The 3rd ASEAN Reader 9789814620628

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THE 3RD

ASEAN READER

ISEAS–Yusof Ishak Institute (formerly Institute of Southeast Asian Studies) was established as an autonomous organization in 1968. It is a regional centre dedicated to the study of sociopolitical, 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 dayto-day operations; it is chaired by the Director, the Institute’s chief academic and administrative officer.

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THE 3RD

ASEAN READER Compiled by

Ooi Kee Beng, Sanchita Basu Das, Terence Chong, Malcolm Cook, Cassey Lee and Michael Yeo

I5ER5

YUSOF ISHAK INSTITUTE

Published in Singapore in 2015 by ISEAS Publishing 30 Heng Mui Keng Terrace Pasir Panjang Singapore 119614 E-mail: [email protected] Website: http://bookshop.iseas.edu.sg All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the copyright holders and ISEAS–Yusof Ishak Institute. © 2015 ISEAS–Yusof Ishak Institute, Singapore ISEAS Library Cataloguing-in-Publication Data The 3rd ASEAN Reader / compiled by Ooi Kee Beng, Sanchita Basu Das, Terence Chong, Malcolm Cook, Cassey Lee and Michael Yeo Chai Ming. 1. ASEAN. 2. Regionalism—Southeast Asia. 3. Southeast Asia—Politics and government. 4. Southeast Asia—Social conditions. 5. Southeast Asia—Economic integration. 6. Southeast Asia—Economic policy. 7. Southeast Asia—Strategic aspects. 8. Southeast Asia—Foreign relations. I. Ooi, Kee Beng. II. Basu Das, Sanchita. III. Chong, Terence. IV. Cook, Malcolm. V. Lee, Cassey. VI. Yeo, Michael Chai Ming. VII. Title: Third ASEAN Reader VIII. Title: ASEAN Reader JZ5333.5 A9A851 2015 2015 ISBN 978-981-4620-61-1 (soft cover) ISBN 978-981-4620-62-8 (E-book PDF) 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 Markono Print Media Pte Ltd

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CONTENTS

Preface xii Forewords to the First and Second ASEAN Reader ASEAN: Conception and Evolution ASEAN: The Way Ahead New Challenges for ASEAN

xiii xix xxiv

SECTION I: ASEAN: THE LONG VIEW Section Introduction by Ooi Kee Beng

3

  1.

Southeast Asia and Foreign Empires

5

  2.

Southeast Asia and the Great Powers

  3.

The Evolving Nature of ASEAN’s Economic Cooperation: Original Vision and Current Practice

  4.

From Political/Security Concerns to Regional Economic Integration

WANG GUNGWU

9

NICHOLAS TARLING

14

NARONGCHAI AKRASANEE

17

RODOLFO C. SEVERINO

SECTION II: COUNTRY ANALYSES Section Introduction by Ooi Kee Beng

25

  5.

Political Figures and Political Parties: Indonesia after Soeharto

27

  6.

Malaysia: Close to a Tipping Point

  7.

Thailand: The Military’s Power Persists

  8.

Vietnam: Reforms Show Mixed Results

  9.

The Philippines: Challenging Conventional Wisdom

HUI YEW-FOONG

31

OOI KEE BENG

36

MICHAEL J. MONTESANO

41

LE HONG HIEP

45

MALCOLM COOK

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vi Contents 10.

Myanmar: Late Embrace of ASEAN

11.

Timor-Leste and ASEAN

49

TIN MAUNG MAUNG THAN

54

DOUGLAS KAMMEN

SECTION III: COMPARATIVE ANALYSES OF THE REGION Section Introduction by Terence Chong

61

Southeast Asian Societies 12. Civil Society in Southeast Asia LEE HOCK GUAN

65

13.

Multicultural Realities and Membership: States, Migrations and Citizenship in Asia

14.

Education in Southeast Asia: Investments, Achievements, and Returns

15.

Asian Pentecostalism: Renewals, Megachurches, and Social Engagement

16.

The Rise of Middle Classes in Southeast Asia

69

MARUJA M.B. ASIS AND GRAZIANO BATTISTELLA

75

DIEP PHAN AND IAN COXHEAD

79

TERENCE CHONG AND DANIEL P.S. GOH

84

TAKASHI SHIRAISHI

The Southeast Asian Economy 17. Urbanisation and Development in South-East Asia GAVIN W. JONES 18.

Understanding the ASEAN Development Gap

19.

Tourism Policy-Making in Southeast Asia: A Twenty-First Century Perspective

91 95

MARK McGILLIVRAY, SIMON FEENY, AND SASI IAMSIRAROJ

99

LINDA RICHTER

Southeast Asian Politics 20. Low-Quality Democracy and Varied Authoritarianism: Elites and Regimes in Southeast Asia Today WILLIAM CASE 21.

Social Foundations of Governance in Contemporary Southeast Asia

22.

Decentralization and Democratic Governance in Southeast Asia: Theoretical Views, Conceptual Pitfalls and Empirical Ambiguities

23.

Authority and Democracy in Malaysian and Indonesian Islamic Movements

24.

Southeast Asia in the US Rebalance: Perceptions from a Divided Region

107 112

GARRY RODAN AND CAROLINE HUGHES

117

MARCO BÜNTE

122

JUDITH NAGATA

126

EUAN GRAHAM

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Contents vii SECTION IV: INTERNATIONAL DEVELOPMENTS Section Introduction by Cassey Lee

133

25.

Is There a Southeast Asian Development Model?

135

26.

Global Production Sharing, Trade Patterns, and Industrialization in Southeast Asia

27.

Chinese Trade Policy After (Almost) Ten Years in the WTO: A Post-Crisis Stocktake

28.

Southeast Asia Beyond the Global Financial Crisis: Managing Capital Flows

29.

Impact of Eurozone Financial Shocks on Southeast Asian Economies

30.

The Collective Influence of Smaller States in the US-China Security Dilemma

31.

China and Japan in “ASEAN Plus” Multilateral Arrangements: Raining on the Other Guy’s Parade

HAL HILL

140

PREMA-CHANDRA ATHUKORALA AND ARCHANUN KOHPAIBOON

145

RAZEEN SALLY

150

JAYANT MENON AND AEKAPOL CHONGVILAIVAN

153

JAYANT MENON AND THIAM HEE NG

157

JA IAN CHONG

160

CHIEN-PENG CHUNG

SECTION V: INSTITUTIONS OF ASEAN Section Introduction by Malcolm Cook

167

32.

The Cambodia-Thailand Conflict: A Test for ASEAN

169

33.

ASEAN in the Twenty-First Century: A Sceptical Review

34.

Facing Unfair Criticisms

35.

Challenges Facing the New ASEAN Secretary-General

36.

ASEAN Governing Mechanisms

SOKBUNTHOEUN SO

172

SHAUN NARINE

176

AHMAD FUZI BIN ABDUL RAZAK

180

TERMSAK CHALERMPALANUPAP

184

ADB INSTITUTE

SECTION VI: ASSESSING ASEAN’S INTERNAL POLICIES Section Introduction by Sanchita Basu Das

191

37.

Challenging ASEAN: A “Topological” View

193

38.

Thinking and Feeling ASEAN: The Challenges of Integration and Identity

DONALD K. EMMERSON

198

MOE THUZAR

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viii Contents ASEAN Political Security Community 39. Achieving an ASEAN Security Community JOSE T. ALMONTE 40.

Turning Points Beyond the Comfort Zone?

205 209

MELY CABALLERO-ANTHONY

ASEAN Economic Community 41. Implementing the ASEAN Economic Community Blueprint HADI SOESASTRO 42.

Towards an ASEAN Economic Community by 2015

43.

Understanding ASEAN’s Connectivity

44.

Enhancing the Institutional Framework for AEC Implementation

45.

What is a Single Market? An Application to the Case of ASEAN

46.

Non-Tariff Barriers: A Challenge to Achieving the ASEAN Economic Community

47.

Towards a Truly Seamless Single Windows and Trade Facilitation Regime in ASEAN Beyond 2015

48.

An Assessment of Services Sector Liberalization in ASEAN

49.

Financial Integration Challenges in ASEAN beyond 2015

50.

Free Flow of Skilled Labour in ASEAN

51.

Toward a Single Aviation Market in ASEAN: Regulatory Reform and Industry Challenges

217 221

DENIS HEW

226

SANCHITA BASU DAS

231

HELEN E. NESADURAI

237

PETER J. LLOYD

241

MYRNA S. AUSTRIA

246

JONATHAN KOH AND ANDREA FELDMAN MOWERMAN

251

DEUNDEN NIKOMBORIRAK AND SUPUNNAVADEE JITDUMRONG

256

MARIA MONICA WIHARDJA

261

CHIA SIOW YUE

266

ALAN KHEE-JIN TAN

ASEAN Socio-Cultural Community 52. An ASEAN Community for All: Exploring the Scope for Civil Society Engagement TERENCE CHONG 53.

Civil Society and the ASEAN Community

54.

The Evolving ASEAN Human Rights System: The ASEAN Human Rights Declaration of 2012

273 278

MAY-ANN LIM

284

GERARD CLARKE

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Contents ix 55.

Divided or Together? Southeast Asia in 2012

56.

The ASEAN Socio-Cultural Community

57.

ASEAN Socio-Cultural Community: An Assessment of its Institutional Prospects

58.

Executive Summary of the Mid-Term Review of the ASEAN Socio-Cultural Community Blueprint (2009–2015)

290

BRIDGET WELSH

294

CAROLINA S. GUINA

298

JULIO S. AMADOR III

303

THE ASEAN SECRETARIAT

SECTION VII: ASSESSING ASEAN’S EXTERNAL INITIATIVES Section Introduction by Malcolm Cook

311

59.

Trust-Building in Southeast Asia: What Made it Possible?

313

60.

South China Sea: Glacial Progress Amid On-Going Tensions

MOHAMED JAWHAR HASSAN

317

IAN STOREY

ASEAN Processes 61. Driving East Asian Regionalism: The Reconstruction of ASEAN’s Identity HERMAN JOSEPH S. KRAFT

323

62.

Pakistan, SAARC and ASEAN Relations

328

63.

Neither Skepticism nor Romanticism: The ASEAN Regional Forum as a Solution for the Asia-Pacific Assurance Game

64.

ASEAN Plus Three and the Rise of Reactionary Regionalism

65.

How the East Asia Summit Can Achieve its Potential

66.

‘Talking Their Walk’? The Evolution of Defense Regionalism in Southeast Asia

67.

ASEAN FTAs: State of Play and Outlook for ASEAN’s Regional and Global Integration 352

68.

Taking ASEAN+1 FTAs Towards the RCEP

69.

RCEP and TPP: Comparisons and Concerns

FAIZAL YAHYA

334

TSUYOSHI KAWASAKI

337

MARK BEESON

342

NICK BISLEY AND MALCOLM COOK

347

SEE SENG TAN

RAZEEN SALLY

357

YOSHIFUMI FUKUNAGA AND IKUMO ISONO

362

SANCHITA BASU DAS

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x Contents 70.

Enhancing the Effectiveness of CMIM and AMRO: Selected Immediate Challenges and Tasks

367

REZA SIREGAR AND AKKHARAPHOL CHABCHITRCHAIDOL

ASEAN’s Major Power Relations 71. ASEAN’s Adventures EVELYN GOH 72.

Developing an Enduring Strategy for ASEAN

73.

Non-Traditional Security in China-ASEAN Cooperation: The Institutionalization of Regional Security Cooperation and the Evolution of East Asian Regionalism

74.

China-ASEAN FTA Changes ASEAN’s Perspective on China

75.

Japan’s Trade Policy with Asia

76.

Managing Integration in East Asia: Behind Border Issues in Japan-ASEAN Trade Agreements

77.

Fortifying the Japan-ASEAN Strategic Partnership: Abe’s Quest for Viable Hedging Policies

78.

Prospects for Korean-Southeast Asian Relations

79.

China’s Two Silk Roads: Implications for Southeast Asia

373 375

ERNEST Z. BOWER AND MURRAY HIEBERT

378

DAVID ARASE

384

WANG YUZHU AND SARAH Y. TONG

388

SHUJIRO URATA

392

YOSE RIZAL DAMURI

397

SUEO SUDO

401

LEE JAEHYON

404

DAVID ARASE

SECTION VIII: SOUTHEAST ASIA: PERIPHERAL NO MORE Section Introduction by Ooi Kee Beng

411

80.

ASEAN Beyond 2015: The Imperatives for Further Institutional Changes

413

81.

Design Faults: The Asia Pacific’s Regioinal Architecture

82.

ASEAN’s Economic Cooperation: Original Vision, Current Practice and Future Challenges

RIZAL SUKMA

418

ALLAN GYNGELL

421

EMIL SALIM

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Contents xi 83.

The 2030 Architecture of Association of Southeast Asian Nations Free Trade Agreements

84.

ASEAN and Major Power Transitions in East Asia

425

SUTHIPHAND CHIRATHIVAT AND PITI SRISANGNAM

429

BILAHARI KAUSIKAN

Bibliography 437 The Contributors 473 The Compilers 485

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PREFACE

T

his Third Volume of the ASEAN Reader series is published this year when the first phase of communitybuilding in ASEAN is ending, and its next phase is being charted by the Association’s political leaders. The forewords to the first volume by ASEAN Founding Fathers Thanat Khoman of Thailand and S. Rajaratnam of Singapore (published in 1992), and to the second volume by ISEAS Chairman, Professor Wang Gungwu (published in 2003), are included to refresh us on the origins of ASEAN and the continuing challenges the 48-year-old Association has been facing, and will continue to face into the future. There are more than 80 articles in this Volume III by scholars and experts from Southeast Asia and beyond. They address issues from different perspectives, from the long-term view and country analysis, to comparative issues and specific challenges in ASEAN, Southeast Asia and the Asia-Pacific, to relations of major powers and their impacts on ASEAN and its members. The next phase of community-building in ASEAN beyond 2015 will be more challenging as the Association and the region face new and unprecedented challenges from within and from without. These include intensified US-China engagement, complex ChinaJapan relations, a more confident India, rising nationalism, widening income gaps within ASEAN countries, global economic

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uncertainties, and threats to human security in the region from international terrorism and contagious diseases. To ensure peace, security and prosperity, individual ASEAN countries and the region will have to work closely together in the next phase of ASEAN community-building. In the coming years, ASEAN may even see a new member, TimorLeste. Readers interested in the ASEAN Community and in ASEAN’s external engagements will find Volume III interesting. So also those keen to understand issues influencing the direction of regionalism in Southeast Asia and to see where the ASEAN Community is heading. Many of the articles in this third volume have been published previously, either by ISEAS or other publishers. We thank all the publishers for their permission to use the selected works. This volume would not have been possible without the efforts of the editorial team headed by Dr Ooi Kee Beng, Deputy Director of ISEAS, and including coeditors Dr Terence Chong, Dr Cassey Lee, Dr Malcolm Cook, and Ms Sanchita Basu Das. Mr Michael Yeo, as editorial assistant, provided sterling support for the team. Tan Chin Tiong Director Institute of Southeast Asian Studies

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FOREWORD TO THE ASEAN READER ASEAN: Conception and Evolution

THANAT KHOMAN

O

n 8 August 1967 the “Bangkok Declaration” gave birth to ASEAN, the Association of Southeast Asian Nations, an organization that would unite five countries in a joint effort to promote economic co-operation and the welfare of their peoples. After repeated unsuccessful attempts in the past, this event was a unique achievement, ending the separation and aloofness of the countries of this region that had resulted from colonial times when they were forced by the colonial masters to live in cloisons etanches, shunning contact with the neighbouring countries. In effect this historical event represented the culmination of the decolonization process that had started after World War II. Following their victory in the war, the colonial powers tried their best to maintain the status quo. However, since they had not even been able to ensure the protection of their territories against the Japanese invasion, how could they justify their claim to control them again. In their defeat, the Japanese had effectively undermined colonial rule

by granting some form of autonomy or even independence to the territories they had earlier invaded, thus sowing the seeds of freedom from the colonial masters. The process of decolonization, inside and outside the United Nations, then advanced at a fast pace and led to the emergence of a number of independent and sovereign nations. This created an entirely novel situation which necessitated new measures and structures. Thailand, as the only nation which had been spared the plight of colonial subjection thanks to the wisdom and political skill of its Monarchs, felt it a duty to deal with the new contingencies. Pridi Panomyong, a former Prime Minister and statesman, tried to promote new relationships and co-operation within the region. I, myself, posted as the first Thai diplomat in the newly independent India, wrote a few articles advocating some form of regional co-operation in Southeast Asia. But the time was not yet propitious. The world was then divided by the Cold War into two rival camps vying for domination over the other, leading the newly emerging states to adopt a non-aligned stance.

Reprinted from K.S. Sandhu, Sharon Siddique, Chandran Jeshurun, Ananda Rajah, Joseph L.H. Tan, and Pushpa Thambipillai, comps., The ASEAN Reader (Singapore: Institute of Southeast Asian Studies, 1992), by kind permission of the Institute of Southeast Asian Studies.

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xiv

Foreword to The ASEAN Reader: ASEAN: Conception and Evolution

When, as Foreign Minister, I was entrusted with the responsibility of Thailand’s foreign relations, I paid visits to neighbouring countries to forge co-operative relationships in Southeast Asia. The results were, however, depressingly negative. Only an embryonic organization, ASA or the Association of Southeast Asia, grouping Malaysia, the Philippines, and Thailand could be set up. This took place in 1961. It was, nevertheless, the first organization for regional cooperation in Southeast Asia. But why did this region need an organization for co-operation? The reasons were numerous. The most important of them was the fact that, with the withdrawal of the colonial powers, there would have been a power vacuum which could have attracted outsiders to step in for political gains. As the colonial masters had discouraged any form of intra-regional contact, the idea of neighbours working together in a joint effort was thus to be encouraged. Secondly, as many of us knew from experience, especially with the Southeast Asia Treaty Organization or SEATO, co-operation among disparate members located in distant lands could be ineffective. We had therefore to strive to build co-operation among those who lived close to one another and shared common interests. Thirdly, the need to join forces became imperative for the Southeast Asian countries in order to be heard and to be effective. This was the truth that we sadly had to learn. The motivation for our efforts to band together was thus to strengthen our position and protect ourselves against Big Power rivalry. Finally, it is common knowledge that co-operation and ultimately integration serve the interests of all — something that individual efforts can never achieve. However, co-operation is easier said than done. Soon after its establishment in 1961, ASA or the Association of Southeast Asia, the

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mini organization comprising only three members, ran into a snag. A territorial dispute, relating to a colonial legacy, erupted between the Philippines and Indonesia on the one hand and Malaysia on the other. The dispute centred on the fact that the British Administration, upon withdrawal from North Borneo (Sabah), had attributed jurisdiction of the territory to Malaysia. The konfrontasi, as the Indonesians called it, threatened to boil over into an international conflict as Malaysia asked its ally, Great Britain, to come to its support and British warships began to cruise along the coast of Sumatra. That unexpected turn of events caused the collapse of the fledgling ASA. While ASA was paralysed by the dispute on Sabah, efforts continued to be made in Bangkok for the creation of another organization. Thus in 1966 a larger grouping, with East Asian nations like Japan and South Korea as well as Malaysia, the Philippines, Australia, Taiwan, New Zealand, South Vietnam and Thailand, was established and known as ASPAC or the Asian and Pacific Council. However, once again, calamity struck. ASPAC was afflicted by the vagaries of international politics. The admission of the People’s Republic of China and the eviction of the Republic of China or Taiwan made it impossible for some of the Council’s members to sit at the same conference table. ASPAC consequently folded up in 1975, marking another failure in regional co-operation. With this new misfortune, Thailand, which had remained neutral in the Sabah dispute, turned its attention to the problem brewing to its south and took on a conciliatory role in the dispute. At the time, I had to ply between Jakarta, Manila, and Kuala Lumpur. After many attempts, our efforts paid off. Preferring Bangkok to Tokyo, the antagonists came to our capital city to effect their reconciliation. At the banquet marking the reconciliation between the three disputants, I broached

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Foreword to The ASEAN Reader: ASEAN: Conception and Evolution

the idea of forming another organization for regional co-operation with Adam Malik, then Deputy Prime Minister and Foreign Minister of Indonesia, the largest country of Southeast Asia. Malik agreed without hesitation but asked for time to talk with the powerful military circle of his government and also to normalize relations with Malaysia now that the confrontation was over. Meanwhile, the Thai Foreign Office prepared a draft charter of the new institution. Within a few months, everything was ready. I therefore invited the two former ASA members, Malaysia and the Philippines, and Indonesia, a key member, to a meeting in Bangkok. In addition, Singapore sent S. Rajaratnam, then Foreign Minister, to see me about joining the new set-up. Although the new organization was planned to comprise only the former ASA members plus Indonesia, Singapore’s request was favourably considered. The first formal meeting of representatives from the five countries — Indonesia, Malaysia, the Philippines, Singapore, and Thailand — was held in the Thai Ministry of Foreign Affairs. The group then retired to the seaside resort of Bangsaen (Pattaya did not exist at that time) where, combining work with leisure — golf to be more exact — the ASEAN charter was worked out. After a couple of days, using the Foreign Office draft as the basis, the Charter was ready. The participants returned to Bangkok for final approval of the draft, and on 8 August 1967, the Bangkok Declaration gave birth to ASEAN — the Association of Southeast Asian Nations. (ASEAN owes its name to Adam Malik, master in coining acronyms.) The formation of ASEAN, the first successful attempt at forging regional cooperation, was actually inspired and guided by past events in many areas of the world including Southeast Asia itself. The fact that the Western powers, France and Britain, reneged on their pacts with Poland and Czechoslovakia promising protection against external aggression, was instrumental in

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xv

drawing the attention of many countries to the credibility of assurances advanced by larger powers to smaller partners. The lesson drawn from such events encouraged weak nations to rely more on neighbourly mutual support than on stronger states that serve their own national interests rather than those of smaller partners. For Thailand, in particular, its disappointing experience with SEATO taught it the lesson that it was useless and even dangerous to hitch its destiny to distant powers who may cut loose at any moment their ties and obligations with lesser and distant allies. Another principle to which we anchored our faith was that our co-operation should deal with non-military matters. Attempts were made by some to launch us on the path of forming a military alliance. We resisted; wisely and correctly we stuck to our resolve to exclude military entanglement and remain safely on economic ground. It should be put on record that, for many of us and for me in particular, our model has been and still is, the European Community, not because I was trained there, but because it is the most suitable form for us living in this part of the world — in spite of our parallel economies which are quite different from the European ones. However, although we had clearly defined our aims and aspirations, international realities forced ASEAN to deviate from its original path. Several developments began to preoccupy ASEAN: the defeat and withdrawal of the United States from Vietnam and even from the mainland of Asia; the growing Vietnamese ambitions nurtured by the heady wine of victory; and the threat of Ho Chi Minh’s testament enjoining generations of Vietnamese to take over the rest of French Indochina in addition to the northeastern provinces of Thailand. Such developments forced ASEAN to turn its attention to more critical issues, like Cambodia, with the result that economic matters were almost entirely neglected and set aside.

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Although not the original plan or intention of the founders of ASEAN, the effective and successful opposition to the implementation of Vietnam’s Grand Design, using only diplomatic and political means, won a great deal of plaudits and international credit, lifting it from an insignificant grouping of small countries to a much courted organization with which more important states now seek to have contact and dialogue. This has not been a negligible result. Indeed, ASEAN has greatly benefited from its deviated performance. ASEAN has now become a well established international fixture. While applauding the successes of the Association, it is not my intention to pass over its weaknesses and shortcomings. In the first place, the partnership spirit is not fully developed. Some parties seek to take more than to give even if in choosing the latter course, they may be able to take much more later on. Indeed, some of them do not hesitate to reduce their allotted share in projects, which, in their opinion, would not immediately bring the highest return, and thus they leave the burden to other members. In fact, it is common practice at many meetings, to jockey for selfish gains and advantages, not bearing in mind the general interest. Nevertheless, the most serious shortcoming of the present system resides in the lack of political will as well as the lack of trust and sincerity towards one another. Yet each and everyone in their heart realizes that the advantages of ASEAN accrue to them all, and no one is thinking of leaving it. Be that as it may, there is no readiness to admit to these shortcomings. That is why they put the blame for these deficiencies on the Secretariat which was set up by the governments themselves. Indeed, they distrust their subordinate officials to the point that they have not been willing, until recently, to appoint a Secretary-General of ASEAN, but only a Secretary-General in charge of the Secretariat.

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Whatever problems exist at present, it is not my intention to dwell on them. They should, however, be resolved as expeditiously and effectively as possible. Personally, I prefer to look ahead and chart out a course that will lead to the objectives originally set out, so as to meet the expectations of our peoples. The question we should ask is: ASEAN, quo vadis? Where do we go from here? To this, I would reply that, first of all, we must set ourselves on the economic track we designed for the Association. This is necessary, even imperative, now more than ever as the world is being carved into powerful trade zones that deal with one another instead of with individual nations. At present, many countries outside our region are prodding us to integrate so that a single or more unified market will simplify and facilitate trade. That stands to reason and yet it was only in 1992 when all partners were convinced of the veracity of the proposition, when the then Thai Prime Minister, Anand Panyarachun, officially put the idea of an ASEAN Free Trade Area for discussion at the ASEAN Summit at Singapore. This meaningful move was logical since ASEAN was born in Thailand. However, it may take some fifteen years — as requested by some members — before a rudimentary single, integrated market comes into being. For the months and years to come, gradual economic integration should be the credo for ASEAN if we want our enterprise to remain viable and continue to progress. Otherwise, it may become stagnant, unable to keep up with the pace of global activity. In spite of the Maastricht setback where the Danes voted against ratifying the Treaty on European Union, the European Community will most probably witness sustained expansion with the addition of former EFTA members as well as a number of Central and East European countries waiting to join. Meanwhile, NAFTA — the North American Free Trade Area — is coming into being, parallel to another one further south of the American continent. Likewise, on the southeast wing of Europe, Turkey is busy organizing some form of

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Foreword to The ASEAN Reader: ASEAN: Conception and Evolution

co-operation with the Islamic states of the Black Sea region of the defunct Soviet Union. All these activities should be sufficient indication that there is an urgent need for ASEAN to scrutinize itself, to update its role, and to implement wider and more serious organizational reforms — measures that are more meaningful than simply revamping the Secretariat. On the non-technical side, political will and the spirit of partnership greatly need to be strengthened. In the future, competition will be severe. Political and economic pressure through the use of unilateral measures and threats will be resorted to without mercy by those who believe in brute force rather than civilized negotiations, a method which I call “crowbar” diplomacy proudly proposed by the “Amazon Warrior” before the legislative authorities of her country. Without appropriate adjustments and improvements, ASEAN may lose in the race for survival. And time is of the essence. ASEAN, in my opinion, does not have much leeway to idle or doodle. We should realize that two or three years are all we really have to implement urgent reforms. While the pursuit of economic aims, as originally assigned, is essential, it does not mean the Association should abandon the considerable political gains it has made. On the contrary, ASEAN should continue to build upon the prestige and recognition that the outside world has accorded it. The results of ASEAN’s past performance especially in the resistance against Vietnamese military conquests and territorial expansionism, as well as the unqualified success in preserving peace and stability against all odds, are evident. Without doubt, ASEAN must strive to consolidate these assets which will complement its efforts on the economic side. In other words, the arduous task ahead for the Association will be a double- or tripletrack endeavour which can be crowned with success provided that the weaknesses mentioned earlier are remedied and all the members, for their own good and that of

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their people, decide to carry out their duties and obligations with determination and a sense of purpose. On the other hand, we should foresee that, in time to come, not only will ASEAN have to face the difficult task of creating and maintaining harmony among its members who have different views, different interests, and are of different stages of development — factors that in the past have made the adoption of needed reforms so uneasy — but ASEAN will also have to cope with the extremely complicated problems of dealing with hard-nosed opponents and interlocutors among the developed countries. Finally, as with all organizations and entities, ASEAN will have to realize that it will not be nor can it be the ultimate creation. In truth, it should be only a stepping stone, a preliminary or intermediate stage in the process of international development. As the world progresses, so will ASEAN. At this juncture, everyone within the Association is aware of this reality. It should be prepared to move on to the next stage and raise its sights towards wider horizons. Some nascent possibilities like PECC (the Pacific Economic Co-operation Council) and APEC (the Asia Pacific Economic Co-operation forum) are already in existence and more or less ready to bloom into something more stable and viable. So far, ASEAN members have not been willing to merge with the new entities, for various reasons, the most important of which may be a lack of conviction in the latters’ viability. Perhaps correctly, ASEAN members prefer to wait for more convincing indications assuring them of their capacity to survive. They continue to insist that ASEAN remains the nucleus from which peripheral relationships might radiate. This is not an unwise approach, apparently dictated by realism and caution in view of the audacity and increasing arrogance of certain major powers. A precipitous decision may result in undesirable entanglement or worse strangulation. Nevertheless, it may be wise for ASEAN not to lose sight of two

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important countries further to the south of Asia — Australia and New Zealand. If and when, they should express a clear willingness and desire to play a genuine partnership role, they should be welcome to join in any common endeavour. Their contribution will undoubtedly increase the strength and capacity of our existing and future cooperative undertakings, thus enabling us to meet with every chance of success in future encounters and negotiations with similar entities of other continents. Lately, ASEAN has taken up a new assignment by engaging in discussions on security matters, more precisely on the Spratly Islands which are claimed by a number of nations, including Vietnam and the People’s Republic of China. The dispute threatened to erupt into an armed conflict after concessions for oil exploration were granted by the People’s Republic of China to some American oil companies. If one or more contestants resort to violence the dispute may degenerate into an ugly conflict thereby disrupting the peace and stability of the region. For that reason, Indonesia has already been moved to organize “workshop” discussions to explore the possibility of an acceptable solution. In the light of the Spratly problem, the ASEAN members prepared a draft “Code of International Behaviour” which rules out any resort to violence. This draft was tabled at the Manila Ministerial Meeting in 1992 which approved it, as did the PRC and Vietnam, a dialogue partner and a signatory of the ASEAN Treaty on Amity and Co-operation respectively. This was what ASEAN could do, although it was only a moral gesture. Obviously, it could not obtain from the main

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parties to the dispute, a categorical pledge not to resort to violence. It may not be much. It was nevertheless better than nothing and certainly better than to bury one’s head in the sand. It is hoped that in this, as in any other case, wisdom and restraint will prevail. What will ultimately be the fate of ASEAN? To this question, I am ready to offer a candid reply, forgetting my role as a co-founder of the Association. My faith in the usefulness and “serviceability” of ASEAN cannot and will not diminish. If anything, members will find it beneficial to strengthen it. This is the rationale. In the post Cold War world, the Western countries find it fit to assert with little restraint or moderation their ascendancy and dominance, and some even seek to establish their hegemony over the entire world by claiming undisputed leadership in a so-called New World Order framework because of the absence of Soviet challenge and rivalry. The ultimate result would be that other nations will, ipso facto, become nothing but mere pawns of different size. The smaller ones will shrink still further and become even smaller and less significant. In fact, they will count less on the world scene than before the advent of the New World Order. Therefore, if they do not combine their minuscule strength, they will lose all meaning. Now the only place where they can do something with a measure of success is none other than the ASEAN forum. Therefore, for our own interests, we cannot afford to be oblivious of this plain truth and fail to act accordingly.

Bangkok 1 September 1992

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FOREWORD TO THE ASEAN READER ASEAN: The Way Ahead

S. RAJARATNAM

I

f the last decade of the 20th century, to whose final death throes we are now the unhappy witnesses, can be termed the Age of Nationalism, then the 21st century, whose pale dawn is visible over the horizon, can be aptly described as the Coming Age of Regionalism. This Foreword focuses on regionalism rather than on ASEAN because the latter is no more than a local manifestation of a global political, economic and cultural development which will shape the history of the next century. Should regionalism collapse, then ASEAN too will go the way of earlier regional attempts like SEATO, ASA and MAPHILINDO. All that remains today of these earlier experiments are their bleached bones. Should the new regional efforts collapse, then globalism, the final stage of historical development, will also fall apart. Then we will inevitably enter another Dark Ages and World War III, fought this time not with gun-powder, but with nuclear weapons far more devastating than those exploded in Hiroshima and Nagasaki.

Modern technology and science are pushing the world simultaneously in the direction of regionalism and globalism. What is responsible for today’s economic disintegration, disorder and violence is the resistance offered by nationalism to the irresistible counter-pressures of regionalism and globalism. As of today, there are only two functioning and highly respected regional organizations in the world. They are, in order of their importance and seniority, the European Community (EC) and the Association of Southeast Asian Nations (ASEAN). The first came into being in 1957 and the second in 1967. A mere ten years separates the two. The population of the European Community as at 1990 was 350 million, and that of ASEAN an estimated 323 million. In terms of population, they are not all that unequal. In terms of political and economic dynamism, though, the gap is qualitatively wider. The economic dynamism and the proven political cohesion of ASEAN is nevertheless slowly

Reprinted from K.S. Sandhu, Sharon Siddique, Chandran Jeshurun, Ananda Rajah, Joseph L.H. Tan, and Pushpa Thambipillai, comps., The ASEAN Reader (Singapore: Institute of Southeast Asian Studies, 1992), by kind permission of the Institute of Southeast Asian Studies.

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but steadily narrowing the gap between the European Community and ASEAN. To com­pare ASEAN with the so-called Little Dragons of Asia is to compare unrelated political species. The Little Dragons are lone wolves hunting separately. They lack collective strength or awareness. With them it is a case of each wolf for itself. In the case of ASEAN, as integration proceeds, its strength will be the cohesiveness of over 300 million people with far greater resources than any of the lone baby dragons. The most remarkable feature about the two regional organizations is their continuity and coherence despite the persistence and often unmanageable turbulence and tensions that have and still characterize the post-war world. There have been some 100 international, civil, racial and religious conflicts. Far from abating, these are growing in number. By comparison the European Community and ASEAN are the still centres in the eye of the storm. There is apprehension that chaos, not order, is the draft of world politics and economies today. For many, the expectation is that tomorrow will be worse than yesterday and that history has been a descent from the Golden Age to the Dark Ages. To quote the poet Yeats, though the world is seemingly intact: “Things fall apart, the centre cannot hold.” Yet the two multi-racial and multi-cultural regional organizations I have mentioned continue to grow in maturity, cohesiveness, and confidence. They believe that regionalism can survive the buffeting winds and storms. The European Community, unlike ASEAN, has had far more experience with regional organization because its founding members, in particular Britain, France, Holland, Belgium and even Germany participated in the creation and management of far-flung complex global empires. Their scientific and technological cultures were many light years ahead of all preceding cultures and civilizations. However eminent and admirable

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pre-European traditional civilizations were, the 19th and 20th century culture created by the West cannot be surpassed or displaced by invoking ancient creeds. Only Japan has so far demonstrated that the gap between medieval and modern cultures can be narrowed and possibly over taken. Moreover, only Western nations and Japan have demonstrated a capacity for constructing massive modern empires, though unfortunately, they demonstrated this by their ability to organize and unleash modern wars. No Asian nation, however, has fought, let alone won, wars of comparable magnitude. Saddam Hussein’s chest-thumping has the resonance of hollow drums. Western Europeans have over a period of 500 years built a chain of multi-racial and multinational empires that at their peak stretched from Portugal and Spain to the Pacific shores of Russia, and parts of Asia and Africa. So reconstituting a West European regional community should be child’s play for them. But creating and managing, within a brief period of only 25 years, an ASEAN community of six economically and industrially underdeveloped peoples who had no experience of administering a modern, complex multi-racial regional organization verges, in my view, on the miraculous. The reach of the ancient empires of Greece, Rome, China, India, Persia and Babylon, ruled by allegedly Divine emperors, was ludicrously short and their claims of being rulers of world empires were fanciful exaggerations. The effective extent of their empires did not go beyond the palace and surrounding villages. Modern nationalism, regionalism and globalism are of a different order politically, economically and even psychologically. Nationalism is a 19th century concept. Earlier forms of nationalism were, in fact, imperialism. It united petty principalities, states and clans into nations. These have now outlived their usefulness.

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But regionalism is based on concepts and aspirations of a higher order. Asian regionalism was first launched on 25 April 1955 at Bandung. It was initially a comprehensive Afro-Asian Conference presided over by Heads of Government. It included legendary figures like Sukarno, Nehru, Zhou Enlai, Kotalawela of what was then Ceylon, Sihanouk and Mohammed Ali, the Prime Minister of Pakistan. However, this regional effort did not last long. Asian and African nationalisms which helped speed up the collapse of Western, and later Japanese imperialisms, did not last long. Within a few years after its founding, not only Afro-Asian solidarity but also the solidarity of individual Asian and African nation states was in disarray. The destruction of nationalism is today being brought about, not by Western imperialism, which had already grown weary, thanks to two world wars, of holding sway over palm and pine, but by Third World nationalism. The economic and political underpinnings of European nationalisms were in fact, even before the start of the 20th century, beginning to crack. In fact, Lord Acton, towards the end of the 19th century, predicted the inevitable collapse of nationalism. I quote his judgement — “Nationality does not aim either at liberty or prosperity, both of which it sacrifices to the imperative necessity of making the nation the mould and measure of the state. It will be marked by material and moral ruin.” This prophecy is as accurate today as it was when Lord Acton made it in 1862. So was Karl Marx’s prophecy about the inevitable collapse of nationalism but for different reasons. He predicted the overthrow of nationalism and capitalism by an international proletariat. So did Lenin and so did Mao with their clarion call of: “Workers of the World unite.” Internationalism has a long history. Chinese, Christians, Greeks, Romans and Muslims were never tired of announcing themselves as “World Rulers”. However, after World War II, empires went out of fashion. It

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is today being gradually replaced by a more rational form of political and economic organization. The early years of the 20th century witnessed, for example, experiments with a novel form of regionalism — continental regionalism. It was formed by simply prefixing the word “Pan” to the continents of Europe, Asia and America — Pan-Europa, Pan-America and Pan-Asia, of which Japan, after having in 1905 defeated the Russian fleet in one of the most decisive naval battles ever fought in the Tsushima Straits, became Asia’s most persistent publicist. After World War II, Pan-African and Pan-Arab movements were added to the list. However, these early “Pan” movements have since then either collapsed totally or are in the process of violent disintegration because of dissension on grounds of race, religion, language or nation. However, the word “Pan” has recently been revived in East Europe. It is called “Pan-Slavism” and is today being revived with bloody vengeance. The multi-racial and multi-cultural Yugoslav nation that President Tito created during World War II and which is today being torn apart is a grim warning of what can happen to nations possessed by racial and religious demons. The new regionalism that is now emerging out of the ruins of post-World War II national­ ism appears to have learnt from the errors of the past. A more sophisticated and realistic form of regionalism is being constructed, not as an end in itself but as the means towards a higher level of political, social and economic organization. I propose to do no more than list the names of some of the new regionalisms now taking shape. Basic to this approach is that there is not going to be any sudden great leap forward from regionalism to globalism. However, none of the new regionalisms now taking shape are as bold as either the European Community or ASEAN. The latter two are more rationally focussed regionalism.

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But a word of caution is necessary. We must know how to handle these new regionalisms intelligently. They could be steps towards global peace, progress and cultural development or they could be fuel for World War III. Foremost among the new regional approaches is the North American Free Trade Area (NAFTA) and the Asia-Pacific Economic Co-operation forum. Among the many other regional concepts waiting in the wings are: the Organisation of Economic Co-operation and Development (OECD); the Group of Seven (G7); East Asian Economic Caucus (EAEC); Pacific Economic Co-operation Conference (PECC); the amiable Little Dragons of South Korea, Singapore, Hong Kong and Taiwan for which no acronym has yet been announced. There are also the distant rumbles of the possible emergence of Big Dragons but as a Chinese saying goes: “There is a lot of noise in the stairways, but nobody has so far entered the room.” One fervently hopes that when a Big Dragon turns up, it would be an amiable Great Dragon and one which would know its way around the Spratly and Paracel Islands but without being a Dragon in a China shop. World War II started, it must be remembered, simply because the German and Japanese Dragons got their maps all wrong. Real regionalism requires a world-view if it is not to lose its way in the global world of modern technology and science. It must also have a rational and deep understanding of the new history which is being shaped not by heroic individuals, but through the co-operative interaction of some 5 billion people who today live in a vastly shrunken planet and who, thanks to growing literacy and fast-as-light electronic communication, are better informed about the world we live in than earlier generations. Nobody, not even super-computers can predict what will happen when each day the flow of history is cumulatively determined by individual decisions made by 5 billion

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human beings who are asserting their right to a decent and just society. Fewer and fewer people today believe that oppression, hunger and injustice is God’s will to which they must meekly submit. People today know the difference between “Let us pray” and “Let us prey”. The end of the Cold War and the collapse of communism has, in no way, made for a more peaceful world. Wars have ended in the Western world but not so elsewhere. World War III, should it ever be unleashed, would be the last war mankind will ever fight. As a student of history, I believe that it is not common ideals but common fears that generally hold groups and nations together. The moment the common fear disappears, the brotherhood becomes an arena for dissension, conflict and even bloodshed. Two world wars and what is going on in Africa, Asia and Central Europe provide ample proof that we live in dangerous times today. However, I believe there is evidence suggesting that ASEAN is an exception to the rule. ASEAN was born on 8 August 1967 out of fear rather than idealistic convictions about regionalism. As one of the two still surviving founder members of ASEAN (the other being Dr Thanat Khoman) I can attest to the triumph of fear over ideals. The anticipated military withdrawal of the Americans from Vietnam in the eighties raised the spectre of falling non-communist dominoes in Southeast Asia. It appeared then that both the East and West winds of communism had joined forces to sweep over Southeast Asia. Fortunately, Adam Smith’s Invisible Hand came to ASEAN’s rescue. The Sino-Soviet split started. The East and West communist winds were suddenly blowing in contrary directions. The second outburst of ASEAN fear was in December–January 1980 when Vietnam with the backing of the Soviet Union proclaimed the liberation of not only its Indochina

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Empire but also of the whole of Southeast Asia. Fortunately for the first time in the history of an Asian regionalism, ASEAN, instead of trembling with fear, dug its toes in and decided to stand up against a Vietnam that had never ceased to boast that it had defeated two great Western powers in Vietnam — first the French and then the Americans. So in the case of Vietnam, it was not belief in regionalism but resolution, born out of common fear, that eventually brought about the collapse of communist Vietnam.

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Today a new fear haunts ASEAN and which, I believe, now makes inevitable the emergence of ASEAN regional solidarity, and, no less important, the actualization of the ASEAN Free Trade Area or AFTA. I also believe this solidarity will manifest itself politically and militarily so long as a common fear persists.

Singapore 1 September 1992

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FOREWORD TO THE SECOND ASEAN READER New Challenges for ASEAN

WANG GUNGWU

N

o one in the 1950s expected that anti-colonialism 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 nonstate actors and other transnational groups. The essays selected in this volume tell us how ASEAN has adapted 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.

Reprinted from Sharon Siddique and Sree Kumar, comps., The Second ASEAN Reader (Singapore: Institute of Southeast Asian Studies, 2003), by kind permission of the Institute of Southeast Asian Studies.

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Foreword to The Second ASEAN Reader: New Challenges for ASEAN

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 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

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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 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 co-operation. Furthermore, most of the descendants of Chinese immigrants who have settled in Southeast Asia still retain links with “Greater

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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 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 intraregion 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

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are likely to go back to bilateral links to support their own vital interests. China and a de-stabilized Muslim world impinge on 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.

Singapore 27 August 2003

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Section

I

ASEAN: THE LONG VIEW

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INTRODUCTION

Ooi Kee Beng

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he history of Southeast Asia is a chequered one. Not only are we talking about a region dissected for several hundred years by colonial expediencies, we are also dealing with its bifurcated geography: the southern territories largely configured by coastal ways of life, and the northern territories by riverine and agricultural activities. The political systems and thoughts that flowed out of these were therefore understandably dissimilar. Layer upon layer of external influences placed over centuries are clearly evident, affecting various areas differently. The Indic and Buddhist kingdoms of old, for example, were overwhelmed by latter-day Muslim regimes in the archipelago, but not in continental Southeast Asia. Along the eastern coastline of Indo-China, it was a Sinic influence instead that remained strong for two millennia. In so-called modern times, European powers laid claim to whatever areas other European powers had not yet called their possession — at least until the Japanese expelled them in 1942. The Europeans could not reclaim these liberated lands in 1945, and in the few places where they persisted — they could not hold them for long. Worse still, they could not reclaim their old authority. Thus, the region went through an essential transformation after the Second World War, and ended up

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as a jigsaw of nation-states, an alignment that suited some more than others. Since 1968, however, the ambition to construct a regional body — ASEAN — is being gradually fulfilled. In this section, Wang Gungwu discusses how “Southeast Asia” evolved as a concept, and how — despite the trading routes that passed through the seas in the region — it was never as important as the continental silk route in Central Asia was. ASEAN, as Wang sees it, is also essentially different from the European Union and comparisons between the two should be made with caution. In his piece, Nicholas Tarling deliberates the history of regionalism in Southeast Asia, and the complex conditions under which the attempts at regional cooperation have operated. This is followed by Narongchai Akrasanee’s revelation of the diplomatic context for key achievements in ASEAN’s development towards economic integration. Finally, Rodolfo Severino — drawing upon his insider’s knowledge on the workings of ASEAN as an organization — examines its development from its origins. He charts ASEAN’s shifting concerns from security matters during the Cold War, to economic cooperation, and the present bold search — informed by the pursuit of geo-security — for an ASEAN that is broadly and deeply integrated.

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1.

SOUTHEAST ASIA AND FOREIGN EMPIRES

WANG GUNGWU

Ooi Kee Beng: May I suggest that we continue discussing Southeast Asia as a concept? Wang Gungwu: As I mentioned earlier, the term really came out of World War II, from the Mountbatten Command in Colombo, which was called the South East Asia Command. The term stuck, and it did so because of the advent of decolonization. The British and the Americans found it useful, and I think the French and Dutch followed thereafter. Decolonization made them think of the region’s future, which they feared would be similar to what had become of the Balkans — fragmented, and in effect a power vacuum. European experiences were transposed on to the region, and the notion was that, where there is fragmentation, big powers would intervene. So a quick look around showed an independent but fragile India on one side, and on the other, Communist China, one of the five powers in the United Nations Security Council. The strategic planners saw a potential political vacuum, and to get down to work they needed a coordinated bigger picture.

Identifying Southeast Asia as one region helped them visualize the future. This didn’t happen immediately, by the way. The Americans took some time to accept it because they thought in terms of East Asia, or the Western Pacific. They never looked at South Asia much, the way the British and the French did. On their side, Europeans saw India and they saw China; and they saw the region in between as a residue. So the French used the term “Indochine”, which is very interesting because it showed that the French had understood the area to be a bit of China and a bit of India. For Western powers that had been moving eastwards, this area would have indeed been orientated through references to India and China. OKB: In the early days, the British were denoting the region as “Farther India”. WGW: Farther India, yes. They were thinking in terms of the projection of British power out of India, an extension into the Malay Peninsula and into Burma. Burma was

Reprinted in excerpted form from Ooi Kee Beng, “Southeast Asia and Foreign Empires”, in The Eurasian Core and Its Edges: Dialogues with Wang Gungwu on the History of the World (Singapore: Institute of Southeast Asian Studies, 2015), pp. 94–140, by kind permission of the Institute of Southeast Asian Studies.

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6

Wang Gungwu

actually managed as a province of India, a tail end of India; something the Burmese have never forgiven them for. So their view was always India-centred. The Americans however were concerned with the Philippines and Japan, and tended strategically to be China-centred. It is significant that “Southeast Asia” is really a British conception. The Americans eventually saw that it could be useful, but even then, this was more among the academics. The strategic thinkers still largely thought in terms of East Asia. Even the universities subsumed Southeast Asia under East Asia; only a few took up the idea of Southeast Asia studies, such as Cornell, and then eventually Michigan and Berkeley. But many other universities didn’t! The British were very early on that front. Take London University’s School of Oriental and African Studies (SOAS) for example, which immediately had a Southeast Asia division, alongside South Asia, and East Asia. I think London University already had that clear idea about this, while Oxbridge took a little while longer, because they were not that interested, and they were looking at the classical era. So I would say it’s a post-war British conception, which was eventually accepted by everybody, and by strategists. … OKB: Can one describe Southeast Asia historically through Silk Road, or trade routes, politics? The ports were not sufficient in themselves. Instead, they were quite peripheral in the larger context, and survived because they were part of the trading activities going on between the empires. WGW: That’s a very interesting way of describing it. It is apparent where the continental side is concerned. Where the maritime side is concerned, we are dealing with a very new perspective, with the Silk Road image being transposed on to the sea.

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The Silk Road in the north was still basically a Eurasian power system, with areas in between and with powerful states at both ends. So it was always the part in between that expressed the relationship between different ends. I won’t say the maritime system in Southeast Asia was like the Silk Road. We think of the Silk Road as having the Roman Empire and the Han Empire at the far ends, and in between there were the Iranian Empire, the Arabs and even the Moghul Empire. The routes in between all these were in areas nobody took the trouble to control, since they were based in oases surrounded by desert. And they were not agrarian like these powers were. There are similarities enough for us to apply this pattern to the maritime region in Southeast Asia. But the one was the Eurasian centre, while the other was on the edges and was not regarded as significant. In terms of political power and even wealth generation, Southeast Asia was not that important. The essential economic power came from agrarian surplus supporting the political system, the army, the garrisons, and so on. OKB: Today, ASEAN groups together a number of states, all of which know how vulnerable they are individually. For them to stay united and enhance their credibility, they have to be each other’s peers and to always make decisions unanimously. WGW: This is a by-product of being between India and China. From day one, decolonization took place under the shadow of the great powers and was affected by how these were planning their own futures. Even though unspoken, the underlying thought which the British had already come up with — and in that way we are still a product of that imagination — was that sooner or later the region as a whole will be clamped between India and China. So what do you do? If you are Balkanized, you will always be subject to one or the other. They sold the

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Southeast Asia and Foreign Empires

idea that they could help us, which they are still doing. The Americans joined in, and so Britain and America basically offered a guarantee that if we welcomed them, they would help us against the two powers. The Cold War, of course, increased the sense of urgency throughout the region. One side had become communist, and the other side was capitalist. So decolonization taking place during the Cold War was the full context. The underlying idea was that these places between India and China offered a strategic opportunity for the West. And now we have President Obama’s pivot to the region. India is no threat today, so they focus on China. You have a counterbalancing act going on, and this is where Australia comes in. Whether they like it or not, Australia represents the West. They are here in the neighbourhood! So if Australia participates, then the West is in the region. OKB: They are more than just deputy sheriff to the Americans then? WGW: They are actually integral to the whole set-up. Having U.S. marines in Darwin doing elaborate surveillance from the south is not accidental. It is an extension of the whole process, and the justification for that is that Southeast Asia needs protection. At the same time, the Southeast Asians who worry about India and China feel that the only chance they have is to let the West in. If you look at the economics alone, the whole of Southeast Asia is not as strong as China or Japan, or even Korea. India still has some problems in South Asia, and Bangladesh and Sri Lanka create some awkwardness for the Indians, but basically the gap is still frighteningly big, and so the Southeast Asians feel justified in allowing the West a role. It makes them sleep better at night. That is why we have the business of ASEAN being in the driver’s seat. The language is very interesting, because putting it that way

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justifies the third leg — not only India and China, but also the West. This centrality of Southeast Asia is based on an assumption that this will forever be the only way that Southeast Asians can feel secure, locked as they are between those two. This proceeds from the post-1945 process of decolonization. There is an extraordinary and interesting continuity here, and I would say it is the brainchild of the British — British idea, American capacity and Australia as the instrument of their partnership; altogether guaranteeing security and stability for the Southeast Asians. OKB: They handled their retreat very well, didn’t they, the British? WGW: Beautifully! Look at the British Commonwealth. It was a brilliant invention. Most people now dismiss it, but I would advise against that. The idea is extremely powerful. It doesn’t depend on power; it depends on diplomacy and negotiated agreements and a sharing of insights about what the future should look like strategically. And if you look at it that way, then the Commonwealth has a different, though seemingly minor, function. It is there to provide a backdrop upon which a lot of other things can take place. A sense of sharing of political culture can continue via the Commonwealth. It doesn’t offer any clear alternative, but it is an alternative, to either India or China. That’s all you need, actually. The Commonwealth remains peripheral though, because in the end you do need a solid territorial base; and that is why ASEAN — the Southeast Asian Ten — was an extraordinary step forward. It has not been very long since the last member joined. Cambodia came in 1999, only fifteen years ago. So it’s too early to say whether it will succeed or fail. It’s just beginning, just growing into a three-sided reality, with Southeast Asia in the centre. It’s brilliant. The ASEAN peoples all know this. So do the other players.

