, “Joint Statement”, clauses 32, 37, 38; the “Declaration of an APEC standards and conformance framework” of 7 November 1994; and the “Leaders’ Declaration”, Bogor, Indonesia, 15 November 1994. See also John Ravenhill, APEC and the Construction of Pacific Rim Regionalism (Cambridge: Cambridge University Press, 2001), p. 107. 2. Chris Patten, East and West (London: Macmillan, 1998), p. 181.

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3. The End of History and the Last Man (London: Hamish Hamilton, 1992); Also, “The End of History”, The National Interest 16 (1989): 3–18. 4. “Australia in East Asia and the Asia-Pacific: Beyond the Looking Glass”, Australian Journal of International Affairs 49, no. 1 (1995): 106–7. 5. Samuel P. Huntingon, The Clash of Civilisations and the Remaking of World Order (New York: SimonSchuster, 1996); “The Clash of Civilizations?” Foreign Affairs 72, no. 3 (Summer 1993), pp. 22–49. 6. Milton Osborne, Southeast Asia: An Introductory History (St Leonards: Allen & Unwin, 1994), p. 240. 7. Selo Soemardjan, “Introduction”, in ASEAN: Identity, Development and Culture, edited by R.P. Anand and Purificacion V. Quisumbing (Quezon City: University of the Philippines Law Center and EastWest Center Culture Learning Institute, 1981), p. xxiv. See also Abdullah Badawi, quoted in Amitav Acharya, Constructing a Security Community in Southeast Asia (London and New York: Routledge, 2001), p. 195. 8. Estrella D. Solidum, “The Role of Certain Sectors in Shaping and Articulating the ASEAN Way” in Anand and Purificacion, ASEAN, p. 133. 9. Selo Soemardjan, “Introduction”, p. xxvi. 10. Ghazali Shafie, Malaysia, ASEAN and the New World Order (Bangi: Universiti Kebangsaan Malaysia, 2000), p. 109. 11. Estrella D. Solidum, “Role of Certain Sectors in Shaping and Articulating the ASEAN Way”, in Anand and Purificacion, ASEAN, p. 138. 12. Solidum, “The Role”, p. 138. On the patient building of trust, see also Abdullah Ahmad Badawi, “Keynote Address”, in ASEAN Towards 2020, edited by Stephen Leong (Kuala Lumpur: ASEAN Academic Press, 1998), p. 15. On the way in which the ASEAN approach is “faithful to the cultures of most, if not all, the countries of Southeast Asia”, see Rodolfo C. Severino, “Reflections on ASEAN: What we did right, where we went wrong — lessons for the future”, in ibid., pp. 90–91. 13. Noordin Sopiee, quoted in Amitav Acharya, The Quest for Identity: International Relations of Southeast Asia (Singapore: Oxford University Press, 2000), p. 128. 14. The survey polled people aged between 17 and 25; “Indonesian youth want a president who is not a politician”, Straits Times, 10 October 2002. 15. See a report on a seminar on this topic held in Canberra; Anthony Milner, “Asia Pacific Perceptions of the Financial Crisis and the Progress of Globalisation”, in Papers of the 14th AASSREC Biennial General Conference, 5–9 November 2001, Hanoi (Hanoi: Association of Asian Social Science Research Councils, 2002), pp. 3–21. 16. See Michael Vatikiotis’ interview with Lee Kuan Yew, Straits Times, 6 December 2002; International Crisis Group, “Al-Qaeda in Southeast Asia: The case of the ‘Ngruki Network’ ”, Indonesia Briefing, 8 August 2002. 17. Maung Aung Myoe, Neither Friend nor Foe: Myanmar’s Relations with Thailand since 1988 (Singapore: Institute of Defence and Strategic Studies, 2002). 18. Kimima Lyall, “Arrests appease Thai PM”, The Weekend Australian, 1–2 February 2003. 19. See, for instance, the comments of Danish Foreign Minister Moeller, quoted in the Straits Times, 26 October 2002. 20. Carol Gluck, Japan’s Modern Myths: Ideology in the Late Meiji Period (Princeton: Princeton University Press, 1985); Earl H. Kinmoth, The Self-Made Man in Meiji Japanese Thought from Samurai to Salary Man (Berkeley: University of California, 1981).

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Section

VIII

DOCUMENTATION

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The ASEAN Declaration (Bangkok Declaration) Bangkok, 8 August 1967

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he 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 SouthEast 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 peacefull 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; 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 South-East Asian Nations; 2. To promote regional peace and stability through abiding respect for justice and the rule of law in the relationship among

Reprinted from the ASEAN Secretariat website by permission of the ASEAN Secretariat. 520

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industries, the expansion of their trade, including the study of the problems of international commodity trade, the improvement of their transportation and communications facilities and the raising of the living standards of their peoples; 6. To promote South-East Asian studies; 7. To maintain close and beneficial cooperation with existing international and regional organizations with similar aims and purposes, and explore all avenues for even closer cooperation among themselves.

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 THIRD,

that to carry out these aims and purposes, the following machinery shall be established: (c) Ad-Hoc Committees and Permanent Committees of specialists and officials on specific subjects. (d) 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 and such other committees as may hereafter 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. (b) 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 on the work of the Association in between Meetings of Foreign Ministers.

FOURTH, that the Association is open for participation to all States in the South-East Asian Region subscribing to the aforementioned aims, principles and purposes. FIFTH, that the Association represents the collective will of the nations of South-East 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 THE REPUBLIC OF INDONESIA:

FOR MALAYSIA

FOR THE REPUBLIC OF THE PHILIPPINES:

ADAM MALIK

TUN ABDUL RAZAK

NARCISO RAMOS

Presidium Minister for Political Affairs Minister for Foreign Affairs

Deputy Prime Minister, Minister of Defence and Minister of National Development

Secretary of Foreign Affairs

FOR THE REPUBLIC OF SINGAPORE:

FOR THE KINGDOM OF THAILAND

S. RAJARATNAM

THANAT KHOMAN

Minister for Foreign Affairs

Secretary of Foreign Affairs

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ASEAN Declaration On The South China Sea Manila, Philippines, 22 July 1992

WE, the Foreign Ministers of the member countries of the Association of Southeast Asian Nations; RECALLING the historic, cultural and social ties that bind our peoples as states adjacent to the South China Sea; WISHING to promote the spirit of kinship, friendship and harmony among our peoples who share similar Asian traditions and heritage; DESIROUS of further promoting conditions essential to greater economic cooperation and growth; RECOGNIZING that we are bound by similar ideals of mutual respect, freedom, sovereignty and jurisdiction of the parties directly concerned; RECOGNIZING that South China Sea issues involve sensitive questions of sovereignty and jurisdiction of the parties directly concerned; CONSCIOUS that any adverse developments in the South China Sea directly affect peace and stability in the region. HEREBY 1. EMPHASIZE the necessity to resolve all sovereignty and jurisdictional issues pertaining to the South China Sea by peaceful means, without resort to force; 2. URGE all parties concerned to exercise restraint with the view to creating a positive climate for the eventual resolution of all disputes; 3. RESOLVE, without prejudicing the sovereignty and jurisdiction of countries having direct interests in the area, to explore the possibility of cooperation in the South China Sea relating to the safety of maritime

navigation and communication, protection against pollution of the marine environment, coordination of search and rescue operations, efforts towards combatting piracy and armed robbery as well as collaboration in the campaign against illicit trafficking in drugs; 4. COMMEND all parties concerned to apply the principles contained in the Treaty of Amity and Cooperation in Southeast Asia as the basis for establishing a code of international conduct over the South China Sea; 5. INVITE all parties concerned to subscribe to this Declaration of principles.

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Signed in Manila, Philippines, this 22nd day of July, nineteen hundred and ninety-two.

HRH Prince Mohamed Bolkiah

Ali Alatas

MINISTER OF FOREIGN AFFAIRS BRUNEI DARUSSALAM

MINISTER FOR FOREIGN AFFAIRS REPUBLIC OF INDONESIA

Datuk Abdullah Bin Haji Ahmad Badawi MINISTER OF FOREIGN AFFAIRS MALAYSIA

Wong Kan Seng

Arsa Sarasin

MINISTER FOR FOREIGN AFFAIRS REPUBLIC OF SINGAPORE

MINISTER OF FOREIGN AFFAIRS KINGDOM OF THAILAND

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Singapore Declaration Of 1992 Singapore, 28 January 1992

1. We, the Heads of State and Government of ASEAN, are encouraged by the achievements of ASEAN in the last twenty-five years, and are convinced that ASEAN cooperation remains vital to the well-being of our peoples. 2. Having reviewed the profound international political and economic changes that have occurred since the end of the Cold War and considered their implications for ASEAN, we declare that : • ASEAN shall move towards a higher plane of political and economic cooperation to secure regional peace and prosperity; • ASEAN shall constantly seek to safeguard its collective interests in response to the formation of large and powerful economic groupings among the developed countries, in particular through the promotion of an open international economic regime and by

stimulating economic cooperation in the region; • ASEAN shall seek avenues to engaged member states in new areas of cooperation in security matters; and • ASEAN shall forge a closer relationship based on friendship and cooperation with the Indochinese countries, following the settlement on Cambodia.