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OKB: The common tendency to study ASEAN by comparing it to the EU misses the point entirely then. WGW: The EU is different. I think the EU is only important to us in the sense that we look at how far one can go without getting into big trouble. We watch what they do and learn from their mistakes, and if there are ideas there which will help us, then we can take them. But it cannot be a model; it’s a totally different story. ASEAN is entirely strategic. The EU had strategic origins as well, what with NATO and the Cold War; but that is all over, so it is a different story now. The dynamics are different. I use the Mediterranean concept because I think what will make the Anglo-Americans and the Indians even happier is if they can complete this arc from Japan all the way down to India, and so contain China. They would then feel safe. You would then see the South China Sea as a real Mediterranean. Keeping the Chinese out of the Indian Ocean and the western Pacific is part of this policy of containment. So the South China Sea

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Wang Gungwu

remains the final region needed to complete this picture. Should they succeed, then you will have a Mediterranean setting stretching from Japan and Korea down to Java and the Malay Peninsula, dividing two sides completely, just as the Muslim and Christian worlds are separated by the Mediterranean. The West knows that they cannot incorporate China into their story. China is too big, too powerful and too rich, and it has too much of its own history. This is the reality that they have to accept. Now, on the Chinese side, many of their leaders accept the reality that they are not able to challenge the United States. What they want is to be sure that they are safe from external attack and intervention. That’s all they want. To do that, they must have a very special relationship with the United States. In between, however, there are many proxies, so who knows what will happen there. That’s a situation that has to be managed. It is in a way the expression of a long stand-off between those two sides. How big or small the arc will be, and who will be included or excluded is for the future to decide.

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2.

SOUTHEAST ASIA AND THE GREAT POWERS

NICHOLAS TARLING

S

outheast Asia has secured over the past half century both a large measure of interstate peace and cooperation and a degree of autonomy from great powers outside the region that few observers had hoped for and scarcely any anticipated. Those have been coupled with a measure of economic and social development that, though far from equitable in its coverage and set back by a major crisis in the late 1990s, also indicated a remarkable transformation. A region of revolt had become a region that invited investment, though also speculation. To that the work of ASEAN (Association of South East Asian Nations) has made a substantial contribution. Many were disappointed with its slow progress towards the cooperative economic projects that it set out as its priority. What was achieved was what that vaunted priority in fact, by design or otherwise, tended to conceal, a practice of political collaboration that in the event was to open up much wider economic prospects. By contrast to the European regional project, ASEAN was avowedly based on the nation-state. That was the prime source of its success, though some would also say its

ultimate limitation. The region had come almost entirely under the formal rule of Western powers and been segmented into parts of their empires. Within the frontiers they had created or affirmed, however, their rule had come to be contested by a nationalism that they had also helped to create. Within the colonial states they built up, an alternative leadership offered the way to modernity. The destruction of the Western empires by the Japanese gave it, rather unwittingly, an opportunity it would not otherwise have had so soon or perhaps so amply. But its achievement, the winning of independence, was won piece-bypiece, colony by colony, and the new states, though claiming as modern states now did, to be nation-states, inherited the colonial frontiers. Just as the colonial states had little in common but their colonialism, those that replaced them had little in common but their nationalism. Any attempt to build regionalism had to take that into account. Politically, the outside powers rather stood back from the region-building of the 1960s and 1970s, though the Soviet Union (SU) thought ASEAN was a US plot and it was

From: Southeast Asia and the Great Powers, Nicholas Tarling, Copyright © 2010 Nicholas Tarling, Routledge, reproduced by permission of Taylor & Francis Books UK.

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indeed often presented as anti-communist, to some extent another piece of its own camouflage. The UK and the US in fact recognised that any open intervention in the venture would be counter-productive. They were reducing their involvement in the region, and that was both a source of apprehension to regional leaders and an opportunity. The attempt to extend ASEAN on the part of its founders, Malaysia, Indonesia, Singapore, the Philippines and Thailand, met the distrust of Vietnam. Vietnam’s invasion of Cambodia in 1979 indeed led ASEAN to cooperate with China, itself at odds with Vietnam’s patron, the SU. It was only in the 1990s that all ten Southeast Asian states were included in the Association. But how far, some leaders wondered, particularly perhaps in Singapore, could it even so provide for the security of the region? Would it be necessary to counter the influence of a rising China by ensuring after all the continued presence of other major powers in the region? Division within Southeast Asia, both within states and between or among them, had led to or invited intervention from outside, and statesmen recognised that, if it were to be limited, they must seek both internal and intra-state stability. A contestant in a state or contestant states must not look for aid or support in maintaining or subverting a regime. The nationalist revolution in Southeast Asia — and so it may be described even though independence was achieved with quite disparate levels of violence — culminated in what might be called a novel conservatism. The nationstates were successor states. The frontiers they inherited must be accepted. The values the Western states enjoined, without necessarily practising, must be followed. States were sovereign. Non-intervention and non-interference were the watchwords, even though ‘minorities’ were left behind and old claims unresolved. So far and no further, so far as national revolution was concerned.

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Nicholas Tarling

The values were, of course, those of the UN Charter, and were at the core of the concept of a world of states. But they had been reendorsed as the principles of co-existence, set out in the Zhou-Nehru understanding of 1954 and at the Bandung conference of 1955, and were appropriated by the ASEAN leaders. They were, of course, idealistic in nature. But they also represented a realistic attempt to deal with the crucial problem of a world of states. States are unequal in power, and, though the distribution of power will vary over time, they will remain so. Setting out and invoking the principles of co-existence provide a way of moderating the exertion of that power and the effect of its inequality. They provide, of course, only one way, even if honestly applied rather than merely used as camouflage. The fact that, while sovereignty may be equal, power is not, has to be recognised. A small state, particularly if it is the neighbour of a great one, will be ready to compromise the exertion of its sovereignty at times, if it hopes to preserve the essence of it. A powerful state will see itself as entitled to exert an influence outside its frontiers commensurate with its power, and it will be a matter of judgement to determine how far that may extend at the expense of others. Without such flexibility, the world of states could not function even as well as it does. The principles it invokes would be weaker, not stronger, if their idealism were not suffused by realism. The creators of ASEAN recognised that. Within their region the states they had inherited and sought to sustain were very unequal in size, potential and power. The principles of co-existence and the practice of compromise could be strengthened by a regional association built upon the independent states. That would at once endorse the principles and provide a vehicle for compromise. But it would also provide a means by which the disparities of power could be both moderated and accepted. If that were not done, the smaller powers

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Southeast Asia and the Great Powers

might be tempted to look outside the region for support against a potential intra-regional hegemon. If it were done, that hegemon would find a means of exerting its influence that avoided eliciting an extra-regional challenge. The imbalance within a region could be adjusted without the need for an outside check. How was a newly-independent state to provide for its security? It was perhaps significant that those who took the initiative in promoting regional association were the leaders of newly-independent Malaya. In particular they had in mind their much larger wrap-around neighbour, Indonesia. At home, there were some who questioned the creation of the new state: was it not dividing the Malay world? Would not an Indonesia Raya provide better security for the continuance of the ‘Malay race’? and in the Republic itself, there were those who saw the new state of Malaya as a colonial creation, brought into existence by collaboration rather than the proper revolutionary struggle. At the time, moreover, Indonesia had been arming itself, initially above all as a means of defeating the challenges the outer islands had presented to the central government in 1956–58 and then, of course, to exert pressure on the Dutch finally to depart from West New Guinea/ Irian. If it were successful there, it might look to other colonial remnants, even if they could not be regarded as part of a successor state, the Borneo territories, Portuguese Timor. In any case the big brother could exert pressure on the newly-independent little brother. The largest and most populous state in the region, it could indeed expect to influence its neighbours, and some such expectation had to be met if the system was to work. But a counter-balance was at least a desirable precaution. The steps the Malayan leaders took after 1957 seemed puzzling, if not confused, certainly difficult to appraise. Various motives were suggested. But the essential clue was surely their search for security in

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the region, in particular with respect to their great neighbour. They might, as a Canadian official put it believe in ‘the safety of numbers’.1 Rather than merely pursue the bilateral treaty that Indonesia proposed, Malaya sought multilateral relations with its neighbours. Its initial attainment was to be limited to the tripartite ASA, but the rhetoric of its leaders and their officials envisaged a more encompassing association in the future. That was, of course, attained with the creation of the five-power ASEAN of 1967 and its later extension to cover all the ten states in the Southeast Asia of the 1990s. The course of events was far from even or linear. But, following the confrontation of Malaysia pursued by the Sukarno regime, and the abortive attempt to resolve it through Maphilindo, Indonesia accepted an alternative, ASEAN, in effect, though not so presented, an extension of ASA, in which the influence it necessarily had in the region could be deployed in a way that its neighbours could accept and to an extent that would not lead them to call on powers outside the region. The subsequent extension of ASEAN took place only after the wars on the mainland had been concluded. Its original members had hoped that it might contribute to the end of the war, and the proposal for a Zone of Peace, Freedom and Neutrality (ZOPFAN]\) — again put forward by Malaysia — was designed to proffer a means by which an accommodation might be reached among all the Southeast Asian nations as the end of the second Indo-China war seemed to be at hand. Vietnam’s response, however, was for the most part negative, shifting only when it came under pressure from China. Its invasion of Cambodia was followed by China’s punitive war early in 1979. It also put it at odds with ASEAN, since it breached Cambodia’s sovereignty, and it was necessary to uphold that, even when it was in the hands of a despicable regime, the Khmer Rouge, and even though the invasion

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was a liberation. It was on this basis that ASEAN and China cooperated. When the Vietnamese withdrew from Cambodia, and a settlement was reached, the way was at last open for the accession of the mainland states to the Association. By a most indirect route, even involving collaboration with an outside power, ASEAN had attained a position that it had long sought as the basis of peace and stability within the region, prerequisite for limiting the role of outside powers, including China. ASEAN extended the idea that, rather than seeking security from outside the region, its members could secure it by agreement inside, perhaps more effectively. Regional cooperation, argued Thanat Khoman of Thailand, insulated participating countries from manipulation by foreign powers, friendly and hostile. It answered the ‘need for a more effective effort to neutralize any eventual interference or intervention on the part of others in our affairs and interests’.2 By resolving intra-regional disputes, or setting them aside, Southeast Asian states might avoid the need to call on outside powers and foreclose their opportunities for intervention. And they could deal with outside powers by acting as a group, not only on the economic front, which would also help to bring them together politically, and add to regional stability, but politically as well. ZOPFAN, too, was not merely an endeavour to contribute to peace in Indo-China. ‘The policy is meant to be a proclamation that this region of ours is no longer to be regarded as an area to be divided into spheres of influence of the big powers’, Dr Ismail told the 4th ASEAN meeting in March 1971. ‘It may be regarded as a project to end or prevent small countries in this region from being used as pawns in the conflict between the big powers.’3

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Nicholas Tarling

Whether that was an account of history that took sufficient account of local initiatives is doubtful, but politically it offered the states something more they could share. In fact there was a dynamic among the outside states as well as among those within the region. A strong element of rivalry had driven their interest in Southeast Asia. ASEAN leaders recalled that, particularly after the major changes among the great powers of the late 1980s and 90s. Steps to diminish rivalry among the outside powers would enhance the security of the region and its component states. Ambitious though it would be, regional leaders might conceive the hope of extending their diplomatic steps on to a wider platform, that of East Asia or the ‘AsiaPacific’ as a whole, for example. Not surprisingly, whatever the depth of their knowledge of history, Southeast Asian leaders wanted to ensure that the past was not ‘repeated’. That, they conceived, involved establishing stability within each state and among the states of the region, so foreclosing the opportunity or the need for intervention from outside. Could that be achieved? It involved two paradoxes: accepting the colonial frontiers, though they had been constructed with another purpose, that of avoiding conflict among the imperial powers; and constructing a regionalism that insisted on the sovereignty of states. If achieved, could it be sustained? That involved judgment and forbearance within regimes and among them. It also required, even so, acceptance on the part of outside powers, particularly on the part of the rising power, China, that had once seen states in the region as in some sense tributary. Was there after all to be another element in the pattern that mixed national and regional commitments? How would it fit?

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NOTES 1. Arthur Menzies/Ottawa, 18.3.59, 172. PM 434/10/1 Pt 2, National Archives (NA), Wellington. 2. Quoted in M. Gurtov, China and Southeast Asia. The Politics of Survival, Baltimore and London: Johns Hopkins University Press, 1975, p. 43. 3. Quoted in R.K. Jain, ed., China and Malaysia, New Delhi: Radiant, 1984, p. 153.

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3.

THE EVOLVING NATURE OF ASEAN’S ECONOMIC COOPERATION Original Vision and Current Practice NARONGCHAI AKRASANEE

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t is my great pleasure to be back at the Institute of Southeast Asian Studies (ISEAS) after many years and to have a chance to speak at the High-Level Conference on the Association of Southeast Asian Nations (ASEAN) today. It could be said that my ASEAN story has developed over the years for two reasons — interest and opportunity. Out of interest, during my studies in Australia and the United States in the 1960s, I studied and then wrote my dissertation on protectionism. When I came back to Thailand, my home country, and started working, I was determined to fight against protectionism, which was basically the industrial policies of that time. Recalling the early 1970s, when countries in the region like Singapore and Malaysia started opening up their economies, I had opportunities to work with the National Economic and Social Development Board of Thailand. My work was on industrial and trade policies. At the same time, I was doing research on regional cooperation — on

ASEAN, in particular. I knew at the time that economies of scale, not protectionism, would help a country to industrialize. So ASEAN economic cooperation would definitely enhance Thailand’s industrialization process. We had, at that time, the Kansu Report1 on ASEAN economic cooperation, which supported this concept. And when ASEAN held its first summit in Bali in 1976, the agenda on economic cooperation, to which I had made some contribution was very much derived from the Kansu Report’s recommendations. The Report’s recommendations were also the origin of the agreements on the ASEAN Preferential Trading Arrangements (PTA)2 and ASEAN Industrial Projects (AIP).3 Before economic cooperation was brought to discussion seriously in 1976–77, political and security issues featured much more dominantly on ASEAN’s agenda. The economic issue was brought up at the first summit, and became ASEAN’s major concern during and after the second oil crisis in 1979.

Printed in abridged format from introductory remarks given at the High Level Conference on the Evolving Nature of ASEAN’s Economic Cooperation, organized by the Institute of Southeast Asian Studies, Singapore, 9 October 2014. An abridged version of this speech will appear in a book to be jointly published by the Institute of Southeast Asian Studies and the Asian Development Bank. Used with the kind permission of the author and the Institute of Southeast Asian Studies.

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The Evolving Nature of ASEAN’s Economic Cooperation

The oil crisis was a wake-up call for ASEAN countries to accelerate the process of industrialization by means of export promotion. There was then a consensus among ASEAN policymakers about having a serious look at ASEAN economic cooperation. For this purpose, a high level Task Force was appointed in 1985, consisting of three members from each of ASEAN’s five founding members — Indonesia, Malaysia, the Philippines, Singapore and Thailand. I was a member of Thailand’s team. The Chairman of the Task Force was Mr Anand Panyarachun, a very senior Thai technocrat who later became the Prime Minister of Thailand in 1991–93. I recall Thailand’s active involvement in the ASEAN Task Force in 1985–86, which produced a comprehensive report on ASEAN cooperation. A few years later, the end of the Cold War and the break-up of the Soviet Union opened up an opportunity for ASEAN to work with Cambodia, Lao PDR, Myanmar and Vietnam (CLMV), whose market economy strategies were starting to materialize. This period saw the Asian Development Bank (ADB) greatly assisting the CLMV countries through the Greater Mekong Subregion Program (GMS).4 It was also the time when ASEAN expanded further to eventually incorporate all ten Southeast Asian countries by 1999. By another accident of history, Mr Anand Panyarachun became the Prime Minister of Thailand in 1991, following a military coup d’état early that year. Taking this opportunity, and also with encouragement from Prime Minister Goh Chok Tong of Singapore, Mr Panyarachun picked up the concept of an ASEAN Free Trade Area (AFTA) from the Task Force Report of 1985/86. An AFTA lobby team was appointed and I was a member of that team. The AFTA negotiations started in September 1991 and concluded in January 1992, with the signing of the Agreement in Singapore in February 1992. Most of the

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countries were very willing to participate in the negotiations, which therefore went very smoothly and were finalized quickly. The international trade environment was also favourable to AFTA. The General Agreement on Tariffs and Trade (GATT) was conducting the Uruguay Round of trade negotiations, starting from 1986, and was about to be concluded in 1992. So for most ASEAN countries, AFTA liberalization was considered to be a proper prelude for GATT liberalization. Then, as the Uruguay Round was expected to be concluded in 1994, AFTA began in 1993.5 Working for the many governments of Thailand since 1974 gave me opportunities to get involved in ASEAN issues deeply. When I became the Minister of Commerce in 1996/97, I had chances to work with ASEAN Economic Ministers to deepen ASEAN’s economic cooperation. We knew then that from the cooperation on trade in goods through AFTA, we should move on to trade in services. We also understood the need to allow the freer flow of direct investments among us, meaning encouraging national treatment for our ASEAN investments. Thus, the ASEAN Framework Agreement on Services (AFAS),6 ASEAN Investment Area (AIA),7 and freer flow of professionals were promoted. The ASEAN Economic Ministers Meeting in Cebu in 1997 was the foundation leading to the Cebu Declaration on the Blueprint of the ASEAN Charter in 2007, followed by the signing of the ASEAN Charter, which came into effect in 2008. While focusing on the common goal of regional cooperation, ASEAN has continued to work with external partners, as its principle is open regionalism. One of the most important turning points in ASEAN cooperation with external partners was its participation in the APEC8 Economic Leaders’ Meeting in the United States in 1993. Other institutions like the ASEAN Plus Three,9 the East Asia Summit,10 and

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the ASEAN+611 are also examples. The agreements between ASEAN and its partners have helped reinforce the openness of the so-called “open economy” of Asian countries. As for Thailand, moving beyond 2015, ASEAN has become “central” to the country’s development strategy. In terms of economic cooperation, Thailand’s strategy for its future development involves three layers: (1) the first is the GMS, which is the closest one to Thailand and which involves the CLMV countries, highlighting the significance of a regional production and market base; (2) the second is ASEAN’s other mainland and maritime countries, which allows for optimal resource allocation under the AEC 2015, and requires Thailand to implement appropriate policies to

Narongchai Akrasanee

improve its most competitive areas; (3) the third is the “ASEAN plus” mechanism, which suggests the internationalization of Thailand’s economic policies. I have shared with you on how I have been involved in ASEAN and how the idea of ASEAN economic cooperation developed. As for Thailand’s policy strategy concerning ASEAN, I am very optimistic that this is the way for countries like Thailand — being a developing country in the Southeast Asian mainland, surrounded by the fast-growing countries of CLMV, and open economies like Malaysia, Singapore, and a big neighbour Indonesia — to move forward, together with these countries, for regional development and prosperity. Thank you very much.

NOTES   1. A study on ASEAN economic cooperation conducted by the United Nations Development Program (UNDP). The report was completed in 1972 and was known as the Kansu Report (after its leader, Professor G. Kansu).   2. Agreement on ASEAN Preferential Trading Arrangements (PTA) signed in Manila on 24 February 1977.   3. Basic Agreement on ASEAN Industrial Projects (AIP) signed in Kuala Lumpur on 6 March 1980.   4. The GMS was established in 1992 and consists of China (specifically Yunnan Province and Guangxi Zhuang Autonomous Region), Cambodia, Lao PDR, Myanmar, Vietnam and Thailand.   5. The AFTA scheme had been transformed into the ASEAN Trade in Goods Agreement or ATIGA since May 2010.   6. The ASEAN Framework Agreement on Services (AFAS) signed in Bangkok on 15 December 1995.   7. Framework Agreement on the ASEAN Investment Area (AIA) signed in Makati on 7 October 1998. The AIA Agreement has been transformed into the ASEAN Comprehensive Investment Agreement (ACIA) which took effect in March 2012.   8. The Asia-Pacific Economic Cooperation (APEC) began as an informal Ministerial-level dialogue group with twelve members in 1989. The Economic Leader’s Meeting in 1993 was the first APEC Summit.   9. ASEAN Plus Three (APT) cooperation began in 1997 between ASEAN and China, Japan and South Korea. 10. The First East Asia Summit (EAS) was held on 14 December 2005 in Kuala Lumpur, Malaysia, attended by the Heads of State/Government of ASEAN, Australia, China, India, Japan, South Korea and New Zealand. The United States and Russia has joined the EAS since 2011. 11. Economic cooperation between ASEAN countries and six other nations — Australia, China, India, Japan, South Korea, New Zealand — under the EAS, towards the establishment of the Comprehensive Economic Partnership for East Asia (CEPEA). CEPEA was initiated in the second EAS in 2007.

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4.

FROM POLITICAL/SECURITY CONCERNS TO REGIONAL ECONOMIC INTEGRATION RODOLFO C. SEVERINO

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he Association of South East Asian Nations, or ASEAN, from its very beginning, has had two objectives. The first is to prevent the historical disputes among its member-states from developing into armed conflict. The other is to keep the major external powers from using the region as an arena for their quarrels. At the beginning, all five founding states were threatened by the rise of Communism, then abetted by like-minded external powers. Soon, however, Communism ceased to be an armed threat. The formation of ASEAN in 1967 was also made possible by the transformation taking place in Indonesia, Southeast Asia’s largest country in terms of population, land area, the economy, and activism in international affairs. It would not do for Indonesia simply to join the young Association of Southeast Asia, or ASA, ASEAN’s template-association composed of three future members of ASEAN — Malaysia, the Philippines and Thailand — and taking over most of ASA’s practices and structures. An entirely new association had to be set up not only because of Indonesia’s status but also because of her

ideological predilections. Thus, Indonesia’s highest-ranking point-man for ASEAN, Vice President Adam Malik, Presidium Minister for Political Affairs and Minister for Foreign Affairs, invited Burma and Cambodia to join the new association. Unfortunately, those two states, like Indonesia staunchly non-aligned, demurred, said to be suspecting that ASEAN would be a replacement for SEATO, another brainchild of the United States in its web of military alliances. The U.S. was then mired in its Indochina war, although the U.S. was showing signs of her determination to get out of the Indochina quagmire. At the same time, Indonesia was transforming itself from the Sukarno to the Soeharto era, from autarky in economic policy to relative openness to international markets, foreign aid and investments, from the Left in foreign policy to a more balanced posture in international affairs. Malaysia had territorial and other jurisdictional disputes with all of its immediate neighbours. There were occasional tensions between Thailand and Malaysia over several issues. Indonesia was opposed, militarily and otherwise, to the formation of Malaysia as a

Printed in abridged format from a presentation given at the High Level Conference on the Evolving Nature of ASEAN’s Economic Cooperation, organised by the Institute of Southeast Asian Studies, Singapore, 9 October 2014. An abridged version of this speech will appear in a book to be jointly published by the Institute of Southeast Asian Studies and the Asian Development Bank, by kind permission of the author and the Institute of Southeast Asian Studies.

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British-inspired enterprise. The Philippines was hostile to the inclusion of Sabah in the new Federation of Malaysia. Singapore and Malaysia had recently undergone an acrimonious separation as well as having territorial disputes between them. It was mostly to prevent these disputes, through consultation, through golf games and personal friendships, from erupting into something worse that ASEAN was formed. A WORLD DIVIDED The world when ASEAN was founded in 1967 was very different from what it is today. The Cold War was at its height. Part of it was America’s venture into Indochina, with the support of some ASEAN memberstates. It was in this situation that ASEAN as an association sought to position itself in the middle, although some of its individual member-states remained part, openly or covertly, of the U.S. web of alliances in East Asia. The twin-objectives of ASEAN — to keep disputes among members from developing into armed conflict and the quarrels of the strong from involving Southeast Asia — have basically remained the same throughout its almost half a century of existence. Nevertheless, especially at the beginning, these objectives have had to be disguised, as ASEAN wanted to continue to be seen only as an association for economic and cultural cooperation, in order to avoid being mistaken for a defence pact allied with the United States. However, the progression of ASEAN from purely political and security concerns to a group of countries professing to discern some value in regional economic integration and socio-cultural and environmental cooperation as mutually reinforcing is plain for all who are well-informed and observant to see. A LEGITIMATE ASEAN ENDEAVOUR In fact, it was not until the first ASEAN Summit, in February 1976, that economic

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Rodolfo C. Severino

cooperation was officially recognised as a legitimate ASEAN endeavour. It was not until early in 1975 that Economics Minister Widjojo Nitisastro and Trade Minister Radius Prawiro of Indonesia went to ASEAN capitals to lobby their counterparts into supporting them in their proposal to hold the first ASEAN meeting devoted exclusively to economic matters. The ASEAN Summit set the agenda for the first meeting of ASEAN economic ministers and decided its place and date, in Kuala Lumpur in March 1976.1 In terms of economic cooperation (this was before “integration” ceased to be a dirty word in ASEAN), the association at first publicly saw its main function as its member-states giving one another tariff preferences on trade in goods and reducing non-tariff barriers to them. They did this through the Preferential Trading Arrangements, an intra-ASEAN agreement in which each of the then-five ASEAN member-states committed themselves to reducing tariffs on their imports from the others. The agreement likewise calls for the removal of quantitative restrictions on such imports and other non-tariff barriers to them, also within certain timeframes. The tariffcutting schedule is largely on track, no doubt helped by the member-countries’ World Trade Organization (WTO) commitments. However, non-tariff barriers have become the means of choice demanded by some sectors for government protection against regional competition. ASEAN economies are thus prevented from becoming truly and comprehensively integrated on a regional basis.2 In this same spirit of protectionism, and eschewing the benefits that regional economic integration is supposed to bring to the nation-state, ASEAN saw industrial cooperation as giving each membercountry a regional monopoly on a certain manufactured product or group of products. Thus, Indonesia and Malaysia were eventually allowed, under the ASEAN Industrial Projects scheme, to build urea fertilizer plants in Aceh and Sarawak, respectively, with government

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From Political/Security Concerns to Regional Economic Integration

protection from regional competition. Similarly, in 1982, the ASEAN Economic Ministers approved the Philippine proposal for a copper-fabrication plant, with which the Philippines had substituted its original AIP project of superphosphates after proposing ammonium sulfate fertilizer and then a pulp and paper plant, depending, presumably, on the lobbying power of the company or sector involved. Starting with its soda-ash project, Thailand had a similar history of changing proposals. Having discovered deposits of natural gas in its national territory, Bangkok in 1983 announced plans to produce urea fertilizer. Indonesia and Malaysia naturally viewed this with misgivings. The ASEAN Economic Ministers approved in 1990 the potashmining project that Thailand had proposed in replacement of its original proposal. In 2004, the Thai Government decided to pull out of the project, claiming that potash mining was for private enterprise to undertake. Singapore, with its doctrinal and pragmatic devotion to the free market and aversion to “states deciding what industries to put up for a protected and exclusive regional market”,3 nevertheless had originally proposed for itself the manufacture of diesel engines. However, Indonesia, Malaysia and the Philippines were not willing to accept engines below 200 horsepower — or give up their own plan to set up plants for the manufacture of such engines, which made up the bulk of the regional market. I was to write, “The PTA agreement would cover ‘basic commodities’, particularly food and energy, the products of the ASEAN Industrial Projects and ASEAN Industrial Complementation schemes, and lists of goods to be negotiated among the parties. Implementation of the PTA started at the beginning of 1978. It initially covered 71 products after much hard bargaining on the 1,700 items that had been considered. By 1986, the number of items covered had grown to 12,700 and, by 1990, to 15,295. The margin of preference was originally an

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insignificant 10 per cent, but was increased to 20–25 per cent in 1980. The cut-off import value was raised from the original US$50,000 to US$10 million in 1983 until it was in effect abolished in 1984. On the occasion of the 1987 ASEAN Summit, the economic ministers signed a protocol committing the ASEAN countries to place in the PTA within five years (with Indonesia and the Philippines allowed seven years) at least 90 per cent of items traded among them with at least 50 per cent of the value of intra-ASEAN trade. The margin of preference for the new items was increased to 25 per cent and for those already in the PTA to 50 per cent, something that the economic ministers had already agreed upon four years before. The ASEAN content requirement would be reduced in five years from 50 to 35 per cent (42 per cent in the case of Indonesia), but ‘on a case-by-case basis’; after five years, it could be brought back up to 50 per cent. “Still, intra-ASEAN trade did not grow much. Because the coverage of the PTA was negotiated product by product, the tendency of the ASEAN member-countries, true to the protectionist spirit and importsubstitution policies of the time, was to include mostly items that were not likely to be traded (among them). The inclusion of snow ploughs and nuclear reactors became the object of derision within knowing circles. The national exclusion lists were long. In any case, even with a margin of preference of 50 per cent, a PTA tariff would remain high if the most-favoured-nation tariff was set at a lofty level. Tariff rates were not brought down; those ASEAN products that were covered were only given 25- to 50-per cent discounts on high tariffs. At their 1991 meeting, the economic ministers observed that, while intra-ASEAN trade in items covered by the PTA had grown from US$121 million in 1987 to US$578 million in 1989, it accounted for an ‘insignificant’ proportion of total intraASEAN trade.”4 It would be easy enough, with the considerable help of hindsight, to blame the

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wrong policies or the negotiators or both for ASEAN’s failure to integrate Southeast Asia’s economies sufficiently to present a serious competitive challenge to China and other continent-sized economies in East Asia for direct investments and export markets. However, we have to remember that, in many ways, ASEAN was a pioneering enterprise and, devoid of experience, was, without meaning to, showing the way to other regional associations of states. Moreover, Southeast Asia’s economic theorists were still under the spell of economists like the Argentine Raul Prebisch, the first SecretaryGeneral of the United Nations Conference on Trade and Development (UNCTAD). However, until today, the political power of lobbies and special interests has been helping to shape state decisions in many ASEAN countries. THE PRIVATE SECTOR At first, the ASEAN Chamber of Commerce and Industry (ASEAN CCI) was given the authority and mandate, for example, to identify products for inclusion in ASEAN industrial complementation schemes. As ASEAN gave up in the late 1980s on trying to manage industrialisation and moved towards letting firms essentially decide their own responses to the market, the private sector, with some exceptions, was reduced to seeking photo opportunities with leaders and ministers and thus demonstrating their connections with those in power. Again with some exceptions, the ASEAN private sector was also reduced to begging for consultation on the formulation of policies that affect their interests or to ignoring government policies altogether. Today, ASEAN leaders and ministers all urge ASEAN to “consult” the “private sector” on any economic moves that it makes. How extensive and effective those consultations have been depends, of course, on the political system of the country concerned. In any case, it seems to me, there is no such thing as a common

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Rodolfo C. Severino

position of the ASEAN “private sector” in support of regional economic integration; only fragmented positions favourable to and favoured by each company or sector. THE CHALLENGE OF CHINA As the 1990s approached, the ASEAN economies were confronted with the rise of China as a formidable competitor for foreign direct investments (FDI) and export markets. In 1976, China attracted a negligible amount of foreign investments. By 1992, largely because of the Deng Xiaoping reforms of the early 1980s, this figure had soared to about US$11 billion or more than 6.5 per cent of the world’s total FDI flows and to more than US$52.7 billion or almost 9 per cent in 2002. In comparison, FDI flows to ASEAN (and much of this was concentrated in Malaysia, Singapore and Thailand), had been overtaken by China as it recorded an aggregate of less than US$11 billion and slightly more than 6.5 per cent of global investments in 1992. Ten years later, ASEAN attracted a mere US$17 billion in FDI, a meager 2.7 per cent of the global total, with China striking more than US$52.7 billion or more than 8 per cent. (By 2013, ASEAN seemed to have recovered its FDI lustre, with Indonesia joining Singapore, Malaysia, and Thailand as the darling of international investors, and ASEAN and China each recording more than 8.5 per cent of the world’s total flows.)5 Meanwhile, the “September 1985 Plaza Accord . . . reached at the Plaza Hotel in New York among the finance ministers of Japan, France, West Germany, the United Kingdom and the USA, had resulted in the substantial depreciation of the US dollar against the other leading currencies. The yen’s consequent appreciation prompted Japanese companies to relocate from Japan and invest and establish production chains in the ASEAN countries, contributing significantly to those countries’ industrialization.”6 Shortly afterwards, MERCOSUR was created, with the Treaty of Asunción being

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From Political/Security Concerns to Regional Economic Integration

signed in March 1991. The European Union was being envisioned, the Maastricht Treaty concluded in February 1992. The North American Free Trade Agreement (NAFTA) was being negotiated among Canada, Mexico and the United States of America. Globally, the General Agreement on Tariffs and Trade (GATT) was being converted into the morebinding World Trade Organization (WTO), as the Final Act of the Uruguay Round of Multilateral Trade Negotiations was signed in December 1991. These facts and figures alarmed some ASEAN leaders enough to go along with proposals to make of ASEAN an integrated economy, a highly competitive production base that is linked with and open to the rest of the world. Thus, they decided to conclude the ASEAN Free Trade Area (AFTA).7 THE ASEAN ECONOMIC COMMUNITY Ten years later, with all ten of ASEAN’s current members on board, they decided to call the ASEAN economic-integration enterprise the ASEAN Economic Community. I can only surmise that the ASEAN leaders agreed to this proposition, in order to show the world the association’s seriousness in integrating the regional economy, knowing that only a regionally integrated market will attract the investments necessary for the national development of each of them. The only way to demonstrate their seriousness was to invoke the spirit of the European Union, or the European Economic Community, as the most economically successful of all regional associations of sovereign states. The Blueprints of the ASEAN Political/ Security Community and of the ASEAN Socio-Cultural Community are full of words like “promote”, “encourage”, “build”, “develop”, “increase”, “intensify”, “advance”, “enhance”, “facilitate”, “improve“, “support”, and “strengthen”, indicating that these communities are never-ending works in progress. These may also mean an acknowledgement that much of the work envisioned

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in the Blueprints is to be carried out by national governments and other domestic entities rather than by ASEAN as a group. On the other hand, the Blueprint for the ASEAN Economic Community carries with it a “Strategic Schedule” that commits the parties, in four two-year tranches (2008– 2015), to specific collective undertakings, as “priority actions”, within certain time frames. Thus, to estimate the prospects of achieving the AEC in 2015, the Asian Development Bank passed to the Institute of Southeast Asian Studies in 2011 the request of the ASEAN Secretariat for help in assessing the situation. ISEAS commissioned global experts to help undertake this task from the points of view of non-tariff barriers, services, investments, competition policy and intellectual property rights, sub-regional development, relations with external partners, dispute-settlement, and institutions. In addition, a survey was undertaken to ascertain companies’ and their decision-makers’ views on these matters. The view of the experts and business leaders was unanimous. If the commitments in the ASEAN Economic Community Blueprint were to be taken at face value, then the conclusion was inevitable — ASEAN was far from being an integrated economy.8 However, there is another way of looking at this. That is to view it as a measure of how far ASEAN has gone since its founding in 1967, a measure of a work in progress. One may also look at it as the ASEAN leaders’ re-affirmation of their aspirations for and commitment to the export orientation, reliance on market forces and openness to the international economic community of their countries’ economies.9 THE FUTURE ASEAN has no choice but to integrate the Southeast Asian economy, not only for investment and other economic reasons, but also for geo-strategic ones. For, increasingly, ASEAN will continue to be taken seriously by the rest of the world, and thus maintain

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its “centrality” in the growing number of schemes and “architectures” in the AsiaPacific, only if it is economically strong and resilient and is perceived by the rest of the world as such. It will continue to be so only if it integrates the regional economy — and carry out domestic political reforms — enough to win back the investments and exports that had been lost to China in recent years. And one can integrate the regional economy and carry out the necessary domestic political reforms, only if peace and stability prevail in the region, values are shared and converge, and the habit of working together is widely inculcated, starting with the cultivation of a strong regional, as distinct from a purely

Rodolfo C. Severino

national, identity, in dealing with a growing number and intensity of transnational problems. In any case, ASEAN agreements are not self-executory; they depend on individual, sovereign nation-states, and thus on the will of the decision-makers in those states, for implementation or compliance. At the same time, ASEAN’s external partners in its FTAs or Comprehensive Economic Partnerships may each have different strategic views and purposes in pursuing and concluding them than those of the ten-member ASEAN. This is all the more reason for ASEAN to strive for economic integration, political cohesion and functional cooperation.

NOTES 1. Joint Communiqué: The First ASEAN Heads of Government Meeting, Bali, 23–24 February 1976, accessed 6 October 2014 in the ASEAN Secretariat Website (http://www.asean.org/news/item/ joint-communique-the-first-asean-heads-of-government-meeting-bali-23-24-february-1976). 2. See below. 3. Mr. S. Rajaratnam, foreign minister of Singapore, as quoted in M. C. Abad, Jr., ASEAN Secretariat: “The Role of ASEAN in Security Multilateralism: ZOPFAN, TAC and SEANWFZ”, a paper presented at the ASEAN Regional Forum Professional Development Programme for Foreign Affairs and Defence Officials, Bandar Seri Begawan, 23–28 April 2000; downloaded 8 September 2014 from the ASEAN Secretariat Website (http://www.asean.org/archive/arf/7ARF/Prof-Dment-Programme/ Doc-10.pdf). 4. Severino, Rodolfo: Southeast Asia in Search of an ASEAN Community (Singapore: Institute of Southeast Asian Studies, 2006), pp. 215–16. 5. United Nations Conference on Trade and Development (UNCTAD). 6. Severino, Rodolfo: “Politics of Association of Southeast Asian Nations Economic Cooperation” in Japan Center for Economic Research: Asian Economic Policy Review (Tokyo, 2011). 7. Severino: Southeast Asia in Search of an ASEAN Community (Singapore: Institute of Southeast Asian Studies, 2006), pages 222 et seq. 8. Basu Das, Sanchita, Jayant Menon, Rodolfo C. Severino, and Omkar Lal Shrestha, eds.: The ASEAN Economic Community: A Work in Progress (Singapore: Institute of Southeast Asian Studies, 2013; Manila: Asian Development Bank, 2013). 9. Ibid., pages 1 et seq.

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Section

II

COUNTRY ANALYSES

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INTRODUCTION

Ooi Kee Beng

T

he end of the Cold War undoubtedly provided new vistas for Southeast Asia’s development and intra-regional cooperation. However, the Asian financial crisis of 1997–98 churned up a sea change that continues to reverberate in the politics of many Southeast Asian countries. These countries had been impressive in their economic growth, and its unravelling was all the more dramatic. In Indonesia, it spelled the end of the long Soeharto era. Following a series of short-term presidencies, the country has since then managed to put into place not only an effective decentralization process, but also a succession of popularly elected presidents. After two terms with Susilo Bambang Yudhoyono, the country welcomed Joko Widodo in late 2014. Despite coming from outside the old elite structure, Widodo experienced a meteoric rise but now finds himself in no easy position, having to live up to the expectations of his supporters while navigating the corridors of traditional power. In Malaysia, the financial crisis precipitated the grave fallout between Prime Minister Mahathir Mohamad and his deputy, Anwar Ibrahim. The latter’s decision to fight his old mentor released a new political force

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that within ten years led to the formation of a strong opposition coalition, whose gains in the general elections of 2008 established a two-party system in Malaysia. Further north, in Thailand, the new millennium saw Thaksin Shinawatra bringing the voting power of the rural northeast and north to bear on the country’s politics. He changed the dynamics of electoral politics and polarized the country to such an extent that two military coups were carried out against him and his followers. The first, in 2006, ended his six years as prime minister, and the second, in 2014, toppled his sister Yingluck Shinawatra as prime minister. Vietnam’s political situation remains ambiguous despite its sustained economic progress. At the same time, reforms in Myanmar are allowing democratic elections to be held, but the challenges are diverse and numerous — inter-ethnic strife not being the least of them. The Philippines is often considered an outlier in that much of its economic and political dynamics do not seem to affect the rest of the region to a significant extent. This makes it of special interest, in adding to the diversity of the region, and making it a case worth studying, for comparative reasons especially.

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Finally, this section discusses Timor-Leste. This newest of Southeast Asian countries is not an ASEAN member yet, but its development

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is watched closely by its neighbours. Presently, it enjoys political stability and economically, it is paying its own way.

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5.

POLITICAL FIGURES AND POLITICAL PARTIES Indonesia after Soeharto HUI YEW-FOONG

INTRODUCTION From being a furniture businessman in the Javanese city of Surakarta, Joko “Jokowi” Widodo became the city’s mayor in 2005, then Governor of Jakarta in 2012, and finally went on to win the Indonesian presidential election in 2014. To assume the highest political office of the land after a formal political career of merely nine years is exceptional by any standard. Needless to say, Jokowi’s meteoric rise as a political celebrity has created much hype and expectations, both domestically and internationally. Jokowi’s supporters see him as the champion who will finally bring about clean and efficient governance in Indonesia, while international analysts interpret his victory as a close call in favour of democracy (Aspinall and Mietzner 2014). I would like to suggest that Jokowi’s rise as a political star was possible because of significant changes in the political system in Indonesia. The implementation of political decentralization or what is known as “regional autonomy” since the end of Soeharto’s New Order era in 1998 led to the emergence of regional political elites (Lane

2014). In particular, the direct election of leaders since 2004, from mayors to district heads, governors and the president, democratized the electoral process, and made these elections a broad contest of popularity among a wide range of candidates. Many work without robust party structures and ideological platforms, and established political parties often play a secondary role. In what follows, I will consider the rise of the political figure in Indonesian politics and its relationship with political parties in practice. POLITICAL FIGURES AT THE CENTRE OF DECENTRALIZATION With the end of the New Order regime, Indonesia embarked on the road of democratization and decentralization. The promulgation of Law No. 22/1999 and Law No. 25/1999 gave greater political authority and control over revenues to the districts and municipalities. These became key administrative units for the implementation of “regional autonomy” and they proliferated, growing from 341 districts and municipalities in 1999 to 440 in 2004,

This chapter was specially commissioned by the Institute of Southeast Asian Studies for The Third ASEAN Reader.

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and now to more than 500. At the same time, with the devolution of power and revenue to these regional administrative units, regional political elite emerged and entrenched themselves, sometimes as political dynasties, such as the Sochib family in Banten (Buehler 2013; Hamid 2014). It seems then that democratization and decentralization, as implemented in the post-Soeharto years, did not offer a miracle cure to the blight of corruption, collusion and nepotism that had been plaguing Indonesia. Instead, these problems, without disappearing from the national stage, became decentralized and replicated themselves in the regional political economies (Allen 2014). In these regional theatres of power, the spotlight is on both political parties and political figures. The former contest the regional legislative elections, while the latter seek office through direct elections at the regional level. However, it is often the election of regional leaders that is at the centre of this decentralized configuration of power, as the role of these leaders in shaping the policies and success of regional units is seen to be critical. Indeed, in the political system that has emerged in the post-Soeharto era, political parties play an ambiguous role. Although they serve as the formal gateway through which candidates can be nominated for legislative and executive political office, they tend to be relegated to the backstage once candidates move past the nomination post. This is in part due to their lack of clear and convincing political ideologies and platforms that their constituencies can identify with. By default then, voters support political figures that they can identify with rather than the parties that have nominated them. The evolution of such a political culture eventually valorizes political figures and their electability, such that political parties vie with each other, or enter alliances of convenience, to bring into their fold candidates that have higher chances of

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winning. In turn, the electoral strength of political parties become dependent, not on the ideas and values that the parties promote or hold on to, but on the popularity of their leaders with the electorate. It is no wonder then that some parties were formed to be electoral vehicles for certain political figures, as was the case of the Democratic Party (led by Susilo Bambang Yudhoyono) and the Great Indonesia Movement Party (Gerindra, led by Prabowo Subianto). Indeed, it can be said that political contests in the postSoeharto period are largely contests between political figures rather than contests of ideas or political parties. That political figures have come to occupy the centrestage of regional politics is in part due to the implementation of direct elections of regional leaders. During the Soeharto era and in the early part of the post-Soeharto period, regional leaders were elected by the regional legislatures, which made party support an essential element in electoral success. Since the implementation of direct elections, however, candidates have become directly dependent on the electorate for support, which means that success is dependent on their ability to win votes. This changed the rules of the game for the political elite, shifting the grounds of engagement from a limited elite circle where transactions are made to the streets where a popularity contest has to be won through the hustings. With at least hundreds of thousands of voters to reach out to, electability is often a function of recognizability and the extent to which voters can identify with the candidate. This is the larger political context in which Jokowi thrived and eventually won the presidency. THE JOKOWI EFFECT AND ITS LIMITS Jokowi’s rise is premised on his success as mayor of the city of Surakarta, one of the key centres of Javanese culture, also known as Solo. He rebranded the city with the motto “Solo: The Spirit of Java” and

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Political Figures and Political Parties: Indonesia after Soeharto

successfully applied for it to be a member of the Organization of World Heritage Cities in 2006. His hands-on approach to improving the amenities of the city and the welfare of its residents, while remaining corruption-free, won him wide appeal and voters returned him as mayor with a formidable 90 per cent of the votes in 2010. His electability gained national attention and he was nominated in 2011 for the governorship of Jakarta, the nation’s capital. The nomination of both Jokowi and his deputy governor, Basuki Tjahaja Purnama, an ethnic Chinese popularly known as “Ahok”, demonstrates the importance of the figure of the electable leader, as well as the limits of such political dynamics. Jokowi, supported by the Indonesian Democratic Party-Struggle (PDI-P), and Ahok, supported by Gerindra, are clear examples of how political parties and the oligarchs behind them seek to appropriate the electability of candidates for themselves. While political parties seek to shore up their symbolic capital in the political arena through fielding electable candidates, such candidates are seldom admitted to the inner circle of party hierarchies. As a result, party leadership and political figures tend to grow independent of each other, especially since truly popular candidates enjoy an electoral base that transcends partisan lines. That Jokowi, as an outsider, managed to unseat Fauzi Bowo, the incumbent governor and part of the Jakarta establishment, proved his strong electability. Thus, even before Jokowi managed to warm his seat as governor of Jakarta, pundits were already mooting his possible nomination as a presidential candidate, and opinion polls had put him down as a frontrunner for the presidency as early as December 2012 (McRae 2013, p. 293). And so, just slightly more than two years after he assumed the governorship of Jakarta, Jokowi was nominated for the presidential race, based more on his electability than on what he has achieved during his short tenure in Jakarta, or his

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seniority in the PDI-P.1 The bifurcation between party leadership and political figures was apparent during the campaigns, where the PDI-P was slow to capitalize on Jokowi’s popularity for the legislative election, and later reluctant to throw the party machinery behind his presidential campaign. What initially looked to be an easy win for Jokowi turned out to be a tight race against Prabowo Subianto. The Jokowi effect — the ability to win elections based on his winning streaks in Solo and Jakarta — faced keen resistance from a section of the political elite that had rallied behind Prabowo. Many of these had courted Jokowi in the early jostle for party alliances, but Jokowi had halted their advances by refusing to give in to transactional politics, that is, party support in exchange for cabinet positions following electoral success (Aspinall and Mietzner 2014, p. 357). As a result, only four parties holding a minority 37 per cent of parliamentary seats supported Jokowi’s nomination. With extensive party machineries and strong financial backing competing against Jokowi’s lacklustre campaign crippled by rivalry within his own party, Prabowo managed to close the gap in opinion polls, gaining 45 per cent in support against Jokowi’s 47 per cent by mid-June 2014 (SMRC 2014). However, on polling day, Jokowi scooted past with 53.15 per cent of the votes against Prabowo’s 46.85 per cent. Jokowi’s close win shows that his legendary electability is contingent. In facing off Prabowo’s deep resources and some of the most organized political parties in Indonesia, Jokowi’s campaign, dependent largely on experts and volunteers beyond his own party, scrambled to keep the lead that was quickly being whittled away. However, Jokowi’s eventual victory with 53.15 per cent of the votes, way above the vote share of 39.97 per cent that the parties supporting him had during the 2014 parliamentary election, demonstrated that voters’ identification with

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him as a political figure went beyond the parties. But what is the nature of the voters’ identification? Exit polls showed that Jokowi’s appeal was stronger among voters with lower income, less education and from the rural areas, suggesting that these voters identified with Jokowi’s plebeian origins. On the other hand, Prabowo’s supporters tended to come from the urban educated middle and upper classes that identified with Prabowo’s urbane and aristocratic origins (Mietzner 2014b, p. 115). In addition, the geographical spread of the votes shows the importance of the non-Javanese vicepresidential candidates. Jokowi’s running mate, Jusuf Kalla, managed to secure victory in most of the provinces of his home island of Sulawesi, while Prabowo’s running mate, Hatta Rajasa, gained important wins in four provinces on his home turf of Sumatra (Aspinall and Mietzner 2014, pp. 361–62). It seems then that these fundamental forms of identification, based on idioms of class and ethnic origins, depoliticized and taken out of public discourse during the Soeharto period, has continued to haunt the Indonesian electoral landscape post-Soeharto. In turn, these forms of identification place limits on the impact of political rhetoric, whether democratic or neo-authoritarian, on electoral outcomes. IS THE PARTY OVER? Although Jokowi had gained entrance to the presidential palace, he very quickly had to contend with the challenge of political parties in the arena of governance. Prabowo’s Red-and-White Coalition had monopolized all key appointments in parliament and

Hui Yew-Foong

vowed to rule the country based on their majority position in parliament and regional assemblies (Aspinall and Mietzner 2014, pp. 364–65). At the same time, Jokowi conceded cabinet positions to parties that supported him and more recently was under pressure to endorse his own party’s nominee for the Chief of Police position, raising questions on whether he was able to truly operate above the vested interests of these parties and whether he needed to form his own party.2 In the event, parties in the opposition coalition were too riddled with internal divisions to challenge Jokowi, and he also managed to subtly put in his own nominee for the Chief of Police position. But does this mean that Jokowi, the political figure, has been able to rise above the pressures exerted by political parties? Jokowi’s victory represents a new development on the political scene — he shows that someone who is not part of the political elite can still aspire to and assume the highest office in the country. However, we still have to be cognizant of the constraints on his administration and not assume that the election of this political outsider will bring about revolutionary changes. Winning votes on the streets and operating in the corridors of power require different skills and different networks. Inasmuch as Jokowi has disavowed transactional politics, it remains to be seen to what extent he is able to manoeuvre amidst the influence of the Jakarta elite with their vested interests, variously called the oligarchy or political cartel by different analysts (Winters 2011; Slater 2004). More importantly, this will reflect the way the exercise of power continues to be structured in Indonesia, between political figures and their parties.

NOTES 1. See Mietzner (2014a) on Jokowi’s rise to the presidential challenge, in particular, his own confidence in his ability to win elections as a qualifying factor for the presidential race, as well as how his position within the PDI-P was mediated. 2. See Fionna (2015) and Lane (2015).

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6.

MALAYSIA Close to a Tipping Point

OOI KEE BENG

A NEW CONSCIOUSNESS ARISES The political changes occurring in Malaysia since the Asian financial crisis have been persistent and profound. Most significantly, these have not led to the ruling coalition — which has ruled the country since independence almost 60 years ago — losing power. This tight hold on power by the Barisan Nasional (BN) — a coalition of more than a dozen parties led by the United Malays National Organisation (UMNO) — has largely been possible due to a race-based discourse and a race-based central policy put into place following racial riots in 1969 in Kuala Lumpur which has sought to advance the interests of the majority Malay community. Backed by draconian laws, legislative restrictions on the freedom of speech and assembly, and a tight control over the mass media, the BN has managed to survive all general elections — sometimes winning them with huge margins, as it did under the leadership of Dr Mahathir Mohamad in 1995. This formidable power structure suffered its biggest shock in 1998, however, when

Mahathir sacked his deputy and heir-apparent Anwar Ibrahim in September that year. Anwar refused to go in silence and instead took to the streets, organizing huge demonstrations throughout the country against the prime minister. On the night of 20 September, police stormed his house and Anwar was arrested, tried in cruel and humiliating fashion, and sentenced to 15 years on charges of abuse of power and sodomy. Thus began the reformasi movement that continues to foster political consciousness for a whole generation of young Malaysians. The 18 years since Anwar’s dismissal marks a new period in the political history of the country. In ways Anwar could not have foreseen — Mahathir certainly did not — the conflict between the two men precipitated a split in the Malay community that saw Anwar functioning as a lightning rod for discontented Malaysians, which surprisingly nurtured a powerful alternative coalition within ten years. The country began running up continuous budget deficits during this period, although strangely, Mahathir’s vision to turn the country into an advanced nation by 2020 continues to be parroted.

This chapter was specially commissioned by the Institute of Southeast Asian Studies for The Third ASEAN Reader.

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Anwar was released in September 2004 after his conviction on the sodomy charge was overturned on appeal. His years in prison were also the final years of Mahathir’s premiership. After faring badly among Malay voters in the general elections of December 1999, Mahathir began contemplating his retirement. Choosing an heir was no easy matter with Anwar out of the picture. His vote finally went to Abdullah Badawi. Najib Razak, whom many had thought to be his preferred successor after Anwar, was bypassed. Perhaps as consolation, or as part of the deal, Abdullah later chose Najib as his deputy. With an electoral platform promising broad reforms, the BN under Abdullah went on to win over 90 per cent of the parliamentary seats in 2004, indicating clearly that the polarization of Malaysian society was not yet as strong in the immediate post-Mahathir period as would soon be the case. Taking over power from a dominant leader like Mahathir — who had been at the helm for 22 years and who was elected into parliament as early as in 1964 — proved a thankless job for Abdullah. Failing to deliver on his promises of reforms due mainly to resistance within his own party, his coalition suffered the indignity of seeing five states fall to opposition parties in the general elections of 8 March 2008. The BN also lost for the first time the crucial two-thirds majority needed for constitutional amendments. Mahathir’s constant attacks on his successor over the preceding two years were partly to blame. To be sure, the morning after Election Day, Mahathir began calling for Abdullah’s resignation. Within a year, by April 2009, his demand had gained enough traction within the party for Abdullah to agree to retirement. The person they chose to replace him was his deputy, Najib Razak. Abdullah’s term in office offers a study in how difficult it is for reforms following the departure of a powerful leader to succeed. From the very start, he raised expectations

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to a level that were hard to meet, given how UMNO’s power structure was left intact and how politely the reforms were propagated. Najib thus took power without a popular mandate, and he had no honeymoon period. Yet, he delayed elections for as long as was constitutionally possible, dissolving parliament only in early 2013, for polls to be held on 5 May that year. To be sure, what he was up against when he took office was quite a formidable force. A TWO-PARTY SYSTEM APPEARS The reformasi movement that began in 1998 may have opened up a deep schism in the Malay community, which in itself suggests a growing confidence that possibly stems from its proportionately larger population, better education and access to broader channels of information. But as the elections the following year showed, the movement failed to assuage the strong suspicions that the non-Muslim communities harboured against the opposition Pan-Malaysian Islamic Party (PAS). Mahathir managed to stay in power despite an electoral revolt against him among the Malays. He had the Chinese vote for that. With Mahathir conveniently retired by the time the 2004 elections took place, the BN managed to reverse the trend and regained the Malay vote to a sizeable degree. The tactic of putting Abdullah at the helm definitely worked out well for UMNO and its coalition partners. So how did things suddenly go so wrong for the BN between 2004 and 2008? The trouncing of the opposition in 2004 by the BN encouraged shows of arrogance among certain UMNO leaders. Education Minister Hishammuddin Hussein, for example, made a show of unsheathing his keris three years in a row at the party’s general assembly. This was strongly criticized each time as a condescending provocation of the non-Malay communities. During this period, a series of inter-faith incidents also took place that included the destruction

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Malaysia: Close to a Tipping Point

of Hindu temples, the snatching of bodies of purportedly secretly converted Muslims at their funerals for Muslim burials, and apostasy cases. At the same time, opposition parties, badly humbled by the election results, met in mid2005 to strategize their next move. Anwar Ibrahim — back in the country after some time spent in the West after his release — acted as the bridge, not only for opposition parties, which included his own Parti Keadilan Rakyat (PKR), but also for a row of non-government organizations. To counteract the race-based politics that had always benefited the BN, the opposition at large had to concentrate on governance issues such as anti-corruption, rule of law, political accountability and transparency in order to unite. Operationally, the effective issue they chose to focus on was clean and fair elections. And so, the Coalition for Clean and Fair Elections (Gabungan Pilihanraya Bersih dan Adil — shortened to “Bersih”) was officially born on 23 November 2006. Accusing the Election Commission of systemic bias and for working for the ruling BN, this new NGO emphasized irregularities such as rampant gerrymandering, malapportionment of voters, postal vote fraud and the existence of so-called “phantom voters”. It organized its first demonstration on 10 November 2007, drawing somewhere between 20,000 to 40,000 people, onto the streets of Kuala Lumpur. Inspired further through the new media, the crowd — Malaysians from across the ages and the races — turned up, many dressed in yellow T-shirts, to voice their disapproval of the government and the failure of Abdullah’s reforms. This concentrated discontent shocked the government — and probably the participants as well. To make matters worse for Abdullah, a month later, on 25 November, an equally huge demonstration organized by a group called the Hindu Front Action Force (Hindraf) took place, again in Kuala Lumpur.

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What the opposition parties under Anwar Ibrahim seemed to have accomplished — or at least inspired — in the process was nothing less than the rejuvenation of Malaysia’s civil society. Other movements would grow out of Bersih even as it went on to declare itself, in April 2010, as a non-partisan movement, titled Bersih 2.0. In 2011 and 2012, it held huge demonstrations calling for clean and fair elections. By the time Najib became prime minister in April 2009, a de facto two-party system had come into being. The three opposition parties that had worked together so successfully in the 2008 elections — PKR, PAS and the Democratic Action Party (DAP) — formally formed an opposition coalition under the name Pakatan Rakyat (PR). These ruled four states, something totally unthinkable before 2008. A fifth state, Perak, reverted back to BN rule following defections from the PR side. This exercise was attributed to Najib. Significantly, Selangor and Penang, the two most industrialized and urban states in the country, were now in PR hands. Selangor was in practice governed by PKR and Penang by the DAP, supported by their allies. PAS ruled Kelantan — as it had done since 1959 barring the interlude between 1978 and 1990 — and Kedah. On taking power, Najib continued Abdullah’s discourse of reform, and titled his major programmes “transformations”. Using the slogan “One Malaysia”, he attempted to regain the middle ground. This was apparently the mandate he had received from the party on taking over its presidency. This he failed to do, and quite dismally, in the general elections held on 5 May 2013. Despite losing the popular vote, however, the BN managed to stay in power. As comfort for Najib, UMNO actually increased its number of parliamentary seats. In turn, the opposition lost Kedah, but in the three states still under their control, DAP, PKR and PAS managed to win a two-thirds majority.

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Although Najib survived both the general elections and the party elections in 2014, his administration seemed uninspired. The One Malaysia slogan had been immediately dropped; and greatly disappointed that he could not woo back the Chinese vote, he allowed extremist voices in the UMNO right wing to ring even louder than before the elections. THE REFORMASI LEGACY Over the last eighteen years, Malaysia has indeed undergone profound changes at many levels. The advanced ways that recent information and communication technologies have been put to use in Malaysia have been astounding. Not only have the new media — including news websites like Malaysiakini and The Malaysian Insider — broken the monopoly over information that had once been a pillar of the government’s social control, the social media — with tweets and facebook groups — have now made social activism a very personal choice. Hand-in-hand with this, civil society groups have also grown in number and become more active and inspired. At the same time, in opposition to these, there are now groups that, though acting like NGOs, struggle to limit public space in the name of Islam and Malay culture. The government, locked in a situation where it does not believe it can win back the middle ground, has shown little inclination to chastise vigorously radical elements within UMNO, the Muslim and Malay community, and the arms of government — including the police. The use of draconian laws has also increased since the elections of 2013, and the Sedition Act has been freely used on opposition figures and academics. The ability of the opposition to retain control in 2013 over the key states it won in 2008 is highly significant. Running these states means that there are administrators and governments being trained outside the

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BN power structure. Furthermore, despite the lack of resources at the state level, competition in policymaking has become possible, and is consciously pursued. Malaysia’s economy today no longer exudes the strength and optimism it did before the Asian financial crisis. In fact, the national debt has increased tremendously, growing from a record low of 31.8 per cent of gross domestic product to 54.8 per cent in 2013.1 The unexpected drop in the global price of oil in 2014 has eased the government’s lifting of petrol subsidies, but the expected national income has also dropped, leading to urgent budgetary adjustments. The introduction of the goods and services tax in April 2015 contributes to the hikes in consumer prices. Najib’s 1MDB project to invest in oil and property, which he started soon after taking power, has turned out to be a financial disaster that may cost the country billions of dollars. This undermines his credibility to such an extent that his former mentor and supporter, Mahathir, has gone into full public opposition to his continued role as the country’s leader. The reformasi movement has brought forth a generation of political activists who strategically seek discourses that avoid racial and religious matters. This challenge has over two elections divided voter support right down the middle, polarizing the population. Any gains by either side from here on will require a lot of hard work, good luck and clever strategizing. In such a situation, it is only expected that one side points out the ill practices of the long arms of government, while the other side — in support of the status quo — tries hard to reinforce racial and religious issues. The fear in Malaysia today is that in amplifying racial and religious tensions, leaders pursuing short-term political gains risk worsening the country’s vulnerability to the violent and extremist Islamism that is now spreading across the world.

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NOTE 1. “Malaysia Government Debt to GDP”, Trading Economics, (accessed 5 May 2015).

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7.

THAILAND The Military’s Power Persists

MICHAEL J. MONTESANO

T

he military coup d’état of 22 May 2014 brought enforced quiescence to Thailand. This quiescence contrasted with the turmoil of the preceding decade. That turmoil included protests against the Thai Rak Thai Party government of Prime Minister Thaksin Shinawatra starting in late 2005, his ouster in a coup in September 2006, the return of a pro-Thaksin party to power in elections held in December 2007, and the removal by means of judicial processes of two premiers from that party in the closing months of 2008. It also brought about Thaksin’s August 2008 flight into exile to escape corruption charges, his “Red Shirt” supporters’ disruption of the ASEAN Plus Three and East Asian Summits hosted by Democrat Party Prime Minister Abhisit Vejjajiva in April 2009, and protests against the Abhisit government whose quelling brought the greatest loss of life in civil conflict in Thailand for many decades during April and May 2010.1 While the triumph of the Phuea Thai Party in the elections of July 2011 propelled Thaksin’s sister Yingluck into the premiership and ushered in relative calm, the end of 2013 and the first half of 2014

witnessed a campaign of demonstrations against her government and led, finally, to the 22 May coup.2 The years since 2005 have also seen Thailand, long viewed as one of the great successes of Cold War-era “nation-building” not only in Southeast Asia but also in the post-colonial world more generally, emerge as a bitterly divided society. It seemed to become, suddenly, a country debilitated by disagreements over fundamental questions concerning its social order, standards of political legitimacy and basic institutions. These disagreements often took the form of feelings — blind hatred on one side, unwavering loyalty on the other — toward the unquestionably transformational figure of Thaksin. But their origins predated Thaksin’s 2001–6 premiership by decades. Their bases lay in developments broader than the policies and conduct that defined that premiership. For the same developments that long accounted for Thailand’s image of harmony, prosperity and success also explain its crisis of the last decade. These developments date to a period of just a few years in the late 1950s and early 1960s.

This chapter was specially commissioned by the Institute of Southeast Asian Studies for The Third ASEAN Reader.

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Thailand: The Military’s Power Persists

The seizure of power by a military clique led by Field Marshal Sarit Thanarat in 1957 brought, first, a decisive step away from domestic Sinophobia and statist economic policy and toward open-economy capitalism and, second, restoration of the monarchy to symbolic and legitimating roles in national life that it had lacked since the end of royal absolutism in 1932. This same period brought a third crucial development, the take-off of commodity production on a vast upland frontier.3 While the need to sell their maize, cane, cassava, and rubber integrated the farmers on this frontier into national and international markets, government officers deployed from Bangkok pushed the Thai state into newly opened reaches of the country and thus integrated those farmers into the polity. The task of integrating them into the nation fell above all to the revivified Thai monarchy, whose leading members’ endless, well publicized, visits to the countryside gave rise to the image of dedication that defines it even today. In the mid-1980s, a quarter-century after these developments began to unfold, Thailand entered a period of breakneck economic growth that ended only with the Asian Financial Crisis. This growth rested on three principal foundations: the economy’s openness to trade and investment, the energies and talents of the urban SinoThai middle and business classes, and the availability of the labour of the children and grandchildren of the settlers of the upland commodity frontier. Fundamental to the low cost of that labour was the fact that a large proportion of the men and women who streamed to Bangkok to work in the country’s booming industrial and service sectors left their families at home and remitted money to them rather than tried to support them in the city. Even the bust that ended Thailand’s great boom in 1997 had the eventual effect of intensifying the patterns of sociological differentiation to which that boom had

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given rise. In the aftermath of the financial crisis, Thailand’s long open economy was opened further still. Assets were cheap, and distressed businesses vulnerable. As foreign money and firms flooded into the country, urban Thailand — above all Bangkok and its sprawling suburbs and exurbs — became during the first decade of the twenty-first century a markedly different place to what it had been a decade and a half earlier. The intensified foreign presence in the economy, the adjustment of Thai firms to new realities, and the concomitant rise in the service sector meant that Thais with the requisite educations, profiles and language skills could command previously unimagined salaries. New tastes and outlooks emerged accordingly. The newsstand at Suvarnabhumi Airport began to stock Luxe Guides to destinations like Milan and Barcelona for departing travellers. Thai Air Asia began to carry increasing numbers of young Bangkok entrepreneurs and wage workers on holiday trips to Singapore and Hong Kong. A critical mass of the city’s people began to look outward, and to give scarcely a thought to developments in Singhburi or Phitsanulok or Ubon Ratchathani. But life in the provinces hardly remained static. Many Bangkokians might cling to the belief that “godfathers”, the strong-men of the frontier, continued to use money and violence to dominate the politics of the countryside. This view took, however, little account of the effects of the roads and schools constructed during the Cold War push for national integration, of rural people’s experience of circular migration to the capital or abroad in search of work and then home again, of the increasing shares of rural incomes derived from non-agricultural activities, of the communications revolution wrought by the mobile phone, or of the rhetorical appeals and social programmes of Thaksin Shinawatra.4 These effects included increasing awareness of the wider world, growing politicization, a reduced tolerance

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for the high-handedness of officialdom and the condescension of urbanites, and growing faith in elections as a means of improving one’s lot. Students of rural Thailand have in recent years coined a series of terms to capture this social transformation: “cosmopolitan villagers”, “middle-class peasants”, and “urbanized villagers”.5 Each of these terms connotes raised political awareness, freedom from serious poverty and consequent unwillingness to be taken for granted. Thaksin spoke to this awareness, this unwillingness to defer. In return, he won both the loyalty of people from across the North and Northeast of Thailand and an electoral base that has sent Thaksinite parties to power in every national election held since the turn of the century. At the same time, his arrogance, his authoritarianism, the manifest conflicts of interest resulting from his roles in both business and politics, and even his electoral prowess earned him the enmity of Thais both convinced that country deserved better in this era of “globalization” and frustrated by the impossibility of besting him or his proxies at the ballot box. The collision of this enmity with the new political awareness of Thaksinite voters led to increasingly trenchant dissatisfaction with the country’s political class — at least that part of this class that consistently won votes in northern and northeastern Thailand. That class’s putative corruption stood, in the eyes of those on the “Yellow” side of the country’s great political divide, in marked contrast to the virtue exemplified King Bhumibol Adulyadej. But a number of ironies characterize the embrace of hyper-royalism on the part of those Thais opposed to Thaksin and his political allies and alarmed over the politicization of their provincial compatriots on the “Red” side of the divide. First, King Bhumibol devoted much of his reign to rural Thailand and to the integration of its people into the life of the country. Today’s “Yellow Shirt” contempt for

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the aspirations of the people of northern and northeastern Thailand thus flies in the face of decades of efforts to minimize the role of regionalism in Thai politics. While the king’s travels to remote corners of Thailand during the hey-day of his reign seemed to render irrelevant the country’s regional “problem”, with its strong ethnic dimension, that problem has now been dramatically reopened.6 Nowhere, of course, have ethnic and regional tensions proved so grave during the past decade as in the Malay-Muslim-majority areas of the former sultanate of Patani, in the far south of Thailand. Renewed violence in those areas had by the end of 2014 cost more than 6,000 lives since early 2004.7 Neither the Thai military’s counter-insurgency operations nor sputtering negotiations, made possible by the good offices of Malaysia, with groups who may or may not speak for the shadowy insurgency have shown any sign of curbing this violence. But, while turmoil in Bangkok has often overshadowed the unfolding tragedy in Thailand’s far south, both that turmoil and that tragedy grow out of the same crisis of an over-centralized state and ossified notions of national identity.8 Second, recent years have seen mounting totals of prosecutions for alleged lèse majesté under Article 112 of Thailand’s criminal code and under its Computer Crimes Act.9 The irony that defence of an institution supposedly inherent to the Thai political and social orders appears to require harsh legal measures is lost on contemporary hyperroyalists. As prosecutions have accelerated since May 2014,10 too, the law of lèse majesté as a generalized tool of repression rather than as a device to protect the king and monarchy has become increasingly evident. In a third irony, today’s hyper-royalism is fundamentally backward-looking. Even as King Bhumibol’s reign approaches its inevitable end, that hyper-royalism fails to learn from his and his courtiers’ reinvention of the monarchy’s role to meet the demands

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Thailand: The Military’s Power Persists

of the Cold War. It fails, that is, to take into account the need for similarly forwardlooking reinvention of that role today, to meet the demands of the twenty-first century. In fact, the role that the king staked out for the monarchy from the late 1950s onward has been of diminishing relevance for some three decades, since the onset of urban-centred rapid economic growth in the mid-1980s. These ironies notwithstanding, an undeniable logic characterizes contemporary Thai hyper-royalism. What could, after all, be a more appropriate response, on the part of metropolitan elites and would-be elites to perceived threats to social status and political clout, than the firm embrace of an institution whose very essence lies in a pronounced sense of social hierarchy? Rooted in mistrust not just of Thaksin and those close to him, but of Thailand’s ostensibly corrupt political class as a whole, and thus of the voters who send members of that class to parliament, the logic of contemporary hyper-royalism enshrines the monarchy and its servants, not least in the judiciary, as checks on corruption and malfeasance. Central to this vision is an ideology of government by “good men” or people of virtue.11 Thais who joined the mass protests of the so-called People’s Democratic Reform Council against the Yingluck government

39

from November 2013 onward, protests triggered by that government’s attempt to give amnesty to Thaksin, embraced this ideology of effective depoliticization. Both the programme of semi-permanent “reform” launched by the National Council for Peace and Order (NCPO) junta that seized power in May 2014 and the hopelessly complicated terms of the Chitty Chitty Bang Bang constitution drafted under junta auspices appear designed to serve that same end. Yet, rather than transferring political power in Thailand either to representatives of Thailand’s royalist elite or to its technocrats, that coup left Thailand under unexpectedly harsh, surprisingly naked, praetorian rule.12 Events in the coup’s aftermath reminded observers of the country that, for all the rapid social and economic changes of the decades since the end of prolonged military dictatorship in 1973, its army remains untrammelled by and unreconciled to civilian control. Increasing interest in Thailand on the part of the People’s Republic of China, Thai citizens’ heightened political engagement, fears among economists that the country will fall into a “middle income trap”, and the eventual transition to a new reign define the context that will put the Thai military’s vision for the country to the test.

NOTES   1. International Crisis Group, “Bridging Thailand’s Deep Divide”, Crisis Group Asia Report N°192, 5 July 2010, (accessed 7 July 2010), p. 1.  2. These latter developments are best treated in International Crisis Group, “A Coup Ordained? Thailand’s Prospects for Stability”, Crisis Group Asia Report N°263, 3 December 2014, (accessed 16 March 2015).   3. See Chris Baker and Pasuk Phongphaichit, A History of Thailand (Cambridge: Cambridge University Press, 2005), pp. 155–59.   4. On these appeals and programmes, see Pasuk Phongpaichit and Chris Baker, Thaksin (Chiang Mai: Silkworm Books, second expanded edition, 2009), esp. Chapters 4 and 6.   5. These terms come from, respectively, Charles Keyes, Finding Their Voice: Northeastern Villagers and the Thai State (Chiang Mai: Silkworm Books, 2014); Andrew Walker, Thailand’s Political Peasants:

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Michael J. Montesano

Power in the Modern Rural Economy (Madison: University of Wisconsin Press, 2012); and Naruemon Thabchumpon and Duncan McCargo, “Urbanized Villagers in the 2010 Thai Redshirt Protests: Not Just Poor Farmers?”, Asian Survey 51, no. 6 (2011): 993–1018.   6. See David Streckfuss, “An ‘Ethnic’ Reading of ‘Thai’ History in the Twilight of the Century-Old Official ‘Thai’ National Model”, South East Asia Research 20, no. 3 (2012): 305–27.   7. Suphaphon Phanatsanasee et al., “สรุปสถิติเหตุการณ์ความไม่สงบในพื้นที่จังหวัดชายแดนภาคใต้ประจำ�ปี 2557: ปีที่มีจำ�นวนเหตุการณ์น้อยที่สุดในรอบ 11 ปี” [2014 Summary Statistics on Violent Incidents in the Southern Border Provinces: The Year with the Lowest Number of Incidents in 11 Years], Deep South Watch, Deep South Incident Database, (accessed 16 March 2015).   8. See Duncan McCargo, Mapping National Anxieties: Thailand’s Southern Conflict (Copen-hagen: NIAS Press, 2012).   9. See “Report on Lèse Majesté Prisoners after 2014 Coup”, iLaw, 16 July 2014, (accessed 16 March 2015). 10. Puangthong Pawakapan, “Multiple Targets of Thailand’s Martial Law”, ISEAS Perspective #15/2015, 12 March 2015, (accessed 16 March 2015), pp. 5–6. 11. Patrick Jory, “Thailand Enters the Interregnum”, ISEAS Perspective #54/2014, 21 October 2014,

(accessed 16 March 2015), p. 7. 12. See Michael J. Montesano, “Praetorianism and ‘the People’ in Late-Bhumibol Thailand”, Seatide Project online paper, February 2015, (accessed 16 March 2015).

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8.

VIETNAM Reforms Show Mixed Results

LE HONG HIEP

O

ver the past ten years, Vietnam has faced substantial economic, political and foreign policy challenges. The country’s efforts to deal with these challenges have produced mixed results, and how it continues to respond in the coming years will likely determine its long-term economic, political and strategic trajectories. ECONOMICS: DIFFICULTIES AND RESTRUCTURING EFFORTS After Vietnam joined the WTO in early 2007 and achieved an annual growth rate of 8.5 per cent the same year, there was high hope that the country would usher in a new phase of robust economic development to reach the goal of becoming an industrialized economy by 2020. However, the 2007–8 global financial crisis and the subsequent economic downturn have dampened this prospect. From 2008 to 2014, Vietnam registered an average annual GDP growth rate of 5.8 per cent, significantly lower than the 7.6 per cent for the 2000–7 period. Adverse global economic conditions together with poor management have also brought

many Vietnamese businesses, especially stateowned enterprises (SOEs), to the verge of bankruptcy. Following the collapse of giant state-owned corporations Vinashin and Vinalines and the mounting bad debts within the banking system, the government had to embark upon an economic restructuring programme. The policy for economic restructuring was officially adopted by the Central Committee of the Communist Party of Vietnam (CPV) in October 2011. The government then developed a blueprint for the restructuring, which was submitted to the National Assembly for review in 2012. The blueprint iden-tified three pillars for restructuring efforts: public (i.e. government-funded) investment, the banking system, and SOEs.1 By early 2015, all the three pillars of the restructuring programme were still underway, and showing mixed results. Regarding the first pillar, the share of public investment in the economy’s total investment tended to decline because of the private sector’s increased involvement as well as the government’s constrained budget. A revised law on public investment,

This chapter was specially commissioned by the Institute of Southeast Asian Studies for The Third ASEAN Reader.

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with stricter regulations designed to make public investment more efficient, was passed by the National Assembly in June 2014 and took effect on 1 January 2015. Meanwhile, bad debts within the banking system decreased but remained substantial, accounting for 5.4 per cent of the banking system’s total gross loans in November 2014 (CafeF 2014). A number of weak banks with high levels of bad debts were merged together or acquired by stronger ones in an effort to make the banking system leaner and healthier. However, by early 2015, the effort was still incomplete with more mergers and acquisitions being planned by the State Bank of Vietnam. Concerns about bad debts and inflation also prevented the government from pursuing expansionary policies, further weakening domestic demand and constraining the country’s economic growth. In terms of SOE reforms, the equitization2 of SOEs witnessed slow progress. In 2011, the government set the target of equitizing 531 SOEs by the end of 2015, but by November 2014, this had happened to only 214 SOEs (Ministry of Finance 2015). With the restructuring programme facing difficulties, Vietnam’s economic performance over the past five years would have been much weaker without the significant contributions of the foreign-invested and private sectors. From 2005 to 2013, for example, the foreign-invested and private sectors’ shares of the GDP increased from 15.16 per cent to 19.55 per cent, and from 8.51 per cent to 10.93 per cent, respectively. Foreigninvested companies have been particularly important in improving the country’s export performance, accounting for up to 66.8 per cent of the country’s export turnover in 2013 (GSO 2014, p. 530). These statistics show that international economic integration and the private sector have become increasingly important sources of Vietnam’s economic growth over the past decade.

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POLITICS: TOWARDS ACCOUNTABILITY AND GOOD GOVERNANCE At its tenth national congress in 2006, the CPV adopted a new policy allowing its members to own private businesses. The policy reflected the Party’s new thinking and continuous efforts to adapt to new conditions. Since then, the Party has also adopted various reforms towards greater accountability and better governance in order to consolidate its rule, especially when the country’s economic difficulties following the 2007–8 global financial crisis and rampant corruption have caused its political legitimacy to decline. These reforms, while limited, are positive developments that may pave the way for more meaningful ones in the future. In 2007, for example, in order to reduce the overlap between the Party and the government, the CPV abolished its Commission of Internal Affairs (CIA) and Commission of Economic Affairs (CEA). In theory, this was a right move towards a more efficient government which reduced the Party’s intervention into government operations. In reality, however, as no alternative supervisory mechanism was set up to replace the two abolished commissions, the government under Prime Minister Nguyen Tan Dung accumulated too much power and problems soon emerged. The over-ambitious yet risky expansion of major SOEs was a primary example. Following the collapse of Vinashin and Vinalines and the exposed corruption scandals in these two corporations, the Party decided to reestablish the CIA and CEA. While the CIA is tasked with coordinating the party’s anti-corruption efforts, the CEA’s most important responsibility is to advise the Party on economic issues and to supervise the government’s economic policies and their implementation. Another related development following the Vinashin and Vinalines scandals was the Politburo’s decision to discipline Prime Minister Nguyen

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Vietnam: Reforms Show Mixed Results

Tan Dung in October 2012. However, the decision was later reversed by the Party’s Central Committee, and Mr Dung survived the challenge to remain securely in office. Another example of the CPV’s efforts to hold its senior officials accountable was its decision to conduct confidence votes on office holders elected or approved by the National Assembly (NA) and the local People’s Councils in 2013 and 2014. The same procedure was later adopted for the Party system, with the Central Committee conducting an unprecedented confidence vote on 20 top party officials in January 2015. Another recent notable reform in Vietnam’s politics was the revision of the 1992 Constitution in 2013. In addition to having more provisions on human rights and citizens’ rights, the revised Constitution also provides for various reforms, such as the creation of a National Election Council (Article 117), or provisions for the possible abolishment of People’s Council at local levels and the direct election of chairpersons for local People’s Committees (Article 111). The revised Constitution, however, has drawn some criticism for maintaining the CPV’s monopoly of power and the state sector’s status as the leading driver of the economy. Although the above-mentioned reforms are positive steps, there have also been some negative developments. A primary example is the new regulation on intraparty elections. At the tenth CPV National Congress in 2006, delegates had, for the first time, the right to nominate candidates for the General Secretary position, and as late as at the eleventh Congress in 2011, delegates still enjoyed the right to selfnominate or nominate candidates for the Central Committee. However, in June 2014, the Central Committee issued a directive stripping delegates of this right, stipulating that all candidates for the Central Committee must be approved by the Politburo. This

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new regulation was possibly a response to an incident in June 2013 when the Central Committee elected into the Politburo two candidates who were not endorsed by the Politburo and the General Secretary. Although reflecting the Party’s wish to centralize and institutionalize its personnel selection process towards greater efficiency, the new regulation may constrain intraparty democracy and make elections at the twelfth CPV National Congress in 2016 less meaningful. FOREIGN POLICY: INTERNATIONAL INTEGRATION AND SOUTH CHINA SEA CHALLENGES Two major features of Vietnam’s foreign policy over the past ten years have been its active push for deeper international integration and its efforts to counteract China’s growing assertiveness in the South China Sea. After its accession to the WTO in 2007, Vietnam has benefited greatly from expanded trade ties. The country’s total external trade turnover jumped 3.5 times from $84.7 billion in 2006 to $298.2 billion in 2014, in which exports increased from $39.8 billion to $150.2 billion (GSO 2010; Vietnam Customs 2015). Apart from WTO membership, Vietnam’s participation in various multilateral and bilateral free trade agreements (FTA) also helped boost its trade performance. For example, as an ASEAN member, Vietnam is also a party to the ASEAN Free Trade Area (AFTA) and five other ASEAN Plus FTAs.3 In 2008, the country entered into its first bilateral FTA with Japan, followed by another with Chile in 2011. By late 2014, talks on free trade deals with South Korea, the European Union, and the Customs Union (Russia, Belarus and Kazakhstan) had either been concluded or had entered into final rounds. By early 2015, the country was also participating in negotiations on the

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Trans-Pacific Partnership Agreement (TPP) and the Regional Comprehensive Economic Partnership (RCEP). Deeper integration into the global economy has provided Vietnam with an important growth engine, but it has also exposed the country to global economic turbulences, as seen in its prolonged difficulties following the 2007–8 global financial crisis. Another foreign policy challenge for Vietnam over the past decade has been how to handle China’s increasing assertiveness in the South China Sea. Towards this end, since bilateral normalization in 1991, Hanoi has been resorting to a mixture of policy prescriptions that can be described as a multi-tiered omni-directional hedging strategy (Hiep 2013b). Under this policy, while directly engaging China politically and promoting bilateral economic cooperation, Vietnam has also pursued a military modernization programme and invested in soft-balancing efforts against China through regional institutions, especially ASEAN, and deepened relations with major countries. Accordingly, by the end of 2014, Vietnam had established 13 strategic partnerships with Russia (2001), Japan (2006), India (2007), China (2008), South Korea, Spain (2009), the United Kingdom (2010), Germany (2011), Italy, Thailand, Indonesia, Singapore, and France (2013). In addition, two “comprehensive partnerships” were also established with Australia (2009) and the United States (2013). Nevertheless, China’s growing assertiveness in the South China Sea, for which the 2014 Haiyang Shiyou 981 oil rig crisis is a recent

Le Hong Hiep

example, has sparked lively debates within the country as to whether or not Vietnam should pursue alliance politics to deal with mounting pressures from China. CONCLUSION In sum, the economic, political and foreign policy challenges that Vietnam has been facing over the past decade are unprecedented. Its responses to economic challenges have been rather indecisive and inadequate, prolonging economic restructuring with limited results. Without more liberal and radical reforms, especially regarding the banking sector and SOEs, its economic performance will likely remain weak in the next few years. Meanwhile, Vietnam’s political system over the past ten years has witnessed limited yet generally positive reforms, and the next few years will probably witness more reforms towards greater accountability and better governance as the CPV continues efforts to improve its legitimacy, given that economic difficulties are likely to persist. The new leadership and policy framework introduced at the twelfth CPV National Congress in 2016 are the key to understanding how these prospects will unfold. Finally, the South China Sea disputes will remain the most serious foreign policy challenge. The country’s strategic options, however, are shaped in Beijing rather than in Hanoi, in the sense that how assertive China decides to be in the South China Sea will set the tone for bilateral relations and determine Hanoi’s future strategic options vis-à-vis Beijing.

NOTES 1. For more information about Vietnam’s economic structuring, see Hiep (2013a). 2. In the Vietnamese context, equitization refers to the process of privatization in which the state maintains a portion of the company’s shares. 3. As of 31 December 2014, ASEAN has entered into FTAs with Korea, Japan, China, Australia and New Zealand (jointly), and India.

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9.

THE PHILIPPINES Challenging Conventional Wisdom

MALCOLM COOK

O

n the political and foreign policy fronts, the last decade in the Philippines has shown powerful continuities nationally and in relation to ASEAN with the preceding decade and the ones before that. These reinforce the widespread view that little changes in the Philippines and hence it is not worthy of as much attention as the more dynamic ‘core states’ of ASEAN and Southeast Asia.1 Yet economically, the last decade has been one of significant and positive discontinuity nationally and in relation to Southeast Asia that challenges this engrained and often dismissive view of the region’s second most populous country. This mixture of continuities and discontinuities is likely to persist in the coming decade, reaffirming the growing separation of the internationalizing Philippine private sector from national political travails and the need to revise the comfortable conventional wisdom about the Philippines. POLITICAL CONTINUITIES Despite an article in the 1987 Constitution requiring a law ending political dynasties

in the country, the Philippines remains the regional pinnacle of dynastic democracy. As noted in the letter introducing the 2013 House and Senate anti-political dynasty bills aiming to satisfy this constitutional requirement, the 2010 election saw 18 of the 23 senators elected hailing from political dynasties and three-quarters of those elected to the House of Representatives being of similar political lineage.2 All post-Marcos presidents have come from political dynasties, as have all elected vice-presidents except for the popular newscaster Noli de Castro. The last fifteen years has seen the rise and quick entrenchment of new national dynasties based in Metro Manila and Luzon, including the Estradas, Binays, Poes, Villars and Revillas. Vice President Binay is the clear front-runner for the presidency in 2016 while the neophyte senator and top vote-getter in 2013, Grace Poe, the daughter of failed presidential candidate and movie superstar Fernando Poe Jr., is the clear front-runner for the vice-presidency. Their closest rivals also all come from new or long-established dynasties. Despite early signs that the Aquino administration would break the pattern of

This chapter was specially commissioned by the Institute of Southeast Asian Studies for The Third ASEAN Reader.

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scandal, legislative lethargy and the early onset of lame-duck presidencies, this oftrepeated pattern that characterized the nineyear term of President Macapagal-Arroyo is proving resilient. After a few seminal legislative accomplishments, including the passing of the decades-delayed sin tax and reproductive health bills against strong legislative and public opposition from vested interests, the queue of priority bills is again growing and approaching the length of previous administrations. In the second half of Aquino’s term, the legislative process and media focus has been diverted — as it was in the Corazon Aquino, later Ramos, Estrada and Macapagal-Arroyo administrations — by scandals, calls for resignations and impeachment, constitutional reform red herrings and the early onset of preparations for the next election. The administration of Benigno Aquino looks like it will follow in the footsteps of the preceding ones when it comes to the search for a lasting political solution to the Muslim Mindanao insurgency. In all cases, negotiations with the largest insurgent group at the time produced promise and often signed agreements for a political solution. All failed to deliver or be implemented in ways satisfactory to both sides, and low-intensity conflict continued, eroding trust on both sides. The Comprehensive Agreement on the Bangsamoro signed in March 2014 by Malacañang and the Moro Islamic Liberation Front (MILF), after seventeen years of negotiations, looked like it might finally break this vicious cycle. It is the most comprehensive regional autonomy agreement signed yet and the MILF is in a strong position within the Moro insurgency. However, the 25 January 2015 massacre of forty-four Philippine National Police officers by MILF fighters and their Agreementopposing peers — the Bangsamoro Islamic Freedom Fighters — in a bungled raid to capture Malaysian terrorists has significantly slowed the Congress’ already delayed

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deliberations on the Bangsamoro Basic Law that is to legally entrench the Agreement. The massacre and the government’s response to it has turned public opinion sharply against the Basic Law and the larger peace process with the MILF. It is now very likely that the vicious cycle of dashed hopes and return to conflict in Muslim Mindanao will continue spinning when the next administration takes office in 2016. FRONT-LINE STATE The territorial and maritime boundary disputes in the South China Sea involving China and five ASEAN member-states has been a focus of global attention on ASEAN and a major test of ASEAN unity and centrality in helping manage major power interests and actions in the region. As in the 1990s, the Philippines has borne the greatest pressure from China’s increasingly assertive actions in these increasingly disputed waters. In the early 1990s, it was tensions between the Philippines and China off the coast of Palawan that was the catalyst for ASEAN’s unified position to call for China to negotiate a Code of Conduct in these disputed waters that host vital global sea lines of communication. Chinese pressure and ASEAN disunity led to the weaker nonbinding 2002 Declaration on the Conduct of Parties in the South China Sea. Over the last decade, China’s force projection capabilities (military and nonmilitary) have expanded rapidly, as have its trade relations with the economies of Southeast Asia and its assertive actions in the South China Sea. The Philippines again has borne the brunt as shown by the loss of Scarborough Shoal to the Chinese in 2012. The Philippines again pushed ASEAN the hardest to take a firmer and more united stand against Chinese actions in the disputed waters, with Vietnam also joining in. The Philippine Foreign Secretary Alberto del Rosario was the one most critical of

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Cambodia’s chairmanship of the first ASEAN foreign ministers’ meeting in 2012 where, for the first time, no joint communique was issued due to disagreements on how to address recent assertive Chinese actions in the South China Sea. Del Rosario’s strong and public stance backed by President Aquino on the need for ASEAN to do more about the territorial and maritime boundary disputes with China in the South China Sea (or the West Philippine Sea, as it is called in the Philippines) point to two discontinuities in the Philippine response to being a front-line state in these regional tensions. Both have tested Philippine relations with ASEAN and with some ASEAN member-states. The first is that under President Aquino, the Philippines has focussed less attention and placed less hope on the ASEAN-China discussions over negotiating a Code of Conduct in the South China Sea (as called for in the 2002 Declaration). Del Rosario himself has publicly questioned the utility of the process based on his suspicions of Chinese intentions.3 At the same time, under President Aquino, the Philippines has sought to bolster their claims in the South China Sea and their ability to defend the further loss of control through mainly non-ASEAN means. The Philippines, despite Chinese claims that this ran counter to the 2002 Declaration and great umbrage, filed a case on its disputed claims with China to the International Tribunal on the Law of the Sea.4 The Philippine decision to use its right to arbitration under the United Nations Convention on the Law of the Sea has gained public support from Japan, the United States, the European Union and the G-7, among others. It has not received a clear public statement of support from ASEAN. The second discontinuity shows that leadership does matter. Under President Macapagal-Arroyo, Philippine-China relations witnessed a “golden moment”.5 During this time, the Macapagal-Arroyo administration focussed on pursuing joint

development with China in the South China Sea even though this was seen by many legal experts as unconstitutional.6 Under Aquino, the Philippine position took a sharp turn to legally prosecuting the Philippine claims in dispute with China. The 2016 election will see another change of government and could well see another significant change in Philippine policy towards these disputes. The Philippines’ unwelcome position as the front-line state facing Chinese pressure in the South China Sea may have been consistent over the last two decades, but Manila’s approaches to this have not.

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HEALTHY MAN OF SOUTHEAST ASIA The Philippines has long been derided as the “sick man of Asia”, the maritime exception to the East Asian growth miracle and a Latin American political economy in Asia.7 Two decades ago, the Philippines’ resilience in the face of the Asian financial crisis provided a moment of celebratory schadenfreude for many in the Philippines as its previously higher-performing neighbours suffered much more. Yet, explanations for Philippine resilience often fell back on the fact that its structural economic weaknesses stopped the Philippines from being able to attract as much hot money as its neighbours. Its chronic illness saved it from crisis contagion. Yet, over the last five years, the Philippines has been the fastest growing major Southeast Asian economy with sustained high growth rates, improving macroeconomic and public finance indicators and green shoot signs of improvements in foreign direct investment inflows, poverty alleviation and employment. In 2014, the Philippines was rated as the second-fastest growing economy in Asia after a slowing China.8 Bullish predictions see the Philippines being the second-fastest growing economy globally in 2015, again after China.9 This sustained period of high growth is based upon a different economic model than its previously higher-performing maritime

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Southeast Asian neighbours, and it is a model less vulnerable to Chinese competition. Philippine growth has been underpinned by continued strong growth in remittance inflows from continuing high levels of labour export to all corners of the world. This has been combined over the last decade or so with continuing explosive growth in the business processing outsourcing industry. The Philippines has already replaced firstmover India as the largest global call centre node and is rapidly moving into other higherend niches in this expanding industry. By 2020, the World Bank estimates that this industry could account for $55 billion in annual revenue accounting for over 10 per cent of total GDP.10 Strong economic growth and the resulting confidence it inspires have seen a deepening of Philippine economic ties with the rest of

Malcolm Cook

Southeast Asia. The Aquino administration has used the looming ASEAN Economic Community to push through liberalizing reforms against local vested interests in the banking sector. The Philippines now has the most open banking policies for foreign bank entry in Asia with the Aquino reformers, led by the central bank, using the threat of a single ASEAN banking market to open up the Philippines to all banks.11 Reformers are seeking to do the same for cabotage laws given the eventuality of a single ASEAN shipping market. More Philippine firms, particularly in services, are expanding more widely and deeply across Southeast Asia. Firms from the low-cost carrier Cebu Pacific to the august Ayala Land are following in the footsteps of accounting firm SGV and drinks maker San Miguel, and expanding outward from their strong Philippine base to Southeast Asia.

NOTES   1. Indonesia, Malaysia and Singapore are frequently identified as these core states. Yang Razali Kassim, “Tsunami: nature’s test for ASEAN’s new leadership”, RSIS Commentaries (Singapore: S. Rajaratnam School of International Studies, 12 January 2005).   2. (accessed 8 April 2014)   3. Michaela del Callar, “China not keen on code of conduct in the South China Sea — DFA chief”, GMA News, 5 June 2014.   4. Shannon Tiezzi, “The Philippines’ UNCLOS claim and the PR battle against China”, The Diplomat, 1 April 2014.   5. Milton Osborne, The Paramount Power: China and the Countries of Southeast Asia (Sydney: Lowy Institute for International Policy, 2006), p. 40.  6. Barry Wain, “Manila’s bungle in the South China Sea”, Far Eastern Economic Review 171, no. 1 (January/February 2008): 48.   7. Marcus Noland, “The Philippines in the Asian financial crisis: how the sick man avoided pneumonia”, Asian Survey 40, no. 3 (2000): 401.  8. Raul Dancel, “The Philippines is Asia’s second-fastest growing economy in 2014 after China”, Straits Times, 29 January 2015.   9. Joshua Robinson, “The 20 fastest-growing economies this year”, Bloomberg News, 25 February 2015. 10. Babe G. Romualdez, “Bright prospects for BPO industry”, The Philippine Star, 10 February 2015. 11. Malcolm Cook, “Manila right on the money with banking reforms”, Straits Times, 27 November 2014.

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10.

MYANMAR Late Embrace of ASEAN

TIN MAUNG MAUNG THAN

INTRODUCTION Myanmar is a multi-cultural, multi-racial and multi-religious society. There are eight main ethnic groups, with the Bamar (formerly known as Burman) being the largest, comprising over 60 per cent of the total population. There are four officially designated faiths (Buddhism, Christianity, Hinduism and Islam), and although Myanmar is a secular state, Buddhism, with 90 per cent following, enjoys support from the ruling elite. Administratively, the Republic of the Union of Myanmar is divided into seven states (named after the major non-Bamar ethnic group that resides in the area) and seven regions (areas with the Bamar ethnic group comprising the majority). There are also six self-administered zones comprising several townships where a substantial population of a non-Bamar ethnic group (which does not belong to the majority non-Bamar ethnic group if it is an ethnic state) resides. The new national capital called Nay Pyi Taw (meaning “Abode of Kings”) was established

in November 2005, to replace Yangon (Rangoon). The English name “Burma” was dropped in favour of “Myanmar” on 18 June 1989. POLITICAL SYSTEM On independence, the country was a parliamentary democracy. After the coup on 2 March 1962, direct military rule was practised by the junta, known as the Revolutionary Council (RC). From January 1974, a one-party (Burma Socialist Programme Party or BSPP) socialist system was in place until 18 September 1988 when it reverted to military rule under the State Law and Order Restoration Council (SLORC) in the midst of a popular uprising that had paralyzed the government for many weeks. The SLORC held a multi-party general election (for a unicameral legislature) in May 1990 but refused to hand over power to the National League for Democracy (NLD; the main opposition party led by Aung San Suu Kyi, who is the daughter of Myanmar’s

This chapter was specially commissioned by the Institute of Southeast Asian Studies for The Third ASEAN Reader.