POLITICAL AND SECURITY COOPERATION 3. In the field of political and security cooperation, we have agreed that: • ASEAN welcomes accession by all countries in Southeast Asia to the Treaty of Amity and Cooperation in Southeast Asia, which will provide a common framework for wider regional cooperation embracing the whole of Southeast Asia; • ASEAN will also seek the cognizance of the United Nations for the Treaty through such means as an appropriate Resolution. This will signify ASEAN’s commitment to the centrality of the UN role in the maintenance of international peace and security as well as promoting cooperation for socioeconomic development;

• ASEAN could use established fora to promote external dialogues on enhancing security in the region as well as intra-ASEAN dialogues on ASEAN security cooperation (such as the regional security seminars held in Manila and Bangkok in 1991, and the workshops on the South China Sea held in Bali in 1990 and Bandung in 1991), taking full cognizance of the Declaration of ASEAN Concord. To enhance this effort, ASEAN should intensify its external dialogues in political and security matters by using the ASEAN Post Ministerial Conferences (PMC); • ASEAN has made major strides in building cooperative ties with states of the Asia-Pacific

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• ASEAN supports the Cambodian Supreme National Council in calling on the UN Secretary General to despatch UNTAC as early as possible in order to preserve the momentum of the peace process and to implement the gains realised by, the signing of the Paris Peace Agreements ASEAN calls on all parties in Cambodia to implement seriously the process of national reconciliation which is essential to a genuine and lasting peace in Cambodia; and

region and shall continue to accord them a high priority; • ASEAN will seek to realise the Zone of Peace, Freedom and Neutrality (ZOPFAN) and a South east Asian Nuclear Weapon Free Zone (SEANWFZ) in consultation with friendly countries, taking into account changing circumstances; • ASEAN will closely cooperate with the United Nations and the international community in ensuring the full implementation of the Peace Agreements signed in Paris in October 1991.

• ASEAN will play an active part in international programmes for the reconstruction of Vietnam, Laos and Cambodia.

4. Conscious of the central role of the Unite Nations in the post-Cold War, we agree that: • ASEAN will participate actively in efforts to ensure that the United Nations is a key instrument for maintaining international peace and security; and

• The proposed Summit of members of the United Nations Security Council should help shape the United Nations’ role for the promotion of a more equitable international political and economic order, and for the democratisation of the United Nations’ decision-making processes in order to make the organization truly effective in meeting its obligations;

• ASEAN will encourage all efforts to strengthen the United Nations, including its role and capabilities, in peacekeeping and peacemaking, in accordance with the United Nations Charter.

DIRECTIONS IN ASEAN ECONOMIC COOPERATION 5. In the field of economic cooperation, we have agreed that: member states have identified the following fifteen groups of products to be included in the CEPT Scheme for accelerated tariff reductions:

• To further accelerate joint efforts in enhancing intra-ASEAN economic cooperation, ASEAN shall adopt appropriate new economic measures as contained in the Framework Agreement or Enhancing ASEAN Economic Cooperation directed towards sustaining ASEAN economic growth and development which are essential to the stability and prosperity of the region;

– – – – – – – – – – –

• ASEAN shall establish the ASEAN Free Trade Area using the Common Effective Preferential Tariff (CEPT) Scheme as the main mechanism within a time frame of 15 years beginning 1 January 1993 with the ultimate effective tariffs ranging from 0% to 5%. ASEAN

vegetable oils cement chemicals pharmaceuticals fertiliser plastics rubber products leather products pulp textiles ceramic and glass products

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– – – –

of sustaining the growth and dynamism of the Asia-Pacific region. With respect to an EAEC, ASEAN recognises that consultations on issues of common concern among East Asian economies, as and when the need arises, could contribute to expanding cooperation among the region’s economies, and the promotion of an open and free global trading system;

gems and jewellery copper cathodes electronics wooden and rattan furniture

• ASEAN shall increase investments, industrial linkages and complementarity by adopting new and innovative measures, as well as strengthening existing arrangements in ASEAN and providing flexibility for new forms of industrial cooperation;

• Further, recognising the importance of nontariff and non-border areas of cooperation to complement tariff liberalisation in increasing regional trade and investment, ASEAN shall further explore cooperation in these areas with a view to making recommendations to the Fifth ASEAN Summit;

• ASEAN shall strengthen and develop further cooperation in the field of capital markets, and shall encourage and facilitate free movement of capital and other financial resources;

• ASEAN shall continue with its concerted efforts in the promotion of tourism, particularly in making the Visit ASEAN Year 1992 a success;

• ASEAN shall further enhance regional cooperation to provide safe, efficient and innovative transportation and communications infrastructure network;

• ASEAN shall continue to step up cooperation in other economic-related areas, such as science and technology transfer and human resource development;

• ASEAN shall also continue to improve and develop the intra-country postal and telecommunications system to provide costeffective, high quality and customer-oriented services;

• ASEAN shall enhance cooperation and collective action in international and interregional fora as well as in international organisations and regional groupings. ASEAN shall also continue to enhance relations with its dialogue partners and other producing/ consuming countries towards the advancement of the commodity sector in the region and in addressing international commodity issues;

• ASEAN shall adopt joint efforts to strengthen trade promotion and negotiations on ASEAN agricultural products in order to enhance ASEAN’s competitive posture, and to sustain the expansion of ASEAN agricultural exports in the international markets; • ASEAN acknowledges that sub-regional arrangements among themselves, or between ASEAN member states and non-ASEAN economies could complement overall ASEAN economic cooperation;

• ASEAN recognises that sustained economic growth require considerable inputs of energy. As member states continue to industrialise and strengthen their industrial base, ASEAN shall focus and strengthen cooperation in energy security, conservation and the search for alternative fuels;

• ASEAN recognises the importance of strengthening and/or establishing cooperation with other countries, regional/ multilateral economic organisations, as well as Asia-Pacific Economic Cooperation (APEC) and an East Asia Economic Caucus (EAEC). With regard to APEC, ASEAN attaches importance to APEC’s fundamental objective

• ASEAN recognises the complementarity of trade and investment opportunities and therefore encourages, among others, increased cooperation and exchanges among

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concerns and interests of the ASEAN economies, and adopt a pragmatic and realistic approach, in using the Draft Final Text as at 20 December 1991 as a reasonable basis for completing negotiations; and

the ASEAN private sectors, and the consideration of appropriate policies for greater intra-ASEAN investments; • ASEAN shall continue to uphold the principles of free and open trade embodied in the General Agreement on Tariffs and Trade (GATT), and work towards maintaining and strengthening an open multilateral trading system;

• ASEAN strongly urges major trading countries to settle their differences on agriculture and other areas, and likewise use the Draft Final Text to work towards an early and successful conclusion of the Uruguay Round.

• ASEAN shall work collectively to ensure that the Uruguay Round addresses the key

REVIEW OF ASEAN’S EXTERNAL RELATIONS 6. In reviewing ASEAN’s external relations, we have agreed that: • While ASEAN’s cooperative relationships with the Dialogue partners have made significant progress, ASEAN should strengthen existing dialogue mechanisms and develop new ones where necessary for the enhancement of economic relations with these countries, especially ASEAN’s major economic partners.