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national hero General Aung San) which won some 80 per cent of the seats. The junta that reconstituted itself in 1997 as the State Peace and Development Council (SPDC) oversaw the drafting of a new constitution by way of a fourteen-year long process in which a handpicked National Convention was tasked to formulate its detailed principles. The resulting constitution, which institutionalized the military’s political role, was passed by an overwhelming vote (92 per cent endorsement in a 98 per cent turnout) in a controversial referendum in May 2008, despite opposition by democracy activists and dissidents as well as the NLD party (which walked out of the NC in 1995) and condemnation by the West. Subsequently, the SPDC held a general election in November 2010 (which was boycotted by the NLD). The Union Solidarity and Development Party (USDP; a party led by high-ranking retired military officers) won a landslide victory (79 per cent in the lower house; 77 per cent in the upper house and 75 per cent average in region/state legislature) and formed the constitutionally-elected government in March 2011, ushering in a new multi-party political system that professes electoral democracy as the operating principle. Currently, Myanmar is governed by President Thein Sein, who was the chairman of the USDP and who had served as prime minister in the former SPDC-appointed government. Members of the Union Government (ministers and deputy minsters) are appointed by the President and need not be elected (Hluttaw) representatives (popularly known as MP or Member of Parliament), bicameral legislature comprises the Pyithu Hluttaw (People’s Assembly or lower house) and Amyotha Hluttaw (National Assembly or upper house) at the national level. The combined sitting of the two houses constitutes the Pyidaungsu Hluttaw (Union Assembly). Each region and state has its own unicameral legislature and government

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Tin Maung Maung Than

whose chief executive is the Chief Minister appointed by the President). Military representatives nominated by the armed forces Commander-in-Chief (C-in-C) occupy 25 per cent of the seats in all three legislatures (upper and lower houses and the fourteen region/state legislative assemblies). Military officers nominated by the C-in-C head the defence, border affairs and home ministries at the Union level and security affairs and border affairs ministries in the region/state governments. The election cycle is five years. According to the 2008 Constitution, all members of the Union Government (except for serving military officers) must resign from government service and give up their seats in the legislature. They must also abstain from party activities if they belong to any political party. The President is chosen by the Union Assembly from among three MPs endorsed respectively by the lower house, upper house and the military representative group. A person whose extended family (parents, spouse, children and their spouses) includes a non-Myanmar national is not eligible for the executive presidency according to the Constitution. The Constitution also exempted the military from civilian control and it enjoys considerable autonomy with respect to its own affairs. Amending important sections in the Constitution requires a daunting twostep voting process. First, an amendment requires over a 75 per cent majority in the Union Assembly to qualify for a national referendum. Next, there must be a majority of over 50 per cent of the eligible voters in the national referendum for the amendment to succeed. POLITICAL REFORMS President Thein Sein quickly introduced political reforms, from the second quarter of 2011 onwards, that engendered a more pluralistic and relaxed political environment. Consequently the NLD led

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by Aung San Suu Kyi (who had been under house arrest for extended periods between 1989 and 2010) returned to mainstream politics by way of a sweeping (winning 43 out of 45 seats) by-election victory in April 2012. Nevertheless the USDP still dominates the national assemblies, while the military’s 25 per cent share allows for a block vote that would be pivotal for any major constitutional amendment proposal. Other political reforms include the release of most political prisoners, permission to form labour unions and student organizations, allowing industrial action and public protest in accordance with new laws and Presidential initiatives to extend ceasefire negotiations (ultimately leading to political dialogue) with armed ethnic groups fighting for autonomy and a federal political system. ECONOMY Under colonial rule, Myanmar was an export-oriented mercantilist economy based on the extraction of its agricultural and natural resources (rice, timber, oil, and minerals) with most of the benefits going to Britain and foreign companies. The importsubstituting industrialization (ISI) drive in the 1950s, based on state control and ownership of major economic enterprises, failed. Self-reliant economic nationalism intensified during the RC rule as the country exercised self-isolation, resulting in little growth. Thereafter, under BSPP rule, Myanmar pursued a resource-extracting ISI strategy with heavy dependence upon official development assistance (ODA) and negligible foreign direct investment (FDI). This led to a near-collapse of the economy in 1988. Only then did the new-generation military leaders introduce an “open door” economic policy that was meant to attract FDI and establish a more open economy. Myanmar has essentially been an agriculture-based economy. Over 60

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per cent of the working population is in agriculture. It is rich in offshore gas, jade and gems, minerals, teak, hardwood, and hydro-power resources. Under President Thein Sein’s economic reforms, much emphasis has been placed on trade and investment (especially FDI) and privatesector development. The most significant reforms include the managed float of the Kyat (local currency) that rationalized the unrealistic fixed exchange rate that was over-valued by some 150 times in relation to the market rate, abolishing the state monopoly on foreign trade and liberalizing the banking sector. The lifting of Western sanctions and the clearance of debt arrears with the International Financial Institutions (IFI), such as the World Bank and the Asian Development Bank, in response to political and economic reforms have facilitated the expansion of foreign trade and FDI inflow in recent years. The rehabilitation of Myanmar’s long neglected transport and energy infrastructure, whose dilapidated state has resulted in poor connectivity and electricity shortage, is being undertaken with ODA from the IFIs and donor states as well as innovative PPP (public-private partnership) schemes. Three special economic zones are being developed (in Yangon, Kyaukphyu near the Bay of Bengal and Dawei near the Gulf of Thailand). The government has also launched a poverty reduction drive through rural development, micro-financing and SME (small and medium enterprise) development with foreign assistance. Presently, Myanmar is regarded by prospective investors as a most promising emerging market. However, the fruits of those reforms have yet to materialize and much needs to be done to improve the business environment, manage labour relations, reduce transaction costs, reform antiquated business laws, reduce corruption and rent-seeking, and introduce robust market-conforming institutions. Myanmar remains one of the poorest nations in ASEAN

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(Association of Southeast Asian Nations) in terms of nominal per capita income. MYANMAR AND ASEAN Myanmar, despite being co-sponsor of the (Asian-African) Bandung Conference in April 1955 and a founding member of the Non-aligned Movement (NAM) in 1961, stayed out of all regional blocs and groupings during the Cold War period, observing strict neutrality throughout. In fact, socialist Myanmar withdrew from NAM in 1979 during its convention in Cuba apparently for the pro-Soviet stance taken by the organization. Myanmar’s leaders rebuffed overtures to join ASEAN at its inception in 1967 and remained relatively isolated for three decades before becoming a member of the regional grouping only in July 1997. Despite having professed that it would stay out of any organization whose members could be identified as hosting foreign military installations, Myanmar finally decided to join ASEAN for a variety of reasons; including the end of the Cold War, the need to counter Western sanctions, enhancing legitimacy, and imperatives of the market economy. For nearly a decade after the 1988 coup, ASEAN was willing to give Myanmar the benefit of the doubt and had constructively engaged in quiet diplomacy and in socializing Myanmar’s ruling generals to appreciate the “ASEAN way”. Thailand invited Myanmar’s foreign minister to the Bangkok summit as an “observer”. Following Myanmar’s announcement in 1995 to accede to the Treaty of Amity and Cooperation (TAC), it had progressed by 1996 to official observer status and membership in the ASEAN Regional Forum (which deals with security issues). Finally, aided by Malaysia’s intense lobbying, Myanmar was admitted as a full-fledged member of ASEAN on 23 July 1997 together with Laos at the 30th AMM (ASEAN Ministerial Meeting) in Subang Jaya, Malaysia. This was despite objections from ASEAN dialogue partners such as the

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European Union (EU) and the United States (US) as well as reservations on the part of some old members. The next decade saw a bumpy ride for both ASEAN and Myanmar as the EU and the US and other Western dialogue partners refused, for many years, to acknowledge Myanmar’s membership status in their engagement with ASEAN. Myanmar’s harsh treatment of the political opposition and its poor human rights record overshadowed its ASEAN membership and created difficulties for the grouping. But ASEAN stood in solidarity with Myanmar in most issues though the organization felt the need to publicly express its disappointment and concern on two occasions when the junta allegedly allowed mob violence against Aung San Suu Kyi’s motor convoy (the so-called Depayin Massacre in May 2003) and cracked down violently on demonstrating Buddhist monks and supporting laity (the so-called Saffron Revolution in September 2007). Myanmar’s first attempt to chair ASEAN, according to the alphabetical rotation principle, ran into difficulties due to opposition by ASEAN’s Western dialogue partners (who threatened to boycott the scheduled meetings with ASEAN under Myanmar chairmanship) and apprehensive rumblings from within other member states. Myanmar then decided to give up its turn, citing domestic priorities and garnered a promise to resume the chair at its convenience in the (undefined) future. President Thein Sein’s government claimed its turn as ASEAN chair for 2014 with the blessing of all concerned parties. In due course Myanmar managed to successfully fulfil its obligations, as ASEAN chair, in organizing and conducting many ASEAN high-level meetings, summits and ASEAN plus meetings. WHITHER MYANMAR? Myanmar is preparing for a landmark general election scheduled for the last quarter of 2015. Unlike the controversial election

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of 2010 that was held under military rule and which was boycotted by the NLD, the forthcoming election would be held under the auspices of an elected government that promises a free and fair process in line with international standards. The NLD is going to contest this time and is expected to win the majority of seats at the expense of the USDP. However, it is unlikely that the ongoing constitutional amendment process in Parliament would yield changes that could allow Aung San Suu Kyi to be an eligible presidential candidate. On the other hand, there have been concerns that heavy fighting between government forces and the Kokang

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ethnic group in recent months, together with rising student and workers protests, would lead to a security problem that could jeopardize the holding of the general election. Meanwhile, the government is likely to be on a holding pattern for the rest of the year due to the elections. Major investors from the West are also believed to be holding back until a new government emerges after the elections. All in all, Myanmar’s prospects as a democratic state with a viable market economy depend upon political stability and economic growth, underpinned by a successful election and a nationwide ceasefire agreement leading to a political settlement with the armed ethnic groups.

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11.

TIMOR-LESTE AND ASEAN

DOUGLAS KAMMEN

T

he popular referendum held on the future of East Timor in August 1999 presented a novel challenge for ASEAN and its members. During the twenty-fouryear Indonesian occupation of the territory ASEAN had studiously upheld its policy of non-interference in the internal affairs of member states, despite the fact that the 1975 invasion was a violation of international law and despite the ongoing abuses of human rights. For this reason, ASEAN was illprepared to play a constructive role at the time of the referendum and East Timorese leaders had little reason to view ASEAN with much sympathy. Nevertheless, when the UN called for regional participation in the peacekeeping force tasked with maintaining security in the territory until the restoration of independence in May 2002, Thailand, the Philippines, Malaysia, and Singapore all agreed to contribute military personnel.1 With the achievement of independence, East Timorese elites began to discuss foreign policy issues, including application for membership in regional associations. These early discussions were coloured by concern about negotiating the maritime

boundary with Australia and productionsharing agreements from offshore oil and gas fields, but also included consideration of cultural affinities with states in the Pacific Islands Forum and the potential economic and security benefits of orientation toward ASEAN. Further afield, the Community of Portuguese-speaking Countries offered historic and linguistic succor, while China loomed as a potential benefactor. Timor-Leste thus enjoyed a range of options in the international arena, but it faced pressing issues on the domestic front. Physical infrastructure had been devastated by the Indonesian military and its militias in 1999, tens of thousands of people remained displaced from their homes (some still in Indonesian West Timor), agricultural output was well below domestic needs, basic health care was limited, and the education system needed to be rebuilt from scratch. The United Nations and a host of international agencies provided technical assistance and aid, but much of the focus was on building new state institutions, not the provision of services or job creation. With meager annual state budgets, the Fretilin government led

This chapter was specially commissioned by the Institute of Southeast Asian Studies for The Third ASEAN Reader.

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by Prime Minister Mari Alkatiri prioritized the repair of basic infrastructure, health care (with Cuba providing doctors to serve in rural clinics and medical training for East Timorese students), and primary education (with Portugal providing several hundred volunteer language teachers). However, tensions soon emerged between President Xanana Gusmão, who had led the resistance from 1981 until 1999, and the Fretilin government, the senior membership of which was composed of individuals who had spent the long occupation in exile and dominated the writing of the new constitution in 2001. These tensions stemmed not only from intra-elite conflicts in 1975 and struggles over leadership of the resistance, but also from the new semi-presidential system and disagreements about policy choices. It was in this context that, in 2006, relatively minor grievances within the newly formed Armed Forces of Timor-Leste (F-FDTL) spiralled out of control, leading first to armed confrontations among and between factions of the security forces and civilians armed by the Minister of the Interior, then to widespread communal violence in the capital, Dili, with more than 100,000 people displaced from their places of residence. President Gusmão adroitly forced Prime Minister Alkatiri to resign and then called for the establishment of a new UN mission to help restore order and address the humanitarian crisis.2 Once the darling of the international community, Timor-Leste now had to suffer rash accusations leveled at it by foreign observers and media that it was a failed state and that nation building was a fiction. In the national elections held in 2007, Nobel Prize winner José Ramos-Horta was elected President, defeating the Fretilin candidate; and Gusmão, backed by an alliance of political parties, was appointed Prime Minister. The new government scrambled to address the three most pressing components of the crisis: the fractured security forces;

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renegade Army major Alfredo Reinado, who had taken to the hills with a band of armed men; and the tens of thousands of internally displaced people in and around Dili. The government’s strategy was simple: buy peace. The means for doing this were new: in 2005 revenue from Timor-Leste’s offshore oil and gas fields began to flow into the country’s Petroleum Fund, which in turn made possible passage of increasingly larger annual budgets, and spending on levels wholly impossible a few years before. With limited state capacity, the easiest way to spend the budget was a combination of direct cash transfers to targeted groups (veterans, former members of the military, and the elderly), subsidies for the general populace (rice and electricity), and government contracts granted to members of the small business community and politically connected elites to import goods, provide services, and carry out infrastructure projects. While recovery from the crisis dominated public discourse, Gusmão’s government also sought to realign Timor-Leste’s foreign policy. Where the Fretilin government had challenged Australia over maritime boundaries and production-sharing agreements, Gusmão’s government sought to mend relations with Canberra. While in opposition, Gusmão and his allies had charged that Fretilin was adopting socialist policies and was too closely aligned with Cuba (which had provided doctors), the PRC (which had offered to construct a new presidential palace), and Lusophone countries in Africa. This rhetoric was quickly dropped for pragmatic reasons, and PRC presence and aid for example, increased. The Minister of Agriculture purchased tractors and rice seed from China and the Prime Minister signed an ill-advised contract to purchase a heavy-oil fuel plant (which was eventually cancelled). At the time of independence, East Timorese leaders expressed a desire to seek membership in ASEAN. In 2002, Timor-

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Leste was granted observer status and its then-Minister of Foreign Affairs stated that he hoped membership would be granted by 2012. With the outbreak of the political 2006 crisis, however, Timorese elites were consumed with pressing domestic turmoil and ASEAN members grew wary about TimorLeste’s ability to manage its own affairs. By 2011, however, with the crisis overcome and the state budget fuelling robust increases in GDP, Timor-Leste applied for ASEAN membership. Its application enjoyed strong backing from its former occupier, Indonesia, which held the Chair of ASEAN that year. The Ministry of Foreign Affairs and other officials in Dili voiced optimism about what membership would bring, many hoping this would open the way for increased foreign direct investment and integration into regional trade. In carefully worded statements, however, several ASEAN members suggested that Timor-Leste was not yet ready to be admitted as a member. The reasons given were that Timor-Leste lacked the diplomatic corps necessary to attend the association’s busy schedule of meetings (totalling more than 600 per year) and did not have the necessary infrastructure to serve as ASEAN chair when its turn came in the future.3 Although unstated, two other considerations were of greater importance. First, the perception that Timor-Leste was prone to domestic conflict, as evidenced by the 2006 crisis, raised fears that ASEAN would become embroiled in resolving future unrest. Second, it was suggested that given the tiny size of the country’s economy and high levels of poverty, Timor-Leste’s admission to the association might hinder the establishment of the ASEAN Economic Community, slated to begin at the end of 2015. ASEAN’s internal mechanism requiring full consensus resulted in a decision not to accept Timor-Leste’s application to become a member, although it nevertheless left the door open for the Timorese government to

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develop a clearer “roadmap” for addressing the above concerns and for reconsideration of the application in the future. Following this rejection, then-Prime Minister Gusmão made concerted efforts to reach out to individual ASEAN members, both through state visits (to Laos, Myanmar, Vietnam, and the Philippines) and small but symbolic grants of disaster aid, such as that given to the Philippines after typhoon Haiyan. Viewed from a wider geopolitical angle, there are critical differences between TimorLeste’s application to ASEAN and those of Cambodia, Laos, Myanmar, and Vietnam (CLMV) in the 1990s. The admission of CLMV was made possible, and indeed became desirable, because of the long regional economic boom that began in the late 1960s and, with a few ups and downs, lasted until 1997. The original ASEAN 5 were keen to gain access to natural resources — of which timber, minerals, and raw agricultural products were most important — and the relatively large markets for exports. Chinese interest in these same resources, as well as its rising military might, were further reason for ASEAN to fast track the admission of CLMV. Timor-Leste’s circumstances differed greatly. The country’s only meaningful natural resources are oil and natural gas, but these reserves are limited (with production in two major fields projected to last for less than a decade) and are already under contract. Furthermore, its tiny domestic market is already open to imports, with Indonesia, Malaysia, Singapore, Vietnam, and Thailand accounting for five of the top eight sources of imported goods. Over the past few years Timor-Leste has enjoyed relative political stability, with the Gusmão-led alliance sweeping the 2012 national elections and more recently initiating a transition to younger national leadership.4 Of greater importance, revenue from oil and natural gas production has continued to accumulate in the national Petroleum Fund, which now stands at US$16

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Timor-Leste and ASEAN

billion. This has allowed the government to pass larger annual state budgets (currently at US$1.5 billion per year) and fund major development projects.5 For the time being, Timor-Leste is not dependent on foreign aid: it can pay its own way. The critical question is how that money is being spent. While infrastructure and basic services are desperately needed, critics rightly warn that some of the government’s major projects are unrealistic. The government has already put the extravagant south-coast Petroleum corridor on hold, but has recently initiated the Oecusse Special Economic Zone, with a projected longterm budget (combining state and foreign investment) of US$4.1 billion dollars. Of equal concern is the raft of populist subsidies and direct cash transfers, among which the allocation for veterans’ pension now accounts for a full 9 per cent of the state budget. This is neither productive nor sustainable in the long term. There is growing evidence, in fact, that TimorLeste is falling prey to the resource curse: distorted notions of economic rationality have led to grandiose development schemes; reliance on petroleum revenue has retarded the development of other state institutions (including political interference in the judiciary); and non-oil and gas sources of domestic growth have been neglected. While GDP has remained above 7 per cent for the past five years, at current spending levels Timor-Leste risks burning through the Petroleum Fund in the next decade.6 Raiding the Petroleum Fund to finance mega-projects, widespread corruption, and foreign economic penetration have helped to fuel grievances and oppositional movements, particularly in areas furthest from the capital. Since 1999, a group called the Popular Democratic Council of the People’s Democratic Republic of Timor-

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Leste (CPD-RDTL) has called for a restoration of the 1975 constitution, opposed the international presence in the country, and challenged current development policies. Over the past year, the situation was exacerbated by the return of a former resistance commander named Paulino “Mauk Moruk” Gama, who declared the formation of the Maubere Revolutionary Council (CRM) and called for the resignation of the government. This has led to stand-offs with the police, arrests, and a major military operation in Baucau district.7 Without good governance and more equitable development, such challenges are likely to persist for the foreseeable future. Admission of Timor-Leste into ASEAN is unlikely to resolve these problems or prompt significantly higher levels of foreign investment, as some East Timorese hope. Nevertheless, both ASEAN and Timor-Leste would be well served by the granting of membership. For ASEAN, inclusion of TimorLeste will allow for deeper engagement at a time when Timor-Leste is financially independent and political leaders are eager to join the association. Rather than forcing a fixed template for membership, ASEAN would be wise to allow for flexibility in areas where there are real financial constraints (i.e. attendance at non-crucial meetings, serving as chair of the association, and even the establishment of embassies in each member state). Should the political climate in TimorLeste change significantly, ASEAN may find it has missed a window of opportunity. For Timor-Leste, ASEAN membership will provide valuable lessons in regional cooperation, enable the sharing of lessons from its own struggle for independence and commitment to the protection of human rights, and provide a way to participate in addressing the critical issues of human security in Southeast Asia and beyond.

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NOTES 1. Recognizing that Fretilin President Francisco Xavier do Amaral had declared independence of the Democratic Republic of Timor-Leste in November 1975, the 2001 constitution states that 20 May 2002 marks the restoration of independence. 2. See International Crisis Group, “Resolving Timor-Leste’s Crisis”, Asia Report no. 120, October 2006, and Douglas Kammen, “Subordinating Timor: Central Authority and the Origin of Communal Identities in East Timor”, Bijdragen tot de Tal-, Land- en Volkenkunde 166 (2/3): 244–69. 3. Barry Wain, “Viewpoint: Closing the ASEAN door on Timor-Leste”, Straits Times, 5 May 2011. 4. In February 2015, Prime Minister Gusmão resigned and was replaced by Rui Mária Araujo, a Fretilin member. 5. For comprehensive data on annual state budgets, see . 6. See Charles Scheiner, “Can the Petroleum Fund exorcise the resource curse from Timor-Leste?”, unpublished paper, . 7. Marisa Gonçalves, “Ex-guerrillas threaten political stability in East Timor”, Global Voices, 1 April 2014, .

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Section

III

COMPARATIVE ANALYSES OF THE REGION

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INTRODUCTION

Terence Chong

I

f there is anything consistent about Southeast Asia it must certainly be its diversity. The varied levels of economic development, differing systems of governance and politics, and the myriad of demographic and cultural complexions ensure that any comparative analysis must be performed and presented in a modest and heavily nuanced manner. With approximately 620 million people covering 4.5 million square kilometres, not to mention the multitude of languages, and the layers of historical kingdoms, the scope for comparative analysis beyond national boundaries is wide indeed. This is because much of Southeast Asia has been studied through the lens of area studies. Area studies is broadly premised on the understanding that: firstly, regions with common characteristics can be identified and examined collectively; and, secondly, that regions should be studied in situ on the basis of detailed local knowledge. In truth, the concepts of the nation, state boundaries, ethnic and religious communities are essentially problematic. However, while diversity must always remain a defining feature, there are several ideological and political experiences shared by many states in the region. Colonialization,

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whether by the British, Dutch, French or Spanish, is a deeply ingrained experience across many Southeast Asian countries. The region has been argued to be a construction by the colonial British as a specific area of military operations against the Japanese, while others have demonstrated that historical events like the Japanese invasion and the later nationalist-separatist movements during the period of decolonialization were markers of national and intra-regional identification. This section, divided into three parts, offers excerpts from leading experts to demonstrate the multi-dimensional nature of the region. Clearly the division is arbitrary not least because it is impossible to untangle societies from the economy and politics, and the dynamics of one must surely impact the others. However, for the sake of easy reference, comparative work on civil society, contestation of citizenship, national education, religion and the middle class come under the sub-section Southeast Asian Societies. Comparative work on urbanization, development and tourism come under The Southeast Asian Economy. Finally, the sub-section Southeast Asian Politics carries comparative work on democracy, ideology and accountability, and regional geopolitics.

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Southeast Asian Societies

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12.

CIVIL SOCIETY IN SOUTHEAST ASIA

LEE HOCK GUAN

I

f one were to apply civil society as the associational space located between the private (that is, family) and public (that is, state) spheres to the Southeast Asian context, then one could certainly say that it existed in pre- colonial Southeast Asia. Civil society forms in the post-independence period were, however, radically shaped by the means and ways the European colonizers initiated and instituted the social, cultural, economic, and political transformations of the indigenous societies. During the colonial period the indigenous, personalized state form in Southeast Asia was transformed, in varying degrees, into the Western depersonalized administrative state. Institutionalization of the colonial administrative state led to the decline of the indigenous political forms and structures, and the élites’ authority and power. Demands of the growing societal and economic complexity led to varying functional differentiation of the state apparatus in the colonies. Educated colonial subjects were recruited and trained to gradually displace the members of the indigenous élites in the

business of governing, but as subalterns. The institutionalization of the colonial administrative state thus led to the formation of “a permanent administration and a standing army” which became the public authority with the colonial subjects “under it [as] the public” (Habermas 1994, p. 18). The introduction and institutionalization of the European state form hence resulted in a more defined demarcation of the public– private spheres, albeit varying from colony to colony. Concurrently, changes to and in the associational space were also taking place. The associational space underwent a fundamental structural change as the notions and boundaries of the public–private spheres became more clearly demarcated. The introduction of the idea that individuals are endowed with rights was to radically reform the indigenous notions and nature of the relations between the ruler and the ruled. Thus while the European colonizers generally limited political participation, there was, nevertheless, a general acceptance

Reprinted in excerpted form from Lee Hock Guan, “Introduction: Civil Society in Southeast Asia”, in Civil Society in Southeast Asia, edited by Lee Hock Guan (Singapore: Institute of Southeast Asian Studies, 2004), pp. 1–26, by kind permission of the Institute of Southeast Asian Studies.

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of the rights of the colonial subjects to form voluntary associations. Cities and towns, for various reasons, became the nodal places where civil society groups and activities were mostly found. While civic-type associations formed the vast majority of the groups in civil society, ethnic- and religious-based groups were by far the most common. Importantly, the formation of educational, literary, and media establishments was to contribute significantly to the propagation and articulation of new ideas in the colonial societies. The expansion of capitalist production and market in the colonial economies and its differentiation of labour led to the formation of class-based groups, from business associations to trade unions. At different times, all across the Southeast Asian colonies, trade unions were engaged in advancing the rights and causes of the working class as well as the anti-colonial struggles. While the working class and nationalist movements’ presence and activities expanded the organizational and democratic possibilities, it also resulted in the colonial states imposing more stringent, more often than not repressive, controls over the colonial civil societies. However, the development of classbased organizations in the Southeast Asian societies was recurrently circumscribed by the prevalence of entrenched primordial attachments, especially originating from the deep ethnic divisions. In some of the countries class formations were largely segmented along ethnic lines. In addition, entrenched ethnic sentiments conflated with the growing nationalist anti-colonial struggles and gradually eclipsed the class characteristics and aims of the local class movements. Ethnic, rather than class, sentiments became the principal organizing force such that the struggles for citizenship rights became intertwined with ethnic conflicts. Indeed, ethno-nationalism in Southeast Asia frequently led post-colonial regimes to assert that the Western democratic

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form is not appropriate for their countries because it is alien to their respective cultural values and traditions. Generally, civil society in Southeast Asia in the early years of the post-colonial period remained depoliticized in varying degrees. Throughout the 1950s and 1960s military-backed regimes in Burma, Thailand, Indonesia, Laos, and North and South Vietnam suppressed civil society groups that were critical of, or perceived as a threat to, the state (Hewison 1999). The triumph of communism in Vietnam, Cambodia, and Laos in the 1970s aborted any prospect of the development of civil society as the selforganization of citizens in those countries. For a while civil society groups were relatively active in the Philippines, Malaysia, and Singapore, but by the 1970s, confronted with mounting challenges from oppositional forces, President Marcos resorted to martial law in the Philippines, and the Malaysian and Singaporean states used a combination of legal and coercive instruments to exert control. By the 1970s, as authoritarian states of various forms came to dominate the region, civil society faced varying degrees of constraint in all the countries. Yet, even though authoritarianism seemed to have a stranglehold in the 1970s, there were, nevertheless, groups in civil society struggling for various rights, freedoms, and issues in the Philippines, Thailand, Indonesia, and Malaysia; for example, student movements were active at various times. More importantly, from the 1970s onwards countries like Singapore, Malaysia, Thailand, Indonesia, and, to some extent, the Philippines began to undergo major social, cultural, and economic transformations. Rapid economic growth resulted in more class-stratified, as well as industrialized and urbanized, societies. All the capital cities and their environs experienced major population growths. All four countries gradually attained universal enrolment, more or less, at the primary school level by the 1980s, and enrolment at the tertiary level

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Civil Society in Southeast Asia

experienced noticeable growth. Importantly, the flow of commodities, people and ideas between the above countries and the rest of the world, especially the West, quickened and multiplied significantly. Partly because of the major transformations, new social movements began to emerge in civil societies in Southeast Asia; for example, student, environmental, women’s, human rights, consumer, and other public interests movements. New ideas and organizational and mobilization techniques both introduce new movements and transform ethnic- and religious-based groups. However, although the number and type of civil society groups in Thailand, the Philippines, Malaysia, and, to some extent, Singapore all grew dramatically, this growth did not necessarily translate into a democratization process in all of them. In the Philippines in the mid-1980s a number of civil society groups, including the church and church-related groups, helped to bring down the authoritarian Marcos regime and brought about democratization in the country (Hewison 1999; Magadia 1999; Hedman 2001). While the 1980s saw increasing civil society activism and political liberalization in Thailand, it was the dramatic resistance of civil society groups against and defeat of the 1991–92 attempted military coup d’état that consolidated the Thai democratization process (Pongsapich 1999; Hedman 2001). Although further democratization in Malaysia and Singapore was stalled, partly by using the “Asian values” argument which asserts that the Western democratic model was not suited for their societies, nevertheless, the associational spaces in the two countries still could accommodate a wide array of civil society groups. In contrast, with the military regime in Myanmar and the communist party in Vietnam still firmly in control of the states, associational space in the two countries continued to be tightly kept in check. The concept of civil society has certainly inspired and gained popularity among many in Southeast Asia who are concerned with

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a wide array of issues: distributive justice; ethnic, religious, and gender discriminations; environmental degradation; governance; democratization and democracy; and human rights. Thus, even though the concept may have a number of limitations, such as its inherently normative feature, it has a number of useful features that make it “useful to think and act with” (Lewis 2001) purposes. The empirical studies in this volume show that the civil society concept can help to focus public attention on a wide array of issues: democracy, women and ethnic rights, environmental policies, and governance. In addition, the concept has inspired many Southeast Asian citizens to engage in public discourse and participation resulting, in certain countries, in the widening of the political arena. This, however, should not lead to the thinking that, prior to the emergence of the civil society concept, Southeast Asians did not struggle for democratic rights and the freedom to association, assembly, and participation in the public realm; these democratic struggles have been going on since the colonial era. Indeed, care must be taken to avoid simply imposing the Western concept and experience of civil society onto the Southeast Asian countries. Conversely, the meanings and formations of Southeast Asian civil societies must be rethought and reworked in the context of diverse colonial histories, ethnic, religious, and cultural mix, economic development, and state regimes. There is, of course, the risk that invoking the local meanings of civil society could legitimize the authoritarian state regimes’ rejection of the conflict view of civil society as a Western concept that is alien to the local cultures and values. Thus is the contest over the concept of civil society between authoritarian regimes and civil society actors, the notion of “Asian values” was used by the former to limit citizens’ active political participation and to tightly regulate advocacy NGOs and social movements. Interestingly, state authorities have readily co-opted

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the globalized civil society discourse such that they would advocate a certain social capital version of civil society where only civic associations involved in social welfare, philanthropy, hobbies, and so on are promoted; for example, the Malaysian and Singaporean. In much of the literature on civil society, the tendency is to generally regard ethnicity and religion as obstacles to the formation of civil societies or threats to already existing civil societies. In the Southeast Asian context, where religious and ethnic groups are prominent, the empirical experience shows that the relationship of religion and ethnicity to civil society is actually quite complex. In the Philippines the Catholic Church played a key role in establishing a vibrant civil society as well as bringing about the democratization process. In Malaysia, while the PAS vision of an Islamic state is decidedly “undemocratic”, and the official Islam is generally conservative, there also are “progressive” Muslims and Islamic groups, such as SIS, that support loosening state political controls and opening up the democratic space in the society. Robert Hefner’s study (2000) on civil Islam in Indonesia shows that the main Islamic groups in Indonesia are largely in favour of democratic principles and practices in the society. Similarly, in Indonesia and Malaysia are found ethnic-based groups that are both advocates and opponents of civil society. The relation between the state and civil society is frequently viewed in an either-or mode, usually autonomous or otherwise, rather than multi- layered. But if one were to

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adhere strictly to the autonomy assumption, then one would miss out on the creative counter-authority strategies played by state-supported entities like the media in Vietnam. More generally, in the Southeast Asian context, where we have a situation of “strong states, weak civil societies”, civic association, NGO, and social movement linkages with state regimes are more likely to be multi-layered. For example, the feminist and Christian movements’ relationships with the Filipino state regime vary from collaboration to confrontation. The same is true of the relationship between the state and civil society in Singapore, Thailand, and Malaysia. Mainstream modernization theory largely claims that economic development, especially the formation of a sizable middle class, would usher in the democratization process. Yet, in Southeast Asia civil society is more vibrant and democratization appears to be ahead in the Philippines and Thailand than in the two most advanced economies Malaysia and Singapore. Even in the economically less developed Indonesia, since 1998 the democratization process and civil society have become more energetic. However, it does not follow that being more democratic will ensure more effective governance and distributive policies. Thus, although the Singaporean state is less democratic, it has better governance and distributive policies than in the Philippines and Thailand where a more vibrant civil society has yet to effectively check state corruption and glaring economic disparities in the society.

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13.

MULTICULTURAL REALITIES AND MEMBERSHIP States, Migrations and Citizenship in Asia MARUJA M.B. ASIS and GRAZIANO BATTISTELLA

INTRODUCTION This chapter will examine some tendencies in selected Asian countries which have been affected by migration. Firstly, unlike the historical linkage to the post-Westphalian idea of the nation-state, the long colonial legacy in Asia and the rise of the nationstate in the post-colonial period de-linked the development of citizenship from the long process of “forgetting” which part of the evolution of the nation-state was in the Western experience.1 Secondly, the specific migration system that developed in some Asian countries, which is premised on keeping migration temporary, rules out settlement, family reunification and long-term integration, including acquisition of citizenship, for less skilled migrants.2 This chapter addresses three questions: (1) How is migration in Asia redefining state conceptions of citizenship? (2) How accessible is the acquisition of citizenship to migrants in Asian countries? (3) What alternative pathways are available in the

Asian context for migrants’ incorporation in countries of destination? WHAT DOES CITIZENSHIP MEAN? In the contemporary context of intense cross-border movements and possibilities for multiple belonging, the boundaries between “citizens” (insiders) and “non-citizens” (outsiders) have been blurred, rendering the measurement of international migration more difficult. Beyond measurement issues, the meaning of citizenship has become more contested under conditions of globalization, unabated international migration and the emergence of transnational communities. The shift in status from citizen/national to non-citizen/non-national — and the corresponding loss of a set of rights is one of the factors that makes international migration inherently risky (Bhabha 2005). International migrants who reside in a state where they are not citizens have varying degrees of inclusion and exclusion in the receiving state.

Reprinted in excerpted form from Maruja M.B. Asis and Graziano Battistella, “Multicultural Realities and Membership: States, Migrations and Citizenship in Asia”, in Migration and Diversity in Asian Contexts, edited by Lai Ah Eng, Francis L. Collins, and Brenda S.A. Yeoh (Singapore: Institute of Southeast Asian Studies, 2013), pp. 31–55, by kind permission of the Institute of Southeast Asian Studies.

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Different approaches or models of migrant incorporation define the place of migrants in receiving states. These approaches range from differential exclusion, which allows migrants to participate in certain spheres of national life but not in others (e.g., temporary migrant workers are allowed to participate in the economic sphere, but are otherwise excluded from the social, cultural and political life of the receiving society), to assimilation (which requires cultural assimilation of migrants), to multiculturalism (which provides latitude for cultural expression) (Castles 2000). From a rights perspective, people on the move do not (and should not) lose their rights when they cross borders. From the standpoint of the nation-state, however, states have the right and the duty to protect national interests from “foreign” interests. The introduction of multicultural policies in several receiving countries has also contributed to the diminishing importance of citizenship in the integration of migrants. In Asia, multiculturalism has been a de facto reality in several countries with a complex ethnic composition, and the social cohesion of different ethnic groups has guided to some extent the leadership in Malaysia and Singapore. Regardless of the various contexts in different parts of the world, it is evident that the multicultural crisis has resulted in two discernible trends (Joppke and Morawska 2003): (1) the resurgence of citizenship as a key factor in defining membership in a national polity, which was partly a response to the crisis of the welfare state and concerns that migrants might abuse the welfare system; and (2) the tendency of migrants to rely on their networks in adapting to the host society and growing evidence of migrants engaging in transnational practices. Since the 1990s, the literature on citizenship has grown considerably alongside the development of new scholarship focused on migrant transnationalism. Although international migration, among others, may

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have eroded the centrality of the nationstate on citizenship matters, it has not been rendered irrelevant — and the Asian landscape provides evidence on this account. HOW IS MIGRATION REDEFINING CITIZENSHIP IN ASIAN COUNTRIES? Increasing and unrelenting migration in Asia since the 1970s has raised questions about migrants’ rights, which, when considered vis-à-vis the rights of nationals, inevitably touch on citizenship.3 Despite the growing presence of migrants, countries of destination are adamant in restricting the entry and residence of less skilled migrant workers while welcoming and integrating highly skilled and professional migrants. In contrast, origin countries have taken significant steps to expand the incorporation of their overseas-based population as part of the “nation”.4 It is important to note that the citizenship/ nationality laws of most Asian countries were drawn before the “age of migration” (Castles and Miller 2009). A review of citizenship laws reveals similarities in provisions concerning citizenship by birth (in general, birth within the national territory does not automatically confer citizenship) and by descent (this generally derives from the father in most cases, where a child born to a mother will have his/her mother’s citizenship only if the father is unknown or stateless; in the Philippines, such a qualification is not necessary). Requirements for naturalization vary across the countries. Origin countries such as India, Indonesia, the Philippines and Thailand all require a period of residence (at least five years in most cases); knowledge/ familiarity with language and/or culture and being economically independent apply in most cases; renunciation of previous nationality is not required for all Countries of destination, such as Japan, South Korea and Singapore, also have residence

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Multicultural Realities and Membership: States, Migrations and Citizenship in Asia

requirements (from three years to ten years); other requirements include knowledge of the language and culture, economic capacity, of good moral character.5 On paper, the rules seem straightforward, but the reality is more complex. Although various types of migratory movement are present in Asia (permanent migration to other regions, particularly North America, Europe and Australia; marriage migration; temporary labour migration; student migration; refugee movements), the most prominent has been and continues to be temporary labour migration, most of which is intra-regional. Labour migration is organized as strictly temporary, mediated by recruiting agencies, with mandatory return to the country of origin at the end of the contract. In other words, there is a twotiered system in the treatment of migrants: the withholding of rights in the case of less skilled migrant workers, and the extension of rights to the highly skilled and professional migrants. As in Western countries, exclusion from membership does not mean that migrants are deprived of all rights. In general, they benefit from labour rights and limited social guarantees, with significant differences from country to country. The lack of a strong human rights tradition in the Asian context does not favour the practical enjoyment of “social” citizenship. Widespread abuses against migrants — particularly for those in an irregular situation and for women migrants in domestic work — have prompted advocacy in protecting and promoting migrants’ rights rather than the larger issue of citizenship. Although the policy of temporary migration remains unchanged, there have been some steps towards better protection of migrants. Singapore, for example, has imposed stiffer sanctions against the abuse of domestic workers. In order to curb unauthorized migration, Thailand, another country dealing with high levels of unauthorized migration, carried out a

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registration of migrant workers and offered protection for migrant workers.6 On the whole, the piecemeal approach in extending rights to migrant workers results in providing some workers’ rights rather than the full range of rights extended to nationals or citizens. As mentioned earlier, migration trends have led to some changes in the notion of citizenship in countries of origin. In part, this change may be due to the “permanence” of temporary migration. The decision to grant dual citizenship is not without pragmatic concerns — the expectation to generate investments is one of the reasons for enacting such a law. A general trend that can be noted across countries (including countries of destination and their efforts to link with their own diaspora populations — e.g., Malaysia’s brain gain scheme, Thailand’s Reverse Brain Drain Project, among others) is a more positive regard for their overseas-based nationals. States, thus, have also gone “transnational” in their attempts to extend the nation beyond the national territory. Granting dual nationality is becoming a global phenomenon, but the trend is generally slower in the Asian region. Considered the most appropriate approach to address the transnational dimension of belonging experienced by migrants (which, according to Faist (1999) is not addressed by national citizenship or multicultural citizenship which still maintains the host country as the territory of reference), it does not enjoy sufficient currency in destination countries because of concerns about allegiance, a sensitive issue in the region. HOW ACCESSIBLE IS CITIZENSHIP TO MIGRANTS IN ASIAN COUNTRIES? There are two pathways by which migrants can obtain citizenship in Asia: (1) possession of skills/talents or capital, and (2) marriage to nationals.

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While citizenship is off limits to less skilled migrants, highly skilled and professional migrants are sought out and welcomed by receiving countries. Investors are welcome in several countries. The premium on skills or capital implies a preference for those who can make an economic contribution to the receiving country. Marriage as a way of gaining permanent residence and citizenship has increased alongside the increase in labour migration in the region. Receiving countries which do not have policies against intermarriages between migrant workers and their nationals have seen an increase in such marriages (Singapore and Malaysia do not allow, or at least, do not encourage intermarriages between migrant workers and their nationals). Intermarriages not only provide a window for permanent residence in Asia, but they are also a precursor to multicultural policies (promoting language education for foreign wives, or the education of multiethnic children are some of the pressing issues) and the expansion of immigrants’ rights.7 Recent trends in intermarriages are also chipping at long-standing gender biases in citizenship laws. WHAT ALTERNATIVES TO CITIZENSHIP ARE AVAILABLE TO MIGRANTS FOR INCORPORATION IN ASIAN COUNTRIES? Contrary to the intent of states, some migrant settlement is taking place in Asia. Four modes can be noted: long-term unauthorized settlement (example: Malaysia); extended residence due to extension of work contracts (examples are Hong Kong, Singapore and Taiwan); long-term legal residence (example: Japan); and local government initiatives (example: Japan).8 Malaysia’s long history of migration is reflected in its identity as a multiethnic society. Indonesians and Filipinos started coming to Malaysia in the 1970s in response to

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opportunities in various sectors — plantation, construction, services — which have been eschewed by the majority of the local population. Regularization programmes, border controls, deportations, and the institution of more stringent immigration laws (2002) have not stopped unauthorized migration. However, although they cannot openly engage with Malaysia and they have no access to services and legal protection, the demand for workers and the presence of networks in Malaysia (not to mention the proximity) are factors that contribute to relatively permanent residence (or recurrent migrations) without authorized status.9 The extension of work contracts has resulted in the extended residence of legal migrant workers, which has led to the creation of minority communities in countries such as Hong Kong, Singapore and Taiwan.10 However, their sheer presence, especially their visibility, has not always worked to their advantage — their weekly gatherings have invited some negative reactions from the local population. The migrant communities that have been formed are mostly along ethnic/ national lines. Aside from providing social support, these communities are conduits of information, assistance and empowerment to migrants. CONCLUSION This overview of the relationship between migration and citizenship in Asia has suggested that, as in other regions, the relationship is multifaceted. Most of the migratory flows in Asia are dominated by the movement of migrant workers, who are not expected by definition to be incorporated in the receiving country and to whom access of citizenship is not available. Nevertheless, the situation is also not static in Asia, and changes in policies provide for longer working contracts, improvement in labour standards and better working and living conditions.

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Multicultural Realities and Membership: States, Migrations and Citizenship in Asia

Where migration is having the clearest impact is on the citizenship norms in countries of origin. Concerned with maximizing the benefits of their diaspora populations, some countries of origin are strengthening the ties with their expatriate population by ensuring that migrants who have settled permanently in foreign countries and acquired foreign citizenship need not lose their citizenship in the origin countries. If the impact of migration on citizenship is limited, access to national citizenship also remains limited. Access to citizenship through marriage has expanded in some cases by opening the possibility for local women citizens to pass on citizenship to their spouses and/or children. Under these conditions, what are the possibilities for the incorporation of migrants in the receiving countries? This is where practical situations indicate how the concept of citizenship, as a clear demarcation between those who belong and those who are excluded, reveals nuances and variations. While the work and residence of regular migrant workers are subject to the terms of their work permits, unauthorized migrants have established communities and parallel institutions in the receiving society,

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transforming temporariness into de facto permanence. The overview of the situation in Asia indicates that the level of migrant incorporation determines the type of protection and opportunities migrants will enjoy. How to expand residence rights, particularly in states that do not facilitate naturalization, is an initiative currently pursued by civil society. Will citizenship remain the ultimate criterion for inclusion and membership? In the conflict between national citizenship and transnational citizenship it appears that some combination of the two is occurring and that assimilation and transnationalism often coexist in the lives of immigrants and their offspring.11 Perhaps a realistic prospect is offered by Aleinikoff (2003, p. 122). He calls it “inter-nationalism”, where more linkages are established among government agencies across borders, and agreements among such agencies determine a new transgovernmental order, but still within the framework of nation-states. Until that happens, migrants will have to look to their home countries for membership while making a living elsewhere as temporary migrant workers.

NOTES   1. The drafting of citizenship and nationality laws in Asian countries coincided with their independence, most of which happened after the conclusion of World War II. It is interesting to note that the “forgetting” of ethnic roots has not been completely successful, as indicated by the emergence of ethnostates and the redrawing of national boundaries along ethnic lines in many parts of the world.   2. Temporary labour migration is carried out by imposing work contracts and requiring migrant workers to return home or to renegotiate an extension of their contract. In general, migrant workers’ work permit does not allow them to transfer to another sector or employer, other than those specified in the work permit. Note that these restrictions only apply to less skilled migrants.   3. For details about migration in Asia, see Asis (2005), UNESCAP (2008) and IOM (2008), among others.  4. This is not limited to countries of origin. Some “destination” countries, such as Singapore, for example, are as keen to maintain their links to their expatriate populations (Ho 2008).   5. See , accessed 19 June 2004.   6. To date, Japan is the only receiving country that maintains a policy of not accepting less skilled migrant workers.

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  7. The extension of support and assistance to marriage migrants contrasts with the notable lack of similar response towards labour migrants. Kim (2008) argues that while marriage migrants may benefit from the assistance extended to them, they may have compromised their cultural citizenship (on account of expectations for them to be “Korean” wives and mothers) to achieve Korean citizenship.   8. Another mode of incorporation might be that of ethnic repatriates, such as the (temporary) return of Japanese Brazilians (nikkeijin) to Japan (e.g., see Tsuda 2003).  9. This scenario also applies to Burmese migrants in Thailand (see Amarapibal, Beesey and Germershausen 2003). It would be interesting to observe the developments with Thailand’s implementation of the work permit system beginning this year. 10. Taiwan has a single entry and a ceiling of nine years maximum stay. Despite the ceiling, migrant communities have carved niches in Taipei and other places which have a large migrant presence. 11. Smith (2003) offers a view of migrant-membership as an instituted process, which is shaped by four institutions and processes: home state domestic politics, the home state’s relationship to the world system, transnational civil society, and the context of migrants’ reception in the receiving country. He used this approach in analysing Mexico’s overtures to Mexicans in the United States and emerging transnational practices between migrants and the home state.

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14.

EDUCATION IN SOUTHEAST ASIA Investments, Achievements, and Returns

DIEP PHAN and IAN COXHEAD

H

uman capital investments have played a crucial role in the early economic success of East Asian economies. Given Southeast Asia’s rapid growth, the claim has often been made that these countries too have benefited from high rates of human capital investment. This claim, however, is less robust for Southeast Asia, and even for the Southeast Asian “Miracle” economies, than for Northeast Asia. In an important region-wide survey, Anne Booth (2003) described the claim that the Southeast Asian economies invested heavily in education at an early stage and in an equitable manner as “gross over-generalisation.” Even among the eight “Miracle” economies, she points out significant differences in the timing and extent of human capital investments between those in Northeast Asia (Japan, South Korea, and Taiwan) and those in Southeast Asia (Singapore, Malaysia, Indonesia, and Thailand). In fact, human capital investments in Southeast Asia started late and have generally not achieved as much as in Northeast Asia: educational attainment has been lower while inequality in access

to education has been severe (Booth 2003; Khoman 2005). Thailand, Malaysia, and Indonesia have made impressive progress in economic growth and poverty reduction, but their movement up the production quality ladder slowed after the Asian financial crisis. They still occupy predominantly low-value-added niches of manufacturing such as assembly and processing. Eichengreen et al. (2013) have presented evidence that growth slowdown or the middle-income trap is less likely in countries where the population has a relatively high level of secondary and tertiary education and where high-technology products account for a relatively large share of exports. If this is so then it seems clear that for Thailand, Malaysia, and Indonesia the lack of high quality human capital helps to explain their growth slowdowns. By the early 1990s, most governments in the region had conceded that their human capital investments had fallen short of what is required to sustain a high growth rate. In the most rapidly growing Southeast Asian economies, the onset of the Asian crisis

From: “Education in Southeast Asia: Investments, Achievements, and Returns” in Routledge Handbook of Southeast Asian Economics, Diep Phan and Ian Coxhead, edited by Ian Coxhead, Copyright © 2015 Ian Coxhead, Routledge, reproduced by permission of Taylor & Francis Books UK.

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in 1997 was at least partly a consequence of underinvestment in education that impeded the transition from labor-intensive to more skill-intensive activities as real labor costs began to rise. Since recovering from the crisis, Southeast Asian countries have continued to make progress in expanding overall access to education and raising average educational levels, following trends established in the pre-crisis era. By the end of the 2000s, most countries in the region had achieved universal or near universal primary school enrollment. However, much work remains to raise primary school retention and completion rates. Secondary and tertiary school enrollments have also increased steadily and, as a result, average years of education among the population aged 15 and older continue to rise. Despite such progress, the gap in educational levels between Southeast Asian countries and their counterparts in Northeast Asia, in particular South Korea and Taiwan, remains high. Progress on quantity measures, however, tends to mask a more serious problem: the quality of education in Southeast Asian countries remains low at all levels, and there has not been much improvement in the past 10 years. Low-income countries, including Laos, Cambodia, Myanmar, and to a lesser extent Vietnam, lag far behind the others in both overall access to education and in quality of education. They are on par with (or in the case of Vietnam, only slightly above) averages for low and lower middle income countries. But they are well below levels reached by Taiwan and South Korea at comparable stages of those countries’ development. With regard to education inequality, most Southeast Asian countries have made respectable progress in eliminating the gender gap in education, but disparities in other dimensions persist. Inequity in access to education is especially bad in Laos, where indicators of education inequality are the highest in the Southeast Asian region, and some indicators even worsened during the

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2000s. School enrollments and expenditures among poor households remain vulnerable to negative shocks from the macroeconomy or labor markets. An implication is that greater volatility from the global market may in the long run produce greater separation in educational outcomes between rich and poor households. Policies to develop human capital can be approached from both supply and demand sides. From the former, since human capital is the scarce factor of production in low and middle-income economies, solving supply constraints and increasing access have typically been the primary concerns of most studies of education and education policy. But resolving supply constraints only is insufficient, because strong incentives to invest in skills and education are needed to stimulate the demand for schooling. These incentives are largely determined by the returns to skills or education. In the 2000s, most Southeast Asian countries other than Malaysia had belowaverage public spending on education as a percentage of GDP when compared with other developing countries. However, within the decade, many countries in Southeast Asia, including Laos, Cambodia, Vietnam, Indonesia, and Singapore, significantly increased their public educational expenditure, which probably explained these countries’ increase in access to education especially at lower levels. Even if Southeast Asian countries succeeded in pushing up the supply of their educated workers in both quantity and quality, there remain other barriers to successful human capital development. The Philippines experience makes it sadly clear that increases in the supply of educated workers are not a panacea for growth if they do not have opportunities to put their skills to work at home. Several decades of persistent and severe macroeconomic and policy instability in the Philippines discouraged fixed investment, and the resulting lack of

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installed capital effectively compelled skilled workers to seek higher returns through emigration. Over the decades, high rates of educational achievement, initially perhaps due to strong cultural predispositions, have come to reflect the recognition that productive employment requires emigration. And that schooling — and preferably a tertiary or vocational credential — is the key to winning a well-paying job abroad. As a result, about 10 per cent of the Philippine population lives abroad, and remittances from overseas Filipinos, at about 13 per cent of GDP, were until very recently the country’s largest single source of foreign exchange earnings, and exceeded FDI inflows by many multiples. The problem of brain drain has been extensively researched and is reasonably well understood. Less has been written on determinants of growth in the demand for education, especially at post-primary levels where most Southeast Asian countries fall below predicted enrollment and completion rates. In rapidly growing economies the opportunity cost of staying in school can be very high, and the returns to additional years of education may be low when most employment growth is concentrated in farming, resource sectors, and light manufacturing. Moreover those economies in which the burden of distortionary development policies is relatively great face larger challenges. Earlier in the chapter we presented evidence that although Vietnam’s educational investments and achievements have exceeded those of other developing countries at comparable income levels, the country still lags far behind other Southeast Asian economies, and its human capital base is still weaker than required to escape the middle-income trap. A straightforward policy recommendation is that Vietnam must increase its investment in human capital, or its government must spend more on education. However, such a policy

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can only deal with supply-side constraints. In the case of Vietnam, there are further problems with the demand side, or the incentives to invest in education. But while the government liberalized output markets, it retains substantially greater control over factor markets, i.e. those for land, labor, and capital. Interventions in these critical markets have negative consequences for long-run economic growth and income distribution, including the incentives to invest in education. Despite liberalization and privatization efforts, the state sector (that is, public administration as well as state-owned firms) continues to dominate the Vietnamese economy, and government policies continue to strongly favor state firms at the expense of private enterprise and the overall economy. State firms receive cheap credit from Vietnam’s state banking system and, as in China and other well-known cases, this causes them to become excessively capitalintensive in their choice of technique relative to the economy’s overall factor endowments. Moreover, because capital and skills are complementary inputs, state firms therefore also employ more skill-intensive technologies. As in China, this combination results in the rationing of high-paying jobs in state-sector companies. This rationing in turn generates rents that add to the incomes of white-collar workers in state-sector enterprises. Anecdotal evidence suggests that the price of entry to a state-sector job can be as high as one or two years of salary, implying that such jobs are capable of generating substantial rents. Meanwhile, the capital-starved private sector, which has generated most new employment during Vietnam’s transition, seeks mainly workers with lower-secondary school education and offers much lower rewards to higher levels of educational attainment. Vietnam’s long-run development prospects are greatest if the problem of market segmentation leading to low educational incentives and diminished employment

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opportunities for skilled workers is addressed at its source. Southeast Asian countries are relatively resource-rich but have evolved manufacturing sectors that are advanced by the standards of the developing world. Among these economies, however, Indonesia has lagged in terms of investments associated with productivity growth and progress up the technological ladder (Thee 2005; Frankema and Lindblad 2006; Timmer 1999). In 1970– 96 Indonesia was one of only a few resourcerich developing economies worldwide clearly to escape the “curse” of natural resource wealth. Indonesia’s productivity growth rate, never high by regional standards, has diminished in the 2000s and now accounts for a negligible fraction of GDP growth (IMF 2011). Growth has instead been fueled by capital accumulation and resource exploitation. Industries whose growth has large effects on the demand for skills have languished. On investments in human and physical capital, Indonesia continues to lag behind its neighbors. The global economy has changed significantly with profound implications for the role of human capital in economic growth and development. Our discussion has made it clear that Southeast Asian economies, no matter at what stage of development, cannot afford to be slow in developing their human capital base. Singapore, the most advanced regional economy, needs to continue its efforts in human capital development to compete with other Asian technological leaders including Japan, Taiwan, South Korea, and Hong Kong. The two uppermiddle income Southeast Asian economies, Malaysia and Thailand, must aggressively invest in human capital and upgrade technologies to take advantage of the fact that their production is complementary

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to China’s, so that they can move up the production ladder and become leaders in some advanced industrial processes and avoid the middle-income trap. For low and lower-middle income regional economies that were latecomers to globalization (Vietnam, Laos, Cambodia, Myanmar, and to a lesser extent Indonesia), the threat of a middle-income trap is even more severe. The global mobility of production platforms in labor-intensive industries means that they can no longer rely on their abundance of unskilled labor to maintain the momentum of industrialization. They have to either find niches for their own products (to avoid direct competition with China and other low-cost producers), or find ways to make their products complementary to China’s (to become players in the East Asian regional production system). At the same time, skills upgrading is now more important than ever, because one way to gain from regional integration is to quickly move into specialized intermediate goods. For this to happen, they must solve the skill supply constraint to avoid the new resource curse, in which they specialize in resource exports and forgo the chance to industrialize. Recognizing the importance of a skilled labor force, many countries in Southeast Asia have stepped up their efforts in human capital development, expanding educational access, especially for primary and lower secondary school levels, and raising average years of schooling. However, they have performed much less well in raising educational quality and reducing inequality in access. And in every measure, they still lag far behind the achievements of their Northeast Asian neighbors at comparable stages of development. It seems they also lag behind what is required to overcome the middle-income trap.