• ASEAN, as part of an increasingly interdependent world, should intensify cooperative relationships with its Dialogue partners, namely Australia, Canada, the European Community, Japan, the Republic of Korea, New Zealand and the United States, and engaged in consultative relationships with interested non-Dialogue countries and international organizations; and

ASEAN FUNCTIONAL COOPERATION 7. In the field of functional cooperation, we have agreed that: establishing an ASEAN University based on this expanded network;

• The ASEAN member countries shall continue to enhance awareness, of ASEAN among the people in the region through the expansion of ASEAN Studies as part of Southeast Asian Studies in the school and university curricula and the introduction of ASEAN student exchange programmes at the secondary and tertiary levels of education;

• ASEAN functional shall be designed for a wider involvement and increased participation by women in the development of ASEAN countries in order to meet their needs and aspirations. This cooperation shall also extend to the development of children to realise their full potential;

• ASEAN should help hasten the development of a regional identity and solidarity, and promote human resource development by considering ways to further strengthen the existing network of the leading universities and institutions, of higher learning in the ASEAN region with a view to ultimately

• The ASEAN member countries shall continue to play an active part in protecting the environment by continuing to cooperate in promoting the principle of sustainable development and integrating it into all aspects of development:

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United Nations Conference on Environment and Development in 1992 at Rio de Janeiro;

• ASEAN member countries should continue to enhance environmental cooperation, particularly in issues of transboundary pollution, natural disasters, forest fires and in addressing the anti-tropical timber campaign;

• As Non-governmental Organizations (NGOs) play an important role in social development, ASEAN shall encourage the exchange of information among NGOs in the region and help expand their participation in intraASEAN functional cooperation;

• The developed countries should commit themselves to assist developing countries by providing them new and additional financial resources as well as the transfer of, and access to environmentally sound technology on concessional and preferential terms;

• ASEAN shall intensify its cooperation in overcoming the serious problem of drug abuse and illicit drug trafficking at the national, regional and international levels; and

• The developed countries should also help to maintain an international environment supportive of economic growth and development;

• ASEAN shall make a coordinated effort in curbing the spread of AIDS by exchanging information on AIDS, particularly in the formulation and implementation of policies and programmes against the deadly disease.

• ASEAN looks forward to seeing these commitments reflected in the outcome of the

RESTRUCTURING OF ASEAN INSTITUTIONS 8. To strengthen ASEAN, we have agreed that: • The professional staff of the ASEAN Secretariat be appointed on the principle of open recruitment and based on a quota system to ensure representation of all ASEAN countries in the Secretariat;

• ASEAN Heads of Government shall meet formally every three years with informal meetings in between; • The ASEAN organizational structure, especially the ASEAN Secretariat, shall be streamlined and strengthened with more resources;

• The five present ASEAN Economic Committees be dissolved and the Senior Economic Officials Meeting (SEOM) be tasked to handle all aspects of ASEAN economic cooperation; and

• The Secretary-General of the ASEAN Secretariat shall be redesignated as the Secretary-General of ASEAN with an enlarged mandate to initiate, advise, coordinate and implement ASEAN activities;

• A ministerial-level Council be established to supervise, coordinate and review the implementation of the Agreement on the Common Effective Preferential Tariff (CEPT) Scheme for the ASEAN Free Trade Area (AFTA).

• The Secretary-General of ASEAN shall be appointed on merit and accorded ministerial status;

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DONE at Singapore on the 28th of January 1992.

FOR BRUNEI DARUSSALAM:

FOR THE REPUBLIC OF INDONESIA:

FOR MALAYSIA:

(Sgd.) HAJI HASSANAL BOLKIAH

(Sgd.) SOEHARTO

Sultan of Brunei Darussalam

President

(Sgd.) DR MAHATHIR BIN MOHAMAD Prime Minister

FOR THE REPUBLIC OF

FOR THE REPUBLIC OF SINGAPORE:

FOR THE KINGDOM OF THAILAND:

(Sgd.) GOH CHOK TONG

(Sgd.) ANAND PANYARACHUN

Prime Minister

Prime Minister

THE PHILIPPINES:

(Sgd.) CORAZON C AQUINO President

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ASEAN Vision 2020 W

e, 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 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.

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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 confidence-building 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 Asia-Pacific 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. 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: 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 subregional cooperation in existing and new sub-

• maintain regional macroeconomic and financial stability by promoting closer consultations in macroeconomic and financial policies. • advance economic integration and cooperation by undertaking the following

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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.

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. • 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

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.

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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. 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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Ha Noi 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. 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; 1.2.3 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

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standards of disclosure and dissemination of economic and financial information; and

year 2003, and where appropriate at a later date especially for the new Member Countries;

1.2.5 Adopt prudential measures to mitigate the effects of sudden shifts in short-term capital flows.

1.5.2 Establish a set of minimum standards for listing rules, procedures and requirements by 2003;

1.3 Promote liberalisation of the financial services sector.

1.5.3 Coordinate supervision of and programmes to strengthen capital markets;

1.3.1 Intensify deregulation of the financial services sector; and

1.5.4 Improve corporate governance, transparency and disclosure;

1.3.2 Intensify negotiations of financial sector liberalisation under the ASEAN Framework Agreement on Services (AFAS).

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;

1.4 Intensify cooperation in money, tax and insurance matters.

1.5.6 Facilitate cross-border capital flows and investments;

1.4.1 Study the feasibility of establishing an ASEAN currency and exchange rate system;

1.5.7 Facilitate clearing and settlement systems within ASEAN;

1.4.2 Establish an ASEAN Tax Training Institute by 2003;

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;

1.4.3 Enhance the role of “ASEAN Re Corporation Limited” as a vehicle to further promote regional cooperation in reinsurance business; and

1.5.10 Prepare the framework to develop bond markets in ASEAN by 2000; and

1.4.4 Establish an ASEAN Insurance Training and Research Institute by 2003.

1.5.11 Promote networking among development banks in Member States for financing of productive projects.

1.5 Develop ASEAN Capital Markets. 1.5.1 Adopt and implement internationally accepted practices and standards by the

II. 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

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2.1.3 Standards and conformity assessment

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.

a. 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; b. Implement the ASEAN Framework Agreement on Mutual Recognition Arrangements (MRAs) by developing sectoral MRAs in priority areas beginning in 1999; and c. Enhance the technical infrastructure and competency in laboratory testing, calibration, certification and accreditation by the year 2005, based on internationally-accepted procedures and guides; and d. 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.

2.1.2 Customs harmonisation a. 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; b. Promote transparency, consistency and uniformity in the classification of goods traded within ASEAN and enhance trade facilitation through the provision of facilities for obtaining preentry classification rulings/decisions at national and regional levels by the year 2003; c. Promote the use of transparent, consistent and uniform valuation methods and rulings through the implementation of the WTO Valuation Agreement by the year 2000; d. 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; e. Fully operationalise the ASEAN Customs Training Network by the year 2000; and f. Undertake customs reform and modernisation, in particular to implement risk management and postimportation audit by the year 2003.

2.1.4 Other trade facilitation activities a. 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; b. Establish contact points in 1999 to facilitate ongoing exchange of the above information; c. Encourage the liberalisation of government procurement; d. 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 e. Encourage the increased use of regional currencies for intra-ASEAN trade transactions.

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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.

2.2 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; f. Improve and enhance the measures and activities of the Cooperation and Facilitation, and Promotion and Awareness

2.3 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

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enhance the competitiveness of its food, agriculture and forestry sectors through developing appropriate technologies to increase productivity and by promoting intraand extra-ASEAN trade and greater private sector investment in the food, agriculture and forestry sector.

of alternative approaches to liberalisation; and d. Accelerate the free flow of professional and other services in the region. 2.3.2 Facilitation

2.4.1 Strengthen food arrangements in the region.

a. Encourage the free exchange of information and views among professional bodies in the region with the view to achieving mutual recognition arrangements; b. Conduct an impact study by the year 2000 on the removal of transport, travel and telecommunication barriers in ASEAN; and c. 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).

security

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; b. 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.

2.3.3 Cooperation a. 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; b. Develop cooperation activities in new sectors that are not covered by existing cooperation arrangements; and c. Cooperate to harmonise entry regulations with regard to commercial presence.

2.4.2 Develop and Adopt Existing and New Technologies. a. 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; b. Conduct R&D in critical areas to reduce the cost of inputs for food, agriculture and forestry production; and c. Strengthen programmes in food, agriculture and agro-forestry technology transfer, training and extension to increase productivity.

2.4 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,

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b. Develop and strengthen agricultural rural communities through enhanced human resource development.

2.4.3 Enhance the Marketability of ASEAN Food, Agriculture and Forestry Products/ Commodities.

2.5 Intensify industrial cooperation.

a. Develop, harmonise and adopt quality standards and regulations for food, agriculture and forestry products; b. Promote diversification of forest products; and c. Promote and implement training programmes and share and exchange expertise in the field of food, agriculture and forestry.

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.

2.4.4 Enhance Private Sector Involvement. a. Conduct a study to identify highimpact 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 b. Establish networking and strategic alliances with the private sector to promote investment and joint venture opportunities in ASEAN.

2.6 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 the development and implementation of non-discriminatory market-oriented policies in ASEAN that will provide a more favourable environment for SME development.

2.4.5 Enhance ASEAN Cooperation and Joint Approaches in International and Regional Issues. a. 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 b. Seek closer cooperation and negotiate, through relevant ASEAN bodies, with trading partners on market access for ASEAN products

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

2.4.6 Promote Capacity Building and Human Resources Development. a. Promote and implement training programmes in the field of food, agriculture and forestry, including the exchange of experts; and

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m. Organise regular joint training programmes, seminars and workshops for SMEs; n. Compile and publish a directory of resource persons in ASEAN in the area of production technology and management; o. Develop programmes on entrepreneurship development and innovation in all Member States; and p. Assist new members of ASEAN on SME development through specialised training programmes and technical assistance.

d. Explore the possibility of establishing a trade or industrial cooperation scheme to promote intra-ASEAN cooperation for SMEs. 2.6.2 Cooperation a. Compile Member States’ SME policies and best practices in selected sectors to enhance mutual understanding and possible adoption; b. Compile and provide information to SMEs on policies and opportunities including electronic media such as the Internet websites; c. Promote information networking between existing SME-related organisations in ASEAN; d. Promote awareness among SMEs on benefits and availability of other sources of finance such as venture-capital and equity; e. Enhance interactions between Government Sector Institutions (GSI) and Private Sector Institutions (PSI) on SME development by convening biennial GSI/PSI conference; f. 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; g. Organise annual ASEAN matchmaking workshops to promote SME joint-ventures and linkages between SMEs and LSEs; h. Organise annual joint ASEAN trade promotion activities/trade exposition; i. Encourage national venture-capital company to go regional; j. Organise annual meetings of all national Credit Guarantee Corporations (CGC) in ASEAN; k. Harness the capacity of non-ASEAN SMEs as a source of technology to ASEAN SMEs; l. Organise biennial ASEAN technology exposition;

2.7 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 a. Deepen Intellectual Property policy exchange among ASEAN Member States; b. Survey the current status of intellectual property rights protection in each ASEAN Member State with a view to studying measures, including development principles, for the effective enforcement of intellectual property rights;

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e. Promote accession of Member States to international treaties; f. Promote Intellectual Property public and private sector awareness; g. Introduce Intellectual Property as a subject in the curriculum of higher learning institutions; h. Develop training programmes for Intellectual Property officials; and i. 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.

c. 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 cross-border flow of counterfeits; d. Exchange information on well-known marks as a first step in examining the possibility of establishing a region-wide trademark system; e. Exchange information on current intellectual property rights administrative systems with a view to simplifying and standardising administrative systems throughout the region; f. 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 g. 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.

2.8 Encourage electronic commerce. 2.8.1 Create policy and legislative environment to facilitate cross-border 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

2.7.3 Cooperation

2.8.3 Encourage technical cooperation and technology transfer among Member States in the development of Electronic Commerce infrastructure, applications and services.

a. Implement an ASEAN Regional Trademark and Patent Filing System by the year 2000; b. Establish an ASEAN Regional Fund for Trademark and Patent by the year 2000; c. Finalise and implement an ASEAN Common Form for Trade Mark and Patent Applications; d. Establish a regional trademark and patent registration system; or establish a regional trademark or patent office (on voluntary basis);

2.9 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

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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 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.

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; 2.9.5 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. 2.10 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:

2.10.2 Telecommunications a. Achieve the interoperability and interconnectivity of the National Information Infrastructures (NIIs) of Member States by the year 2010; b. Develop and implement an ASEAN

2.10.1 Transport a. Develop the Trans-ASEAN transportation network by the year 2000 as the trunkline or main corridor for

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and experiences among Member States as means to improve water resources management and water supply system within the region; and b. Support the development of TransASEAN land and submarine pipeline for conveyance of raw water between ASEAN Member States.

Plan of Action on Regional Broadband Interconnectivity by the year 2000; and c. Intensify cooperation in ensuring seamless roaming of telecommunications services (i.e., wireless communications) within the region, as well as in facilitating intraASEAN trade in telecommunications equipment and services.

2.11 Further development of growth areas. 2.10.3 Energy To narrow the gap in the level of development among Member States and to reduce poverty and socio-economic disparities in the region.

a. 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 b. Institute the policy framework and implementation modalities by 2004 for the early realization of the trans-ASEAN 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).

2.11.1 Actively expedite the implementation and further development of growth areas such as the BruneiIndonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP-EAGA), IndonesiaMalaysia-Singapore Growth Triangle (IMSGT), 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 ASEAN-Mekong Basin Development Cooperation Scheme.

2.10.4 Water utility

2.11.2 Facilitate the economic integration of the new Members into ASEAN.

a. Cooperate on a regular basis, exchange of information, knowledge,

III. PROMOTE SCIENCE & TECHNOLOGY DEVELOPMENT AND DEVELOP INFORMATION TECHNOLOGY INFRASTRUCTURE 3.3 Establish networks of science & techonology centres of excellence and academic institutions by 2001.

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.

3.4 Intensify research & development (R&D) in applications of strategic and enabling technologies.

3.1.2 Ensure the protection of intellectual property rights and consumer rights.

3.5 Establish a technology scan mechanism and institutionalise a system of science & technology indicators by 2001.

3.2 Develop the information content of the AII by 2004.

3.6 Develop innovative systems for programme management and revenue generation to support ASEAN science and technology.

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3.8 Undertake studies on the evolution of new working conditions and living environments resulting from widespread use of information technology by 2001.

3.7 Promote greater public and private sector collaboration in science and technology, particularly in information technology.

IV. 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.

4.7 Strengthen the ASEAN Regional Aids Information and Reference Network.

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.

4.8 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.

4.3 Use the ASEAN Foundation to support activities and social development programmes aimed at addressing issues of unequal economic development, poverty and socioeconomic disparities.

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.

4.4 Implement the ASEAN Plan of Action for Children which provides for the framework for ensuring the survival, protection and development of 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.

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.

V. PROMOTE HUMAN RESOURCE DEVELOPMENT 5.3 Implement the ASEAN Work Programme on Informal Sector Development to provide opportunities for self-employment and entrepreneurship.

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.

5.4 Implement the ASEAN Work Programme on Skills Training for Out-of-School Youth by 2004, to strengthen their capacity to obtain gainful employment.

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5.5 Strengthen regional networking of HRD centres of excellence and develop the regional capacity for HRD planning and labour market monitoring.

5.8 Begin to implement the ASEAN Science and Technology Human Resource Programme addressing the needs of industry and business by 2000.

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.

5.9 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.

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.

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.

6.7 Strengthen institutional and legal capacities to implement Agenda 21 and other international environmental agreements by the year 2001.

6.2 Strengthen the ASEAN Specialized Meteorological Centre with emphasis on the ability to monitor forest and land fires and provide early warning on transboundary haze by the year 2001.

6.8 Harmonise the environmental databases of Member Countries by the year 2001.

6.3 Establish the ASEAN Regional Research and Training Centre for Land and Forest Fire Management by the year 2004.

6.10 Establish a regional centre or network for the promotion of environmentally sound technologies by the year 2004.

6.4 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.

6.11 Formulate and adopt an ASEAN Protocol on access to genetic resources by the year 2004.

6.9 Implement an ASEAN regional water conservation programme by the year 2001.

6.12 Develop a Regional Action Plan for the Protection of the Marine Environment from Land-based and Sea-based Activities by the year 2004.

6.5 Promote regional coordination for the protection of the ASEAN Heritage Parks and Reserves.

6.13 Implement the Framework to Achieve Long-Term Environmental Goals for Ambient Air and River Water Qualities for ASEAN Countries.

6.6 Develop a framework and improve regional coordination for the integrated protection and management of coastal zones by the year 2001.

6.14 Enhance regional efforts in addressing climatic change.

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6.15 Enhance public information and education in awareness of and participation in

environmental and sustainable development issues.

VII. STRENGTHEN REGIONAL PEACE AND SECURITY 7.9 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.

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.

7.10 Convene the Commission for SEANWFZ Treaty to oversee the implementation of the Treaty and ensure compliance with its provisions.

7.2 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.

7.11 Support and participate actively in all efforts to achieve the objectives of general and complete disarmament, especially the nonproliferation of nuclear weapons and other weapons of mass destruction.

7.3 Ratify the Second Protocol of the Treaty of Amity and Cooperation in Southeast Asia (TAC) as soon as possible.

7.12 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.

7.4 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.

7.13 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.

7.5 Formulate draft rules of procedure for the operations of the High Council as envisioned in TAC. 7.6 Encourage greater efforts towards the resolution of outstanding problems of boundaries delimitation between ASEAN member states.

7.14 Continue efforts to promote confidencebuilding measures in the South China Sea between and among parties concerned. 7.15 Encourage all other parties concerned to subscribe to the ASEAN Declaration on the South China Sea.