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15.

ASIAN PENTECOSTALISM Renewals, Megachurches, and Social Engagement TERENCE CHONG and DANIEL P.S. GOH

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e argue that Asian Pentecostalism is characterized by enigmatic attributes in three dimensions that distinguish it from Western Pentecostalism on the one hand and Pentecostalism in the Global South on the other hand. Firstly, Asian Pentecostalism is indigenizing and transnationalizing and this simultaneous movement is spearheaded by prophetic preachers and the crafting of contextual theologies grappling with specific social and cultural conditions. Secondly, organizationally, Asian Pentecostalism tends towards the building of mega-churches and, at the same time, promotes close discipling and disciplining in small groups. Thirdly, while socially and oftentimes politically conservative, Asian Pentecostalism invents new modes of social engagements with developmental states and democratizing public spheres that may have surprisingly progressive outcomes. A definition of Pentecostalism and Asian Pentecostalism is warranted before we

proceed. In taking the conventional definition of ‘Pentecostalism’ to be an emphasis on the religious-spiritual experience, the baptism of the Holy Spirit and the speaking of tongues or glossolalia (see Anderson 2004), we are cognisant of the fact that any attempt at defining an evolving religious movement is going to be fraught with theoretical and political hazards. Indeed, the difficulty is historiographical. It has been shown that the early narrative of Pentecostalism has been infused with the ‘ritualisation of Pentecostal history’ that suffers from the erasure of ‘native missionaries’, ‘white racial bias’, as well as a ‘persistent gender bias’ (Wacker 1986: 95). By the 1980s and early 1990s, the rapid growth of Pentecostalism had become visible in Indonesia, Malaysia, Singapore, Taiwan and South Korea. Against the backdrop of economic growth in much of Asia, the rapid expansion of these Pentecostal congregations, noticeable for their younger upwardly mobile well-educated Chinese members, led to the

From: “Asian Pentecostalism: Renewals, Megachurches, and Social Engagement” in Routledge Handbook of Religions in Asia, Terence Chong and Daniel P.S. Goh, edited by Bryan S. Turner and Oscar Salemink, Copyright © 2015 Bryan S. Turner and Oscar Salemink, Routledge, reproduced by permission of Taylor & Francis Books UK.

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breakaway of independent churches, from which came the rise of the ‘mega-church’. The growth of the mega-church in Asia has been one of the most important developments in Pentecostalism in the past two decades. While the worship styles, organizational strategies and use of technologies by mega-churches in the US have shaped the general character of the mega-church, its non-denominational nature has allowed indigenous features to define those found in Asia. The global spread of mega-churches not only attests to the transnationalizing and indigenizing effects of Pentecostalism but also helps us further refine secularization theory to account for religiosity in modernizing societies outside Europe. Indeed, mega-churches have been most visible in highly urban settings in South Korea, Southeast Asia and south India, exhibiting a youthful dynamism and cultural relevance that often distinguishes them from more established mainline denominations. And while the Asian mega-church traverses varying trajectories, themselves shaped by the different histories and politics in different countries, there are several shared characteristics that offer a springboard for further discussion.

who attend 27 parishes across the island, the 21,800 Assemblies of God followers who go to 49 different churches and the 32,500 Methodists who are found in 44 churches (Lee and Long 2010). Historically, the megachurches were formed when charismatic preachers broke off from mainline churches during the Charismatic Renewal to establish independent churches that filled in the gap left behind by the decline of liberal and socially activistic Christianity due to state suppression and restrictions (Goh 2010). Chong and Hui (2013), in surveying over 2,600 Protestant mainline and megachurch Christians, tease out distinctions in attitudes towards public and social issues such as money and finance, politics, sex and sexuality, proselytizing and perceptions of other faith and ethnic communities. It was found that although the level of education among those attending mainline churches and mega-churches are comparable, they do have different socio-economic backgrounds. Broadly speaking, those who attend mainline churches have largely inherited their middleclass status, while those who attend megachurches tend to be part of the ‘new’ or aspiring middle-class with whom the megachurch shares ‘elective affinity’ (Weber 1991).

SINGAPORE

INDONESIA

Christianity is one of the fastest growing religions in Singapore. Singaporeans aged 15 years and over who professed to be Christians have grown from 14.6 per cent in 2000 to 18.3 per cent in 2010 (Singapore Census 2010). The mega-church landscape in Singapore is dominated by the ‘big four’ of City Harvest Church (33,000 members), New Creation Church (24,000 members), Lighthouse Evangelism (12,000 members) and Faith Community Baptist Church (10,000 members). To put the growth of these mega-churches in context, City Harvest’s 33,000 members alone outstrips the entire Anglican denomination of 20,500

The arrival of Suharto’s New Order regime in 1968 paved the way for a spike in Pentecostalism in Indonesia. With the spectre of communism vanquished, an estimated 2 million Javanese and Timorese converted to Christianity with Pentecostal Evangelical churches benefitting the most, especially after Reformed churches rejected healing and miracles (Anderson 2004; Robinson 2005). By 1998 the Pentecostal movement was approximated to be in the region of 7 to 10 million, with about 60 Pentecostal denominations (Robinson 2005). The Gereja Bethel Indonesia (GBI), for example, with 5200 congregations, has

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Asian Pentecostalism: Renewals, Megachurches, and Social Engagement

an estimated membership of over 2 million (Andaya 2009). Charismatic mega-churches began to emerge in major cities like Jakarta and Surabaya during the early 1990s with the GBI Bethany Jakarta and GBI Bethany Surabaya seeing 40,000 and 70,000 members, respectively (Wiyono 2005). Unlike their early Korean counterparts that catered to the poor who made the rural-urban transition, these Indonesian mega-churches were in predominantly middle and upper-middle class areas. The relationship between the Indonesian mega-church and media is also worth noting. Until the late 1980s when television stations were under the government’s tight control, mainline churches only enjoyed a weekly hour of programming but upon privatization many Charismatic mega-churches, understanding the power of the medium, began to buy up airtime with stations only too eager to tap this lucrative market (Budijanto 2009). The growth of the mega-church in Indonesia is down to a complex mix of identity politics, economic growth and cultural networks or what Koning (2011) characterizes as ‘business, belief and belonging’. According to Koning (2011) the religious experience is just as important as the legitimisation of wealth accumulation, the minority ethnic politics and cultural networking for Chinese Indonesians, especially businessmen and young professionals. ASIAN PENTECOSTALISM AND CHRISTIAN SOCIAL ENGAGEMENT Pentecostalism’s exact socio-political position in society is difficult to pinpoint for several reasons. For example, it has been observed that, although Pentecostalism was born from social discontent and protest, it gradually withdrew from the struggle with its increasing institutionalisation (Anderson 1979). It has also been noted that the Pentecostal emphasis on personal piety has ‘become a sop for a lack of social conscience’ (Anderson 2004:

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263). Arguably, the importance placed on the personal religious-spiritual experience has led to an inward perspective that accentuates the private-public line more clearly with regards to politics, except for issues which touch on public morality, as we will see below. However, new contextual theological explorations suggest the emergence of ‘progressive Pentecostals’ who are poised to move beyond inward purity towards action for social transformation (Miller and Yamamori 2007: 39). PENTECOSTAL-STATE RELATIONS In the case of Indonesia during the early 1990s, the eroding support enjoyed by the army prompted Soeharto to court modernist and political Muslims who had been at the fringes of power. The cooptation of these modernist Muslims and their rapid penetration into Soeharto’s inner circle meant that ‘Christian politicians were left with very little space and limited choices. Meanwhile, hostility toward the church and Christianity escalated very rapidly’ (Budijanto 2009: 163–64). At the other end of the spectrum, Pentecostal Christianity played an active role in the democratization process in South Korea. Unlike many Asian countries, the introduction of Christianity to Korea was not via colonialism, and it has been a powerful force in the country’s drive towards modernity and democracy. The country’s transition from authoritarian regime towards a more democratic society in 1987, for example, was accompanied by demonstrations and protests that included Pentecostal and evangelical Christians (Hong 2009). Furthermore, unlike Latin America or parts of Africa, Christians in Asia, Pentecostals in particular, are in the minority. Except for the Philippines and East Timor, which have Roman Catholic majorities, and South Korea and Singapore with approximately 25 and 18 per cent of the population respectively, Christians in China,

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Indonesia, Malaysia, Thailand and the rest of Asia continue to make up only a sliver of the population. According to some estimates, Christians make up 9 per cent of Asia’s population, or nearly 351 million people, while the figure dips to approximately 230 million if only Protestants are considered (World Christian Database 2005). These estimates, however, have been considered to be on the high side in light of the tendency to over-report in China, India and Indonesia (Jenkins 2001). Nevertheless, Pentecostal Christians, with the exception of Korea, and in the Philippines with regards to Catholicism, comprise the minority in multiethnic and multi-religious Asian societies. This has resulted in less coherent Pentecostal-driven political activism compared to Latin American and Africa. In terms of percentages, Christians just do not match up to other religious blocks for sustained political movements. And it is precisely because of their location multi-religious settings that controversies over Christian proselytization in Indonesia, Malaysia and Singapore have erupted from time to time. According to Kessler and Rüland (2008) Charismatic Catholicism and Pentecostal Protestantism have contributed to populist politics in the Philippines by emphasizing conservative morality and personal transformation as preceding political and socioeconomic change. Yet, Eddie Villanueva of Jesus is Lord Church, because of persistent Catholic bias and his more radical brand of social justice activism, has not been able to make headway in electoral politics in the 2000s. PUBLIC MORALITY It has been asserted that the combination of American Pentecostalism’s concern for spiritual warfare, or ‘demonology’, with personal piety and right wing politics might lead to the denomination losing touch with

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its humble origins and, instead, becoming a righteous ideology of an affluent middle class (Cox 1996). Hot-button issues like abortion, pre-marital sex, homosexuality and intelligent design blur the boundaries between private and public morality, and raise debates over the nature of the secular state. In much of Asia, especially its multi-ethnic constituents, the definition of the secular state is not the absence or marginalization of religion from the civil or public sphere but, rather, the ensuring of religious pluralism as a foundational component of contemporary society with the state in a privileged position of arbiter of civic-religious exchange and debate, always deemed to be neutral and objective. It is under this secular state where Pentecostalism can make claims over hotbutton issues in the public sphere. In Singapore, the Christian takeover of a women’s rights group in 2009 in order to curtail the latter’s perceived championing of lesbianism is one such example. The highly educated and middle-class profile of Pentecostals in Singapore has seen civic and legalistic expressions of public morality (see Thio 2007), and has been explained broadly as a result of the way in which the challenges of globalization have forced the Singapore state to be less morally conservative, opening up a perceived moral vacuum that certain segments of Pentecostals have felt compelled to fill (Chong, T. 2011a). CONCLUSION Anderson (2013: 225) argues that Pentecostalism is inherently contextualizing because of the vibrancy and spontaneity of charismatic practices. We would add that the charismatic practices provide a shared language, a ‘revolutionary aesthetic’ of revelation and critique of history (Smith 2010: 688), which have enabled diverse indigenizing revivals in Asia to speak to each

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other across time and space. Travelling along ethnic routes and colonial and cold war geopolitical lines, charismatic revivals

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have shot out in two arcs from India and from Korea and China to Southeast Asia and back.

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16.

THE RISE OF MIDDLE CLASSES IN SOUTHEAST ASIA

TAKASHI SHIRAISHI

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ostwar economic development over half a century has given rise to substantial urban middle classes in Southeast Asia. Constituted through rapid global and regional industrialization driven by foreign direct investments and finance capital, their horizontal solidarity is dependent on, but no longer confined only to, their ability to express themselves politically through the state and culturally as a nation. Because the middle classes are constituted not solely through a homogeneous national culture, but rather through networks of markets, global cultural and financial flows, middle class consciousness is fostered through interactions between national governments, domestic and transnational markets. These people share a lot in common among their professional lives and their lifestyles, in fashion, leisure and entertainment, in their aspirations and dreams. The kind of life they espouse and live carries social and environmental costs. Their survival and expansion as a class are largely dependent

on the economic performance of their respective countries, which are increasingly intertwined with and influenced by the regional and global economy. Above all, the regional market of which the middle classes are the main consumers mediates new forms of national and regional identities that can potentially advance regional integration. What distinguishes the postwar emergence of the middle classes is, as I argued elsewhere more extensively, the extent to which the formation of these classes has been shaped by the military, intellectual and cultural hegemony of the United States in the region (see Shiraishi 2006). The waves of middle class formation took place in postwar Japan, the so-called Newly Industrialized Economies (South Korea, Taiwan, Hong Kong and Singapore), and Southeast Asia within the context of an East Asian regional system fashioned under U.S. hegemony. The creation of middle classes was part of the American informal empire’s ideological vision to contain and combat communism.

Reprinted in excerpted form from Takashi Shiraishi, “Introduction: The Rise of Middle Classes in Southeast Asia”, in The Rise of the Middle Classes in Southeast Asia, edited by Takashi Shiraishi and Pasuk Phongpaichit (Kyoto: Kyoto University Press, 2008), pp. 1–23, by kind permission of Kyoto University Press and Trans Pacific Press 2008.

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The Rise of Middle Classes in Southeast Asia

But of equal importance is the role of 20th century American middle class formation in mediating the construction and selfrepresentation of the middle classes in Asia. Unlike their counterparts in Britain, who defined themselves in relation to the aristocracy, American middle classes that came into being in the 1920s took as the object of their social consumption and selfrepresentation the idea of ‘the standard package’ (Matsubara 2000, pp. 52–58). Ownership of cars, radios, refrigerators, washing machines, cosmetics and other goods made people middle class, as people no longer believed in an enduring class structure. Through mass media the American way of life, transcending sex, age, class, racial, ethnic and regional differences, became representable as a standard package. TV programs, Hollywood films and department stores displayed the American way of life as the standard package and educated people on how to dress, how to furnish their houses and how to enjoy their leisure as Americans. The emergence of middle classes in major urban centers in Southeast Asia in the twilight years of the Cold War represents the third wave of middle class formation in this region (while the fourth wave of middle class formation is taking place in urban centers of China’s coastal provinces). But the creation of Thai, Filipino, Malaysian and Indonesian middle classes as well as in other urban centers has taken place in different political and social structures and proceeded along different paths either successfully or unsuccessfully. Thai middle classes are a product of a long period of economic development, but especially of the great boom of 1986–96, sparked by the relocation of industry from Northeast Asia. Thai urban middle classes were also a product of educational expansion. The number of university students increased enormously in 1975–1985, from 316 for every 100,000 population in 1975 to 2009 in 1985 and leveled off (in 1995 it was 2096).

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Yet those who benefited from economic development have remained limited to urban middle classes in Bangkok, while those in the provinces, above all peasants and farmers who formed more than half of the population, as well as the urban poor, remained outside the sphere of prosperity. This resulted in a huge and expanding per capita income disparity between the provinces and the Bangkok Metropolitan Area (BMA). It is not surprising then that the urban-rural gap divided parties. If Thai middle classes came into being in a generation in the 1980s and 1990s, Filipino middle classes have been around for at least two generations. This is due to the fact that the Philippine industrialization started earlier in the 1950s, though it has remained stunted since. Those in middle class jobs remained proportionately constant at 11.5 per cent in 1995. To understand the Filipino middle classes, it is also important to remember that educational development started earlier and proceeded more steadily there than in any other Southeast Asian country. But the new middle classes thus created were grounded more in the private sector than in the state bureaucracy. Stunted economic development forced the Philippine state to adopt a policy of exporting its labor force by the 1980s. Filipino middle classes exhibit a pronounced sense of self-awareness as a group separate from peasants, workers and the urban poor. Their relative autonomy from the state has meant that while a portion of the middle classes occupies important positions in the state bureaucracy and public office, other portions have been at the forefront of reformist as well as radical political and social movements aimed at challenging the state and led by communists, church based organizations, NGOs and the private sector. In brief, the stunted economic development has kept Philippine middle classes small in number, socially separate from peasants, workers and urban poor, politically visible but divided and dependent on larger social

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coalitions, and in the past two decades, dispersed. In Malaysia, middle classes were a product of regional economic development in the boom years from 1986 to 1997 in which the economy grew by 8.6 per cent annually. Malaysian middle classes, above all Malaysian Malay middle classes, were also a product of the Malaysian developmental state. Its New Economic Policy (NEP) as well as its successor National Development Policy have been geared in part to achieving this objective, improving Malay social and economic positions and creating Malay middle classes with state-led economic and educational development, while lulling nonMalays with the FDI-led export-oriented economic growth. Malay middle classes also were a product of state-led educational development. Ethnic divisions remain the most important division in Malaysian politics. Like their counterparts in Malaysia, Indonesia’s new urban middle classes emerged in a generation under Soeharto’s New Order. New urban middle classes were born during these boom years. Given Indonesia’s 5 million civil servants, the majority of middle classes in the provinces were in the state sector. Economic development, together with the rise of new urban middle classes, transformed Jakarta into an emergent middle class city with a population of 10 million combining the central city district with business and banking headquarters, first-class hotels, shopping centers, suburbs with industrial estates and new towns into an integrated structure. Yet the middle classes remained small in number in a vast country with a population of 220 million. Moreover, they were divided in many ways, though not as segregated as in Malaysia. There were tensions between Sino- and pribumi-Indonesians and between those dependent on Soeharto’s family and crony businesses and independent-minded professionals and executives. There were also tensions between those in the public sector

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and those in the private and between pious Muslims and nominal/statistical Muslims. As in Malaysia, an Islamic revival deeply affected middle class Indonesians in the making. In national as well as local politics, local men with middle class backgrounds dominate. In part a product of Soeharto’s politics of stability and development, this emergent elite thrived under Soeharto, but now encompasses formerly marginalized (but nonetheless middle class) groups composed of journalists, school teachers and religious leaders. Equally important, class divisions have deepened since the crisis in 1997–1998 and threaten to tear apart the social fabric because the crisis hit the poor hard and not enough jobs have been created since for those 2.5 to 3 million people who enter the labor market every year. If the decentralized democratic regime fails to address this question, it is not hard to see what would happen to the current regime and who the people, above all middle class people, would turn to for the protection of their own class interests and against the forces that their politics of ethnicity and religion might unleash. Complex historical forces have shaped the new urban middle classes in Thailand, the Philippines, Malaysia and Indonesia differently. They are a product of regional economic development that has taken place in waves over half a century, first in Japan, then in South Korea, Taiwan, Hong Kong and Singapore, subsequently in Thailand, Malaysia, Indonesia and the Philippines, and now in China. They are a product as well of developmental states, whether democratic or authoritarian, and their politics is one of productivity, a politics to transform political issues into problems of output and adjourn class conflict for a consensus on growth (Maier 1978, p. 23). Southeast Asian middle classes exemplify the diversity and complexity of class formation: Thai middle classes are socially coherent, culturally assertive and politically ambitious; their counterparts in

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The Rise of Middle Classes in Southeast Asia

Malaysia and Indonesia are socially divided, dependent on the state, politically assertive but vulnerable; and the Philippines middle classes are socially coherent (less so than in Thailand, but more than in Malaysia and Indonesia), less dependent on the state, culturally ascendant but politically vacillating. These middle classes’ long-term cultural hegemony and political ascendancy are largely dependent on the economic performance of their respective countries because high economic growth means not only their survival, prosperity and expansion, but also the promise of a life of plenty for the lower classes. In this respect, the longterm development and stability of Philippine middle classes appear problematic. The Philippine economy has shown anemic performance for the last 25 years. This has resulted in deepening social and political crises which routinely manifest themselves in the outflow of workers; increasingly polarized class politics playing out in the national arena; corruption and capture by rent seekers of the state apparatus; and challenges against the state by Communist revolutionary and Islamic separatist movements. If the national significance of rising middle classes varies from one country to another, their regional significance is beyond any doubt. Rising region-wide middle classes constitute expanding regional markets for multinational corporations. The purchasing and consumption power of the middle class is borne out by the Financial Times’ report (22 April 2002, p. 14), which pointed out that in 2002, personal consumption in East Asia stood at about $5 trillion, on par with

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the figure for the European Union, and not that far behind the $6.9 trillion figure for the U.S. Whether in fashion, life style, music, or other businesses, firms that are successful in capturing regional markets thrive. Regional middle class markets open up the possibility for the construction of marketmediated national and regional lifestyles. As Kasian Tejapira persuasively argues about Thai middle class consumption and identity: Thainess, unanchored, uprooted, and freed from the regime of reference to commodities signifying national or ethnic Thai identity, is now able, as it were, to roam freely around the commodified globe, to coexist and copulate with Italian earrings, American fragrance, English wool, a Swissmade watch, Seiko, Sanyo, Toyota, Wacoal, or any other un-Thai commodities and sundries (2001, p. 153). Markets, in other words, are there and now safely Thai (or Malay Malaysian or SinoIndonesian or Filipino) because national identity is now spectral and undefined, commodities which can be assembled and reassembled by cultural entrepreneurs and politicians to construct an ‘Asianness’ that is not opposed to national identities. And indeed they have developed regional life styles. The 20th century middle classes can be defined in terms of the standard package. A recent METI research examined how much middle class people in East Asia have standard package items in common across nationalities and found that those who live in Taiwan, Singapore and Manila, for instance, have developed a common regional life style (Tsusho Hakusho 2005, pp. 206–207).

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The Southeast Asian Economy

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17.

URBANISATION AND DEVELOPMENT IN SOUTH-EAST ASIA

GAVIN W. JONES

TRENDS IN URBANISATION IN SOUTH-EAST ASIA South-east Asia is one of the world’s least urbanised regions. Aside from Singapore, which is 100% urban, only Malaysia and recently, Indonesia, have officially passed the point where 50 per cent of their population lives in urban areas. However, these statistics are misleading, in two ways. First, the official definitions of urban areas differ considerably from country to country, and in some cases understate the proportion of population living in what most observers would consider to be urban areas. Second, the spread of urban lifestyles and influences to areas classified as rural is profound, and means that rural areas are very different from what they were a few decades ago (Jones 1997: 239–41). TRENDS IN DISTRIBUTION OF URBAN POPULATION BY SIZE CLASS About half of Asia’s urban population lives in towns and cities with populations below half a million. If we go behind the regional

figures and focus on two Southeast Asian countries — Indonesia and Malaysia — some interesting facts emerge. First, the proportion in different urban size class groups fluctuates when cities move from one size class to another (as when Jakarta moved into the 5 million plus class size in 1980). Malaysia does not yet have any city in the 5 million plus class range, at least not when the Federal Territory boundary is used to measure the population of Kuala Lumpur. Both countries appear to be well above the Asian average in the share of small towns and cities (i.e. less than 500,000) in their overall urban population distribution. In Malaysia, this proportion has moved down over time, whereas in Indonesia, it has moved up over time; in 2010, the proportions were 70 and 74 per cent respectively, well above the proportion for Asia as a whole (round about 50 per cent). However, in both cases, this proportion would fall sharply if the reality of mega-urban regions (MURs) were taken properly into account. In Indonesia, the number of urban localities increased from 12,351 in 2000 to 15,786 in 2010, thus increasing the

Reprinted in excerpted form from Gavin W. Jones, “Urbanisation and Development in Southeast Asia”, Malaysian Journal of Economic Affairs 51, no. 1 (2014): 103–20, by kind permission of the Malaysian Journal of Economic Affairs.

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proportion of urban localities to total localities from 17.96 per cent to 20.46 per cent (Firman 2013: 3). The million cities all grew more slowly than the national population, with the exception of Bekasi, Tangerang, Depok and Makassar. The first three of these are all located in Jakarta’s mega-urban region, and the increase for this region as a whole was certainly above the national population growth rate. Likewise, for Bandung, the growth rate of the city was only 1.1 per cent per annum over the decade, but the surrounding areas grew more rapidly — Kabupaten Bandung, 2.5 per cent; Kota Cimahi, 2.06 per cent; and Kabupaten Bandung Barat, 1.99 per cent. Some smaller Indonesian cities have not shown any significant growth. The traditional function of small cities in Java (defined as those with populations of less than half a million) is as centres for collection and distribution of goods. Overall, the small cities in Java developed rather slowly between 2000 and 2010, with populations growing more slowly than the national population growth rate. Cities such as Tegal, Magelang and Madiun have barely grown at all; Yogyakarta has lost population (though perhaps this is related to urban overspill). However, the situation may be distorted slightly by the lack of information on non-municipality cities, some of which have populations exceeding 100,000. Outside Java, however, small cities grew more rapidly than in Java. The most spectacular example is Batam, a short ferry ride away from Singapore, which grew by 11.7 per cent per annum. Other examples include Sorong (9.7%), Jayapura (6.5%), Tarakan (6.4%), Pekanbaru (5.4%), Den Pasar (5.1%), Dumai (4.7%), Kendari (4.5%), Bontang (4.4%), Samarinda (4.0%) and Balikppapan (3.7%). Firman (2013: 13) argues that this suggests that small and medium cities outside Java play a more important role as centres of economic activities, most notably natural resource

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exploitation (mining, oil, timber, and palm oil), than in Java. Of course, in the case of Den Pasar, tourism is the main driving force in its growth. The unsatisfactory state of comparative data on urban agglomerations in many countries is well illustrated by the example of Malaysia, and its primate city, Kuala Lumpur. Kuala Lumpur cannot really be discussed without reference to Singapore, which for a brief time was part of Malaysia, but for 48 years has been an independent neighbouring country. Looking back five decades, Singapore was a much larger city than Kuala Lumpur, but after the split with Malaysia in 1965, Singapore to some degree lost its Malaysian hinterland. Thus its growth has not been as rapid as that of Kuala Lumpur, though this growth has accelerated more recently as a result of considerable net immigration, both permanent and temporary. The Singapore-Kuala Lumpur comparison will be elaborated later in the paper. Kuala Lumpur’s growth has been very rapid indeed, as it draws migrants from all over Malaysia as well as from overseas, particularly Indonesia. The mega-urban region centred on Kuala Lumpur today has a population of approximately 6.1 million, most of it residing in the adjoining state of Selangor. But the United Nations Population Division (2011) still uses Kuala Lumpur’s official boundary (i.e. the Federal Territory) to delineate its urban agglomeration. The problem with this is that Kuala Lumpur is a dramatically under-bounded city. Driving into Selangor state from Kuala Lumpur is simply a matter of moving from one part of the inner suburban area of the city into another. Indeed, the Selangor State government tried to bring greater awareness of the fact that motorists were entering its territory by building a major archway across the highway at the point of entry — the only sign of discontinuity in the urban landscape the motorist is traversing. Thus,

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Urbanisation and Development in South-East Asia

the United Nations figure for Kuala Lumpur urban agglomeration in 2010 is 1.5 million, compared to the reality of about 6.1 million. Malaysian urban and regional planners, of course, are well aware of the real magnitude of Malaysia’s major cities. The Federal Department of Town and Country Planning in its National Physical Plan, published in 2005, has projections for the three largest conurbations reaching substantial populations in 2020: 8.46 million in the case of Kuala Lumpur, 2.42 million in the case of Penang, and 1.84 million in the case of Johor Bahru. DEVELOPMENT, DIVERGENT INTERESTS AND THE POLITICS OF URBAN-RURAL BALANCE In this final section of the paper, I will select a few issues out of the large number that confront researchers and planners in South-east Asia seeking to understand and to influence the growth of their country’s urban areas. The first is whether South-east Asian cities are different from those in other regions. The second is the appropriate size of the megacity or megacities. The third is the role of intermediate cities. Finally, there is the issue of the politics of urbanisation. On the first issue, Dick and Rimmer (1998; see also Rimmer and Dick 2009: Chap 1), while paying tribute to McGee’s seminal work on the South-east Asian city (McGee, 1967) and his subsequent prolific writings, argue that it is time to discard the notion of the distinctive South-east Asian city, and integrate studies of South-east Asian urbanisation into the mainstream urban analysis. McGee’s “desakota” model of South-east Asian urbanisation — first developed in published form in 1987 and further elaborated in McGee (1991) — stressed the in situ urbanisation of areas surrounding large Asian cities characterised by a dense population engaged in smallholder production, typically of wet rice; a welldeveloped infrastructure of roads and canals,

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a reservoir of cheap labour, and an increase in non-agricultural activities, often perceived by the government as being “invisible” or “grey”. The model clearly applies better to cities such as Bangkok, Manila and Jakarta than it does to Kuala Lumpur or Singapore, but even in the prototypical cases of Bangkok and Jakarta, Dick and Rimmer argue that the literature stressing the unique elements of South-east Asian urbanisation (which they rather unkindly categorise as an “inwardlooking, specialist literature with its echoes of Orientalism”) is a “misleading guide to understanding the modern development of cities in South-east Asia” (Rimmer and Dick 2009: 48). Although I greatly admire McGee’s writings, and his influence on urban studies in South-east Asia and beyond, I come down firmly on the side of Dick and Rimmer. They take Jakarta as their key case study, and show that the development of “bundled” cities on its outskirts is an element of globalisation, and that the study of cities in South-east Asia must be “informed by knowledge of urban processes, especially in the United States” (p. 50). Like Webster (1995), I would argue that in this context, Los Angeles might be a more apt model for the way South-east Asian mega-urban regions are developing than the “desa-kota’ paradigm. Incidentally, the suburbanisation of Jakarta has been fuelled partly by the Indonesian government’s longstanding, unsustainable fuel subsidy, reduced (though certainly not eliminated) in 2013, which brought the costs of commuting from far-flung “new towns” surrounding Jakarta within the reach of the middle class and lower middle class to an extent that would not have been possible had the price of fuel reflected its true cost. When the fuel price is finally raised to market rates, this is likely to work to some extent against the urban sprawl that has characterised Jabodetabek’s recent development. The second issue is the appropriate size of megacities. It is not possible to say that any size

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is “too large”, particularly given the possibility of polynucleation. As Vining (1985: 30) put it, “The concentration of investment in the core region, which causes the ... (cityward) ... migrational flow, is the most efficient route to increased production”. Similar arguments are put forward by World Bank (2009). The third issue concerns the role of small and intermediate cities in the growth process. The case for promoting the growth of such cities is well argued by Hardoy and Satterthwaite (1986), though much of the intermediate city literature suffers from imprecision about the mix of policies that would be needed to achieve significant changes in urban development patterns. In any case, in Asia, the intermediate and smaller cities, overall, are growing somewhat more rapidly than the mega-urban regions. However, it is still possible to find cases of smaller cities in decline. In the case of Indonesia, some examples were noted earlier in the paper. There can be many reasons for the failure of a small city to grow — for example, economic decline, perhaps due to the decline of particular industries on which the city depended heavily and the consequent loss of employment; or decline linked to local conflict or the city’s loss of political importance. It is also important

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to understand the different typologies of intermediate cities, which may have a major bearing on whether they are growing or relatively stagnant. One important element to consider is whether they lie in the extended zone of a mega-urban region. Finally, we might consider whether the perception of big cities by governments in power, which has tended to be largely negative, remains that way. There have been many elements to this perception. One is the fear of the in-migration of the rural poor, thus choking up the city’s transport systems, and fuelling the growth of slums and crime. Jakarta’s unsuccessful attempt in the 1970s to close the city to in-migration, and the recent decision to do the same in Hanoi, reflect these negative attitudes. But there is a broader political concern as well. Autocratic governments in the region have typically had to fear the big cities as the locus of the most effective challenges to their power. Students, liberals, as well as criminal elements are concentrated there. Whether it be the potential to challenge the regime’s power through demonstrations or revolution, in the case of autocratic regimes, or through the ballot box, in the case of more democratic regimes, there is reason for governments to fear their big city populations.

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18.

UNDERSTANDING THE ASEAN DEVELOPMENT GAP

MARK McGILLIVRAY, SIMON FEENY, and SASI IAMSIRAROJ

I

n the minds of ASEAN stakeholders, the ASEAN development gap is the disparity that exists between the ASEAN-6 and CLMV groups — that is between the original members of ASEAN (Singapore, Malaysia, Indonesia, Philippines and Thailand, plus Brunei Darussalam) and the latter joining members (Cambodia, Lao PDR, Myanmar and Vietnam). The narrowing of this gap has been a focus of ASEAN since the launch of the Initiative for ASEAN Integration (IAI) at the Fourth Informal ASEAN Summit in 2000. Narrowing the development gap is a cornerstone of the equitable economic development agenda within ASEAN and forms an important part of the ASEAN Roadmap. ASEAN recognises that the gap between its member countries needs to be narrowed if it is to move forward in a more unified manner towards the achievement of an equitable ASEAN community. This chapter provides a definition of the development gap that is consistent with current international thinking on the meaning of development. In line with the writings of Nobel Prize-winning economist

Amartya Sen, and widely accepted quality of life or standard of living conceptualisations, it treats development as an end or as an outcome in which people are provided with the opportunity to exercise their reasoned agency. As such it does not define the development gap in terms of the many drivers of development in ASEAN member states, but as the quality of life outcomes that these drivers generate. The drivers of development identified in this chapter are those for which there is both robust theoretical and empirical support, as well as those with broad acceptance in policy circles. These drivers will differ in importance among ASEAN countries. All these drivers are important in all countries, although their relative importance to countries at varying stages of development may differ. The identified drivers include trade openness, investment in human and physical capital, governance and institutions, labour mobility and external development finance. Processes through which these drivers contribute to development and to development gaps are identified.

From: “Understanding the ASEAN Development Gap” in Narrowing the Development Gap in ASEAN: Drivers and Policy Options, Mark McGillivray, Simon Feeny, and Sasi Iamsiraroj, edited by Mark McGillivray and David Carpenter, Copyright © 2013 the Association of Southeast Asian Nations, Routledge, reproduced by permission of Taylor & Francis Books UK.

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Development, broadly speaking, is seen as multidimensional, involving achievements in universally valued quality of life outcomes. Defining development in terms of achievements in or levels of health, education and income has clear implications for how development gaps are defined and measured. As these achievements differ among individuals according to the country in which they live, development in this sense varies among countries. This variation may be considered as a development gap, and this is how the gap between the ASEAN-6 and CLMV countries will now be examined. The means by which development is achieved are, of course, all those factors that drive achievements in health, education, income and other valued quality of life achievements. It follows that these factors are also the drivers of development gaps. To be clear, for the purpose of this chapter and those that follow, the achievements in, or levels of, these drivers of development is not considered development per se; development is the intrinsically valued quality of life outcomes that these drivers generate. What has been shown is that a development gap exists, with the CLMV countries lagging behind their ASEAN-6 counterparts in each of the development achievements in the health, education and income dimensions, based on all indicators considered. However, this gap has narrowed slightly over the last decade. The gap in income has increased by 10 per cent during this time though. Different messages are provided by the poverty data. There appears to be a very large development gap that favours the CLMV countries. The gap based on the number of people living below the $PPP1.25 and $2.00 per day poverty lines sees the ASEAN-6 countries lagging well behind their CLMV counterparts; the reverse is the case based on the average poverty gap where the CLMV group lags slightly behind ASEAN-6 in terms of the intensity of poverty.

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Policy interventions seeking to reduce the gap must be based on an understanding of what drives it, and, in turn, which of these drivers can themselves be driven by policy interventions. Growth in incomes is, in particular, a major driver of achievements in health and education. It does so by providing both public and private resources that can be allocated to health and education services (McGillivray, 2005). Growth alone is insufficient to guarantee broad-based achievements in health and education, but it is necessary for such achievement (Commission on Growth and Development, 2008). As Brooks et al. (2010) and Menon (2012) and many other studies note, the literature points to the following key drivers of growth: 1 physical capital; 2 openness to trade; 3 human capital; 4 financial sector development; 5 governance; 6 labour mobility; 7 foreign direct investment, and; 8 external development finance. Physical capital or infrastructure includes roads, water supply, power grids, telecommunications and water supply and sanitation systems. While there is some speculation about the precise empirical contribution of infrastructure investment to growth, and discussion of the contributions of different types of infrastructure, it can be taken as a basic fact that ongoing investment in infrastructure, together with maintenance of the infrastructure stock, are keys to achieving and sustaining higher per capita income levels. It is clear from the preceding comments that ongoing investments in infrastructure in CLMV countries are essential for reducing the ASEAN development gap. Trade openness refers to the actual or potential extent an economy trades with the rest of the world. Openness can contribute

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Understanding the ASEAN Development Gap

to growth in per capita incomes in a variety of ways. Exporting to the rest of the world can allow for greater capacity utilisation and economies of scale and incentives for technological innovation and improved management efficiency due to the pressure of overseas competition, as Feder (1982), Balassa (1985) and a host of other studies have noted. Importing goods from the rest of the world can allow for the greater absorption of technological advances and for greater productive capacity. Moreover, as Edwards (1997) and others note, if the costs of technological imitation in poorer countries are lower than the costs of locally developed technological innovations, then these countries can grow faster than their richer counterparts and development gaps can be reduced more expeditiously. Achieving higher levels of openness, both in terms of the levels of exports and imports relative to GDP, and in terms of policy stance, among the CLMV group will help address the ASEAN development gap. Human capital has traditionally been defined as the stock of competencies, skills and knowledge possessed by individuals to produce economic value. The definition of human capital can be extended to include the ability to produce such value, and therefore is associated with achievements in health. The CLMV countries were ranked among those with the worst performing health systems. Vietnam’s ranking out of the 190 countries was 160. Lao PDR, Cambodia and Myanmar were ranked 165, 174 and 190 respectively. Of the ASEAN-6 countries, Singapore was ranked at position 6. The rankings of Brunei Darussalam, Thailand, Malaysia, Philippines and Indonesia were 40, 47, 48, 69 and 92 respectively. One would hope that these gaps have diminished substantially. If not, they must be seen as a major issue in addressing the ASEAN development gap, and be given very high priority in policy interventions. There is a compelling case that financial sector development is an important driver of

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economic growth in developing countries. While the evidence of the important role of financial sector development in supporting growth is reasonably clear, it is equally clear that such developments are no panacea insofar as growth is concerned. That is, in order for it to be effective in this regard it needs to be accompanied by a range of support services, including the provision of training and capacity building and assistance in accessing markets and technologies. Financial sector development and innovation will also bring risks, and as such it is important to maintain sound macroeconomic management, put in place effective regulatory and supervisory mechanisms, and carry out structural reforms in developing the financial sector (Zhuang et al., 2009). That noted, based on the wealth of evidence on the impact of financial sector development, ignoring this sector could well be at the cost of a larger development gap than would otherwise be the case. Governance has long been acknowledged as an important driver of growth, increasingly so over recent decades. The positive association between governance and institutional quality, and economic growth and income levels is very well established. Accountability, transparency, rule of law, political stability, bureaucratic capability, property rights protection and contract enforcement, and control of corruption are now regarded as key and mutually reinforcing aspects of growth-enhancing institutions. ASEAN countries, in particular the CLMV group, will need to continue to strive for improvements in each of these areas if the development gap is to be reduced. Control of corruption is an area in which CLMV countries especially will have to work, based on the 2011 Transparency International Perceptions of Corruption Index. While Singapore was ranked number 6 according to this index, Vietnam, Lao PDR, Cambodia and Myanmar were ranked number 112, 154, 164 and 180 respectively out of 182 countries (Transparency International, 2012).

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Labour mobility involves the flow of people, or migration, and has emerged as a key issue in development. Two aspects of labour mobility are central to its development implications: brain drain and remittance flows. Whether brain drain has an overall adverse impact on income growth depends on the relative strengths of the two impacts. There is little empirical evidence on the relative strengths of the impacts, although Beine et al. (2001) find that the beneficial impact of higher average human capital outweighs the impact of the outward flow of skilled personnel. Regardless of what the impact of brain drain and remittances on growth of per capita income might be, the point remains that migration can be made to work for source countries. The potentially harmful impact of skilled labour losses owing to brain drain can be offset by the potentially positive impacts of a more highly skilled workforce and remittance flows. Ensuring a freer flow of migrants of all levels of skills among ASEAN countries, and in particular from CLMV to ASEAN-6 countries, is therefore one way to narrow the development gap. Foreign direct investment (FDI) can play a crucial role in contributing to income growth in host countries. It not only augments local investment but can potentially lead to increased technology, better managerial expertise, increased research and development, and productivity and efficiency gains. It will promote higher growth in the long run if it generates improvements in technology (Solow, 1957; de Mello, 1997) or improvements in human capital (Lucas, 1988; Rebelo, 1991; Romer, 1986). This research provides a compelling reason for seeking to increase FDI flows to the CLMV countries as one means of decreasing the ASEAN development gap. But it is also clear that FDI alone will not sustain higher growth rates in these

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countries. It should not crowd out domestic economic activity, and needs to be led to or be accompanied by higher levels of human capital, improvements in technology and financial sector development. In this context the encouragement of FDI in Cambodia, Lao PDR and Vietnam in most sectors is a welcome development, although the downward trend in FDI to Myanmar since the early 2000s is a matter of concern (Menon and Melendez, 2011; Menon, 2012). External development finance consists of a number of inflows including export credits, portfolio investment and official development finance. Aid to the CLMV countries that is consistent with the Paris principles will enhance its impact on growth and in turn reduce the ASEAN development gap. This does, however, require that relative to the size of their economies and populations, the CLMV countries receive larger shares of total ASEAN aid receipts than their ASEAN-6 counterparts. If we accept that aid flows are effective in promoting growth in per capita incomes and greater achievements in health and education, giving preference to the ASEAN-6 over CLMV countries will exacerbate the existing gap. The gap in human development achievement has been gradually decreasing over time, but the gap in income has increased by 10 per cent over the last decade or so. With regards to poverty, the analysis in this chapter has demonstrated that by far the largest number of poor people live in the ASEAN-6 countries, almost entirely in Indonesia and the Philippines, but that the depth of poverty and its intensity is greater in the CLMV countries. This analysis suggested that it will be at least two decades before we see some significant convergence in most indicators, although some countries, most notably Vietnam, will converge with ASEAN-6 much earlier and indeed convergence in some areas is already being observed.

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19.

TOURISM POLICY-MAKING IN SOUTHEAST ASIA A Twenty-First Century Perspective LINDA RICHTER

INTRODUCTION The central problem for discussing public policy in Southeast Asia is that it is incredibly varied — politically, economically, linguistically, geographically, religiously, historically and in terms of the factors and processes by which tourism is being developed (Hitchcock, King and Parnwell, 1993). Politically, the nations of Southeast Asia range from communist Vietnam and Laos to the despotic military junta which renamed Burma ‘Myanmar’ in l989. Economic systems range from socialist-lite, to state-controlled governments like Myanmar, to varying degrees of capitalist societies in the rest of the region. Languages and scripts are numerous within nations and among them. Geographically, the range is from land-locked Laos to archipelagos like the Philippines and Indonesia with most of the nations having both mainland and islands. Historically, most of the nations except Thailand have also experienced long periods

of colonialism (up to 400 years) from a variety of European powers. It is no wonder that their public bureaucracies and political cultures vary so much. Nor are their boundaries undisputed (Richter, 1993; Musa, 2003). Thus, finding patterns of tourism policy-making in the midst of this variety of governmental experiences is very challenging. Still, some characteristics are obvious: top-down policy-making, some national planning, belated attention to environmental and indigenous factors and much corruption. In the next section I provide a broad analysis of tourism public policy-making across three stages of development. Included are several policy decisions these nations confronted in their decision-making. Then in the subsequent section of the chapter several sustainability challenges to policymakers will be examined. Finally, some of the aspects of the region’s tourism will be noted that encourage cautious optimism.

Reprinted in excerpted form from Linda Richter, “Tourism Policy-Making in Southeast Asia: A Twenty-First Century Perspective”, in Tourism in Southeast Asia: Challenges and New Directions, edited by Michael Hitchcock, Victor T. King, and Michael Parnwell (Copenhagen: Nordic Institute of Asian Studies Press, 2008), pp. 132–45, by kind permission of the publisher.

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STAGES OF TOURISM POLICY-MAKING Colonial Tourism and Its Aftermath Traditional rulers in these nations may have visited religious shrines or sought seasonal respite from the heat, but it was not until European conquests and colonization that discretionary travel as opposed to trading and pilgrimage flourished in Southeast Asia (Stockwell, 1993; Saunders, 1993; Douglas and Douglas, 2000). Linkages to that early era still persist in place names, museums, and in the histories. Modern tourism existed from the postWorld War I era but it was not until the independence of these countries (the Vietnam War in Thailand’s case) and the arrival of the wide-bodied jet in the 1960s that international tourism became significant. Planned Tourism/Unplanned Implementation From 1970 on tourism in Southeast Asia stopped being something that just happened to being something consciously planned (Burma and Brunei would be exceptions for another 15 years). To some extent many of the countries developed similar top-down strategies: national plans, government developed infrastructure and/or incentives for development of tourism facilities (Bramwell, 1998; Wanhill, 1998). Most opted for a national level plan often with a Ministry of Tourism or something similar. This was consistent with the governmental structure of most of the nations in Southeast Asia. A second decision was to determine the target of tourism promotion. In most cases it was the international tourist over the domestic tourist, reflecting the relatively small middle class in each nation with the financial security to travel. This would change slightly with growing affluence. Also, the Western tourist was initially preferred over the Asian tourist.

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A third and related question of policy was the type of tourist clientele. The overall strategy of promotion and infrastructure development was designed to attract luxury­ seeking tourists, not pilgrims, students, backpackers or individual travellers. Tourism was always advanced as an economic bonanza, but job maximization was not a high priority in the national plans, nor were the training institutes that developed in some countries like the Philippines really geared to assuring national control of tourism. A major policy question attached to tourism distribution was whether tourists themselves should be clustered in almost self-contained tourist belts and enclaves or integrated as much as possible into the population. A case could be made for both strategies. In conservative Muslim societies, enclaves were seen as separating the polluting impacts of the tourist from the rest of the population. Enclave tourism was also practised in Burma, the Philippines and Thailand. Restrictions on itineraries and access in Myanmar persist to this day. By shielding visitors from the poverty and the consumption patterns of the tourist from the population, it was thought all would go more smoothly. Moreover, the problems of enclave tourism grew obvious. Very little money, services or benefits trickled out of the enclaves to the local population and often whole settlements of residents were removed or the resorts built for the tourists (Henderson, 2003; Richter, 1989). Enclave tourisms tended not to defuse insurgencies but to radicalize ordinary people, as the Philippine ‘Light a Fire Movement’ illustrated in the early 1980s and the Bali bombings may do once more (Richter and Waugh, 1991; Richter, 1992; Hitchcock and Darma Putra, 2005). Government-sponsored tourism led the private sector in the early days and there was little if any consideration of how tourism could be made accessible to the local people or how their input could be valued. To most, it must have seemed as if the only policy objective was ‘more’, the only

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implementation schedule was ‘as soon as possible’, and the only evaluation was in terms of arrivals and gross receipts. The Philippines under Ferdinand Marcos was a classic example (Richter, 1982; 1989; 1999). Tourism infrastructure that would not be viable under any scenario for another decade was built in Manila to impress the World Bank-IMF financiers to continue aid to the government following martial law. The presence of tourists was also designed to legitimize the Philippine government, something present-day Myanmar apparently seeks to do (Henderson, 2003). Indonesia at first confined tourism to largely non-Muslim areas but as those areas flourished the government developed Bali Plus — a plan to broaden the tourism attractions to other parts of the country. Vietnam, Cambodia and Laos are at a disadvantage in developing tourism given the war-torn character of some of their landscape. Still, in recent years, travel to Vietnam has soared. It is based on the fascination of a beautiful land so long off-limits, but also the country has promoted heritage tourism around what some call ‘thanatourism’ — the Viet Cong tunnels, China Beach and other war sites so familiar to hundreds of thousands of French, American and Australian troops (Laske and Herold, 2004; Mok and Lam, 2000). Malaysia has had to neutralize its multiethnic heritage against an overwhelming Malay political control and tourism has offered a way simply to move around or beyond it. Malaysia has concentrated primarily on recreational attractions, and more recently ecotourism, over its contested cultural mix. Despite all the overt decisions reflected in special plans, five year goals and so on, the political objectives are seldom acknowledged. They are sometimes reflected in the budget but all financial decisions are not always clearly identified — making Harold Lasswell’s injunction to look at who gets what, when and how rather difficult (Lasswell, 1936).