7.7 Ensure border security and facilitate safe and convenient border crossings. 7.8 Encourage Member Countries to cooperate in resolving border-related problems and other matters with security implications between ASEAN member countries.

7.16 Promote efforts to establish a regional code of conduct in the South China Sea among the parties directly concerned.

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7.17

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.

primary driving force in respective ASEAN Member Countries.

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.

8.5 Continue the involvement of ASEAN defense and security officials together with foreign affairs officials in 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.

8.7 Enhance consultation and coordination of ASEAN positions at the United Nations and other international fora.

8.6 Develop a set of basic principles based on TAC as an instrument for promoting cooperative peace in the Asia-Pacific region.

8.8 Revitalize ASEAN’s relations with Dialogue Partners on the basis of equality, nondiscrimination and mutual benefit.

8.4 Promote public awareness of the ARF process and the need for ASEAN’s role as the

IX. PROMOTE ASEAN AWARENESS AND ITS STANDING IN THE INTERNATIONAL COMMUNITY 9.5 Publicise ASEAN’s HPA priorities through ASEAN’s external mechanisms with its Dialogue Partners.

9.1 Support the activities of the ASEAN Foundation and other available resources and mechanisms to promote ASEAN awareness among its people.

9.6 Develop linkages with mass media networks and websites on key areas of ASEAN cooperation to disseminate regular and timely information on ASEAN.

9.2 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.

9.7 Prepare and adopt an ASEAN Declaration on Cultural Heritage by year 2000. 9.8 Mount professional productions of ASEAN performances and exhibitions within and outside ASEAN and provide adequate mass media coverage on such activities.

9.3 Establish and operate an ASEAN satellite channel by year 2000. 9.4 Provide and disseminate materials on ASEAN’s efforts to cope with the financial and economic crisis.

9.9 Organize art and cultural immersion camps and exchange programmes for the youth and encourage their travel to other ASEAN Member Countries.

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9.10 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.

X. IMPROVE ASEAN’S STRUCTURES AND MECHANISMS relations mechanisms with its Dialogue Partners, regional organisations and other economic groupings.

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.

10.3 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.

10.2 Review and streamline ASEAN external

Ha Noi, 15 December 1998

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Declaration on Terrorism by the 8th ASEAN Summit 1. We, the Heads of State and Government of the Association of Southeast Asian Nations, condemn the heinous terrorist attacks in Bali, Indonesia, and in the Philippine cities of Zamboanga and Quezon. We extend our deepest sympathies to the families of those who died and to those who were injured. We express the solidarity of our countries with Indonesia and the Philippines and ASEAN’s full support for their determined pursuit of the terrorist elements responsible for the attacks. We commend Indonesia and the Philippines for their efforts to curtail terrorism within their borders and for their determination to step up those efforts. 2. We denounce once again the use of terror, with its toll on human life and society, in many places around the world for whatever cause and in the name of whatever religious or ethnic aspiration. We deplore the tendency in some quarters to identify terrorism with particular religions or ethnic groups. 3. We are determined to carry out and build on the specific measures outlined in the ASEAN Declaration on Joint Action to Counter Terrorism, which we adopted in Brunei Darussalam in November 2001. We resolve to intensify our efforts, collectively and individually, to prevent, counter and suppress the activities of terrorist groups in the region. The ASEAN countries shall continue with practical cooperative measures among ourselves and with the international community. 4. We welcome Thailand’s accession to the Agreement on Information Exchange and Exchange of Communication Procedures. We commend our law-enforcement authorities for the cooperative work that has resulted in the arrest of persons plotting to commit acts of terrorism and in otherwise preventing such acts. We direct them to continue to intensify their cooperation in combating terrorism and, in particular, in expeditiously carrying out the Work Plan adopted by the Special ASEAN Ministerial Meeting on Terrorism in Kuala Lumpur in May 2002, raising the level of cooperation, coordination and the sharing of information in the fight against terrorism. 5. We look forward to the following activities: • the International Conference on AntiTerrorism and Tourism Recovery in Manila next week; • the Regional Conference on Combating Money-Laundering and Terrorist Financing in Bali in December 2002;

• the Intersessional Meeting on Terrorism of the ASEAN Regional Forum in Kota Kinabalu, Sabah, Malaysia, in March 2003; • the ASEAN Ministerial Meeting on Transnational Crime with ministerial counterparts from China, Japan and the

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Republic of Korea in Bangkok in October 2003; and

• the establishment of the Regional Counterterrorism Center in November 2002 in Kuala Lumpur.

6. We call on the international community to avoid indiscriminately advising their citizens to refrain from visiting or otherwise dealing with our countries, in the absence of established evidence to substantiate rumors of possible terrorist attacks, as such measures could help achieve the objectives of the terrorists. 7. We urge the international community to support ASEAN’s efforts to combat terrorism and restore business confidence in the region. We are determined to cooperate actively in mitigating the adverse impact of terrorist attacks on ASEAN countries and urge the international community to assist us in these efforts. 8. We resolve to ensure the security and harmony of our societies and the safety of our peoples and also of others who are in our countries and in the region.

(ASEAN Leaders adopted the Declaration at their working dinner in Phnom Penh on 3 November 2002.)

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Section

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LIST OF ABBREVIATIONS

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List of Abbreviations

AARB

ASEAN Agriculture Research Co-ordinating Board

ABC

ASEAN Brussels Committee

ACCSM

ASEAN Conference on Civil Service Matters

ACCRRIS

ASEAN Co-ordinating Committee for the Reconstruction and Rehabilitation of Indochina States

ACEID

ASEAN Centre for Education and Innovation for Development

ADB

Asian Development Bank

AEC

ASEAN Economic Community

AECF

ASEAN Education Co-operation Fund

AEEM

ASEAN-EC Economic Ministers

AEGE

ASEAN Expert Group on the Environment

AEM

ASEAN Economic Ministers

AEMM

ASEAN Economic Ministers Meeting

AFAS

ASEAN Framework Agreement on Services

AFC

ASEAN Finance Corporation

AFTA

ASEAN Free Trade Area

AGTC

ASEAN General Trading Corporation

AHRA

ASEAN Hotels and Restaurants Association

AIA

ASEAN Investment Area

AIC

ASEAN Industrial Complementation scheme

AICO

ASEAN Industrial Cooperation scheme

AIDC

Asian Industrial Development Council

AIEDP

Asian Institute for Economic Development and Planning

AII

ASEAN Information Infrastructure

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AIJV

ASEAN Industrial Joint Venture scheme

AIM

Asian Institute of Management

AIP

ASEAN Industrial Projects

AIPO

ASEAN Inter-Parliamentary Organization

AIT

Asian Institute of Technology

AMBDC

ASEAN-Mekong Basin Development Co-operation

AMF

Asian Monetary Fund

AMM

ASEAN Ministerial Meeting

AMMTC

ASEAN Ministerial Meeting on Transnational Crime

ANCOM

Andean Common Market

ANS

ASEAN National Secretariat

APEC

Asia-Pacific Economic Co-operation

APEID

Asia and the Pacific Programme of Educational Innovation for Development

APO

Asian Productivity Organization

ARF

ASEAN Regional Forum

ASA

Association of Southeast Asia

ASAIHL

Association of Southeast Asian Institutions of Higher Learning

ASEAN

Association of Southeast Asian Nations

ASEAN PMC

ASEAN Post-Ministerial Conferences

ASEAN-CCI

ASEAN Chambers of Commerce and Industry

ASEAN-ISIS

ASEAN Institutes of Strategic and International Studies

ASEM

Asia-Europe Meeting

ASEP

ASEAN Environment Programme

ASIC

ASEAN Small and Medium Industries Centre

ASMI

ASEAN Small and Medium Industries

ASOD

ASEAN Senior Officials on Drug Matters

ASOEAN

ASEAN Senior Officials on the Environment

ASPAC

Asian and Pacific Council

ATDC

ASEAN Technology Development Centre

CADEX

Council of ASEAN Directors of Extension

CAEC

Council for Asia-Europe Cooperation

CBMs

confidence-building measures

CCOP

Committee for Co-ordination of Joint Prospecting for Minerals in Asian Offshore Areas

CEPT

Common Effective Preferential Tariff

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CLMV

Cambodia, Laos, Myanmar, and Vietnam

COCI

Committee on Culture and Information

COFAB

Committee on Finance and Banking

COFAF

Committee on Food, Agriculture, and Forestry

COIME

Committee on Industry, Minerals, and Energy

COSD

Committee on Social Development

COST

Committee on Science and Technology

COTAC

Committee on Transport and Communications

COTT

Committee on Trade and Tourism

CPP

Cambodian People’s Party

CPSC

Colombo Plan Staff College

CSBMs

confidence- and security-building measures

CSCAP

Council for Security Co-operation in the Asia Pacific

CSCE

Conference on Security and Co-operation in Europe

CSOs

civil society organizations

DSM

Dispute Settlement Mechanism

EAEC

East Asian Economic Caucus

EC

European Community

ECAFE

Economic Commission for Asia and the Far East

EEC

European Economic Community

EPG

Eminent Persons Group

EWCTP

East-West Corridor Transport Project

FPDA

Five Power Defence Arrangement

GATT

General Agreement on Tariffs and Trade

GMS

Greater Mekong Subregion

GMSARN

Greater Mekong Subregion Academic and Research Network

GSP

Generalized System of Preferences

HPA

Hanoi Plan of Action

IAII

Intra-ASEAN Industrial Investment

IAI

Initiative for ASEAN Integration

ICT

information and communications technology

IGOs

inter-governmental organizations

IMF

International Monetary Fund

IMS GT

Indonesia-Malaysia-Singapore Growth Triangle

IMT GT

Indonesia-Malaysia-Thailand Growth Triangle

INF

Intermediate Nuclear Forces

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INNOTEC

Regional Centre for Educational Innovation and Technology

ISG

inter-sessional support group

ISM

inter-sessional support meeting

IT

information technology

JCM

Joint Consultative Meeting

JICA

Japan International Co-operation Agency

JMM

Joint Ministerial Meeting

LAFTA

Latin American Free Trade Association

LAIA

Latin American Integration Association

MAPHILINDO

Malaysia, Philippines, Indonesia

MCEDSEA

Ministerial Conference for Economic Development in Southeast Asia

MDCs

more developed countries

MFA

Ministry of Foreign Affairs

MNCs

multinational corporations

MOFERT

Ministry of Foreign Economic Relations and Trade

MOP

Margin of Preference

MRAs

Mutual Recognition Arrangements

NAFTA

North American Free Trade Agreement

NFCs

National Flag Carriers

NGOs

non-governmental organizations

NIEs

newly industrialized economies

NTBs

non-tariff barriers

NTOs

National Tourism Organization

NWFZ

Nuclear Weapons Free Zone

OAM

Other ASEAN Ministers

OECD

Organization for Economic Co-operation and Development

OPIL

Overseas Private Investment Corporation

OSCE

Organization for Security and Cooperation in Europe

PBEC

Pacific Business Economic Council

PECC

Pacific Economic Co-operation Conference

PMC

Post-Ministerial Conference

PNOC

Philippines National Oil Corporation

PTA

Preferential Trading Arrangements

RIAs

regional integration agreements

RMA

Revolution of Military Affairs

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RoO

Rules of Origin

RTAs

regional trading agreements

SAARC

South Asian Association for Regional Cooperation

SARS

Severe Acute Respiratory Syndrome

SCCAN

Special Coordinating Committee of ASEAN Nations

SCOT

Sub-committee on Tourism

SEACEN

Southeast Asian Central Banks

SEAMEO

Southeast Asian Ministers of Education Organization

SEANWFZ

Southeast Asia Nuclear Weapon-Free Zone

SEARCA

Centre for Graduate Studies and Research in Agriculture

SEATO

Southeast Asia Treaty Organization

SEM

Single European Market

SEOM

Senior Economic Officials’ Meeting

SLORC

State Law and Order Restoration Council

SMEs

small and medium enterprises

SOEs

state-owned enterprises

SOM

Senior Officials Meeting

SOME

Senior Officials Meeting on Energy

SOMSWD

Senior Officials Meeting on Social Welfare and Development

SPDC

State Peace and Development Council

STOM

Senior Transport Officials Meeting

TAC

Treaty of Amity and Co-operation

TRIMs

trade-related investment measures

TRIPs

trade-related intellectual property provisions

UNDP

United Nations Development Programme

UNESCO

United Nations Educational, Scientific, and Cultural Organization

UR

Uruguay Round

VFA

Visiting Forces Agreement

WGIC

Working Group on Industrial Co-operation

WHFTA

Western Hemisphere Free Trade Agreement

ZOPFAN

Zone of Peace, Freedom, and Neutrality

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BIBLIOGRAPHY

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Section

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THE CONTRIBUTORS

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The Contributors

M. C. ABAD, Jr. is Assistant Director at the ASEAN Secretariat, Jakarta. His current research interests are regional security; conflict resolution; and peace studies. GEORGE ABONYI is Senior Adviser of the Asian Development Bank. AMITAV ACHARYA is Deputy Director of the Institute of Defence and Strategic Studies, Nanyang Technological University, Singapore. He is currently researching on regionalism and multilateralism in the Asia-Pacific; Asian security; and international relations theory. NARONGCHAI AKRASANEE is Chairman of Seranee Holdings Co. Ltd. His current research interest is in the area of international economics. MUTHIAH ALAGAPPA is Director of East-West Center, Washington, D.C. His current research interests are in the fields of international politics and comparative politics of Asia. ALI ALATAS is Of Counsel in Makarim & Taira S. Law Firm, and Adviser and Special Envoy of the President of Indonesia. Mr Alatas was Foreign Minister of the Republic of Indonesia from 1988 to 1999. Prior to that, he had a distinguished diplomatic career spanning more than thirty years. RAMSES AMER is Research Associate and Senior Researcher at the Southeast Asia Programme, Department of Peace and Conflict Research, Uppsala University, Sweden. His research interests include regional co-operation, conflict management, and border dispute in Southeast Asia; China–Vietnam relations; and the South China Sea. KUSNANTO ANGGORO a researcher at the Center for Strategic and International Studies, Jakarta. His research interests are in economic and security linkages; regime transformation and religion-politics; security and defence issues, comparative politics and Islamic fundamentalism. JUTAMAS ARUNANONDCHAI is Senior Researcher at the Fiscal Policy Research Institute, Bangkok. Her research interests are in international economics; and public economics. PREMA-CHANDRA ATHUKORALA is Professor of Economics at the Research School of Pacific and Asian Studies, The Australian National University. His research interests are in the areas of trade policy; macroeconomic policy; and labour migration. WILLIAM J. BARNDS was previously President of Japan Economic Institute of America, Washington, D.C.

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JOHN BASTIN is Reader Emeritus in the Modern History of South-East Asia at the School of Oriental and African Studies, University of London. His current research interests include Sir Stamford Raffles; Dr John Leyden; and Colonel William Farquhar, first Resident of Singapore. The late HARRY J. BENDA was Professor of History at Yale Unversity at the time of his death in 1971. He is remembered for his many contributions to Southeast Asian history. Professor Benda served as Director of the Institute of Southeast Asian Studies, Singapore from 1968 to 1969. SUCHIT BUNBONGKARN is Justice of the Constitutional Court of Thailand. He was previously Director of the Institute of Security and International Studies, Bangkok. MELY CABALLERO-ANTHONY is Assistant Professor at the Institute of Defence and Strategic Studies, Nanyang Technological University, Singapore. Her research interests cover regionalism; Southeast Asia security; multilateralism; and human security. DAVID CAPIE is Director of the Armed Groups Project at the Centre of International Relations, University of British Columbia. His research interests include regional institutions in the Asia-Pacific; and the U.S. Asian security policy. SISOWATH D. CHANTO is Assistant Director of the Cambodian Institute for Co-operation and Peace. He has previously served in the Council of Ministers Legal Co-ordinating Unit of the Royal Government of Cambodia. CHAN HENG CHEE is Singapore’s Ambassador to the United States. Prior to her appointment, she was the Executive Director of the Singapore International Foundation and also served as Director of the Institute of Southeast Asian Studies, Singapore from 1993 to 1996. Ambassador Chan was the founding Director of the Institute of Policy Studies. JOSEPH Y. S. CHENG is Professor (Chair) of Political Science at City University of Hong Kong. His research interests are in the areas of Chinese foreign policy; political development in Hong Kong; international relations; and Guangdong. CHIA SIOW YUE is Senior Research Fellow at the Singapore Institute of International Affairs, Singapore. She served as Director of the Institute of Southeast Asian Studies, Singapore from 1996 to 2002. CHIN KIN WAH is Senior Fellow at the Institute of Southeast Asian Studies, Singapore. His research interests are in the areas of international relations of Southeast Asia; and ASEAN regionalism. KAVI CHONGKITTAVORN is Assistant Group Editor of The Nation (Thailand). His research interests are in ASEAN–GMS relations; and the Jemaah Islamiah. JAMES COTTON is Professor of Politics at the University of New South Wales @ The Australian Defence Force Academy. His current research interests include Asian and Australian regional relations; and the politics of the Koreas. DEREK DA CUNHA is Senior Fellow at the Institute of Southeast Asian Studies, Singapore. His research interests are in the areas of defence and security. BARRY DESKER is Director of the Institute of Defence and Strategic Studies, Nanyang Technological University, Singapore. His main research interests are in the fields of regional security; terrorism; and international economics issues, especially the World Trade Organization. JANADAS DEVAN is Senior Writer with the Straits Times. J. MALCOLM DOWLING is Visiting Professor at the Singapore Management University. His main research interest is in the economic development in Asia.