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This leads to another point — what does not happen. ‘Non-decisions’ have resulted in several nations being notorious for their sex tourism, paedophilia tours and trafficking in women and children despite the fact that prostitution is officially illegal in all the countries (Bachrach and Baratz, 1963; Richter, 1989; 2003; 2004; 2005; Lim, 1998; Hall, 1992; WTO News, 2004, 4th quarter: 6; and Richter and Richter, 2003). In fact, the situation which accelerated but did not start during the Vietnam War is now so widespread and aggravated by the internet that some tourist-generating countries are choosing to prosecute sex tourists who go to Southeast Asia since the Southeast Asian nations too rarely can be depended upon to enforce their own laws (Richter, 2005). In a region where smoothly ordered relationships are highly valued, serious government or elite attentions to the seamier or criminal side of tourism is considered indiscreet. Tourism in the Twenty-First Century Several of the countries of Southeast Asia today have what tourism analysts might refer to as ‘mature’ tourism infrastructures, though Vietnam, Laos, Cambodia, Myanmar, East Timor and Brunei might still be characterized as emerging. The growth of terrorism globally, the emergence of SARS, and the looming threat of an avian flu pandemic have cost the region greatly despite the greater sophistication of policymakers and priorities focused on tourism. There is a growing wealth in the region which has encouraged more domestic travel and a more deliberately regional tourism development approach. This has long been a goal of organizations like the Association of Southeast Asian Nations (ASEAN), but internal competition has inhibited much progress. Attractions are being developed but are increasingly geared to the regional traveller, such as golf and gambling. Ecotourism is

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becoming a more important component of the tourist scene as its appeal to upscale travellers is noted. Public policy continues to guide tourism development, but the private sector is playing an ever more important role. Deregulation of the industry is uneven, but to some degree are adopting freer trade, foreign ownership and other features of globalization once considered intolerable. Niche tourism is also on the up-swing and fortunately is not confined to the still active sex tourism industry. Spa tourism in particular and luxury tourism in general are on the increase. A special and growing niche in the Philippines, Singapore and Thai land is health-related tourism. The attacks on the Pentagon and the World Trade Center also highlighted the vulnerability of many of the predominantly Muslim Southeast Asian countries, the Southern Philippines and more recently Southern Thailand to radical Islamic plots against tourists and the countries from which they come. There is increasing research on the efforts policy-makers are making through international bodies like the Association of Southeast Asian Nations (ASEAN). There are also more limited efforts to forge so-called ‘growth triangles’ that encourage regional promotion and co-ordination of tourism itineraries and transport (Henderson, 2001; Teo, Chang and Ho, 2001). SUSTAINABILITY ISSUES FOR THE PUBLIC SECTOR Many public policy issues can be considered sustainability issues. The literature is replete with discussions of reef protection, the problems of deforestation, issues of water and energy supplies. Social issues also are increasingly noted as central to keeping tourist attractions from being terrorist targets or centres of ordinary crime. I highlight only four of these health and sustainability issues. First, consider the

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26 December 2004 tsunami. The first anniversary of this disaster found tourism severely depressed in Indonesia and Thailand. However, significant progress has been made in infrastructure development and education for health and weather disasters. The second major regional health issue is ‘smaze’ [smog-haze], the unhealthy thick smoke that blanketed much of the region for months following uncontrolled burning in Indonesia in the late 1990s. Smaze caused many deaths, countless respiratory problems and was an undisputed tourism disaster for a region already struggling with polluted cities. A third and present threat is the terrible trafficking in women and children. Paedophilia tours, the rise of sexual slavery and with it AIDS has allowed a belated but deadly scourge to infect the region. This situation raises issues of enforcement, criminality, and disease that few governments are willing to acknowledge (Richter and Richter, 2003; Cockburn, 2003: 2–29). Trafficking is a threat both to women and children and to clients especially with the soaring AIDS rates. More nations also are attempting to prosecute those of their own citizens who commit crimes against children in other nations. The non-governmental organizations of the region have done more than the affected governments to curb this problem. Still today, girls and women from Myanmar are trafficked to the brothels of Bangkok and then abroad as are women from the northern hill tribes of Thailand (Meyer, 2001; Richter, 2003; 2005; East-West Center Conference on Trafficking in Women and Children in Asia and the Pacific, October 2003). The fourth health-linked public policy issue for Southeast Asian tourism is also the most open-ended and challenging. It reflects the powerful twin pressures for both deregulation and globalization: international public health. As such, it extends from terrorist threats to a myriad of health issues brought on by the travel of

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millions to countries whose citizens may lack the necessary immunity to the diseases the tourists bring. The most recent tourist-related threats to public health have come from East and Southeast Asia. SARS (Severe Acute Respiratory Syndrome) in 2003–2004 inflicted a dramatic roll on tourism, although it fortunately killed relatively few people due to an unprecedented effort by governments throughout the world to keep the threat confined. The tourist industry globally is estimated to have had losses of $40 billion from SARS, much of that in airline, convention and hotel cancellations in Southeast Asia (Shute, April 4, 2005: 40–47; Puska, 2005: 85–134).

A WARY, WEARY, BUT HOPEFUL FORECAST Despite these challenges, several new characteristics of Southeast Asian policymaking with respect to tourism are encouraging. First, there is a growing, although still limited, regional effort to address not just promotional and marketing

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issues but also questions of disease, trafficking and pollution. Secondly, although tourism has soared in the region and has grown to be a much more important sector to virtually all these economies, the countries have retained relatively diversified economies and diversified sources of tourists. It is critical to maintain this diversity. Thirdly, also encouraging is the fact that domestic tourism is increasing, heritage protection is growing and regional travel is strong — all factors that would seem to broaden the distribution of political and economic benefits from tourism. Models for responsible tourism do exist. The will to look at them and develop others depends on the political strength of the society at large and on how much groups insist on a role in the governments’ plans. There is much reason for optimistic that future tourism policy-making will be better integrated with the environment and local public if only because governments have learned all too painfully what a fragile industry it can be — subject to disease, terrorism, sabotage, environmental decay and corruption.

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Southeast Asian Politics

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LOW-QUALITY DEMOCRACY AND VARIED AUTHORITARIANISM Elites and Regimes in Southeast Asia Today WILLIAM CASE

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y the mid-1990s, democracy’s third wave had marked two decades of progress. But even as many parts of the developing world joined in, Southeast Asia served up quite mixed results, prompting Donald Emmerson (1995: 227, 238) to classify it as the ‘most recalcitrant region’, steeply resisting both democratizing processes and their comparative analysis. But he now looks upon Southeast Asia with greater optimism, contending that the ‘region is not immune to political change’ (Emmerson 2008: 79). Through a combination of ‘political entrepreneurship’ (agency) and ‘black swans’ (contingency, i.e., ‘a consequential but unexpected event’), he argues that more of Southeast Asia’s political regimes may soon be democratized. In addition, though the principle regional organization, the Association of Southeast Asian Nations, is dismissed by most analysts as inutile for political reform, Emmerson (ibid: 77–78) is encouraged by the liberal overtones, however faint, of its recently inked charter, suggesting that democratization may also be hastened by ‘neighborhood effects.’

In making this argument, Emmerson tones down the causality usually attributed in Southeast Asia to structural and institutional forces. He writes that democracy’s advance in Southeast Asia ‘depends less on underlying preconditions than on political entrepreneurship of the right kind’ (ibid: 79). He notes too the catalytic effects of black swans, in particular, the mis-fortuna of financial crises and natural disasters that has hastened regional cooperation between governments. Accordingly, Emmerson shifts attention back to the agency and contingency that once were spotlighted by O’Donnell and Schmitter (1986), as well as the regional ‘snowballing’ elaborated by Huntington (1991: 104–6). He thus poses a striking challenge to much recent scholarship which, in veering from democratic transitions to authoritarian durability, has moved steadily away from elite-level preferences and relations to structures, institutions, and masslevel formations. Democracy in Indonesia raises some separate, yet related questions about durability. The configuration of elites in the

Reprinted in excerpted form from William Case, “Low-Quality Democracy and Varied Authoritarianism: Elites and Regimes in Southeast Asia Today”, The Pacific Review 22, no. 3 (2009): 255–69, reprinted by permission of the publisher Taylor & Francis Ltd, www.tandfonline.com.

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country has grown wider and more varied. Yet relations have remained characterized by much forbearance, at least at the national level, with the interests of new elites in political parties and legislative bodies accommodated by traditional elites in the bureaucracy and military. As collusion deepens, democracy’s quality is diminished, of course, by the patronage that elites so vigorously pursue and the reserve domains that they tenaciously defend. But it is here that democracy’s quality and persistence intersect. With elites reorganizing their relations in ways that accommodate one another’s interests, it is precisely the low quality that results that enables democracy to endure. In the Philippines, democratic change was driven by an exemplary display of ‘people power’, ousting President Marcos and his cronyist networks. And with this change seemingly driven from below, expectations were heightened over the quality of the democratization that followed. However, if the upstart elites associated with Marcos were mostly swept aside, an older oligarchy of landholders and business magnates quickly reconstituted itself, then recaptured the monopolies it had lost. At the same time, these elites fiercely resisted efforts by the new president, Corazon Aquino, to reform the land tenure system that had traditionally underpinned their statuses. In these conditions, a drumbeat of coup attempts seemed only to cease once Aquino had abandoned her reformist agendas. Tensions came to the boil when elites in the bureaucracy and business, in alliance with factions in the military, were challenged during the presidency of Joseph Estrada, a leader whose behaviors and strategies were traceable to the neo-patrimonialism of Marcos’s early tenure. Thus, as Estrada rebuilt cronyist networks and issued populist appeals, the military stood aside while urban middle classes took to the streets, protesting vigorously over poor governance and

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Estrada’s personal corruption (Thompson 2007). In this way, through an uprising labelled People Power II, Estrada, was forced from office in 2001. But the aim of elites had little to do with raising democracy’s quality. If anything, after Estrada was succeeded by his vice-president, Gloria Macapagal-Arroyo, the pace of electoral manipulations and corrupt practices only quickened. Under Macapagal-Arroyo, state patronage has been dispensed with ever more inclusiveness (Hutchcroft 2008), therein placating enough top bureaucrats, generals, business magnates, politicians in Congress’ lower house, and even key Church officials that, just as in Indonesia, democracy’s low quality, rendering it tensile, strengthens its resistance to sudden breakdown. Thailand’s democratic experience has been briefer than that of the Philippines. But with the country never having undergone the party-building and electioneering encouraged by American colonial officials, much less the thoroughgoing political ‘tutelage’ once administered by the British (Weiner 1987), its democratic record has been more home grown. Transitions have been sequentially driven by student activists during the 1970s, provincial business figures a decade later, and a street-level amalgam of middle-class reformists, working class activists, and urban poor during the early 1990s. But from whichever quarter transformative pressures have been delivered, democracy’s quality has remained low, eroded by the abuses of selfregarding bureaucrats and generals, as well as the rapaciousness of vacuous and transient political parties (Ockey 2003). And though state administration came to display more programmatic coherence during the recent prime-ministership of Thaksin Shinawatra, executive watchdog agencies were run down, civil liberties were truncated, and human rights were grossly violated. However, if democracy’s low quality has enabled elites in Indonesia to reach accommodation and,

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to a lesser extent, in the Philippines, they have needed first to resolve a more epic confrontation in Thailand, a process that may just have begun. Elites in Thailand, arrayed across imperious ministries and royalist bureaus, a non-hierarchical military, disembodied political parties, metropolitan business conglomerates, and upcountry ‘godfather’ enterprises, have historically sooner clashed while in pursuit of their interests than coalesced. Like old oligarchism in the Philippines, then, reconstructed monarchism in Thailand has increased the differentiation between elites, widening the institutional and factional fissures between them. Democracy thus broke down in late 2006 when the military, evidently with royalist support, ousted Thaksin through a coup. During the military’s year of rule that followed, it built authoritarian features into the constitution, ensuring that when multiparty elections were restarted in late 2007 the quality of democracy remained low. But so deep was the enmity between elites that rather than seeking accommodation, statists first used democracy’s low quality to vanquish their pluto-populist rivals. Making highly partisan use of the judiciary, executive agencies, and rights of popular assembly, old elites ousted a succession of popularly elected governments which, through links to Thaksin, had challenged their preeminence. And hence, in late 2008, with Thaksin convicted on corruption charges and forced into exile, his party deregistered and its rural followings dispersed, statists enticed enough of the parliamentarians once loyal to Thaksin to defect to the Democrat party, anchored soundly in the middle class, that they regained control over the national assembly. Thus, after deep purging, elites finally seemed poised to reach accommodation. Of course, they at the same time canvassed additional features by which to diminish democracy’s quality and hence, to insulate their newfound unity.

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New democracies in Indonesia, the Philippines, and Thailand, debased on various dimensions, have enabled elites to disperse the societal pressures that had driven democratic change, then to reconfigure their relations in ways that aid them in perpetuating their interests. In their respective settings, elites first yielded to people power in the Philippines during the mid-1980s, the upsurge of Black May in Thailand during the early 1990s, and student protests and the Jakarta riots in Indonesia at the end of the decade. But after transitions took place, established elites, though sacrificing paramount executives, gradually reached accommodation with the party leaders and legislators that democratic change had thrust up. To be sure, the pace with which these dynamics unfolded was uneven, encountering coup attempts against Aquino and the ouster of Estrada in the Philippines, a ‘good coup’ (Hewison and Connors 2008) and a ‘judicial revolution’ mounted against elected governments identified with Thaksin in Thailand, and legislative upheavals and the impeachment of President Abdurrahman Wahid in Indonesia. But in each case, elites gradually formed new alliances, then so lumbered their new democracies with controls that politics neared the boundary beyond which they might slip into less un-ambiguous categories of authoritarianism. The exercise of civil liberties, especially by investigative journalists and rural activists, is threatened in the Philippines today by hit men and private armies. The contestation of meaningful elections, especially by populist parties, is offset in Thailand by military meddling and partisan court rulings. And the supremacy of civilian rule remains challenged in Indonesia by the military’s reserve domains. Elsewhere in Southeast Asia, social forces have never posed pressures enough that elites have needed even to respond with low-grade democratic concessions. They have remained fragmented by ethnic rivalries, placated by

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economic performance, mired in singleparty mentalities or traditional belief systems, or intimidated by base coercion. Thus, at most, elites in these settings have made but slight and quite retractable adjustments in authoritarian controls. In Malaysia during 2007–2008, elites moderated single-party dominance by under-enforcing limits on civil liberties, then recalibrated more widely the competitiveness of elections. In Vietnam too, apertures in a single-party system have grown more open, permitting elections that standalone candidates, if not parties, can contest. And even in Burma, elites have tried to lighten their brutal imagery by fabricating a constitutional convention and pledging elections. For more than three decades, elites in Malaysia have perpetuated a singleparty dominant system and an electoral authoritarian regime. With mass-level populations divided over ethnicity and religion, yet made content by general economic prosperity, pressures for fuller civil liberties and electoral competitiveness, apart from momentary surges, have lacked determinative force. In Malaysia’s general election held in March 2008, the government was dealt a great setback, so much so that despite its retaining control over the federal parliament, the contest was popularly interpreted as an ‘historic “victory” ’ for the opposition. Indeed, with its new momentum, the opposition sought to entice enough defectors that it might replace the government, finally completing a transition from a single-party dominant form of electoral authoritarian rule to a competitive two-party system and democratic politics. However, in the year since the election, the government has begun to reassert its single-party dominance, finessing the transfer of executive power from Abdullah to his deputy, Najib Razak, a more autocratic figure, while in some measure renewing distributions of state largesse

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through reissued state contracts and recommissioned megaprojects. And in using the tools of electoral authoritarianism, it has at the same time tamped down opposition, once more committing the opposition leader, Anwar Ibrahim, to trial for sexual misconduct, while arresting opposition parliamentarians and dissident bloggers under the Internal Security Act (ISA). And for good measure, through court rulings, corruption investigations, and induced defections and scandals, it has chipped away steadily at the five state-level governments that the opposition had formed. A large part of the explanation for why Malaysia’s electoral authoritarian regime, rock solid for three-and-a-half decades, so surged with competitiveness during its last general election must be found in the transfer of executive power from the domineering Mahathir Mohamad to the temporizing Abdullah Badawi who, through personal preferences or simple lassitude, allowed a fuller exercise of civil liberties and more vital functioning of parliament. And surely structural and institutional boundaries have not shifted so swiftly that they can by themselves account for the reassertion of single-party dominance in Malaysia that has followed, coincident with elite-level negotiations over the rise of Najib Razak as Abdullah’s successor. In Thailand, if societal pressures for trans-class populism have long smoldered, a political party only arose to give organized expression to these forces once Thaksin Shinawatra, after having experimented with sundry electoral tactics, learned finally to draw on his corporate acumen to innovate appeals based on customer preferences and programmatic responsiveness. Heretofore, Thailand’s party system had mostly been characterized by transience, fragmentation, and social disembodiment. But led by Thaksin, Thai Rak Thai broke the mould, forming the first elected government to complete a full term, then later to win

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reelection by so large a margin that it could have formed a one-party government. To be sure, the voluntarism of elites resists predictability except in highly institutionalized decisional arenas, rendering them theoretically unsatisfying for many mainstream Southeast Asianists. But the indeterminacy with which structures and

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institutions are afflicted is in no way resolved by ignoring the agency of leaders and elites. Indeed, the best way forward is to specify structural and institutional parameters in systematic ways, then introduce the elites who navigate within them, thereby easing the causal promiscuity that separately runs rampant in both domains.

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SOCIAL FOUNDATIONS OF GOVERNANCE IN CONTEMPORARY SOUTHEAST ASIA GARRY RODAN and CAROLINE HUGHES

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apitalist development and its attendant crises have posed differing challenges for political and economic elites in Southeast Asia. Indeed, Singapore powerfully illustrates how a wholehearted embrace of global capitalism does not inexorably translate into a convergence around either liberal or democratic governance institutions. It is a case of outstanding elite cohesion even in the face of periodic global economic crises. However, such cohesion and the durability of authoritarian rule in Singapore is a function of a particular form of state capitalism. PAP leaders realized, though, that they also needed to develop the party’s own power base and towards this end a merger of state and party reshaping the political economy of Singapore was affected. This entailed not just a powerful new class of politico-bureaucrats, but also a form of state capitalism that rendered many Singaporeans directly or indirectly dependent on the state for economic and social resources, including housing, employment, business contracts, and access to personal savings. This structural

relationship fostered vulnerability to political co-option and intimidation and further limited the possibility of alternative social and economic bases from which challenges to the PAP could be effectively mounted. Importantly, the emergence of this state capitalist class not only cultivated a strong nexus of material and ideological interests between state bureaucrats and political leaders. It also contained and circumscribed the domestic bourgeoisie’s development as a matter of political strategy, given suspected links in the early 1960s between elements of this class and oppositionists (Rodan 1989: 98). As a result, the domestic bourgeoisie’s economic opportunities have been heavily conditioned by, and dependent on, state capitalism-most recently through offshore investment strategies by GLCs (Rodan 2006). The political inclinations and capacities of the middle class have been no less influenced by the structural relationships embodied in Singapore’s state capitalism. Much of that class is either employed within the state in one or another of the

Reprinted in excerpted form from Garry Rodan and Caroline Hughes, “Accountability Coalitions in the Southeast Asian Context”, in The Politics of Accountability in Southeast Asia: The Dominance of Moral Ideologies (Oxford: Oxford University Press, 2014), pp. 27–56, by kind permission of Oxford University Press.

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government departments, statutory bodies, or GLCs, or indirectly derives its livelihood from servicing state capitalism through the provision of professional, legal, commercial, or other services. Therefore, the PAP state capitalist model has thus far succeeded in generating the social foundations for the consolidation of the existing elite’s own reproduction. Periodic capitalist economic crises in 1986– 87, 1997–98, and 2009 have precipitated reviews and re-evaluations of government policies and strategies, but these have resulted in refinements to, and consolidation of, the state capitalist model. This is not to claim that the model is completely devoid of tensions. Rising material inequalities, for instance, appear to be laying the basis for a growing public scepticism towards ideological pronouncements about ‘meritocracy’. However, organized civil society avenues through which to progress such concerns are not only constrained, but the absence of serious intra-elite frictions further limits opportunities to open up potential political alliances towards pressuring the PAP government for liberal or democratic governance reform. The Philippines has one of the longest histories of electoral democracy in Southeast Asia and, in 1986, also led the region in overthrowing Marcos’ authoritarian regime. To be sure, organizational space for political dissent under Marcos was never as thoroughly suppressed as under other dictatorships in Southeast Asia. Rather, moderate and radical critics of the regime operated through various legal and underground organizations in attempts to test and extend the limits of political space. Nevertheless, the threat such resistance posed was effectively limited and contained. Marcos’ introduction of martial law in 1972, though, put an end to what Anderson (1988) referred to as post-War ‘cacique democracy’ under which oligarchy faced no serious challenges.

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Marcos’ challenge to traditional oligarchic power laid the basis for alliances with popular forces opposed to authoritarian rule. The 1983 assassination of Benigno Aquino galvanized oligarchic elements in opposition to Marcos (Winters 2012: 61). By the mid1980s, these elements had joined liberal and conservative business and Catholic Church critics of Marcos as well as popular forces with more reformist and radical agendas in mobilizing against Marcos (Thompson 1995; Boudreau 2001). However, Marcos’ overthrow may have demonstrated the might of People Power in 1986, but subsequent developments highlighted its limitations. Oligarchs and their political allies minimized the prospect of radical reform by containing new popular aspirations for democratic participation (Boudreau 2009a). More generally, the return to electoral democracy allowed the wealth and patronage systems of oligarchs to be re-exercised over political parties, ensuring personal rather than programmatic or ideological agendas continued to dominate. Where necessary, paramilitary and other coercive means could be utilized to supplement networks of influence over public bureaucracies and legal institutions to capture or block state power (Hutchcroft and Rocomora 2012: 104; Sidel 1999). The poor and marginalized, that had resorted in the past to the unsuccessful Huk Rebellion over land reform or joined the communist Party of the Philippines, thus continued to lack effective political representation (Anderson 1988; Boudreau 2009a: 238–41). Against the background of the 1997– 98 Asian financial crisis and economic liberalization programmes under President Ramos, Joseph Estrada resoundingly won the presidency in 1998 employing anti-oligarch and pro-poor rhetoric (De Castro 2007; Quimpo 2008: 51–52). In office Estrada aroused the ire of established oligarchs by combining patronage politics with market

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liberalization benefiting his own cronies. Much of the middle class that by now had warmly embraced the good governance agenda of international aid agencies joined established oligarchs in an anti-corruption campaign against Estrada. This culminated in the People Power 2 movement in which powerful business interests, the middle class, and Catholic Church leaders were instrumental in forcing Estrada from office in January 2001 (Hedman 2006). It did not take long for Estrada’s successor, Gloria Arroyo, to also face allegations of corruption and for yet another president, this time Liberal party senator Benigno Aquino III, to come to power pledging to arrest corruption. His campaign slogan was ‘Kung walang corrupt, walang mahirap’ (‘If there is no corruption, there would be no poverty’) (BBC News 2011), yet it was not backed by policies of social redistribution or structural reform likely to trouble powerful oligarchs. Indonesia provides another example of successful adjustment by capitalist oligarchs following the collapse of authoritarian rule. Embedding of oligarchic rule effectively began with the advent of Suharto’s presidency in 1965. The command capitalism of the Sukarno era was replaced with state capitalism and a highly centralized military rule. In the Cold War climate, Western aid and investment was readily available to support importsubstitution industrialization and resourcesbased economic activity. Interventionist foreign investment, trade, and banking policies also bolstered the importance of the state to capital accumulation (Robison and Hadiz 2006: 118). In this period, proximity to Suharto was established as crucial in determining protection and access to wealth (Winters 2012: 56). However, the collapse of oil prices in the 1980s exerted a structural pressure on the state and private interests it had been organized to serve. In a context of diminished state revenues, arguments from technocrats

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favouring economic liberalization gained political traction. This was no triumph of neoliberal ideology. Public monopolies were often simply handed over to politically wellconnected private corporate interests, many of whom had outgrown the model of state capitalism that had nurtured them. Because the authoritarian regime had decimated all organized opposition and independent media (Heryanto and Hadiz 2005; Hill 2006), this phase in oligarchic rule was at one level politically unproblematic. Yet by the 1990s, Suharto’s children had joined the ranks of the oligarchs to complicate patronage processes for established conglomerates. Questioning of the favoured treatment of Suharto’s children increasingly came not just from students, intellectuals, and activists but also disgruntled oligarchs (Winters 2012: 57– 58; Aspinall 2005: 78–85). Contradictions inherent in the political economy of Indonesia’s oligarchic capitalism were brought to a head by the 1997–98 Asian financial crisis. Massive private debt, accelerated by financial deregulation, underscored the collapse of the banking sector and an imminent fiscal crisis. Thus, in October 1991, the International Monetary Fund (IMF) was invited to Indonesia. The result was a raft of loan conditions seeking to dismantle various forms of state protection and privilege underpinning the accumulation strategies of corporate conglomerates and politico-business families. By May 1998 Suharto had resigned, against a background of mass street demonstrations and his abandonment by oligarchs (Aspinall 2005: 213–38; Robison and Hadiz 2006: 125–26). By mid-2000, many of the old conglomerates managed to not just retain core assets but also to have their debt absorbed by government (Robison and Hadiz 2006: 127). They adapted quickly to electoral politics by harnessing wealth, connections, and extra-legal means (Hadiz 2003, 2012; Boudreau 2009b; Aspinall and

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Social Foundations of Governance in Contemporary Southeast Asia

Mietzner 2010). Furthermore, administrative and political decentralization resulted not in a diminution of oligarchic influence so much as a transformation in the way it operated. New layers of bureaucrats, party officials, entrepreneurs, and paramilitary interests were incorporated into revamped systems of patronage and corruption previously centralized through Suharto and Jakarta (Hadiz 2010). In Thailand, a military dictatorship established in the late 1950s assured stability for private investment in the context of ongoing war and intervention in neighbouring Vietnam, Laos, and Cambodia. Thailand’s membership of the South East Asian Treaty Organisation and its willingness to host American bases permitted the Thai elite to take advantage of significant American assistance in its own fight against the Communist Party of Thailand. The anticommunist struggle was pursued not only by coercion but also by heavy and astute investment in a cult of personality that emerged surrounding the Thai king. The king personally patronized populist anticommunist movements such as the Village Scouts, who along with the military were mobilized against movements of the left (Bowie 1997: 107–10). Meanwhile, the repression of workers’ and farmers’ movements in a context of rapid private sector-led development resulted in uneven levels of growth across the country. Urban centres, particularly Bangkok, industrialized rapidly on the back of low waged labour migrating in from rural backwaters. This had complex effects for Thailand’s political economy. The business class expanded and diversified beyond the clique of families that had dominated the economy via a firm grip on the banking system from the 1930s onwards. The rise of new sectors including services and tourism, the diversification of manufacturing, the establishment of the Thai stock exchange as a new avenue for raising capital, and the

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influx of foreign investors all produced new political forces with distinct interests and, consequently, new forms of intra-elite political competition (Hewison 2006). At the same time, uneven development in a context of authoritarian repression produced high levels of inequality both between the elite and the mass of the population, between urban and rural areas, and within rural areas where the household incomes of the poorest were heavily dependent upon remittances from Bangkok (Glassman 2010). Once the cold war began to wind down in the late 1980s and the threat of communist insurgency and/or invasion declined, a new interest in democratization emerged in urban areas. Protests in Bangkok in 1992 against military rule illustrated this, leading some observers to conclude that Thailand had successfully modernized during the boom of the 1980s, producing the socio-economic conditions for stable liberal democracy. That electoral politics was heavily influenced by vote-buying, pork-barrelling, and patronage in poor rural areas was regarded as evidence that rural Thailand lagged behind the capital not only in income and industrialization but also in its capacity for democracy. However, the political parties that emerged in the 1990s were exclusively oriented towards the urban elite and middle class, reflecting the repression of leftist politics during the Cold War era, and leaving the poor little to choose from when it came to electoral platforms (Montesano 2009). The Asian Financial crisis of 1997 had cataclysmic effects upon Thailand’s political economy. The seriousness of the crisis for Thai capital, exacerbated by IMF policies accepted by the ruling Democrat Party, prompted a major political reorganization of forces. As economic recovery began in the mid-2000s, the interests of business and the middle class began to diverge from the personal interests of Prime Minister Thaksin Shinawatra (Hewison 2006; McCargo and Ukrist 2005). The wider business class and

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the urban middle class desired a return to the pre-Crisis order where the poor were left to fend for themselves. These conflicting ideas prompted the emergence

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of a deep divide in Thai society, a military coup, and a subsequent period of profound and protracted constitutional and political crisis.

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22. DECENTRALIZATION AND DEMOCRATIC GOVERNANCE IN SOUTHEAST ASIA Theoretical Views, Conceptual Pitfalls and Empirical Ambiguities MARCO BÜNTE

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n the last two decades, many developing and transitional countries have experimented with decentralization reforms. Much of Southeast Asia stood in contrast to this global trend for a long time; before the 1990s, most countries had highly centralized polities. Today, even non-democratic states such as Vietnam and China are experimenting with reform of their central-local relations in order to enhance the legitimacy and effectiveness of their political systems. The aim of this chapter is to give an overview of recent decentralization reforms and explore whether and how decentralization impacts on democratic governance in the region.

DECENTRALIZATION AND DEMOCRATIC GOVERNANCE In the past quarter of a century, decentralization has become an integral element in the standard template of democracy promoters around the world. It

is supposed that decentralization supports the modernization of public administration, that it leads to economic growth and poverty reduction and that it contributes to democratic consolidation (Rondinelli and Cheema, 2007; Cohen and Peterson, 1999, p. 20). However, the exact nature of this relationship is still not clear and the value of decentralization and the consequences it has for the broader democratic system and society at large are far from uncontroversial (Treisman, 2007). First, the controversy can be attributed to the l ack of theoretical knowledge about the proper relationship between decentralization and democracy. Secondly, decentralization is a ‘complex concept’ and catch-all term for what proves in practice to be a highly differentiated and differently motivated range of political, economic and administrative practices and institutional reforms. Democratic decentralization means the devolution of decision-making authority to local citizens or their democratically elected representatives. Advocates of democratic

Reprinted in excepted form from Marco Bünte, “Decentralization and Democratic Governance in Southeast Asia: Theoretical Views, Conceptual Pitfalls and Empirical Ambiguities”. Edited by Aurel Croissant and Marco Bünte, The Crisis of Democratic Governance in Southeast Asia (New York: Palgrave Macmillan, 2011), reproduced with permission of Palgrave Macmillan.

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decentralization emphasize a number of assumed positive consequences of democratic decentralization. These can be summarized in five arguments. First of all, the liberal tradition, which has its origins in the Federalist Papers, mainly stresses the importance of vertical checks and balances resulting from decentralization and elected sub-national governments (Madison, 1999, p. 270; Hamilton, 2001, p. 282). Secondly, the communitarian or conservative tradition goes back to Alexis de Tocqueville. According to de Tocqueville, local self-rule and township democracy was the key to democratic freedom (de Tocqueville, 1969, p. 192). Thirdly, following the arguments of Alexis de Tocqueville, Robert Putnam and others have emphasized the idea that democratic governance requires a solid foundation in well-functioning institutions of participatory self-governance (Putnam, 1993). Fourthly, in development studies it is strongly suggested that decentralization is likely to help to alleviate bottlenecks in decision-making that are often caused by central government planning and control of important economic and social activities (Kimeny and Meagher, 2004). A fifth point is the argument of inverse timing of democratization. Initiating democracy at the local level may well prove an important way to begin the transition to national democracy. On the other hand, it can be argued that implementing decentralization involves certain trade-offs. Firstly, Weingast emphasizes a potential liability of democracy he calls the ‘tragic brilliance mechanism’ of an authoritarian regime (Weingast, 2006). The tragic brilliance mechanism implies that for democracy to serve as a mechanism of freedom and choice, it must be embedded in institutions that provide working checks and balances against the local government’s misuse of discretionary

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authority to threaten particular voters who vote for the opposition. Secondly, for local democracy to work, it must be embedded in a series of institutions that affect the incentives of political officials. When the absence of limit conditions is combined with the ‘tragic brilliance’ mechanisms so that basic services depend on whom citizens support in elections, citizens’ freedom of choice is proscribed and democracy serves more as a mechanism of social control than of personal choice. Thirdly, democracy at the local level can only increase accountability if it allows local citizens to make choices of competing visions about policies and throw out corrupt or ineffective local officials (Bardhan and Mookherjee, 2006). Fourthly, even though a decentralized state may be more efficient and responsive to local needs or the interests of minorities, it may also be more fragmented and inefficient because of insufficient planning, coordination and administrative capacities or funding. Fifthly, while decentralization policy narratives are often dressed up in the clothes of technical governance issues, decentralization is a highly political and· complex process affected by multiple struggles between diverse social interests (Hadiz, 2004). Thus, successful democratic decentralization requires more than just good policies, planning and resources — it also calls for the political will and power to tip the balance in favour of meaningful local democratization. DEMOCRATIC DECENTRALIZATION IN SOUTHEAST ASIA — FORMS AND STRATEGIES OF DECENTRALIZATION AND THEIR IMPACT ON DEMOCRATIC GOVERNANCE Southeast Asia is a late developer as far as decentralization is concerned. In general, the

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Decentralization and Democratic Governance in Southeast Asia

approaches to decentralization in Southeast Asia can be divided into three broad categories: ‘fast starters’, ‘incrementalists’ and ‘cautious movers’ (World Bank, 2005, p. 6). The fast starters (Indonesia and the Philippines) have rapidly introduced major structural, institutional and fiscal reforms in response to a sudden and far­ reaching political stimulus. These fast starters introduced the basic elements of the decentralization framework in their revised constitutions, enacted far-reaching decentralization laws, installed democratic elections at the local level and quickly opted for a substantial resource sharing formula. The incrementalists have taken a more piecemeal approach to decentralization. In China or Vietnam, for instance, the government made ad hoc policy decisions and passed legislation directly affecting sub-national governments (some decentralizing, some recentralizing), although decentralization is not an officially documented policy (Vasavakul, 1999). The cautious movers (Thailand and Cambodia) have established significant elements of decentralization at the formal policy and legislative levels, but only limited progress has been made on implementation. The difference in these approaches can mainly be attributed to the interplay of three factors: firstly, the mode of transition to democracy and the strength of the bureaucracy in the regime coalition; secondly, the intensity of provincial separatism and communal tensions at the local level and the push for decentralization from below; and thirdly, the extent of conflict between bureaucratic and non-bureaucratic players at the central level, especially during the implementation phase, which made decentralization either succeed or fail. In both Indonesia and the Philippines, the authoritarian regime coalition has been seriously weakened by democratization, and bureaucratic elements came under intense

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pressure to alter central-local relations. In Indonesia, regional and local leaders began voicing their discontent about the perceived excesses of centralized rule and started demanding greater regional control over political and economic affairs after Suharto’s fall in May 1998. There have only been modest moves towards decentralization in Thailand and Cambodia. In Thailand, there has been considerable opposition to even small steps towards decentralization since democratization took place in 1992. The resistance of the bureaucracy has been hard to overcome. In the end, however, decentralization reforms caught the attention of political players and bureaucrats in their search for political power. Thailand’s prodemocracy movement paired the reform of the overall system with the development of an initial decentralization framework. This movement culminated in the passage of the People’s Constitution in 1997, which mandated further decentralization of the political system (Medhi, 1995). While even minor attempts at transferring power to sub-national levels have been thwarted by nationalist bureaucrats and conservative politicians in Thailand, the initiatives for decentralization in Cambodia came from the state itself. The rationale for decentralization has been to strengthen the presence and legitimacy of the state at the local level after decades of conflict and turmoil. Since the rural areas have always been the political backbone of the ruling Cambodian People’s Party (CPP), the party supported the direct election of commune councils after 2001 (Turner, 2002). The three factors mentioned above proved to be even more important during the implementation phase. While the resistance of senior bureaucrats was overcome in Indonesia and the Philippines, the decentralization provisions of the Thai constitution of 1997 and the Decentralization Act of 1999 have still not been fully implemented yet.

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In Indonesia and the Philippines, the implementation of the decentralization framework remained a protracted struggle between the central government ministries and local governments. In contrast, Thai decentralization has been in a dilemma ever since the inauguration of Prime Minister Thaksin Shinawatra in 2001. His election, however, also meant a radical departure from the more democratic politics of the late 1990s, which had culminated in the promulgation of the new constitution in 1997 and the Decentralization Act in 1999. DECENTRALIZATION AND DEMOCRATIC GOVERNANCE IN SOUTHEAST ASIA Existing evidence from Southeast Asia suggests that the relationship between decentralization and democratization is problematic at best in the young democracies. With particular reference to Indonesia and the Philippines, it can be argued that decentralization has broadened formal routes of citizens’ participation in local politics and established channels of direct involvement and monitoring of civil society organizations. This achievement, however, has to be seen against the increasingly oligarchic character of local politics, the continuing involvement of local bosses, which has been accompanied by illiberal practices such as increasing corruption, a lack of transparency and mounting violence. In the Philippines, the evidence of effective participation in local government is mixed. The legal framework made the Local Government Code a good vehicle by which to advance local democratization and deepen national democracy (Brilliantes, 1997). However, despite the involvement of NGOs in local politics, participation is often merely a ritual. In general, we can find a number of regions where civil society plays an active role in local politics. In other areas, however,

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local governance simply relies on political democracy with limited amounts of direct participation (Ishii et al., 2007, p. 369) The overall oligarchic character of local politics has been further consolidated and the effects of decentralization, which in this context means the empowerment of local strongmen, have been captured. In Indonesia, the verdict on decentralization and local democracy is still pending after ten years. Taking into account the huge regional diversity of the archipelago and the differing historical, cultural and economic local conditions in each region, it is no wonder that there is no clear picture about the impact of the decentralization process on local democracy so far. The latest studies point to the intricacies posed by the historical legacy of the Suharto era, the restructuring of the New Order elites and rise of local bosses and their abuse of state power in addition to the side effects of decentralization, namely ethnic and religious mobilization, violence and administrative and political fragmentation (Schulte Nordholt, 2004). CONCLUSION After many decades of centralism, Southeast Asian states have embarked on the decentralization of their state structures. The approaches that Southeast Asian states have taken to decentralization have varied: while some have opted for comprehensive decentralization, including a complete overhaul of their political and administrative structure, others have been more cautious in their reforms. This chapter has shown that far-reaching decentralization evolved from a combination of local, national and international pressure to initiate a reform of central-local relations. With regard to the relationship between decentralization and democratization, we can learn some important lessons from the case of Southeast Asia.

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First of all, democratic decentralization does not automatically serve as a tool to deepen democracy at the sub-national level and needs to be embedded in institutions that provide working checks and balances against the local governments’ misuse of discretionary authority. Secondly, decentralization in former neo-patrimonial

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systems can lead to the decentralization of corruption. Thirdly, as existing research on bossism in Thailand, the Philippines and Indonesia indicates (Sidel, 2004; Hutchcroft, 2004), it is essentially the interplay between national and local forces that provides incentives for the rise of local strongmen.

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23.

AUTHORITY AND DEMOCRACY IN MALAYSIAN AND INDONESIAN ISLAMIC MOVEMENTS JUDITH NAGATA

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uring the political upheavals of the past decade in the Middle East, Iraq, Afghanistan and what is often called the ‘Muslim world’, the attention of politicians, diplomats and policy-makers has turned ever more to the conundrum of the relationship between Islam and democracy. The question is not confined to the imperatives of realpolitik, but appears also on the agendas of scholars of social science, political philosophy, theology, Islamic history and even anthropology. A number of conferences on the topic have been added to the international circuit, such as those sponsored by the recently formed Indonesian International Centre for Islam and Pluralism (ICIP), which cover both theoretical and practical concerns of democratization and Islam in particular states. Most recently, concerns with symptoms of an ‘authoritarian democracy’ have emerged in some states, which this chapter addresses. The approach to Islam and democracy taken by many social scientists (Hefner 2000; Weiss and Saliha Hassan 2003; Martinez

2004) has largely been directed towards finding connections between Islam and civil society, the voluntary and welfare sectors and assorted non-governmental organizations (NGOs) (e.g. Weiss), and in participation in the institutional electoral process, as measures of democratic potential. Others seek evidence of political, social, cultural and legal pluralism, or even authoritarianism within the democratic system, as an indicator of tolerance and accommodation of Islam and other religions within its own framework. Here, religious and democratic pluralism may be mutually constitutive. Invariably, social scientists tend to bound their focus and interests within national units or states, although they recognize that many religious communities, such as the Muslim ummah, do not always follow these boundaries. Clearly the cultural and historical genealogies of social science and religious scholarship follow separate traditions and have their own epistemologies and methodologies. Each may take a different position on the ‘state’, the ‘law’, the ‘people’

From: “Authority and Democracy in Malaysian and Indonesian Islamic Movements” in Islam and Politics in Southeast Asia, Judith Nagata, edited by Johan Saravanamuttu, Copyright © 2010 Johan Saravanamuttu for selection and editorial matter; individual contributor Judith Nagata, Routledge, reproduced by permission of Taylor & Francis Books UK.

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and notions of authority, and each has its distinct styles of discourse and rhetoric, which have implications for comparative analysis. Recognizing that there is no single, universally accepted (or practised) understanding of democracy, or how it might be identified; there is scope for serious comparative political ethnographic research as to how democracy operates in actual cases. Just as democracy cannot be taken for granted, Islam likewise is not monolithic, and needs to be understood in specific local, cultural and national contexts. It is also essential to take account of the views of Muslim scholars, and to see theories of society, authority and politics from a Muslim perspective. Debates on religion and democracy rarely engage social science and religious specialists in equal measure, but rather tend to be one-sided, and allow disciplinary biases to shape the issues. Nonetheless, protagonists on both sides need to be aware of their often unexamined disciplinary assumptions and worldviews, and be prepared to deconstruct the foundational concepts, whether scriptural or secular doctrines, of their received traditions. With the above caveats in mind, it is proposed in this chapter to examine more minutely the nature of the intersection between the democratic processes and certain Muslim movements within two Muslim majority states which claim to be democratic, Malaysia and Indonesia. How far do Muslim organizations observe national boundaries, identities, political cultural norms and participate in national civil and electoral institutions? To what extent are citizens caught between two systems of legal, moral and political authority? In general, how do national political authorities (often simplified as the ‘government’) react to public religious claims, agendas and activities, whether violent or not? What are the constraints for the Muslim citizen who wishes to engage in national electoral politics, whom Satha-Anand calls the ‘engaged Muslim’? In circumstances where public

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religious activity is perceived as ‘political’, is an authoritarian response inevitable, whereby democratic processes are routinely ‘adjusted’ to handle the situation, leading either to the marginalization, management or suppression of religious elements? In what circumstances can confrontation between secular and Islamic authority and interests within a nation lead even to the erosion of democracy, and what is the mark of democracy’s end? Finally for how much longer can the democratic myth, legitimacy, narrative and discourse survive its apparent procedural and substantive loss? In this chapter I focus on the experiences of two Southeast Asian Muslim majority nations with internal Islamic movements. I lead into the discussion with a critical prologue on the various uses and meanings of ‘democracy’, the concept upon which the arguments of the volume are premised. Different Southeast Asian states have picked up the ball of democracy and run with it in their own ways, and distinct national styles of discourse, process and practice in the name of democracy have evolved in each country. This is followed by a brief excursion into the diversities of local Islam and forms of religious expression and action in the national contexts of Malaysia and Indonesia. As a counterpoint to the exegesis of the doctrine of ‘democracy’, I present a brief selection of some of the ideas from religious scholarship and theology concerning ideal religious principles and qualifications of authority, Islamic understandings of the political and legal rights of Muslim citizens in relation to ‘secular’ state and national power and systems of law. This will reveal the diversity within the Muslim community, with its own assortment of ‘progressives’, modernists’, ‘liberals’, ‘pluralists’ and ‘Islamists’, and their respective views on engagement with the state. Finally, I offer ethnographic case studies of selected religious movements in Malaysia and Indonesia as evidence of political engagement, and as a test of authoritarian tendencies on both sides.

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Evidence suggests that both national ‘democratic’ governments and autonomous religious movements have their own idealized myths and narratives of authority which may not be totally congruent with the praxis and process on the ground. Whereas the discourse of democracy serves as a net catching a wide range of procedural rules and practices, even to the point of authoritarianism or ‘non/no longer-democracy’, somehow it still manages to maintain its currency and resonance with the political community. In fact, a growing number of (Southeast Asian) ‘democracies’ today appear to be moving in the direction of the authoritarian camp, quite independently of any Muslim confrontation. Few Muslim movements have traditionally appealed to democratic values internally, but have followed their own systems of authority, whose narratives invoke divine sovereignty and its delegation, through qualified religious specialists or family lineages. Whereas democracy speaks of the will and power of the people, Islamic rhetoric privileges scriptural and legal knowledge and spiritual/moral qualities, but has little space for the popular will per se. Where democratic states call on constitutions and secular legal codes, religious communities recognize only the sovereignty of God and the scriptures, making for perennial conflicts between human rights and secular law on one hand, and the Syariah on the other. For national governments, the democracy myth attempts to leaven otherwise non-democratic or authoritarian procedural reality, while the quasi kinship and moral community discourses of many Islamic movements tend to obscure or soften internal authoritarian and patriarchal hierarchies. Putting the two together in a single system, political ideology or party therefore is fraught from the beginning. Few Muslim movements have traditionally appealed to democratic values internally, but have followed their own systems of authority, whose narratives invoke divine sovereignty and its delegation, through

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qualified religious specialists or family lineages. Whereas democracy speaks of the will and power of the people, Islamic rhetoric privileges scriptural and legal knowledge and spiritual/moral qualities, but has little space for the popular will per se. Where democratic states call on constitutions and secular legal codes, religious communities recognize only the sovereignty of God and the scriptures, making for perennial conflicts between human rights and secular law on one hand, and the Syariah on the other. For national governments, the democracy myth attempts to leaven otherwise non-democratic or authoritarian procedural reality, while the quasi kinship and moral community discourses of many Islamic movements tend to obscure or soften internal authoritarian and patriarchal hierarchies. Putting the two together in a single system, political ideology or party therefore is fraught from the beginning. In Indonesia, after the fall of Suharto’s authoritarian regime the more violent and terrorist mutations of Islam occurred, in the forms of Jema’ah Islamiy’ah, Laskar Jihad and Front Pembela Islam, in the more relaxed and ‘democratic’ space, in the loose sense, that opened up. This could be construed as a vindication of the effectiveness of the previous authoritarianism, as could the absence of any such public religious violence in Malaysia under Mahathir’s authoritarian hand. As conditions change, both states and their internal religious constituencies engage in constant mutual adjustments. Authoritarian governments raise the stakes by pre-emptively widening their definition of ‘political Islam’, and Muslim groups may opt in and out of the electoral process, by cooption or by voluntarily becoming political parties, all of which are forms of ‘political’ engagement in the broadest sense. There does not seem to be any direct causative connection between authoritarianism in politics or religion, yet in their interactions they may reciprocally reinforce any such tendencies on both sides.

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Democracy narratives are most likely to be appropriated by Islamic organizations when they are actively engaged in the national political process, whether as political parties contesting elections or as active citizens and voters in their other roles. Both PAS in Malaysia and Indonesia’s NU, particularly since the Gus Dur presidency, use these strategies, to appeal to a wider electorate. Even as they play democratic politics and tackle broader public issues, however, many of their Syariah-based concerns are temporarily shelved. Thus on the one occasion that a Muslim party (PKB) took power nationally in Indonesia under Gus Dur, it briefly formed an axis with other Islamic parties (boros tengah); however, the agenda and operation of the National Consultative Assembly (MPR) did not veer from its Pancasila-based democratic course. Movements which seek to influence or change the current system of governance, such as the GAM movement in Aceh, and Malaysia’s ABIM before the co-optation of Anwar, include calls for greater democracy as a means of drawing support and credibility from a wider public. Contestations, verbal or other, as to the democratic credentials and performance of national governments by a religious constituency usually arise in those areas where the two engage directly in public politics, although the religious movements may continue to follow their own system of authority internally, as do NU and Arqam/ Rufaqa. It is when the Islamic groups have a stake in national affairs that political narratives

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converge, as does potential for normative as well as procedural conflict. This may lead to authoritarian responses by the government, which in turn may stimulate further action from the religious side in dialectical fashion. Authoritarianism has a habit of generating more of the same, as is happening on both sides in Southern Thailand, and has occurred in Indonesia between government and some terrorist groups like Laskar Jihad and Jemaah Islamiyah. In Malaysia by contrast, the extreme authoritarianism of the government, with the help of the ISA since the late 1970s, has managed to contain or quell such response from the Muslim side. The Islamic opposition has capitulated rather meekly as in the cases of ABIM and Arqam/Rufaqa. But in the process, they have stimulated a more public Islamic climate and style of governance and respect for Syariah at the national government level, to enhance the latter’s moral image and (democratic) vote-drawing capacity. Ultimately, the fact that Islam is readily politicized means that many kinds of Muslim movement are able to engage with more pluralist regimes, as in Indonesia today, or as in the mutual accommodation between ABIM and UMNO and NU in its political party (PKB) incarnation. Alternatively religious activism may bring out an authoritarian response, as in South Thailand at present, and as has occurred between militant groups1 notably in Indonesia. There are no predictable rules to these processes: political and religious formations mutate rapidly, as do the situations which shape them.

NOTE 1. A clash of narratives and agendas may occur without violence. A recent series of fatwas, issued by the Indonesian Ulama Council (MUI) in July 2005 made a direct onslaught on ‘liberal’, ‘pluralist’ and secularist trends in Indonesian Islam, intended as a message to the government (of SBY) and to such organizations as ICIP. Although at the level of a war of words, these pronouncements bore the marks of an authoritarian oppositional stand-off, and diminished political or civil engagement (cf. Asian News Network, ‘Top Muslim body lays down law in Indonesia’, 30 July 2005).

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24.

SOUTHEAST ASIA IN THE US REBALANCE Perceptions from a Divided Region EUAN GRAHAM

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his article explores perceptions and reactions across Southeast Asia towards the Obama administration’s “pivot” or “rebalance” to Asia. The US approach has been dismissed as more rhetorical than substantive grand strategy, its credibility under renewed scrutiny following President Obama’s cancelled visit to Southeast Asia in October 2013. Nonetheless, the rebalance has expanded from its origins in 2010– 11, acquiring diplomatic and economic “prongs” with a particular focus on Southeast Asia, broadening the bandwidth of US engagement beyond military diplomacy and force realignment. However, the US “pivot” has had to contend with entrenched narratives of the US role in the region oscillating between extremes of neglect or over-militarization. The US-China strategic dynamic weighing over the region, itself central to Washington’s strategic calculus across Asia, has also coloured the lens through which Southeast Asians have viewed the re-balance. Varied reactions to the US rebalance at the national level in Southeast

Asia are further suggestive of a sub-regional divide between “continental” and “maritime” states that to some extent predisposes their perspectives and orientation towards the Great Powers. The rebalance1 to Asia — launched two years into Barack Obama’s first term — initially re-awakened the over-militarization critique of US policy, given its up-front focus on US force realignment and rising tensions in the South China Sea. Within the US military global commands structure, the Western Pacific and eastern Indian Ocean fall within the Pacific Command (PACOM) and Pacific Fleet’s area of responsibility. This automatically subsumes Southeast Asia in a wider strategic context. Secretary of State Hillary Clinton’s intervention at the July 2010 ARF in Hanoi, and her subsequent November 2011 Foreign Policy article — still the closest document to an official doctrine for the pivot — clearly signalled an intensification of US interest in the South China Sea.2 Attention in Southeast Asia was further garnered by Washington’s apparent interest in a more

Reprinted in excerpted form from Euan Graham, “Southeast Asia in the US Rebalance: Perceptions from a Divided Region”, Contemporary Southeast Asia 35, no. 3 (2013): 305–32, by kind permission of the Institute of Southeast Asian Studies.

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“redistributive” footprint for the US military forward-deployed presence in the Western Pacific, given its top-heavy dispositions in Japan, South Korea and Guam. Since 2012 there has been a conscious re-calibration to the pivot/rebalance, widening the base of US engagement efforts to include diplomatic and economic legs to match the already extended defence component. Although the pivot concept, as originally used by US officials, “suggested the transfer of resources and strategic attention from the Middle East and Europe to Asia”, the military substance — at least in terms of additional US military deployments — in Southeast Asia has been somewhat underwhelming.3 Notwithstanding the cancellation of two previous presidential visits to Southeast Asia before October 2013, the overall engagement effort has been relatively consistent, given the considerable presidential “face time” invested in annual attendance at both the EAS and APEC leaders meeting. The US diplomatic focus on Southeast Asia has also benefited from the Obama administration’s embrace of multilateralism, given ASEAN’s importance as a hub for Asia-wide trade and security dialogues and groupings.4 However, as doubts have accumulated about the fiscal sustainability of the US forward-deployed posture and whether its commitment is primarily rhetorical, the narrative has swung from over-militarization back towards “neglect”, a theme reinforced in recent media coverage.5 Pendulum-like swings between these persistently polarized narratives about America’s role in Southeast Asia prompt the question whether, in fact, there is such a thing as a happy medium for US engagement in Southeast Asia that is neither overbearing nor inattentive, and how this might be defined? In surveying regional attitudes towards the US rebalance, there is a sub-theme to this article, premised on the assumption that perceptions may be indicative of a widening divide between “continental” and

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“maritime” Southeast Asia, porous though these labels evidently are. While it is not my intention to engage in a systematic discourse analysis, to give my guiding assumptions and analysis some grounding in local and elite opinion in Southeast Asia, I have cited from a range of regional commentators, drawing in particular from a National Bureau for Asian Research (NBR) report on Asia-wide attitudes to the US pivot/rebalance strategy, published in January 2013.6 I also adopt a definition of the strategy offered within that report, as a “trident” combining the three prongs of multilateral/bilateral diplomacy, trade and investment promotion, and military presence.7 While the primary focus of this analysis lies with the military and diplomatic elements to US policy in Southeast Asia, the economic prong, though less developed, is integral to understanding the orientation of Southeast Asian states towards China and the United States: specifically, whether America is perceived as a provider of broadbased public goods to the region including military security, or as lacking the economic foundation to sustain its engagement beyond the short term and over-reliant on military levers to maintain its influence. Trade may be a limited indicator of “depth” and maturity to commercial relationships, yet by 2010 the US relative market share of ASEAN’s trade had more than halved, to 9 per cent, from 20 per cent in 1998.8 The Obama administration has appeared cognizant of the perception problem this has posed for the credibility of the “pivot” in Southeast Asia, as well as the genuine necessity of underpinning the expansion of its defence and diplomatic relationships in Southeast Asia with initiatives directed at economic revival.9 Meanwhile, to flesh out the multilateral and diplomatic aspects to US regional engagement, the appointment of a US Ambassador to ASEAN — resident in Jakarta since March 2011 — appears designed to

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serve a twin objective: first, of endorsing ASEAN as the main vehicle for Washington’s multilateral diplomacy in Southeast Asia plus the wider region; and second, to deepen US engagement across a raft of cross-cutting, transnational security and development issues.10 Part of the problem that America faces in enhancing its political leadership role in Southeast Asia is that power factors are difficult to divorce from the economic policy realm. Indeed, China’s diplomatic gains in the region since the late 1990s have been delivered inseparably from economic initiatives, originating from Beijing’s diplomatically effective if largely cost-free supportive stance towards Southeast Asia as the region’s economies recovered from the 1997–98 Asian Financial Crisis. Economic inducements (real or apparent) were an effective tool of China’s regional diplomacy in the decade that followed, as Beijing “attempted to co-opt … Southeast Asian states by providing incentives in the form of trade concessions, investments and large-scale Official Development Assistance projects”.11 Although China’s economic statecraft in Southeast Asia has been characterized by regional analysts as an exercise in soft power,12 an explicit linkage between geopolitical influence and trade in Southeast Asia is increasingly acknowledged in the mainstream Chinese media, while competitive comparisons are drawn openly with the United States.13 China’s confidence in the economic element of its statecraft has also taken on a selectively punitive aspect since the denial of market access has been employed by Beijing as a pressure tactic in maritime territorial disputes in the East and South China Seas. US-China competition is commonly identified by leading regional commentators as an increasingly divisive dynamic for ASEAN. Hugh White identifies Asia’s power shift as the underlying reason why ASEAN is increasingly split on the South China Sea and

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sees some form of accommodation of China’s “challenge” by the United States as essential to avoiding conflict.14 White is not specific about what this would entail for Southeast Asia, but it would presumably involve a parallel accommodation of China by its “continental” Southeast Asia neighbours and rival territorial claimants in the South China Sea. Emmerson foresees the possibility that “if Sino-American rivalry escalates, ASEAN’s members could split into China-deferring and China-defying camps”.15 Evelyn Goh also identifies the US-China dynamic — though differently interpreted — as the major wedge in ASEAN’s cohesion. Goh sees Southeast Asia as facing a parallel US-China “resurgence” in the region, requiring adaptive responses that fit neither within the International Relations template of bandwagoning or balancing behaviours.16 Both Goh and White agree that ASEAN has lost its ability to control the Great Power dynamics that are now dominating Southeast Asia’s strategic architecture, despite the fact that regional institutions have been deliberately layered around ASEAN in order to reinforce its selfstyled “centrality” to regional multilateralism. Awareness of these crumbling foundations is leading individual ASEAN members to tacitly or overtly welcome a revival of US interest and presence in the region for essentially Realist logic. Without attempting an exhaustive regionwide survey, a few states can be singled out that demonstrate Southeast Asia’s divided strategic geography. The Philippines and Thailand are obvious candidates for inclusion as US treaty allies; yet in their differing responses they are also illustrative of Southeast Asia’s diverging maritime and continental trajectories. Vietnam and Malaysia are correspondingly interesting as partial outlier “swing states” with the potential for pursuing strategic alignments that to a certain extent “defy” their respective continental and maritime geographical settings. Singapore, firmly “maritime” in its

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Southeast Asia in the US Rebalance: Perceptions from a Divided Region

strategic and economic orientation is now more important to Washington as a defence partner and logistical host to US forces than Thailand, a formal treaty ally. Singapore also maintains a diversified “portfolio” of defence and security partnerships beyond the United States, including the need to manage its economically important but complicated relations with China. This is a basic dilemma that Singapore shares with the rest of Southeast Asia, including Malaysia, another maritime state but with particularly close economic ties to China and a strong pan-Asian strain to its diplomacy. While Singapore is a close US bilateral defence partner, it remains highly protective of ASEAN, as a diplomatic “force multiplier” for smaller countries in Southeast Asia. Hence some of Singapore’s diplomatic energies are channelled via this multilateral route, as a potential constraint on bilateral cooperation with the United States. Last and not least, Indonesia, as ASEAN’s primus inter pares, counts for more than other members simply in terms of its size, resource allocation and population. Yet cultural reticence about leading from the front and the legacy of non-alignment tends to see Jakarta observing equidistance in its external relations, while adopting a behindthe-scenes brokering role within ASEAN, as it has on the South China Sea.17 For the US pivot and military strategy, Indonesia carries geopolitical weight because of its position as an archipelagic state astride the major bottle-neck straits connecting the Indian and Pacific Oceans. While the Obama administration has gone to substantial lengths to seed bilateral and multilateral relations in Southeast Asia beyond the superficial optic of attendance at annual summits, the diplomacy behind the rebalance also relies on symbolic effects. The pendulum-like swing back towards negative

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perceptions of Washington, as domestically distracted and unable to sustain its attention on the region, may be indicative of polarized regional narratives towards the United States that are highly sensitive to presentational triggers. Nonetheless, the fallout for the rebalance may be more than cosmetic, given that none of the economic, diplomatic and security prongs of the rebalance “trident” have yet reached an irreversible tipping point in terms of regional acceptance, even from states that actively support a strong US presence in the region. Meanwhile, over a longer event horizon, the spectrum of Southeast Asian perceptions of benefits, constraints and limitations to the US rebalancing strategy is steadily widening. There is a loose, geopolitical division within the region between continental and maritime states that influences states’ orientation towards Great Powers, with the “offshore” insular countries better disposed towards an invigorated US presence. The divide, however, is porous, with Vietnam and Malaysia serving as partial “outlier” counterexamples. On the South China Sea, and the fundamental question lying behind it about whether China poses a strategic threat to Southeast Asia, ASEAN’s fragile unity has already been publicly shattered, causing some of its individual members to seek closer relations with the United States, while others tilt towards China. One of ASEAN’s long-serving diplomatic rationales has been to “flatten” Southeast Asia’s strategic geography, projecting an image of solidarity towards the Great Powers that masks internal divisions, uppermost of which in geopolitical terms is the continental versus maritime gap. Narrowing this divide will require more than a reform of ASEAN’s decision-making structures, but basically a new grand bargain among its members.

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NOTES   1. The terms “pivot” and “re-balance” are used interchangeably in this article. However, the US policy focus on Asia under Obama was framed initially more in terms of the “pivot” in State Department usage, associated in particular with former Assistant Secretary of State for East Asian and Pacific Affairs, Kurt Campbell. The “re-balance” was more closely associated with Pentagon parlance, but has since replaced the “pivot” as the preferred term used in US official policy pronouncements, as seen for example in the January 2012 Sustaining US Global Leadership: Priorities for 21st Century Defense, signed by Barack Obama .  2. Hillary Clinton, “America’s Pacific Century”, Foreign Policy, November 2011, .   3. Phillip Saunders, “The Rebalance to Asia: US-China Relations and Regional Security”, Strategic Forum [National Defense University], Number 281 (August 2013): 1–16.   4. Robert Sutter, “The Obama Administration and US Policy in Asia”, Contemporary Southeast Asia 31, no. 2 (August 2009): 209–11.  5. See for example, Howard LaFranchi, “Obama cancels Asia trip: Is the US ‘pivot’ in jeopardy?”, Christian Science Monitor, 4 October 2013, and Andrew Browne, “Asia Ponders U.S. Role Amid Syria Strife; Doubts Rise in Asia Over U.S. Move to Rebalance Security Obligations Toward the Region”, Wall Street Journal, 10 September 2013.   6. National Bureau of Asian Research, “Roundtable Regional Perspectives on US Strategic Rebalancing”, Asia Policy 15, no. 1 (January 2013): 1–44.   7. Alexander Chieh-cheng Huang, “Taiwan in an Asian ‘Game of Thrones’ ”, ibid.  8. Ernest Bower, “The U.S.-ASEAN Relationship in 2030”, Southeast Asia from the Corner 3, issue 9 (10 May 2012): 1, .   9. Sutter, “The Obama Administration”, op. cit., pp. 209–11. 10. “U.S. Engagement with ASEAN”, United States Mission to ASEAN, . 11. Renato Cruz de Castro, “The US-Philippine Alliance: An Evolving Hedge against an Emerging China Challenge”, Contemporary Southeast Asia 31, no. 3 (December 2009): 409. 12. Ibid. 13. A recent Global Times editorial, for example, notes: “Thanks to its geopolitical influence in this region, China possesses certain advantages that the White House is envious of. Consequently, China has surpassed the US and become the largest trading partner of ASEAN.” “SE Asia tests China’s diplomatic creativity”, Global Times, 10 October 2013, . 14. Hugh White, The China Choice (Sydney: Black Inc, 2012). 15. Donald Emmerson, “Challenging ASEAN: The US Pivot Through Southeast Asia’s Eyes”, Global Asia 7, no. 4 (Winter 2012): 25. 16. Evelyn Goh, “Evaluating Southeast Asian Strategies for Managing Great Power Resurgence”, paper presented at a conference, The Growth of Chinese Power and Changing Security Dynamics in Asia, S. Rajaratnam School of International Studies, 22 February 2013, pp. 1–13. Cited with permission. 17. See for example, “China closer to South China Sea Code of Conduct, Marty says”, Jakarta Post, 3 May 2013, .

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Section

IV

INTERNATIONAL DEVELOPMENTS

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INTRODUCTION

Cassey Lee

S

outheast Asia has often had to react to developments taking place in the world outside. International tensions played an important role in the formation of ASEAN in the late 1960s. In recent years, the influence of global changes has intensified. On the economic front, Prema-Chandra Athukorala and Archanun Kohpaiboon talk about the emergence and subsequent deepening of global production networks further integrating a number of Southeast Asian economies with major East Asian manufacturing powerhouses such as Japan, South Korea and Taiwan. ASEAN’s goal of establishing a single market and production base reflects the importance it attaches to the integrating of its economies into the global production network. Be that as it may, as Hal Hill has pointed out, the convergence and integration of ASEAN economies is still an on-going and slow process. This has not, however, prevented ASEAN from creating cooperative mechanisms, processes and institutions aimed at mitigating risks from external shocks such as the Global Financial Crisis in 2007/2008. This is discussed by Jayant Menon and Aekapol Chongvilaivan, and Jayant Menon and Thiam Hee Ng. Another important development, which is debated by Razeen Sally, is the rise of China as a major global economy since the 1990s.

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This has had significant impact on trade and foreign direct investments (FDI) in Southeast Asia. For one thing, Southeast Asian countries is now more dependent on trade with China, whilst the two at the same time have become competitors in attracting FDI. Ja Ian Chong analyses the rise of China from a geo-strategic and political perspective. The rise of China has also increased tension between China and Japan, and between China and the United States. The maritime disputes over the South China Sea and the Diaoyu/Senkaku Islands have further compounded the problem. ASEAN’s responses to these challenges have included economic-oriented initiatives, such as the establishment of the ASEAN-Japan free trade agreement and the American-led Trans-Pacific Partnership Agreement. ChienPeng Chung argues how cooperation and rivalry between these countries have also been played out in various ASEAN-based multilateral forums, such as the ASEAN Regional Forum and the ASEAN Plus Three. Southeast Asian countries will continue to respond to external forces in the future — both individually and collectively. The challenge they face is one of finding space to shape their separate destinies whilst functioning within a regionally integrative context. ASEAN centrality is a manifestation of this balancing act.

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25.

IS THERE A SOUTHEAST ASIAN DEVELOPMENT MODEL?

HAL HILL

INTRODUCTION Now into its 47th year, the Association of Southeast Asian Nations, ASEAN, is the most durable and effective regional economic and political grouping in the developing world. This raises the question, does it make sense to contemplate the existence of a ‘Southeast Asian development model’? The approach adopted in this paper is two-fold. The first is to enquire whether the Southeast Asian economies are in some sense converging with respect to development policies, strategies and outcomes. Second, to the extent that there is such convergence, is there any causality at work that is derived from common geographic location. The paper focuses primarily on eight of the countries, excluding Brunei because it is so small and atypical, and Myanmar because of the poor quality of its statistics. GROWTH The growth record is first examined to get a sense of whether there is any sort of synchronised growth pattern discernible.

First, the three Indo-China latecomers, led by Vietnam, have actually grown the fastest. This is not surprising, as they commenced growth at extremely low levels of per capita income, and were less affected by the Asian financial crisis (AFC). Second, the Philippines remains an outlier (along with Myanmar if reliable national accounts statistics were available), both before and after 1990. Third, apart from the Philippines, the growth dynamics of the original ASEAN Five have been broadly similar over this period. These diverging growth rates are unsurprising. First, the experience with major departures from trend growth rates, principally economic crises, have varied enormously, reflecting both the differing responses to common exogenous shocks, and the presence of home-grown crises. Second, commodity price fluctuations have different effects within the region. Third, a range of other country-specific factors is at work. Localised political disturbances are also a factor, such as in Cambodia and Indonesia in 1998 and the Philippines in 1986.

Reprinted in excerpted form from Hal Hill, “Is There a Southeast Asia Model of Development?”, Malaysian Journal of Economic Affairs 51, Special Issue (2014): 89–111, by kind permission of the Malaysian Journal of Economic Affairs.

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More importantly for the purposes of this paper, are the region’s growth cycles synchronised? Putting aside the outliers, Brunei and Myanmar, the coefficients are quite high, especially in the case of pairs of countries where intuition suggests similar growth drivers. In fact, for the ASEAN Five, with the partial exception of the Philippines, practically all the bilateral coefficients are high, suggesting deepening integration. MACROECONOMIC MANAGEMENT First, annual inflation has been consistently low, less than 10 per cent, for over 95 per cent of the annual observations, and always for Malaysia, Singapore and Thailand. Second, the rare cases of double-digit inflation have been quickly contained, with inflation returning to less than 10 per cent within a year or two. These achievements are particularly noteworthy, confirming the conclusion of general inflation-aversion and prompt responses to occasional inflationary episodes, especially as this record has been achieved during one of the most tumultuous periods in global economic history, including two major crisis periods, food and commodity price volatility and, in several countries, considerable domestic political turbulence. Fiscal policy is central to macroeconomic management since, as noted, the monetisation of fiscal deficits is typically the most important explanation of inflationary episodes. Prior to the AFC, most countries ran small fiscal deficits or surpluses, a reminder that the initial IMF conditionality as part of its rescue packages of fiscal tightening constituted a general mis-diagnosis of policy settings in the affected economies. Although most of the countries have run fiscal deficits since the late 1990s, they have been modest for several reasons. First, the tradition of prudent and powerful finance ministries somewhat immune from the political pressures that intrude into other portfolios has been maintained, and if anything

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strengthened since the AFC. Second, the trend towards establishing independent central banks that do not have as their remit the responsibility to finance a budget deficit has added a layer of fiscal policy caution. Third, explicit legislative restrictions on the size of fiscal deficits have been introduced or reinforced, most notably in Indonesia and Thailand. As a result of this fiscal prudence, public debt rose in the wake of the AFC, but since then it has either declined, or has been stable relative to GDP. OPENNESS Since the 1950s, only Singapore has remained completely open to international commerce, apart from a very brief period of mild import substitution when it was part of Malaysia between 1963 and 1965 (Huff, 1995). Malaysia too was a very open, exportdriven economy at the time of independence in 1957, and it has never fundamentally deviated from this posture, apart from a costly flirtation with heavy industry during the Mahathir era, some protection for food crops, and various barriers to services trade. Thailand was never as open as Singapore and Malaysia, but its trade barriers were mostly mild, usually in the form of tariffs, and FDI has always been welcomed, albeit with greater conditionality than in the other two economies. The Philippines was the first country in the region to explicitly adopt an importsubstituting strategy in the context of continuing preferential trading arrangements with its former colonial master, the US, until 1974. It was not until the late 1980s that there was a significant change of direction which, once embarked upon, developed a constituency in support of the reforms, to the point where the country became fairly open by around the turn of the century. Indonesia turned increasingly inward after independence in 1945, and by the early 1960s it had effectively disengaged

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Is There a Southeast Asian Development Model?

from the international community. However, the transition from Sukarno to Soeharto in 1965–66 marked a startling change of direction, and the economy suddenly became very open to both trade and investment. Although protectionist pressures and rhetoric have been ever-present, over the past quarter century these reforms have never fundamentally been overturned, even during the 1997–98 AFC, when strong antiwestern sentiments surfaced in the wake of the IMF’s mismanagement of the economic rescue package. The four poor mainland Southeast Asian states also progressively disengaged from the global economy in the 1960s and 1970s. The Indo-China War overshadowed the economies of Vietnam, Cambodia and Laos, and then all three countries became communist in 1975. About a decade later, however, the Mekong economies began to open up, initially cautiously, with Vietnam’s Doi Moi leading reforms from plan to market. Even Myanmar, once second to North Korea in its international isolation, began to liberalise in 2011, at an accelerating pace. These successful and far-reaching unilateral liberalisations have been reinforced by ASEAN’s adoption of what the late Hadi Soesastro (2006) referred to as ‘outward- looking regional integration’. The countries of ASEAN trade predominantly with the rest of the world, and thus the costs of trade diversion would exceed the benefits of trade creation in any customs union. Accordingly, the ASEAN countries have undertaken several waves of multilateralising preferences, where they have voluntarily offered their AFTA concessions to nonmembers on a non-discriminatory basis. INSTITUTIONS AND GOVERNANCE Here arguably the greatest diversity exists. If one subscribes to the proposition relating to the primacy of institutions (for example,

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Rodrik 2003; Acemoglu and Robinson, 2012), and that it determines a country’s long-term development outcomes, then the prospects for convergence among the 10 economies are weak. On most comparative indicators, Indonesia now scores most highly on the strength of its democracy (Diamond, 2010), followed by the Philippines. Yet these two countries score much lower on government effectiveness. That is, their free-wheeling democracies have not as yet been able to deliver lower corruption, although Indonesia in particular has now arguably the region’s most activist and independent anti-corruption agency, known by its acronym KPK. Singapore and Malaysia tend to be at the opposite end of the spectrum, with Singapore in particular always at or close to the top of rankings, globally and regionally, on institutional quality, and a businessfriendly environment. But the two countries have each been governed by one party continuously since independence, and their political systems frustrate the emergence of viable opposition parties. Laos and Vietnam are the two least democratic countries in the region, along with Myanmar until recently, but Vietnam scores more highly on some governance indicators. Cambodia and Thailand adopt intermediate positions on the democratic indicators, but diverge on the effectiveness scales. Thailand is closer to the higher income countries on the latter, whereas not surprising, Cambodia’s institutions are among the weakest in the region. SOCIAL INDICATORS Southeast Asia’s economic dynamism, combined with the general commitment to universal literacy and modest gender divides, has resulted in rapid improvements in social indicators. Can one therefore conclude that, allowing for the large income differentials, there is a ‘Southeast Asian social policy

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model’? In short, the answer is no, although here too there are substantial common features. First, the incidence of poverty had fallen dramatically in Southeast Asia whenever there has been high growth. According to this indicator, poverty has almost disappeared in higher income Malaysia and Thailand, while it has almost halved in countries that have experienced strong economic growth for at least two decades. The exception again is the Philippines, where slower growth, combined with a less elastic response to that growth, has resulted in a much slower reduction in poverty incidence. These poverty outcomes reflect the joint influence of economic growth and the distribution of income, the latter being the principal determinant of the growth-poverty elasticity. Initial conditions varied greatly, with Malaysia and the Philippines inheriting highly unequal land ownership structures, that resulted in high levels of income inequality that have broadly persisted ever since. Subsequent development trajectories have also varied considerably. For example, inequality in Thailand began to rise quite quickly from the late 1970s, much of it associated with the divide between Bangkok and the poorer Northeast region. Cambodia commenced its recent rapid growth with extremely low inequality, as the Khmer Rouge and subsequent civil war had impoverished the entire population. Inequality in Indonesia was stable and relatively low during the Soeharto era, but it has begun to rise quickly over the past decade. Unlike in Thailand, inter-regional inequality has been quite stable (Hill 2014). In Singapore, much of the concern with inequality centres on the poorly educated elderly citizens with inadequate retirement savings, whose earnings are depressed by the presence of large numbers of unskilled foreign workers, and in the context of a very limited state welfare net.

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Hal Hill

Similarly, the policy approaches to inequality have varied greatly. Malaysia stands out for its consistent promotion of affirmative action to improve the relative standing of the Bumiputera community. Less explicitly, Indonesia has also adopted such policies. In the Philippines, a long running, and largely unsuccessful, agrarian reform programme has been pursued. While all countries have been reasonably successful with the basic education strategies aimed at universal literacy and primary school enrolment, other aspects of health, education and welfare policies have been less effectively targeted and under-funded. Moreover, tax policies have been at best very weakly progressive, and often regressive. CONCLUSION The ten Southeast Asian countries are extremely diverse in their histories, economies, living standards, political systems, resource endowments, and institutions. It therefore makes little sense to advance the proposition that there is a ‘Southeast Asian model’. Yet there are arguably greater similarities than are commonly realised, beyond the obvious geographic proximity. The countries are increasingly integrated economically and politically. There is some modest convergence evident, of outcomes, policies and strategies. All these economies are becoming more open over time, and pursuing this openness in the context of the distinctive ASEAN approach to outwardlooking regional economic integration. Macroeconomic policies are also converging to a regional norm of generally low inflation and at least moderately sound fiscal policy. Social policy priorities include a commitment to universal education through to lower secondary level. However, in several other respects, notably institutional quality and governance, and patterns of inequality, there is little evidence of convergence.

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Is There a Southeast Asian Development Model?

In sum, there has never been a ‘Southeast Asian development model’, and it is unlikely that there ever will be. But as these countries

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become better integrated and more cohesive, so will their development strategies continue to converge in important respects.

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26.

GLOBAL PRODUCTION SHARING, TRADE PATTERNS, AND INDUSTRIALIZATION IN SOUTHEAST ASIA PREMA-CHANDRA ATHUKORALA and ARCHANUN KOHPAIBOON

T

he purpose of this chapter is to document, analyze and explain Southeast Asia’s engagement in global production sharing and to examine its implications for the process of industrially transformation in these countries. A BRIEF HISTORY Southeast Asia’s engagement in global production sharing dates back to 1968 when two US companies, National Semiconductors and Texas Instruments, began assembling semiconductor devices in Singapore (Lee 2000). As early as 1972 the MNEs with production facilities in Singapore began to relocate some low-end assembly activities in neighbouring countries, particularly Malaysia, Thailand and the Philippines, in response to the rapid growth of wages and rental costs. By the late 1980s this process had created a new regional division of labour, based on differences in relative wage and

skill requirements in different stages of the production process. By the mid-1980s, the hard disk drive assemblers entered Singapore, further boosting the country’s role as a global assembly centre. As in the case of semiconductor industry, a regional production network encompassing Malaysia, Thailand and the Philippines and centered in Singapore have developed by the early 1990s. Until about the early 1990s, Southeast Asian countries’ engagement in global production sharing was predominantly a two-way exchange with the home countries of MNEs: parts and components were brought to these countries for assembly, and the assembled parts and components were then re-exported to the home country to be incorporated in final products. As supply networks of parts and components became firmly established, producers in advanced countries began to move the final assembly of an increasing range of electronics and

From: “Global Production Sharing, Trade Patterns, and Industrialization in Southeast Asia”, in Routledge Handbook of Southeast Asian Economies, Prema-Chandra Athukorala and Archanun Kohpaiboon, edited by Ian Coxhead, Copyright © 2015 Ian Coxhead, Routledge, reproduced by permission of Taylor & Francis Books UK.

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Global Production Sharing, Trade Patterns, and Industrialization in Southeast Asia

electrical goods such as computers, cameras, TV sets and motor cars) to Southeast Asian locations. In recent years, the East Asia production networks have begun to spread to Vietnam and Cambodia. Despite obvious advantageous in terms of its location and relative wages, Indonesia has continued to remain a small player in regional production networks. Its engagement has so far been limited only to some low-end assembly activities undertaken mostly by Singaporean subcontracting companies in the Batam free trade zone (BFTZ). TRADE PATTERNS The past two decades have seen palpable shift in global production sharing away from mature industrial economies toward developing countries and in particular countries in East Asia.1 The share of network trade in total manufacturing trade is much higher in East Asia compared to the other major regions. In East Asia Southeast Asian countries in particular stand out for their heavy dependence on global production sharing for their export expansion. In 2009–10, network exports accounted for nearly 70% of total manufacturing exports in Southeast Asia, up from 57% in the early 1990s. When total network trade is disaggregated into parts and components (henceforth referred to as components for brevity) and final assembly, countries in Southeast Asia stand out from the rest of East Asia for their heavy reliance on parts and component and the increase over time in the degree of component intensity of their trade flows within global production networks. Components accounted for 85% of total network exports of Southeast Asia in 2009– 10, up from 40% in 1992–93. The data clearly point to the heavy concentration of network exports from Southeast Asia in electronics and electrical

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goods (SITC 75, 76 and 77), in particular, semiconductor devices compared to the total world network exports. At the early stage of Southeast Asia’s engagement in global production sharing, when it was a two-way exchange with the home countries of MNEs involved, there was a clear developed-country bias in the geographic profile of their manufacturing trade. However, over the years the geographic profile has shifted towards East Asia as regional production networks have expanded to encompass an increasing number of countries, and, in particular, the emergence of China as the premier assembly centre within global production networks. Southeast Asia and China in Production Networks When China began to emerge as a major trading nation in late 1980s, there was a growing concern in policy circles in Southeast Asia, and in other Asian countries, that competition from China could crowdout their export opportunities. As we have noted, there has been a significant contraction in final assembly of consumer electronics and electrical goods exported from Southeast Asia as an outcome of competitive pressure from China for final assembly.1 However, this structural shift has not resulted in a ‘hollowing out’ of production bases in Southeast Asia. On the contrary, the past two decades have seen a close complementarity between China and Southeast Asian countries within global production networks, for three reasons. First, expansion in final assembly in China has created new demand for parts and components assembled in Southeast Asia. Second, a number of large electronics MNEs have shifted regional/global headquarter functions to Singapore and Penang. Third, while the electronics industry is still the main engine of growth in the region, in recent years the production base has begun

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to diversify into a number of electronicsrelated dynamic product lines, in particular in Singapore, Malaysia and Thailand. Determinants A number of factors seem to have underpinned the continued attraction of the Southeast Asia as a location of assembly activities within global production networks. First, despite rapid growth, manufacturing wages in all Southeast Asian countries except Singapore remain lower than or comparable to those in countries in the European periphery and Latin America. At the same time, there are significant differences in wages among the countries within the region, permitting rapid expansion of intra-regional product sharing systems. Second, the relative factor cost advantage of Southeast Asian countries has been supplemented by relatively more favorable trade and investment policy regimes, traderelated infrastructure and communication systems (Athukorala and Hill 2011). Third, as first comers in this area of international specialization, Southeast Asian countries, in particular Malaysia, Singapore and Thailand, seem to offer considerable agglomeration advantages for companies that are already located there. GLOBAL PRODUCTION SHARING AND MANUFACTURING PERFORMANCE This section examines the role of global production sharing in manufacturing performance of Southeast Asia countries. The available production–side data (based on manufacturing surveys) do not permit directly linking network trade with manufacturing performance. The secondbest approach followed here is to delineate the industries in which global production sharing is heavily concentrated as revealed by the analysis of trade patterns in the previous section (which we dub here ‘global

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production sharing’ (GPS) industries) and compare their performance with the other (non-GPS) industries. Among the five countries Singapore and Thailand stand out for the contiguous increase in the share of GPS industries in total manufacturing during the period 2000– 2008: from 60.1% to 71.6% in Singapore and 41.2% to 46.8% in Thailand. The share of GPS products in total in Indonesian manufacturing in 2007–08 was 27.0%, down from 32.6% in 2000–01. An in-depth analysis of the underlying causes of inter-country differences in the performances of GPS industries is beyond the scope of this chapter. But there is evidence to suggest that at least part of the explanation lies in the nature of investment climate within which GPS industries operate. Notwithstanding rapid increases in labour and rental cost, Singapore has continued to remain an attractive location within global production networks for high-value, more sophisticated tasks in the value chain because of the excellent overall investment climate which places the county at the top notch in various global business/investment climate rankings (e.g. World Bank 2010 & 2012). In Malaysia, impediments to further expansion of GPS industries with diversification into other more sophisticated product lines are deeply rooted in Malaysia’s long-standing ethnicity-based economic policy. Political instability and poor infrastructure often figures prominently in evidence on the nature of investment climate in the Philippines (World Bank 2010 and 2012; Calimag 2008). However in all five countries, employment shares of GPS industries are smaller compared to their output shares, suggesting that these industries are generally less labour intensive compared to the other industries in general. This pattern is consistent with the view that even though global production sharing essentially involves offshoring relatively low-skill-intensive segments of the production process from advanced countries,

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Global Production Sharing, Trade Patterns, and Industrialization in Southeast Asia

these tasks are relatively more capital and shill intensive compared to the low-skill activities in the recipient (host) country (Feenstra and Hansen 2003). Value added share in gross output in GPS industries does not seem to vary in line with these industries’ relative contribution to manufacturing output and employment. For instance, in Singapore the share of value added in gross output in these industries declined from 22.5% to 21.8% between 2000–01 and 2007–08 even though, as already noted, both their the contribution to output and employment recorded impressive increases. In Thailand the increase in employment and output shares of GPS industries has accompanied by a remarkable stability (at around 20%) of the value-added share in output. In Malaysia and the Philippines too this share has remained around 20% without showing any relationship with the employment and output shares. Interestingly, value added shares in gloss output is much higher in Indonesia compared to the other four countries (47%). This is understandable because these industries in Indonesia are predominantly domestic market oriented; in domestic market-oriented industries there is much more scope using locally source inputs in the production process. In Singapore real wages in GPS increased from US$21,764 to US$32,264 between 2000–01 and 2007–08, compared to an increase of wages in other industries from US$20,928 to US$26,672. Similar patterns can also be observed in trends and patterns of real wages in the Philippines, Malaysia and Thailand, although the gap between wages in GSP industries and the other industries in these countries is not as large as in Singapore. The wage restraint critique is based on the popular characterization of export-oriented MNEs in general as ‘footloose ventures’ whose locational decisions are based largely on unit labour costs. This characterization is not consistent with the corporate behaviour of

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MNEs involved in global production sharing. While labour cost is important, other factors such as the presence of strong (or potentially strong) indigenous supply capabilities, good infrastructure, political stability, and the relevant government policies usually figure prominently in the international investor’s locational decisions. CONCLUSION Global production sharing has become an integral part of the economic landscape of Southeast Asia. Trade within global production networks has been expanding more rapidly than conventional final-good trade. The degree of dependence on this new form of international specialization is proportionately larger the main Southeast Asian economies compared to the other countries in East Asia. The rapid integration of China into global production networks as the premier assembly centre has not been a zero-sum proposition from the perspective of the Southeast Asian countries. Rather, it seems to have added further dynamism to East Asia’s role within global production networks. China has opened up opportunities for producing original, equipment-manufactured goods and backto-office service operations in these countries. Global production sharing has certainly played a pivotal role in the continued dynamism of East Asia and its increasing intra-regional economic interdependence. This does not, however, mean that the process has contributed to lessening the region’s dependence on the global economy. The region’s growth based on vertical specialization depends inexorably on its extra-regional trade in final goods, and this dependence has increased over the years. Global production sharing has significantly transformed the overall industrial landscape in Southeast Asia. However there are notable differences among these countries

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in terms of trends and patterns of trade and production relating to their engagement in

Prema-Chandra Athukorala and Archanun Kohpaiboon

global production networks and the resultant developmental gains.

NOTE 1. The data used in this section for all countries other than Taiwan are compiled from the United Nation’s Comtrade Database, based on Revision 3 of the Standard International Trade classification (SITC Rev. 3). Data for Taiwan are obtained from the trade database (based on the same classification system) of the Council for Economic Planning and Development, Taipei. In order to minimize the effect of possible random shocks and measurement errors, two-year averages are used in intertemporal comparison throughout this section.

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27.

CHINESE TRADE POLICY AFTER (ALMOST) TEN YEARS IN THE WTO A Post-Crisis Stocktake RAZEEN SALLY

INTRODUCTION So much has changed since China joined the World Trade Organisation (WTO) in late 2001. In the past decade China has become the leading regional power in Asia, and is on its way to becoming a “great power” in the wider world, alongside the USA. These trends have clearly accelerated in the wake of the global economic crisis. China is now one of the Big Three in the global economy. Until recently, it imported “global order”: it absorbed policies, rules and institutions that materialised from decisions made elsewhere. China still imports global order; but, given its market size, and like the USA and EU, it now exports global order as well. But, given the speed and scale of this transformation, China has evident difficulty in acting like a rule-setter and system-shaper — in other words, like a leader (or co-leader) of the world trade order.

TRENDS UP TO WTO ACCESSION; TRADE AND FDI PATTERNS1 China’s “Reform” and “Opening” started in 1978. But its decisive external opening, and with it sweeping industrial and agricultural restructuring, belong more to the postTiananmen phase, especially since 1994. China undertook enormous trade and FDI liberalisation during the 1990s — before WTO accession in 2001 — followed by another big dose of liberalisation in line with its WTO commitments. It is important to note that the primary liberalisation thrust, especially in the 1990s, was domestic and unilateral, coming from the Beijing leadership. China’s WTO commitments, and its participation in the WTO after accession, can be read as more the consequence than the cause of its sweeping unilateral reforms.

Reprinted in excerpted form from Razeen Sally, “Chinese Trade Policy After (Almost) Ten Years in the WTO: A Post-Crisis Stocktake”, ECIPE Occasional Paper No. 2/2011 (Brussels: European Centre for International Political Economy, 2011), by kind permission of Razeen Sally and the European Centre for International Political Economy.

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China’s weighted average tariff is just over 4 per cent — low-ish by developingcountry standards and the lowest among large developing countries (e.g. compared with other BRIICS — Brazil, Russia, India, Indonesia and South Africa). Trade liberalisation also whittled down the impact of border non-tariff barriers (NTBs) to about 5 per cent on the eve of WTO accession. Overall, border barriers on goods trade have come down to Southeast-Asian levels, and have been locked in by much stronger WTO commitments. China’s GATS commitments are very strong. China has climbed up the world rankings for trade and FDI with lightning speed. It first displaced Japan as the world’s secondlargest trading nation (third-largest if the EU is counted as one), and then Germany as the world’s leading exporter of merchandise goods, with almost 12 per cent of world merchandise exports by 2009. China had a 3 per cent share of global inward FDI stock in 2009, again ahead of the other BRICS. In sum, China has succeeded more than most developing countries, including the other BRICS: first in generating very high rates of growth; and second in translating the latter into employment, poverty reduction and human-welfare improvement for a broad section of the population. China still has high regulatory barriers that waste resources, restrict internal trade and generally stifle domestic sources of growth. Tackling these barriers is the next big political and economic challenge. CHINA IN THE WTO The strength of China’s unilateral reforms and WTO commitments, and its integration into the world economy, have made it keenly aware of its stake in well-functioning multilateral rules — more so compared with most other developing countries. It has become a strong WTO stakeholder, active in multilateral rule-enforcement and dispute

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settlement — much more so than Japan, for example. Nevertheless, China’s record in the WTO has not been without controversy — not surprising given such a huge and complicated accession. Implementation of WTO commitments has been mixed. A raft of sensitive cases against China, mostly prosecuted by the USA, has been working its way through dispute settlement. China has stayed conspicuously on the sidelines of the Doha Round. At the WTO mini-ministerial meeting in July 2008, it was partly responsible for blocking an overall deal. These are all manifestations of China’s difficulty in making a quick transition from a rule-taker to a rulesetter in the WTO. CHINA’S TRADE-RELATED REFORMS: UNILATERAL MEASURES AND PTAS There has been paltry unilateral liberalisation going beyond China’s WTO commitments. The Beijing leadership is more concerned with social stability in the wake of the massive social convulsions that have accompanied market reforms. Decision-making is much more collegiate, cautious and incremental; it is less visionary and certainly less committed to strong liberalisation. None of the above is cause for wild alarm and panic: China is, to some degree, acquiring the “normal” economic features and political pressures of a very large, complex market economy. And its already deep integration into the world economy — much deeper than that of Japan, South Korea and Taiwan at an equivalent stage of development — constrains protectionist pressures and their distortive effects on international trade and investment. Still, these pressures need to be contained, especially with a turbulent global economic environment and more protectionist pressures as a result of the recent crisis. To list some major signs of industrialpolicy intervention, as well as “unfinished

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Chinese Trade Policy After (Almost) Ten Years in the WTO: A Post-Crisis Stocktake

business” in external liberalisation and related structural reforms:2 First, China’s already complex export regime has become considerably more restrictive. Second, tax incentives, subsidies and price controls, as well as administrative “guidance” on investment decisions, are used to favour domestic sectors over imports, especially where SOEs and assorted “national champions” operate. Third, China has promoted unique national technical standards — some would say as a regulatory-protectionist device to compensate for falling border barriers. Fourth, services barriers have come down more slowly than goods barriers, and perhaps more slowly than expected after WTO accession. Fifth, foreign-investment restrictions have been tightened. Sixth, government procurement explicitly discriminates in favour of domestic enterprises. Seventh, energy sectors are largely insulated from global markets. Eighth, China’s “investment nationalism” extends to its Go Out policy. SOEs benefit from cheap finance from state-owned banks. Ninth, China has become a prominent user of trade remedies. And tenth, foreign business associations — especially from the USA and EU — continue to complain of opaque and unpredictable laws and regulations. Trade and FDI-restricting measures have increased during the crisis. Chinese protectionism has increased since the crisis broke, but not dramatically or to the extent of reversing a thirty-year liberalising trend. China is the driving force for PTAs in Asia. By 2010, it had 11 PTAs on the books, with 11 others under negotiation or proposed. China’s approach to PTAs is pragmatic and eclectic (Antkiewicz and Whalley, 2005). But it is mostly “trade light”. China’s PTAs are

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driven more by “high politics” (competition with Japan to establish leadership credentials in east Asia; securing privileged influence in other regions) than by economic strategy. In addition to bilateral PTAs, China is at the heart of regional-economic-integration initiatives in east Asia (Kawai and Wignaraja, 2008). Since the crisis, a newly fashionable argument holds that regional trade patterns are changing fast, and will favour regional production for regional consumption, i.e. a more comprehensive type of regional integration less reliant on the West. But these prognostications are highly premature and speculative. China has enjoyed a shortterm consumption boost through massive government stimulus. But it is highly questionable that it has had a structural shift to a more consumption and less investmentoriented economy. On the policy front, regional players are speeding ahead with bilateral PTAs. This does not seem to have done much harm so far; but, if unchecked, it could slow down and distort the advance of regional and global production networks. So could region-wide PTAs that discriminate against extra-regional trade and FDI. But the odds are still stacked against region-wide PTAs, especially ones that will be more than trade-light. Perhaps the best that can be expected is gradually stronger “soft cooperation” in regional institutions such as APEC, ASEAN, APT and EAS. Inevitably, China will be the most important player in these institutions; no stronger cooperation, hard or soft, will work without its lead.3 CHINA’S TRADE POLICY: CHALLENGES AHEAD China’s domestic climate for further tradeand-investment liberalisation is clearly more inclement than it was before WTO accession; and there is greater industrial-policy interventionism.

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From a market-liberal perspective, China should restrain its industrial-policy activism and its protectionist spillover. And it should go further in two respects: plug gaps in its implementation of WTO commitments; and proceed with WTO-plus reforms. On WTO implementation, China needs to improve its enforcement of the TRIPS, TRIMS, SPS, TBT and SCM agreements, and have better WTO notification of its subsidies. What about WTO-plus reforms? China could further reduce applied import tariffs, especially on industrial goods. It should reverse export controls on raw materials and agricultural commodities. But its more substantial — and politically very tricky — challenge is to tackle high trade-related domestic regulatory barriers in goods, services, investment and public procurement. There are several tracks on which to pursue China’s trade-related reforms: the unilateral (domestic) track; in the WTO; in PTAs; and in key bilateral and regional relationships, especially with the USA, EU and its east-Asian neighbours. First, the primary thrust of trade-related reform must be unilateral, i.e. outside trade negotiations, and hitched firmly to domestic reforms to improve the business climate. Second, China-induced unilateral liberalisation is not a panacea. That leaves room for reciprocal negotiations and international agreements, particularly in the WTO. Third, PTAs are generally trade-light; their noodle-bowl discriminatory patchwork causes complications for business and multilateral rules; and they are unlikely to spur regional and global integration. There should be much more caution with PTAs; and serious attempts made to minimise the damage from their discriminatory provisions. Fourth, China’s key bilateral relationships, especially with the USA, matter as much as what it does in the WTO and PTAs. Fifth, talk of constructive engagement in key bilateral relationships — especially with the USA — leads inevitably to consideration

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of global macroeconomic tensions. That said, a Chinese move to gradually revalue the RMB to a market-determined level, cautiously sequenced with domestic financial-sector reforms, is desirable. THE BROADER CONTEXT: CHINA’S HYBRID POLITICAL ECONOMY AND GEOPOLITICS China’s trade policies must be seen in the context of the domestic economy and its political arrangements, and also in the context of China’s rising geopolitical power. In essence, China’s development trajectory follows that of other east-Asian countries in massively over-investing and misallocating capital, but its embedded political economy keeps it on the same treadmill. However, investment-driven growth is subject to diminishing returns (note the slowdown in total-factor-productivity growth since the late 1990s), and Chinese exports face a turbulent post-crisis external environment of depressed global demand and greater trade friction. At bottom, the Beijing leadership remains pragmatic and internationally engaged. It does not want to “rock the boat” too much. But stalled trade and FDI liberalisation, the absence of domestic structural reforms and creeping protectionism threaten future trade tensions. They also diminish China’s ability to look outward and exercise leadership in the regional and world economies. China may be rising economically and geopolitically, but there remain binding constraints on its ability to lead externally, whether in its east-Asian neighbourhood or on the global stage. Crucially, China lacks a tradition of external leadership, and its recent opening to the world economy is simply too new for it to exercise leadership assuredly. Rather the Chinese governing elite is too preoccupied with domestic political and economic issues to be willing and able to exercise external power strongly and responsibly.

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NOTES 1. This section draws on Greene et al. (2006), Lardy (2002), Ianchovichina and Martin (2001), Mattoo (2003), Bhattasali, Shantong and Martin (2004), Athukorala and Hill (2011), and WTO (2010). 2. The following draws on WTO (2010), USTR (2010), European Chamber of Commerce in China (2010), Paulson (2008), Scissors (2009). 3. On prospects for regional economic cooperation and integration, see Sally (2010).

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28.

SOUTHEAST ASIA BEYOND THE GLOBAL FINANCIAL CRISIS Managing Capital Flows JAYANT MENON and AEKAPOL CHONGVILAIVAN

RECENT TRENDS IN CAPITAL FLOWS Southeast Asia was one of the first regions to recover from the recent global economic meltdown. While the region posted an anaemic 1.2 per cent growth in 2009 — its worst performance since the 1997 Asian financial crisis — the outlook for Southeast Asia in 2010 and beyond is buoyant. The five economies that bore the brunt of the crisis — Brunei Darussalam, Cambodia, Malaysia, Singapore and Thailand — have all recovered rapidly. Southeast Asia’s bullish outlook and relatively high interest rates have attracted a massive influx of capital, with the region’s emerging markets becoming an attractive destination for footloose liquidity from global funds. These have flown into financial and equity markets in the main, although some have arrived as foreign direct investment (FDI). The two-year peaks of price-to-book values have increased in all major Southeast Asian markets — by a factor of 3.4 for Indonesia’s JKSE, 2.1 for the Philippines’ PSI, 1.9 for Malaysia’s KLSE, and 1.7 for both Singapore’s FTSTI and

Thailand’s SETI — all well above pre-crisis levels. This rally in the region’s stock markets is expected to continue in the near term, as the economies continue to perform above expectations, and as risk-taking investors rotate money to underpriced financial assets. POST-CRISIS CAPITAL FLOWS: POLICY ISSUES AND CHALLENGES In theory, capital inflows should offer substantial benefits to Southeast Asian countries in terms of improving resource allocation and filling financing gaps, facilitating cross-border transfers of knowledge and technology, improving risk diversification, and promoting financial market reforms, provided that host countries are equipped with absorptive capacity and sound economic fundamentals. These benefits are usually associated with FDI in productive sectors, but what if the majority of the inflow is short term in nature? In reality, the recent surge in volatile capital has complicated macroeconomic policy management and has the potential of com-

Reprinted in excerpted form from Jayant Menon and Aekapol Chongvilaivan, “Southeast Asia Beyond the Global Financial Crisis: Managing Capital Flows”, ASEAN Economic Bulletin 28, no. 2 (2011): 107–14, by kind permission of the Institute of Southeast Asian Studies.