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PAUL EVANS is Professor at the Institute of Asian Research, University of British Columbia. His research interests include Track Two security processes in the Asia-Pacific; and East Asian regionalism. AKIKO FUKUSHIMA is Director of Policy Studies and Senior Fellow at the National Institute for Research Advancement, Tokyo. GOH CHOR BOON is Associate Dean of the National Institute of Education, Singapore. His research interests are in the areas of sports history; and the Death Railway in Thailand. MAUREEN GREWE is Research Associate at the Thailand Development Research Institute. ROHAN GUNARATNA is Associate Professor at the Institute of Defence and Strategic Studies, Nanyang Technological University, Singapore. With many years of operational, policy and academic experience in the field, Dr Gunaratna has emerged as one of the foremost experts on terrorist organizations, infrastructure, and support networks. JÜRGEN HAACKE is Lecturer at the Department of International Relations of the London School of Economics. His current research interests are in international relations of Southeast Asia; ASEAN; and China–ASEAN relations. YOSHIYUKI HAGIWARA was Professor of Comparative Politics, Dokkyo University. He is now retired. RUSSELL HENG HIANG-KHNG is Senior Fellow at the Institute of Southeast Asian Studies, Singapore. His current areas of research are the political culture in Vietnam and Singapore. CAROLINA G. HERNANDEZ is Chair, Board of Directors at the Institute for Strategic and Development Studies, Philippines. Her research interests include ASEAN/East Asia community building; human development in Southeast Asia; the military in politics; and governance issues. RICHARD HIGGOTT is Director of the Centre for the Study of Globalisation and Regionalisation, University of Warwick. GRAEME HUGO is Professor of Geography at the Department of Geographical and Environmental Studies, The University of Adelaide. His research interests are in the areas of urban and population geography and demography; social geography; demographic trends, especially population mobility; and development in Southeast Asia. JUANITO P. JARASA is a retired ambassador. His last-held position was as the Philippine’s Ambassador to Korea (1999–2003). He has published articles on ASEAN–Korea relations. GAVIN W. JONES is Professor at the Asia Research Institute, National University of Singapore. His research interests are in the dynamics of educational change in Southeast Asia; family change in Asia; and mega-urban regions in Southeast Asia. SIDNEY JONES is Indonesia Project Director of International Crisis Group, Jakarta. KAO KIM HOURN is Executive Director at the Cambodian Institute for Co-operation and Peace (CICP). Concurrently, he serves on the Supreme National Economic Council, and as adviser to the Ministry of Foreign Affairs and International Co-operation. H. S. KARTADJOEMENA was a former Indonesian Ambassador to the World Trade Organization. He is Adviser to the National Committee for WTO Negotiations. His current research interests are in the areas of WTO; ASEAN; and trade in services. YUEN FOONG KHONG is Fellow of Nuffield College, Oxford University. His areas of research interests include ASEAN’s post-Cold War security strategy; identity and U.S. foreign policy.

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KHOO HOW SAN is an independent strategic analyst. His main research interests are in the fields of regional security; terrorism; and military/defence issues. He has contributed articles to the Today newspaper (Singapore). TOMMY KOH is Ambassador-at-Large at the Ministry of Foreign Affairs, Singapore; Director of Institute of Policy Studies; and Chairman of the National Heritage Board. Professor Koh is also Singapore’s Chief Negotiator for the US-Singapore Free Trade Agreement (2000–2003). He has held various senior diplomatic postings and was founding Executive Director of the Asia-Europe Foundation. SREE KUMAR is a Director of Sreekumar Siddique & Co., a regional research consulting firm. His areas of specialization include economic and political analyses, project feasibility studies and policy design for government agencies. He was previously a Fellow of the Institute of Southeast Asian Studies, Singapore (1990–1994). ROLF J. LANGHAMMER is Acting President of Kiel Institute for World Economics, Germany. His current research interests are in regional and multilateral trade policies; and development economies. LEE TSAO YUAN is Executive Director of SDC Consulting, Singapore. She was formerly Director of the Institute of Policy Studies, Singapore. She has published widely on economic issues pertaining to her research interests, including topics such as the state of the Singapore and regional economies; ASEAN, APEC and ASEM; and local entrepreneurship in Singapore and its transformation into a knowledge-based economy. The late MICHAEL LEIFER was Emeritus Professor of International Relations at the London School of Economics and Political Science (LSE) and was the Director of LSE’s Asia Research Centre. He had published widely on the politics and international relations of modern Southeast Asia. KWAN KWOK LEUNG is with the Department of Applied Social Sciences, City University of Hong Kong. PIERRE P. LIZÉE is Associate Professor at the Department of Political Science, Brock University, Ontario. His research interest is in the theories of international security in Asia. LUAN THUY DUONG is Deputy Director of the Centre for Southeast Asian Studies, Institute for International Relations, Hanoi. His current research interests are in regional security issues; and co-operation in ASEAN. C.P.F. LUHULIMA is Senior Fellow and Research Professor at the Centre for Strategic and International Studies, Jakarta. His research interests are in the areas of regional studies; ASEAN; European Union; international political economy; and security studies. PETER LYON is Senior Research Fellow at the Institute of Commonwealth Studies, University of London. His current research interests are in Southeast Asian international (including strategic and economic) affairs. SEIICHI MASUYAMA is Chief Researcher at the Nomura Research Institute, Tokyo. He is currently researching on the role of multinational corporations in Asian industrial development. AMITABH MATTOO is Director, Core Group for the Study of National Security and Associate Professor of International Relations at Jawaharlal Nehru University, New Delhi. GORDON P. MEANS is Professor of Political Science Emeritus at McMaster University, Ontario. His current research interests are in public policy issues in Southeast Asia; and tribal politics in Northeast India.

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AMADO M. MENDOZA, Jr. is Associate Professor in Political Science and International Studies at the Department of Political Science, University of the Philippines. His current research interests include the politics of economic reform; and cyber-politics and e-governments. JAYANT MENON is Senior Economist at the Asian Development Bank, Manila. His main research interests are in the fields of international economics; development economics; and economics of transition. ANTHONY MILNER is Basham Professor of Asian History, The Australian National University. His current research interests are in the areas of Malay studies; Australian– Asian relations; and ASEAN regionalism. MOHAMED ARIFF is Executive Director of the Malaysian Institute of Economic Research (MIER). His research interests are in trade and investment. MOHAMED JAWHAR BIN HASSAN is Director-General of the Institute of Strategic and International Studies, Malaysia. His special focus is in the fields of international relations; security; and nation-building. MUBARIQ AHMAD is Executive Director of World Wildlife Fund Indonesia. He has extensive experience as an economist, focusing on natural resources policy and governance issues. CHANDRA MUZAFFAR is President of International Movement for a Just World (JUST), Selangor, Malaysia. His research interests cover the areas of international politics; religious reforms; and civilizational dialogue. MYA THAN is Visiting Fellow at the Institute of Security and International Studies, Chulalongkorn University. His main research interests are in the areas of regional and sub-regional economic co-operation; and economic development of CLMV countries. SHAUN NARINE is Professor at St. Thomas University, New Brunswick, Canada. Dr Narine’s research interests are in the fields of great power relations; and Asia-Pacific institutions. K. S. NATHAN is Senior Fellow at the Institute of Southeast Asian Studies, Singapore. His research interests are in the areas of Malaysian politics; Malaysia–Singapore relations; and regional security in Southeast Asia, including political Islam and terrorism. HELEN E. S. NESADURAI is Assistant Professor at the Institute of Defence and Strategic Studies, Nanyang Technological University, Singapore. Her research interests include globalization–regionalism relationship; governance and development; and social/ developmental agendas in regionalism. NG CHEE YUEN is Adjunct Senior Fellow at the Institute of Defence and Strategic Studies, Nanyang Technological University, Singapore. His current research interests are in industrial policy and economic growth in East Asia. NGUYEN PHUONG BINH is Deputy Director-General of the Institute for International Relations, Hanoi. His current research interests are in the areas of Southeast Asian studies; and regional security issues. MAKITO NODA is Chief Program Officer and Director for Research Co-ordinator at the Japan Center for International Exchange. His main research interests are in East Asian regional community; and Track Two activities. NOORDIN SOPIEE is Chairman and Chief Executive Officer of the Institute of Strategic and International Studies, Malaysia. His current research interests include the development of ASEAN; terrorism; and global values. MARI PANGESTU is a member of the Board of Directors of the Center for Strategic and International Studies (CSIS), Jakarta. Her current research interest is in international trade.

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SUNG-HOON PARK is Professor at the Graduate School of International Studies, Korea University. His research interests include regionalism; and the Asian financial crisis. JULIUS CAESAR PARRENAS is Senior Advisor to the Chairman, China Trust Financial Holding Co. Ltd. His research interests include the Asian regional affairs; finance; and trade. SURIN PITSUWAN is former Minister for Foreign Affairs of Thailand. He is a member of the International Commission on Human Security, and Advisor to the International Commission on Intervention and State Sovereignty (ICISS). WISARN PUPPHAVESA is Director of the Center for International Economics and Development Studies, School of Development Economics, National Institute of Development Administration, Bangkok. His areas of research interests include trade liberalization; and economic co-operation. ROBIN RAMCHARAN is Consultant at the World Intellectual Property Organization, Geneva. He is currently researching on intellectual property issues in ASEAN. NARHARI RAO is Senior Economist with the Asian Development Bank, Manila. JÜRGEN RÜLAND is Professor at the University of Freiburg and Director of ArnoldBergstraesser Institut, Freiburg, Germany. His research interests include East Asian regionalism; globalization; democratization; and ASEAN. The late SEIZABURO SATO was Professor Emeritus, University of Tokyo and Professor, Graduate School of Policy Science, Saitama University. SEKIGUCHI SUEO is Professor of Economics at Tokyo Keizai University. His current research interest is in the area of regional integration. RODOLFO C. SEVERINO is Professor at the Asian Institute of Management, Makati City, Philippines. He was the former Secretary-General of ASEAN from 1998 to 2002. His current research interest is regional economic integration in Southeast Asia. SHENG LIJUN is Senior Fellow at the Institute of Southeast Asian Studies, Singapore. His main research interest is China–ASEAN relations. GREG SHERIDAN is Foreign Editor of The Australian. After many years in the field of journalism, he is a veteran of international affairs who has interviewed leaders all over the Asia-Pacific and America. SHARON SIDDIQUE is a Director of Sreekumar Siddique & Co., a regional research consulting firm. She specializes in policy design and strategy for public and private sector corporations, and in risk assessments of countries in Southeast Asia. She was previously Deputy Drector of the Institute of Southeast Asian Studies, Singapore (1990– 1994). DJISMAN S. SIMANDJUNTAK is Executive Director of Prasetiya Mulya Business School, Jakarta. His current research interest is in long-term economic development. SHELDON W. SIMON is Professor of Political Science at Arizona State University. His current research interests are in the areas of Asian regional security; and multilateral security organizations in Asia. DALJIT SINGH is Senior Fellow at the Institute of Southeast Asian Studies, Singapore. His current research interests include regional security in ASEAN; and ASEAN states’ fight against terrorism. ANTHONY L. SMITH is Senior Research Fellow at the Asia-Pacific Center for Security Studies, Hawaii. His research interests are in ASEAN; Democratization in Indonesia; East Timor; and Aceh.

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KUSUMA SNITWONGSE is Chairperson, Advisory Board of the Institute of Security and International Studies, Chulalongkorn University, Bangkok. Her current research interests are in regional security; Thai foreign policy; and regional co-operation. HADI SOESASTRO is Executive Director of the Center for Strategic and International Studies (CSIS), Jakarta. He has researched and published widely on regionalism; political economy; and international economic issues RICHARD STUBBS is Professor at the Department of Political Science, McMaster University, Canada. His main research interests are in the areas of the Cold War and the political economy of East Asia; and East Asian regionalism. JUWONO SUDARSONO is Republic of Indonesia’s Ambassador to the United Kingdom. He was the former Minister for Defence of Indonesia. His current research interests are in political economy of development; and security studies. TAKANO TAKESHI is Associate Professor at the Faculty of Administration, Prefectural University of Kumamoto, Japan. His main research interest is in the area of security and international co-operation in a broader East Asia. TAN KONG YAM is Head of the Department of Business Policy, Faculty of Business Administration, National University of Singapore. His research interests are in international trade and finance; growth and development in the Asia Pacific region; and economic reforms in China. SIMON S.C. TAY is Chairman of the Singapore Insitute of International Affairs. He is also Associate Professor at the Faculty of Law, National University of Singapore. His research interests include human rights; environmental law and institutions; Constitutional law; and trade, investment and the environment. CARLYLE A. THAYER is Professor of Politics at the School of Humanities and Social Sciences, the University of New South Wales @ Australian Defence Force Academy. His current research interests are in the areas of domestic politics; and international relations and security affairs in East Asia. TIN MAUNG MAUNG THAN is Senior Fellow at the Institute of Southeast Asian Studies, Singapore. His research interests include the politics and development of Myanmar; civil-military relations; and democratization. WILLIAM T. TOW is Professor in the School of Political Science and International Studies, University of Queensland. His main research interest is in the field of Asian security politics. SARASIN VIRAPHOL is Executive Vice President of Charoen Pokphand Group, Thailand. He was formerly Ambassador-at-large and Thailand’s Ambassador to the Republic of the Philippines. His research interests include economic security; and China and ASEAN. NORBERT WAGNER is Head of Paris Office, Konrad Adenauer Foundation. His research interests include European integration; and transatlantic relations. JUSUF WANANDI is Chairman of the Supervisory Board and member of the Board of Directors of the Centre for Strategic and International Studies in Jakarta. He is a frequent commentator on ASEAN affairs. WANG GUNGWU is Director of the East Asian Institute, Singapore. He is also the Chairman of the Board of Trustees of the Institute of Southeast Asian Studies, Singapore. Professor Wang has published several books and many articles and essays in the fields of Chinese and Southeast Asian history. His current research interests are on nationalism and migration.

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MICHAEL WESLEY is Senior Lecturer in Politics and International Relations at the University of New South Wales, Sydney. His research interests focus on international institutions and theories of multilateral bargaining; regional organizations especially in the Asia-Pacific; and Australian foreign policy and diplomacy. The late O.W. WOLTERS was a member of the Cornell Southeast Asia Program. He had published widely on the history of Southeast Asia. His publications include Early Indonesian Commerce: A Study of the Origins of Srivijaya (1967); History, Culture, and Region in Southeast Asian Perspectives (1982); and Two Essays on Dai-Viet in the Fourteenth Century (1988). JOHN WONG is Research Director of the East Asian Institute, Singapore. His current research interest is in the economic development of China, Asian NIEs, and ASEAN states. DAVID WURFEL is Senior Research Associate at the York Centre for Asian Research, York University. His research interests are in Southeast Asian politics; and foreign policies. ZAKARIA HAJI AHMAD is Professor in the Faculty of Social Sciences, Universiti Kebangsaan Malaysia. His research interests include Malaysian politics and the Southeast Asian security issues.

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THE COMPILERS Dr Sharon Siddique is a Director of Sreekumar Siddique & Co., a regional research consulting firm. She specializes in policy design and strategy for public and private sector corporation, and in risk assessments of countries in Southeast Asia. She was previously Deputy Director of the Institute of Southeast Asian Studies, Singapore. Dr Siddique is a noted authority on Islam in Southeast Asia and has written extensively on social, cultural and political developments in the region and has been a consultant on policies for industrial and social restructuring. She is fluent in a number of languages including Indonesian, Bahasa Malaysia, German and Spanish. She holds degrees from the Universities of Montana, Singapore and Bielefeld in Germany. Mr Sree Kumar is a Director of Sreekumar Siddique & Co., a regional research consulting firm. His areas of specialization include economic and political analyses, project feasibility studies, and policy design for government agencies. He was previously a Fellow of the Institute of Southeast Asian Studies, Singapore. Mr Kumar’s background includes management consulting, engineering, and oil exploration. He was a Principal with Spicer & Oppenheim Consultants in the United Kingdom and worked in restructuring for a variety of financial institutions in Europe and Asia. Prior to that he was a senior consultant with Booz Allen & Hamilton where he worked in strategy and organizational design. He holds degrees in engineering, economics, and management from the Universities of Singapore, London, Oxford and Cranfield.

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