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promising economic stability, putting the region at risk of succumbing to another round of financial distress. The large volume of volatile capital flows raises a number of policy challenges. First, expectations of currency revaluations and further interest rate increases in order to curb rising inflation will inevitably attract speculative capital flows. This is already evident in some Southeast Asian countries like Indonesia, Malaysia and Thailand, where real exchange rates have kept appreciating despite central banks’ intervention in the foreign exchange markets. In some countries like Indonesia, the Philippines and CLMV, the consumer price index is projected to rise substantially in the postcrisis period. As the 1997 Asian financial crisis has shown, such speculative flows can be extremely destabilizing, and the failure to shield domestic economies from currency misalignment and excessive leverage can have far-reaching consequences. Managing speculative capital inflows will have far-reaching implications for exchange rate policy. The key question pertains to the desirability and feasibility of maintaining relatively rigid exchange rates in the face of such massive inflows. Even though there have been extensive interventions by Southeast Asian central banks to try and mitigate currency appreciation and maintain export competitiveness, the unwinding of global imbalances implies that Southeast Asia may have to learn to accept currency appreciation, and allow flexible exchange rates to perform the role of an automatic stabilizer.1 The key challenge in this regard is how to pursue gradual currency realignment, in such a way that capital inflows are commensurate with a country’s absorptive capacity. Second, the rapid surge in short-term capital inflows will make it increasingly difficult to manage risks. An attempt to sterilize inflows will only create excess liquidity in domestic financial markets, resulting in exchange rate misalignments, and ultimately derailing

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economic stability and growth. Southeast Asian economies are now in dire need of new policy and regulatory instruments that address these risks, particularly financial fragility. For instance, easy credit combined with strong demand driven by speculative motives have raised property prices in many Southeast Asian cities like Bangkok, Ho Chi Minh, Phnom Penh, Kuala Lumpur and Singapore, in some cases surpassing peaks reached in 2007. This increases the risk of a price bubble that could lead to drastic losses in terms of both real output and price levels. To stem the tide of speculative capital flows, Southeast Asian central banks may be tempted to fall back on capital restrictions, such as various types of controls or taxes or levies on inflows or outflows, intensive investigation of currency payments, and close supervision of capital inflows. Unfortunately, in most cases, central banks are not equipped with the capacity to determine whether international capital movements are truly desirable, for two main reasons. The first is the problem of asymmetric information between central banks and market players, while the second is the lack of monitoring tools to detect unfavourable developments in domestic financial markets. In addition, past experience has shown that measures imposed on international capital mobility can hurt business sentiment, distort efficient resource allocation, and undermine the role of a flexible exchange rate regime as an automatic stabilizer, at least in the mediumto-long term. All of this comes on top of the fact that the effectiveness of these measures in curtailing speculative flows is limited because they can often be bypassed, in one way or the other. If controls can be bypassed, or if taxes, levies of other measures prove ineffective in significantly influencing short-term flows, then what else can these countries do to stem the tide and curtail the impacts of these flows? For instance, to what extent

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can the impacts of regional capital flows be addressed through regional cooperation or coordination, particularly in relation to exchange rate policy? Given differences in the level of economic and financial development among Southeast Asian countries, and the countries’ desire to retain monetary policy region does not appear to satisfy many of the conditions required of an optimal currency area (see Zhang, Sato and McAleer 2001). In light of this, could Southeast Asian countries agree upon a gradual, cohesive adjustment of their currencies towards their equilibrium levels instead? So far, we have heard a lot about the apparent value of coordinating exchange rate movements, but we have seen little, if any, evidence of the willingness of these countries to pursue this at a practical level. If exchange rate coordination is too ambitious a target for now, what else could these countries focus on in working together to mitigate the impacts of these inflows? At a

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basic level, relatively informal arrangements, centred on policy dialogue and discussion rather than the creation of new institutions, could be a first step in moving towards greater exchange rate cooperation. This type of cooperation could be pursued through existing regional forums such as the ASEAN+3 Economic Policy and Review Dialogue (see ADB 2010). Regional cooperation could also address reserve management issues to help Southeast Asian countries weather future regional or global economic crises. Although several regional cooperation initiatives are already in place, such as the multilateralized Chiang Mai Initiative (CMIM) and the Asian Bond Market Initiative (which will migrate to the Asian Capital Markets Initiative), the usefulness of these initiatives remains limited. The relatively small size and low utilization of these regional initiatives calls for more ambitious programmes to strengthen regional foreign reserve coordination, going forward.

NOTE 1. The seminal work making the case in support of flexible exchange rates is Friedman (1953). The role of flexible exchange rates as a stabilizer is perhaps best summarized by Mundell (1961, p. 657), in his path-breaking work on Optimal Currency Areas: “(with) flexible exchange rates … depreciation can take the place of unemployment when the external balance is in deficit, and appreciation can replace inflation when it is in surplus.”

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29. IMPACT OF EUROZONE FINANCIAL SHOCKS ON SOUTHEAST ASIAN ECONOMIES JAYANT MENON and THIAM HEE NG

INTRODUCTION Five years after the Global Financial Crisis (GFC), the economies of the United States and the eurozone continue to struggle, with the eurozone recovery lagging behind that of the United States. European banks’ funding conditions have been worsening as evinced by slower bond issuance (Bank for International Settlements 2012). Worries about the health of the banking system have also led to a rash of withdrawals by bank depositors. The banking system in the United States is relatively healthier as losses have been recognized and banks have undertaken recapitalization. Nevertheless, the troubles facing European banks could also affect the liquidity situation in the United States. Given the fragility of the financial system, what are the possible impacts of a shock to the financial system in the eurozone on the economies of Southeast Asia?

SOUTHEAST ASIA AFTER THE GLOBAL FINANCIAL CRISIS The initial impact of the 2007/08 GFC was felt more on the real side. A huge decline in exports led to a sharp slowdown in the region’s economic growth. However, this impact was short lived. On the financial side, there was also an initial outflow of foreign capital from the region’s economies. However, fund inflows resumed quickly. The region’s financial system has become more resilient following the reforms carried out after the 1997/98 AFC. Nevertheless, capital inflows to the region have remained volatile. The inflow of foreign capital to the region can be beneficial as it supplements the domestic resource base and facilitates the transfer of technological knowledge and managerial expertise from abroad. However, sudden stops and reversals in capital flows could disrupt financial systems and lead to macroeconomic instability.

Reprinted in excerpted form from Jayant Menon and Thiam Hee Ng, “Impact of Eurozone Financial Shocks on Southeast Asian Economies”, Journal of Southeast Asian Economies 30, no. 2 (2013): 179–200, by kind permission of the Institute of Southeast Asian Studies.

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An attempt to sterilize inflows will only create excess liquidity in domestic financial markets, resulting in exchange rate misalignments, and ultimately derailing economic stability and growth. Policy-makers fear that the surge in capital flows could lead to asset bubbles and exert upward pressure on the exchange rate. Given the threat to the region’s economies, governments acted quickly to implement fiscal and monetary stimulus. Higher initial policy rates compared to those in the United States and Europe provided ample room for the region’s monetary authorities to reduce interest rates. Monetary policy easing has had the desired impact of increasing bank lending in the Asian economies. Consequently, although Asia had relatively low debt at the beginning of the GFC, it is now more highly leveraged. Another cause for concern is non-core liabilities (usually consisting of interbank borrowings), which have been increasing significantly even prior to the 2007/08 GFC. There are concerns that with European banks deleveraging, the banking system in Southeast Asia will find it more difficult to continue borrowing funds from abroad. IMPACT OF FINANCIAL CRISIS IN EUROPE Fears of a eurozone debt crisis have receded somewhat but the threat of a financial crisis remains. While liquidity provision by the ECB and the successful restructuring of Greek debt have helped to calm financial markets, the stability could be short-lived. Over the past decade or so, the Asian economies have liberalized and opened up their financial systems. While this has brought certain benefits, it has also increased the region’s vulnerability to external shocks. This suggests that there is likely to be stronger contagion effect from eurozone financial markets to the region in the event of a crisis.

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If the eurozone debt crisis worsens, it could result in a rise in global investor risk aversion which would have an impact on Asian economies as well. A key concern for policy-makers is that capital flows can suddenly reverse, as they did the wake of the 2008/09 GFC. ESTIMATING IMPACT OF SPILLOVERS FROM EUROZONE FINANCIAL CRISIS To estimate the potential impact of spillovers from a financial crisis in the eurozone, we employ the GVAR model originally introduced by Pesaran, Schuermann and Weiner (2004) and further developed by Dees et al. (2007). To estimate the spillovers from an external financial shock, we construct a GVAR model for thirteen economies consisting of: the United States; the United Kingdom; the eurozone; and ten Asian economies — the East Asian economies of the People’s Republic of China (PRC), Hong Kong, China; Japan and Republic of Korea; the five original ASEAN economies of Indonesia, Malaysia, Philippines, Thailand, and Singapore; and India. The model uses real GDP growth, equity prices, lending to the private sector, and interbank rates. It is estimated using monthly data over the period 1999–2011. Our dynamic analysis shows that the equity market shocks from the eurozone are transmitted quickly to the region through stock prices. There are substantial comovements in Asian stock markets following a negative shock in eurozone equities. The transmission is rapid, with the peak effect occurring about five to seven months after the onset of a shock. One exception is the PRC, which is less affected by a fall in eurozone stock prices. This suggests that the PRC’s relatively closed equity markets are driven more by domestic factors, making them less vulnerable to external factors. Another way to gauge the impact of a eurozone equity shock is to compare the

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Impact of Eurozone Financial Shocks on Southeast Asian Economies

impacts of the shock on Asian economies relative to that in the eurozone. For each economy, the biggest impact on the region’s stock markets is compared with the largest impact from the eurozone equity market. The impact on the region’s stock markets is found to be about half the level of the eurozone stock market impact. We find that equity markets of India, Indonesia, and Singapore are most affected by a eurozone shock while there seems to be less of a spillover effect on the PRC stock market. Next, we examine the impact of Asia’s economic growth from a eurozone financial shock. We find that the responses of the region’s economies are mostly similar. However, the impact of the shock is transmitted over a longer period, taking seven to nine months to reach its trough. Growth in Malaysia and Singapore are the most affected by a eurozone equity shock. In contrast, Indonesia, the PRC, and the Philippines — with their relatively large domestic sectors — appear to be better insulated against a financial shock from Europe. Our empirical results show that a eurozone financial crisis will have a small but non-negligible impact on the region’s stock markets and economic growth. This will affect countries in the region to varying degrees, with ASEAN economies such as Malaysia, Thailand, Indonesia, and Singapore showing more vulnerability to the financial fallout. What we cannot quantify are the indirect effects that may flow from adjustments that take place which feed through via changes in value assessments and confidence. If the direct impacts lead to a reassessment of asset valuations in the region and perceptions of risk, this could lead to further corrections. IS EAST ASIA READY TO DEAL WITH ANY FALLOUT? How prepared is the region to deal with a shock in the eurozone that translates into a liquidity crisis in East Asia? Although our

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analysis points to a small but non-negligible direct impact from a further shock to the eurozone, this can easily be amplified into a significant one through indirect channels. When the AFC hit, the ASEAN Swap Arrangement (ASA) proved sorely inadequate in providing the liquidity needed by its members, given its small size. Following disenchantment with the way in which the IMF dealt with the AFC, the region has been working on bolstering its own financial safety net. The first step towards establishing such a scheme was taken soon after in May 2000 with the launch of the Chiang Mai Initiative (CMI), as part of the ASEAN+3 process. The CMI grew from just $1 billion to $84 billion by the time the next crisis hit, which was the fallout from the GFC. If the AFC lit the fuse for the need to transform the ASA into the CMI, then the GFC of 2008 highlighted the continued shortcomings of that transformation. Despite the CMI having grown rapidly in size, it was still too small and the absence of rapid-response mechanisms forced affected countries to turn to bilateral swaps with the United States, China, Japan, and regional agencies (Hill and Menon 2012). What followed was a radical transformation of the CMI. First, it was multilateralized so that the CMIM would be a self-managed reserve pooling arrangement governed by a single contract, reducing costly and wasteful duplication. Second, the size of the pool was increased to US$120 billion in May 2009. A decision was taken to establish an ancillary institution in the form of an independent regional surveillance unit — the ASEAN+3 Macroeconomic Research Office (AMRO), which came into being in May 2011. The continuing problems in the eurozone and risks of further deterioration have highlighted the need to strengthen the CMIM’s capacity to act as a regional financial safety net (Azis 2012). To address this need, the 15th Meeting of ASEAN+3 Finance Ministers in May 2012, agreed to (i) double

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the total size of the CMIM to US$240 billion; (ii) increase the IMF delinked portion to 30 per cent in 2012, with a view to increasing it to 40 per cent in 2014, subject to review should conditions warrant; and (iii) introduce a crisis prevention facility. These are impressive developments over a relatively short period of time. However, the critical question that needs to be answered is whether these reforms are sufficient to provide the region with a working alternative in the event of a crisis? Unfortunately, the CMIM still appears unusable, either as a cofinancing facility in tandem with the IMF or as a stand-alone alternative. First, as a reserve-pooling arrangement, there is no fund but a series of promises (Hill and Menon 2012). This is not a problem per se but it is when there are no rapid response procedures to handle a fast-developing financial emergency. If the CMIM is to be a real substitute for the IMF and serve its role as a true regional alternative, then the size of the fund, or the portion delinked from a IMF programme, also needs to be increased substantially. Without these changes, ASEAN+3 is unlikely to turn to the CMIM as a cofinancier or a substitute to the IMF, which explains why countries continue to take the high-cost mercantilist route of self-insurance through excessive holdings of foreign exchange reserves, or why they continue to pursue bilateral swaps separately, often with other CMIM members. However, shifting national reserves to a regional fund that is unlikely to be used could actually be counterproductive as it weakens a country’s first line

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of defense. Although ASEAN+3 may appear to have a co-financing facility with the IMF in the CMIM, it is not a useable one. If it wants its own regional safety net, then it has a long way to go. CONCLUSIONS If there is a worsening of a eurozone debt crisis, and there are signs of this with yields beginning to increase again starting June 2013, it could result in a rise in global investor risk aversion which would have an impact on Southeast Asian economies as well. To estimate the impact, we use a GVAR regression model to quantify possible spillover effects from a crisis in Europe. We find that while the overall impact of a worsening in the eurozone crisis is likely to be quite limited, the larger impact is on equity markets in the region. There is also the possibility that such spillovers, while relatively small in the aggregate, could lead to a second round of adjustments involving re-evaluation of other asset prices. Given the potential for shocks in eurozone financial markets to affect Asia both directly and indirectly, policy-makers need to ensure that they respond quickly to bolster financial stability and avoid deterioration in market confidence. They should also continue to carefully monitor banks’ portfolios, especially in countries where lending has risen sharply, to ensure that there has not been excessive risk-taking. In light of this, there is a pressing need to ensure that crisis management frameworks are strengthened and are ready for use.

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30.

THE COLLECTIVE INFLUENCE OF SMALLER STATES IN THE US-CHINA SECURITY DILEMMA JA IAN CHONG

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ino-US disquiet over East Asia in recent years highlight the collective role that non-leading regional states have in exacerbating security dilemmas between major powers at moments of power transition. Security dilemmas occur when actors view their own attempts to enhance security as benign, but are seen as threatening by others — particularly competitors. Defending against perceived threats may consequently agitate potential rivals and ironically make other actors feel less secure. How regional states from Japan and Korea, through various ASEAN members along with Australia, individually respond to Chinese and US initiatives can unfortunately further aggravate Sino-US suspicions, even if inadvertently. After all, support from regional actors has influence on the success of bilateral, as well as multilateral, initiatives, arrangements, and institutions that ground US and Chinese efforts to maintain or modify the prevailing order in East Asia.

COOPERATION, TRANSITION, AND FRICTION Regardless of whether power transition is real or perceived, expectations about substantial shifts in international politics can be disconcerting. The preeminent power — the United States in this case — worries about how to best maintain its interests and leading position, whereas the emergent power — China — frets about ways to sustain and entrench its growing prominence, while simultaneously addressing potential challenges impeding its rise. Beijing views its efforts to establish preeminence in East Asia as a natural expression of China’s rights, while Washington sees retaining regional leadership as a preservation of longstanding American interests. Neither the United States nor China appear completely comfortable with fuller expressions of each other’s goals in this regard, especially given uncertainties over the pace of power transition and the long-term viability of each other’s competitive positions.

Reprinted in excerpted form from Ja Ian Chong, “The Collective Influence of Smaller States in the USChina Security Dilemma”, Asia-Pacific Bulletin No. 193 (Washington, D.C.: East-West Center, 2012), by kind permission of the East-West Center.

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Individual choices that regional states make under such conditions of flux collectively influence the severity of the Sino-US security dilemma by affecting the context and environment in which Washington and Beijing operate. Governments from Tokyo to Jakarta are figuring out whether and how much political capital to commit to existing arrangements, as well as when and how to seek alternatives that may involve a reduced US role. A tepid and slow readjustment from existing US-backed frameworks may result in a regional state missing new opportunities, while a too rapid and drastic response could potentially result in foregoing — or even undermining — key public goods and benefits the current system provides. If smaller states appear to be quickly seeking alternative arrangements given these calculations, Washington may see potential decline as more threatening and seek to arrest the situation in ways that alarm Beijing. Slower and more reserved regional acceptance of Chinese-backed initiatives for more exclusive intra-East Asian frameworks may lead Beijing to anticipate efforts to stymie its rise, prompting more assertive behavior that in turn will cause concern in Washington. Attempts by regional states in East Asia to “hedge” their relations with both China and the United States over the past decade have helped widen Sino-US differences. The mid- to late-2000s saw regional governments, including longstanding US allies Japan, Korea, Thailand, and Australia, welcome an accelerated broadening and deepening of cooperation with China across a range of issues. They sought to enhance the ASEAN plus frameworks, develop the Northeast Asian trilateral, expand the Chiang Mai currency swap initiative, and conclude bilateral and multilateral trade arrangements with Beijing resulting in furthering economic integration with China. From 2009, those same regional governments were similarly receptive to US efforts to highlight and consolidate

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Washington’s regional presence through public demonstrations of US diplomatic and military commitment to the region. Despite this increase in regional cooperation involving both leading powers, longtime observers of the US-China relationship Wang Jisi and Kenneth Lieberthal have noted growing apprehension between Beijing and Washington in their 2012 report titled Addressing US-China Strategic Mistrust. Policy, academic, and journalistic circles in the United States and China at times appear to take regional engagement efforts by the other as some sort of an affront to their own national positions. Given an upswing in both bilateral and multilateral cooperation with China by other countries throughout the Asia-Pacific from the mid2000s through roughly 2008, many US analysts pointed to an end to Washington’s Asian preeminence. Former George W. Bush administration National Security Council Asian Affairs Director, Victor Cha, called this understanding the “conventional wisdom” he had to counter in a 2007 Foreign Affairs article titled “Winning Asia.” This was in spite of regional alliance adjustments and efforts to increase interoperability with the United States at the time. Today, Chinese observers see receptiveness to the US “rebalance” to Asia and participation in US-led initiatives like the Trans-Pacific Partnership as either US “manipulation” or regional actors trying to “play” Beijing and Washington against each other. Many in China also view the recent intensification of disputes over the South China Sea with Vietnam and the Philippines, along with the ongoing dispute with Japan over the Senkaku/Diaoyutai islands as indicative of US “meddling.” WAYS FORWARD? Any ratcheting down of Sino-US security dilemmas in the Asia-Pacific is a task that ultimately falls to Washington and Beijing,

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The Collective Influence of Smaller States in the US-China Security Dilemma

but regional states should avoid fueling tensions. It would be helpful if regional states were more cognizant about how their efforts fit into broader configurations of regional interactions, and how such patterns affect perceptions in Washington and Beijing. Regionally-led initiatives to develop serious dialogue mechanisms and common practices for managing behavior over contentious issues can help provide some cushion between the United States and China, especially if sufficiently transparent. Explicit attempts to demonstrate equivalency in working with both the United States and China can also aid in tempering the competitive element in Sino-US ties in Asia. These possibilities may not be surprising, but remain difficult to realize given the diversity of economic and strategic interests — not to mention intraregional competition — among regional states in East Asia. Regional states need to first get their collective house in order. In Southeast Asia, this means giving substance to the integrative goals laid out in the ASEAN Charter and

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the goal of a 2015 ASEAN Community by addressing the difficult substantive questions associated with state sovereignty, integration, divergent concerns, and differing levels of development. Likewise, Northeast Asian states should work on finding mechanisms to manage regional issues like territorial disputes. Governments in both Northeast and Southeast Asia can also consider ways to further enhance indigenous political and economic integration across the two subregions. An initial first step is to candidly assess the strengths and limitations of the multiple, overlapping regional arrangements in Asia. This can point regional governments toward building on complementarities, reducing contradictions, and greater overall effectiveness in intra-regional coordination, if not cooperation. Undoubtedly, even such preliminary efforts will face challenges from the realities of domestic politics in all the countries involved as well as likely interference from Washington and Beijing, and will require sustained local political support to succeed.

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31.

CHINA AND JAPAN IN “ASEAN PLUS” MULTILATERAL ARRANGEMENTS Raining on the Other Guy’s Parade CHIEN-PENG CHUNG

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he variety of regionalism in East Asia consists of an overlapping selection of bilateral, multilateral, and “minilateral” (three or more-sided subsets of existing multilateral) cooperative groupings in the diplomatic, economic, and military realms, with variations in membership and scope. Among the “ASEAN Plus” multilateral regional forums anchored on ASEAN, the most prominent are the ASEAN Regional Forum (ARF), ASEAN Plus Three (APT), East Asia Summit (EAS), and ASEAN Defense Ministerial Meeting Plus (ADMM+). The involvement of China and Japan in these groupings may be described as having passed through all or some of three stages: attempts at cooperation, mutual tolerance amid rivalry, and pro forma attendance or purposeful nurturing. More specifically, we may analyze these stages as follows: • Stage One: trying to establish a mode of cooperation, which would characterize Sino-Japanese relations in the ARF from 1994 to 2004 and the APT from 1997 to 2004;

• Stage Two: tolerating the other’s schemes while deploying one’s own stratagems to neutralize them, which describes their relationship in the ARF, APT, and EAS from 2005 to 2009; • Stage Three: increasing attention to APT and EAS for diplomatic gains, by China and Japan; pro forma attendance in the ARF and ADMM+ by both countries reflects their security realignments in other set-ups beginning around 2007 but gathering strength since 2010. The underlying tone of Sino-Japanese interactions in East Asian regional arrangements for at least a decade has been one of competition for influence over the surrounding countries constituting the member states of the forums. In general, the functional effectiveness of a grouping tends to decrease as membership grows. Unsurprisingly then, to concentrate and maximize its own influence in the regional forums where it has the advantage, China would favor having fewer members in economic groupings such as the APT and

Reprinted in excerpted form from Chien-Peng Chung, “China and Japan in “ASEAN Plus” Multilateral Arrangements: Raining on the Other Guy’s Parade”, Asian Survey 53, no. 5 (2013): 801–24, by kind permission of the University of California Press.

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China and Japan in “ASEAN Plus” Multilateral Arrangements

EAS, while Japan would prefer the same in security groupings such as the ARF and ADMM+. A major consequence of this contest is that the “ASEAN Plus” arrangements have become a numbers game. ASEAN REGIONAL FORUM: THE LIMITS OF INSTITUTING TRUST First Stage: Attempts at Cooperation, 1994–2004 According to the ARF Concept Paper (1995),1 promotion of confidence-building measures (CBMs) constitutes the first stage of the forum’s evolution, of which pressing for the transparency of a member state’s military establishment should be the key undertaking. One of the very few CBMs developed so far is the Annual Security Outlook (ASO). While Japan has contributed every year and made detailed submissions, China has either skipped a few years or its occasional submissions have avoided discussing its defense policy or budget.2 After hosting the Intersession Group on Confidence-Building Measures (ISG-CBM) in 1997, China has been much in favor of the ARF focusing on a non-traditional security (NTS) agenda.3 Japanese officials have perceived the push for NTS, or declarativetype CBMs such as the ASO as running contrary to Japan’s interest in promoting CBMs focused on military transparency.4 Japan’s proposals for the ARF chair to be able to call an emergency meeting without prior notification, or to make changes to a communiqué without consensus, were thwarted, not least by Chinese objection.5 Increased communication and interaction between China and Japan within the ARF has hence not led to greater mutual trust or confidence, but rather the opposite.

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invasion, involving a Taiwan Strait crisis, the contested Diaoyu/Senkaku Islands, or the disputed gas fields in the East China Sea.6 By the time Abe Shinzo became prime minister later that year, Japan had turned its attention to building up security networks outside of the ARF. The foreign ministers of Japan, South Korea, and the U.S. held a separate conclave on the sidelines of the July 2011 ARF to call for a resumption of the Six-Party Talks on North Korea’s nuclear disarmament at the meeting.7 Third Stage: Pro Forma Attendance, 2010 Onward Just as Japan was giving consideration to fostering security arrangements apart from the ARF, China has become less enthusiastic about the forum, particularly since the Hanoi meeting in July 2010. Before the July 2011 ARF meeting in Bali, diplomats from ASEAN and China reached agreement on a statement regarding a set of eight guidelines to implement the Declaration on the Conduct of Parties in the South China Sea. The South China Sea was again debated at the July 2012 ARF meeting in Phnom Penh, with then-Japanese Prime Minister Noda Yoshihiko raising the issue8 and Secretary Clinton saying that “ASEAN should speak with one voice on the South China Sea and should have unity.”9 Underlying her call was an abrupt change of course by the Chinese. In a meeting of deputy foreign ministers on July 8,10 ASEAN and China had agreed to start talks on a legally binding maritime code of conduct to manage the South China Sea disputes. Days later, just before the start of the ARF meeting, Beijing shifted, refusing to begin talks until “conditions are ripe.”11 ASEAN PLUS THREE: LABORED ACCOMMODATION

Second Stage: Mutual Tolerance amid Rivalry, 2005–09

First Stage: Attempts at Cooperation, 1997–2004

In 2006, Japan’s Self-Defense Force began planning for three scenarios of Chinese

APT was formed in December 1997 and provided both an opportunity and a need

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for China and Japan to participate actively in promoting economic and financial interdependence among East Asian countries. APT took on a principal economic integration function in May 2000, when the finance ministers of member states agreed in Chiang Mai, Thailand, to create a network of individually negotiated bilateral currency swap arrangements. Second Stage: Mutual Tolerance amid Rivalry, 2005–09 Against Japan’s attempts to widen the APT process in terms of membership, Beijing was keen to deepen the grouping, particularly where its growing wealth gave it an advantage in international finance. The key institutional development in APT from 2005 onward was the multilateralization of the CMI. To this end, an agreement was reached in May 2008 that 80% of the Chiang Mai Initiative Multilateralization (CMIM) scheme would come from China, Japan, and South Korea, with the rest coming from ASEAN. At the APT conference at Pattaya, Thailand, in April 2009, Seoul accepted a quota of 16% of the total, or US$24 billion.12 As to the remainder of the “Plus Three” quota of the CMIM, both China and Japan sought to provide the largest financial contribution, and enjoy the corresponding clout. Third Stage: Competition and Compromise, 2010 Onward China was reluctant to accept having to make a lower financial contribution, and therefore acquire a lower voting weight than Japan in the CMIM.13 Finally, in March 2010, a compromise was worked out whereby Japan and China each contributed $38.4 billion, or 32% of the total of $120 billion. This was the first time in an international or regional economic forum that China was accorded equal financial voting weight with Japan. Not surprisingly, then, Japan has sought to include not only India, Australia, and New Zealand but also the U.S. and Russia in an

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expanded arena, to counter China’s growing influence. As the most populous country with the largest economy in East Asia, China would be relatively more influential in a smaller setting, which is the main reason Beijing prefers to maintain the existing membership size of APT. In May 2010, senior officials involved with the forum unveiled plans to create an APT Macroeconomic Research Office (AMRO) in Singapore “to monitor and analyze regional economies” and thus contribute to the “early detection of risks and swift decision-making of the CMIM.”14 China and Japan once again dueled over the choice of the AMRO director. A compromise was reached in April 2011 whereby the Chinese candidate, Wen Benhua, a senior PRC official would hold the post for the first year. The Japanese candidate, Nemoto Yoichi would serve for the remaining two years of the term.15

EAST ASIA SUMMIT: WIDENING VERSUS DEEPENING OF MEMBERSHIP First Stage: Attempts at Cooperation before 2005 The EAS was conceived as a structured way for China, Japan, and South Korea to cooperate with the 10 ASEAN countries on political, economic, and security matters. Rivalry with Japan was a major contributory factor to China’s push for the earliest possible evolution of the APT into the EAS. After China had agreed with ASEAN to establish an FTA, then-Japanese Prime Minister Koizumi Junichiro on his visit to several ASEAN states in 2003 proposed building an East Asian Community (EAC) that included Australia and New Zealand. Japan was concerned that China and Malaysia under the anti-Western Prime Minister Mahathir Mohamad would take the initiative in forging an EAS out of the APT and determining its membership. Japanese officialdom obviously desired that any EAC be defined as APT+3, or ASEAN+6. China’s possible domination of the region also worried countries like Indonesia and

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China and Japan in “ASEAN Plus” Multilateral Arrangements

Singapore, to the extent that they lobbied for the inclusion of countries outside geographic East Asia, such as those suggested by the Japanese. Second Stage: Vetoing the Other’s Proposal, 2005–09 By early 2005, a clear message had come from the U.S. that it objected to the exclusive regionalism represented by the putative EAS as envisaged by China.16 When China failed to convince ASEAN countries not to invite non-APT countries to the first EAS in Kuala Lumpur in 2005, it favored a draft declaration for the summit that would portray the APT states as a core group having a dialogue with a secondary group made up of Australia, New Zealand, and India.17 This position met with strong opposition from Japan. Beijing then offered to host the second summit, but this was vetoed by Japan. When Japan bid to cochair the first EAS with Malaysia, the proposal was refused by China.18 With the two countries competing for leadership, ASEAN moved to manage this community building effort by insisting that only its member states could host the EAS. Beijing became frustrated by the decision to include non-APT countries in the EAS, believing this would hobble EAS efficiency because more members would make consensus harder.19 Furthermore, by including countries that Beijing perceived as aligning together to marginalize China by promoting “universal values,” the EAS would decrease rather than increase Chinese influence.20 With its vision for the EAS blocked, China changed strategy, basically abandoning its support for the summit to achieve anything and attempting to neutralize its effectiveness for Japan by welcoming as many foreign countries into it as possible. Third Stage: Pro Forma Attendance, 2010 Onward With the U.S. and Russia joining in as full members of the EAS in 2011, the focus of

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its meetings will become more diffused, to include discussions of more sensitive political issues and security problems. It seems that, while the trans-Pacific expansion of the EAS may make it less distinct from the ARF, the mandate of the former will be even narrower than that of the latter. Beijing would gain influence by being at the center of regional cooperative arrangements that do not include the U.S. and help to make rules for East Asia. As such, why did it agree to U.S. participation in the EAS? This is because Beijing knows that many Asian nations actually welcome an American presence in the region’s forums, and open opposition by China might increase its neighbors’ suspicions of its intentions to dominate the region.21 China’s strategy in any forum in which the U.S. and Japan are both present is not to openly criticize any proposal on the table, except to ignore it, or to keep it under discussion until Beijing finds it useful for a decision to be made. CONCLUSION China and Japan are currently more interested in preventing the other from establishing dominance over the region, instead of coming up with a defining architecture to promote regional cooperation. Both countries through their recent actions have revealed that they regard participating in regional frameworks as but a foreign policy tool to enhance their own interests and influence. The larger the “ASEAN Plus” groupings, the less effectively they can be expected to function, but participating in smaller groupings may result in ASEAN being dominated by China, or alternatively by one or more members of the Australia-Japan-India-U.S. “Quad.” ASEAN does not have the capability to arbitrate the hardening competition between China and Japan, yet going with the leadership of either may tear ASEAN apart along the lines of the political values, economic interests, and foreign policy positions of its member states. As such, for the foreseeable future,

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what remains will have much of the form, but little of the substance, of the “ASEAN Plus” economic and military groupings.

Chien-Peng Chung

Constructing a community of East Asian countries will not be possible without reconciliation of the Sino-Japanese rivalry.

NOTES   1. ASEAN Secretariat, The ASEAN Regional Forum: A Concept Paper, , accessed April 30, 2013.  2. John Rathus, Japan, China, and Networked Regionalism in East Asia (Basingstoke, U.K.: Palgrave Macmillan, 2011), p. 155.   3. Takeshi Yuzawa, Japan’s Security Policy and the ASEAN Regional Forum (London: Routledge, 2007), p. 80.  4. Rathus, Japan, China, and Networked Regionalism in East Asia, p. 156.   5. Takeshi Yuzawa, “Japan’s Changing Conception of the ARF,” Pacific Review 18:4 (2005), p. 473.   6. Richard Samuels, Securing Japan: Tokyo’s Grand Strategy and the Future of East Asia (Ithaca, N. Y.: Cornell University Press, 2007), p. 169.   7. Asia Pulse (Rhodes, Australia), “Japan to Urge Chinese Restraint in Territory Rows,” July 20, 2011.   8. “Japan Warns That South China Sea Row Could Damage Regional Stability,” November 19, 2012, , accessed April 30, 2013.   9. “Clinton Urges ASEAN Unity over Islands,” Bangkok Post, July 13, 2012, , accessed April 30, 2013. 10. “ASEAN-China Consultation on COC Opens,” Vietnamese News Agency, July 9, 2012, , accessed April 30, 2013. 11. “Divided We Stagger: ASEAN in Crisis,” Economist, August 18, 2012. 12. Rathus, Japan, China and networked Regionalism in East Asia, p. 114. 13. Chaitrong Wichit, “Japan and China Vie to Be Top Contributor to Regional Fund,” The Nation (Bangkok), April 10, 2009. 14. Joint Ministerial Statement of the 13th ASEAN+3 Finance Ministers’ Meeting, Tashkent, Uzbekistan, May 2, 2010, paragraph 9, , accessed April 30, 2013. 15. John D. Ciociari, “Chiang Mai Initiative Multilateralization,” Asian Survey 51:5 (September/October 2011), p. 946. 16. Kazuhiko Togo, “Japan and the Security Structures of Multilateralism,” in East Asian Multilateralism: Prospect for Regional Stability, ed. by Kent E. Calder and Francis Fukuyama (Baltimore, Md.: Johns Hopkins University, 2008), p. 175. 17. Bruce Vaughn, “East Asia Summit: Issues for Congress,” CRS [Congressional Research Service] Report, December 9, 2005, p. 2. 18. Eric T. C. Cheow, “East Asia Summit’s Birthing Pains,” Straits Times, February 22, 2005. 19. Jae Cheol Kim, “Politics of Regionalism in East Asia: The Case of the East Asia Summit,”Asian Perspective 34:3 (2010), pp. 125–26. 20. Yan Wei, “A Broader Asia without China,” Beijing Review, September 20, 2007. 21. Ming Wan, “The Great Recession and China’s Policy toward Asian Regionalism,” Asian Survey 50:3 (May/June 2010), p. 535.

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Section

V

INSTITUTIONS OF ASEAN

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INTRODUCTION

Malcolm Cook

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he governance and administrative institutions of ASEAN and ASEAN’s process of institutionalization itself have come under increasing pressure over the last decade. There are no signs to suggest that ASEAN’s expanding agenda is slowing down. Rather, the opposite appears to be the case. In 2007, partly in response to increasing external pressures and the post-Cold War environment, ASEAN member-states committed to what must be the single most important institutional strengthening of ASEAN to date. They adopted the ASEAN Charter, which provides ASEAN with a legal identity. The five articles in this section address new pressures on ASEAN institutions over the last decade and into the future. The article by Sokbunthoeun So focuses on challenges facing the ‘ASEAN Way’ from the flare-up of border tensions over the Prear Vihear temple between Cambodia and Thailand. So’s article also shows how the post-Cold War expansion of ASEAN membership has added pressure on the informal norms of intra-ASEAN communication and action. The next two articles by Shaun Narine and Ahmad Fuzi bin Abdul Razak focus on the ASEAN Charter. Narine provides a critical

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academic analysis of the ASEAN Charter and the idea of an ASEAN Community that the successful passage of the Charter stimulated. The author studies the mismatch between the norms and principles codified in the Charter and the history and present form of ASEAN interaction and practice. Ahmad Fuzi, a member of the ASEAN High Level Task Force that developed the ASEAN Charter, provides a practitioner’s view of the development of the ASEAN Charter. He directly challenges the academic and journalistic criticisms about the depth and scope of the Charter. Termsak Chalermpalanupap’s article focuses on the challenges that awaited the new ASEAN Secretary-General, Vietnam’s Mr Le Luong Minh, when he took on the job in 2013. He provides a practitioner’s view of the broadening and deepening responsibilities of the ASEAN SecretaryGeneral, and the ASEAN Secretariat more generally. The final article in this section is from the Asian Development Bank Institute’s 2014 ASEAN 2030: Toward a Borderless Economic Community publication. It looks at the likely future responsibilities of the ASEAN Secretariat, and the recommended institutional reforms meant to effectively manage its growing workload and its centrality in regional economic integration.

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32.

THE CAMBODIA-THAILAND CONFLICT A Test for ASEAN

SOKBUNTHOEUN SO

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he current conflict between Cambodia and Thailand, both members of the Association of Southeast Asian Nations (ASEAN), provides a test case for ASEAN to act as a key player in resolving disputes among its members. A failure by ASEAN to do so would reduce its credibility and impede the realization of an ASEAN community by 2015. Since its establishment in 1967, ASEAN has made substantial achievements in preventing armed conflict among its members. In the view of many ASEAN supporters, such achievements are attributed to the development of a regional identity among ASEAN members through strict adherence to the “ASEAN Way,” a concept that includes non-interference in member countries’ domestic affairs, the peaceful settlement of disputes, and reliance on the principle of consultation and consensus for decision-making. While the non-interference component of the ASEAN Way may help prevent problems from occurring, it has been less successful at solving conflicts after

they erupt. Such a test case now exists in the conflict between Cambodia and Thailand. Cambodia and Thailand’s diplomatic relations deteriorated severely following the Cambodian government’s November 2009 appointment of Former Thai Prime Minister (PM) Thaksin Shinawatra as an economic advisor. Thaksin, who was ousted in a 2006 military coup, remains in exile and is wanted by the current Thai government on corruption charges. This situation is not a disconnected event, but part of a chain of events that occurred after the enlistment of the Preah Vihear temple as a World Heritage Site by the Cambodian government in July 2008. Preah Vihear, a 900-year-old Hindu temple dedicated to Shiva, is situated near the Cambodian-Thai border. Despite the International Court of Justice (ICJ)’s 1962 ruling that the Preah Vihear temple is located within Cambodian territory, some Thai nationalists have never accepted that the temple belongs to Cambodia. Others

Reprinted in excerpted form from Sokbunthoeun So, “The Cambodia-Thailand Conflict: A Test for ASEAN”, Asia-Pacific Bulletin No. 44 (Washington, D.C.: East-West Center, 2009), by kind permission of the East-West Center.

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suggest that the ICJ’s ruling only covers the temple and not the surrounding 4.6 square kilometers of land. This situation made Preah Vihear a point of contention between Cambodia and Thailand. Cambodia’s enlistment of the temple as a World Heritage Site actually covered only the temple, not the surrounding land, and was supported by the government of former Thai PM Samak Sundaravej. A joint communique demonstrating Thailand’s support was signed between former Thai foreign minister, Noppadon Pattama, and Cambodia. However, both Samak and Noppadon were viewed by their political opponents as Thaksin’s proxies, and the situation was exploited by an anti-Thaksin group known as the People Alliance for Democracy (PAD) to raise nationalist ire in order to remove the so-called “Thaksin’s remnant” from Thai politics. The result was an escalating political upheaval within Thailand and a renewed and deteriorating border conflict with Cambodia. Cambodia proposed ASEAN’s assistance to facilitate a peaceful settlement of this border conflict with Thailand during the 2008 ASEAN summit. However, because of its strict adherence to the non-interference principle, ASEAN asked Cambodia to resolve the dispute through bilateral negotiations with Thailand. The negotiations were unsuccessful. The appointment of Thaksin as an economic advisor to the Cambodian government was part of Phnom Penh’s quest for an international solution to the unresolved Cambodian-Thai conflict. It increased bilateral diplomatic tensions and sent a message to the international community that the conflict had yet to be resolved and required international attention. As a result of this escalation, Indonesia, one of the core founding members of ASEAN, has offered to help mediate the conflict. Embracing Thaksin and escalating the conflict may seem like a risky move, putting Cambodia in danger of war with Thailand, which is better equipped militarily. However,

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Sokbunthoeun So

two factors may be crucial to the Cambodian government’s decision. First, Cambodia and Thailand have an interdependent relationship that makes it hard for Thailand to resort to coercive measures to end the conflict. Thailand trades heavily with Cambodia, and a move to close the border or wage war would have a more damaging economic effect on Thailand than on Cambodia. In 2008, Thailand’s exports to Cambodia amounted to approximately $2 billion worth of merchandise compared to about $90 million of exports from Cambodia.1 In addition, Thailand, which is already ravaged by political conflicts between Bangkok elites and rural Thais, also has a separatist movement in the south. A Thai engagement in an external armed conflict could provide an opportunity for the insurgents in the south to revolt. Further, Thailand needs the support of Cambodia and other neighbors to prevent the flow of arms to these insurgents. Second, the ruling Cambodian People’s Party (CPP) would make a substantial political gain domestically if the border conflict is resolved. The border issue includes not only the area surrounding the Preab Vihear temple, but also hundreds of miles of shared land and maritime borders that have not been completely demarcated and agreed upon by both parties. The favorable resolution of the border conflict would satisfy nationalist sentiment and would further increase the CPP’s popularity. It is crucial to note that the CPP gained a substantial proportion of votes in the 2008 election because of nationalist sentiment over the Preah Vihear enlistment as a World Heritage site. If Thaksin can help to boost the CPP’s legitimacy by promoting trade and investment in Cambodia through his personal business connections, this will continue to increase the CPP’s popularity and therefore appears to be a worthwhile risk to the CPP. The current Cambodian-Thai conflict originates from deep historical animosities

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The Cambodia-Thailand Conflict: A Test for ASEAN

between the two countries and the use of nationalism for domestic political ends by both sides. This situation renders a bilateral solution difficult without mediation from a third party. ASEAN can play a crucial role to help mitigate this bilateral conflict by serving as a mediator and providing an avenue for negotiation between the two

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parties. Yet ASEAN’s strict adherence to the non-interference principle will likely keep it from fully utilizing its potential for resolving conflicts among its members. Without a change in ASEAN’s approach to intra-Southeast Asian conflicts, the question of its ability to form and maintain an ASEAN community remains in doubt.

NOTE 1. Speech by Prime Minister Hun Sen, cited in “Thaksin to give economics lecture in Phnom Pehn”, Kyodo News, November 8, 2009.

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33. ASEAN IN THE TWENTY-FIRST CENTURY A Sceptical Review

SHAUN NARINE

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his paper is an effort to assess ASEAN’s efforts at reform and their implications. Can these measures achieve the goal of rejuvenating the organization or are they aspirations that transcend ASEAN’s structural and political capabilities? If the latter point, then what are the long-term prospects for ASEAN’s regional relevance? This paper draws on Mohammed Ayoob’s (1998) theory of ‘subaltern realism’ to examine ASEAN’s development as a regional actor. Subaltern realism argues that concerns with nation-building are the most significant factors shaping the foreign policies of developing world states. This theory offers some key insights into ASEAN’s evolution and limitations. Drawing on subaltern realism (SR), the paper examines the content of the ASEAN Charter and ASEAN’s goal of creating an ‘ASEAN Community’. Subaltern realism suggests that both of these efforts are at odds with the political realities of most ASEAN

members. The analysis bears this out. The ASEAN Charter embodies norms and values that, in practice, are in contradiction. It juxtaposes a traditional ASEAN emphasis on non-intervention with commitments to human rights and democracy. There is little reason to think that most ASEAN states will respect these commitments. Similarly, creating an ASEAN Community is, at best, a long-term project and one that faces many practical limitations. From this argument, it may seem that ASEAN’s days as a functional institution are limited. However, such a conclusion is premature. The second prong of the argument shows that while the strength of ASEAN’s identity may be at issue, the unique qualities of the East Asian political environment in which ASEAN operates allow it a prominent and meaningful role in the regional architecture. The rivalries between China, Japan and the United States (US) — and, potentially, India and Russia — create a political space within which ASEAN

In excerpted form from Shaun Narine, “ASEAN in the Twenty-First Century: A Sceptical Review”, Cambridge Review of International Affairs 22, no. 3 (2009): 369–86, Copyright © Centre of International Studies, reprinted by permission of Taylor & Francis Books Ltd, www.tandfonline.com on behalf of Centre of International Studies.

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may exercise significant regional influence. Whatever emerges, ASEAN will follow an atypical path of institutional development. THE LIMITS OF ASEAN: THE PROBLEMS OF INSTITUTIONAL REFORM The 1990s were a pivotal decade for ASEAN. The cessation of the Cold War ended ASEAN’s confrontation with Vietnam over the latter’s 1978 invasion and subsequent occupation of Cambodia — an event that gave ASEAN focus for more than a decade. ASEAN needed new purposes. It found them by promoting regional economic integration in the form of the ASEAN Free Trade Area (AFTA), trying to manage regional security through the ASEAN Regional Forum (ARF) and expanding its membership to include Vietnam, Laos, Myanmar and Cambodia (the CLMV states) by the end of the decade. But in 1997, ASEAN’s efforts to redefine itself ran into problems. Human-caused forest fires in Indonesia created a ‘regional haze’ that ASEAN could not address effectively.1 The inclusion of Myanmar in its ranks undermined ASEAN’s relationships with many of its Western allies. Cambodia’s membership was delayed as the country was wracked by political upheaval. Most significantly, the Asian Economic Crisis of 1997–1999 devastated the regional economies and seriously compromised ASEAN’s carefully cultivated international image. ASEAN lacked both the economic resources and institutional structures necessary to deal with economic upheaval (Narine 2008b). Expecting ASEAN to deal with the crisis was unreasonable (Narine 2002a). Nonetheless, this expectation existed, and ASEAN was left looking impotent in the face of the economic collapse. This raised unwelcome questions in the international community about exactly how important ASEAN really was. The Indonesian military’s rampage across newly independent East

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Timor in 1999, and ASEAN’s inability to manage this crisis, further strained ASEAN’s international credibility and prestige. Over the next few years, ASEAN struggled to reassert itself despite various political and economic initiatives. It realized that the organization’s credibility and therefore its ability to be an effective and respected international actor were at stake. The ASEAN Charter and the ASEAN Community are the most recent and ambitious efforts to address these concerns by redefining and strengthening ASEAN for the twenty-first century (Narine 2008a). The ASEAN Charter encompasses principles and purposes that, in practice, contradict each other. Most of the ASEAN states are not democracies — or, at least, possess questionable democratic credentials — and are selective in following international human rights standards (Jones 2008). If all the ASEAN states agreed on what ‘democracy’ and the protection of human rights entailed, there would be no difficulty. It is conceivable that ASEAN could make a commitment to these values but then define them in such a way as to accommodate its more traditional norms and practices. However, such a consensus does not exist. The ASEAN Charter, as it now stands, is a ‘maximum achievement’ for the organization (Khalik 2008). However, the potential for the Charter to undermine ASEAN’s international standing is very real. It could do this by graphically demonstrating the gap between what ASEAN professes to be and what it actually is if — as seems likely — the Charter proves to be ineffective in promoting the democratic and humanitarian values it has so prominently championed. At a deeper level, the Charter indicates a real and growing ideological divide within ASEAN. Democratic values have taken root in some ASEAN states and these countries do not wish to be alienated from the international democratic community. For the first time in ASEAN’s history, the domestic nature of member states is beginning to matter.

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THE ASEAN COMMUNITY In October 2003, ASEAN held the ninth annual ASEAN summit in Bali, and issued the Declaration of ASEAN Concord II (Bali II). The Declaration states: an ASEAN Community shall be established comprising three pillars, namely political and security cooperation, economic co-operation, and socio-cultural co-operation that are closely intertwined and mutually reinforcing for the purpose of ensuring durable peace, stability and shared prosperity in the region. (Declaration of ASEAN Concord II) These ‘three pillars’ have manifested as the ASEAN Economic Community (AEC), the ASEAN Security Community (ASC) and the ASEAN Socio-Cultural Community (ASCC) (Severino 2006, pp. 342–71; Freistein 2005, pp. 177–203). Economic regionalism in the Asia Pacific is, by far, the most advanced of the three kinds of regionalism. Intra-Asian trade has exploded over the past three decades (Chia 2004; Pempel 2005; Park 2006). The AEC is the latest in a long line of ASEAN economic initiatives (Severino 2006, pp. 212–55; Narine 2002b, pp. 24–31). From its inception, ASEAN has aspired (at least on paper) to further economic ties between its members. However, it has been most notable for its failure to do this. The substantial economic integration that has taken place in the Asia Pacific has been driven almost entirely by private actors pursuing their own arrangements. Government- and ASEANsponsored initiatives have had very little impact. In the post-Cold War era, ASEAN began a more serious effort to define itself as an economic institution, but the results remain unimpressive (Narine 2008b; Ravenhill 2008, p. 483). The ideas of an ASEAN security community and an ASEAN Socio-Cultural Community are closely intertwined and must be examined in concert. Acharya has argued that ASEAN is not a ‘Deutschian security community’,

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Shaun Narine

which is typified by its members completely foregoing the use of fear or force in their relations with each other. Rather, he argues that ASEAN is a ‘nascent security community’ and that the organization is experiencing a halting process of socialization that may be leading to a meaningful sense of community (Acharya 2001, p. 208). Important aspects of building an ASEAN Community intersect with building a sociocultural community. As Rodolfo Severino notes, taking a long-term perspective, one would say that the core of the ASEAN Community is the Socio-Cultural Community, if one conceived of the Socio-Cultural Community as a vehicle for developing a sense of Southeast Asian identity, building a regional awareness and fostering mutual understanding among the people of ASEAN. That identity, that awareness and that understanding would contribute greatly, indeed would be essential, to the building of a security community in Southeast Asia. They would be necessary for common norms to be adopted and common values to be shared. They would make regional cooperation easier on a broad range of security concerns. They would also smooth the path to regional economic integration by cultivating mutual trust and, thereby, building confidence in regional institutions, arrangements and understandings. Many of the hopes for and obstacles to the ASEAN enterprise lie in the mind, the minds of ASEAN’s people (Severino 2006, p. 368). The creation of a socio-cultural community is absolutely essential if ASEAN is to evolve into a more institutionalized and effective regional actor. However, of the three pillars of the ASEAN Community, the ASCC was the one given the least time and attention. As Severino notes, ‘(t)he Socio-Cultural Community was apparently brought in almost as an afterthought, at the Philippines’ suggestion, in the interest of rounding out the concept of a community’ (Severino 2006, pp. 368–69).

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Seen through the lens of subaltern realism, the problems of the ASEAN Charter and the ASEAN Community and the difficulties of implementing them are not unexpected. A survey of the states of Southeast Asia reveals that most are still preoccupied with developing coherent nation-states out of disparate groups, although the levels of instability and state legitimacy vary from country to country. The fact that most ASEAN states were willing to quickly ratify the Charter suggests that they do not believe that its democratic and human rights provisions will prove to be problematic for their continued exercise of sovereignty. They feel that the non-interventionist guarantees of the Charter trump its other provisions or their understanding of ‘democracy’ allows for considerable leeway in their actions. SR suggests that the only way states in the process of state-building would agree to restrain their sovereign rights is if doing so could enhance the state-building process. The most successful ASEAN countries have benefited greatly from economic globalization and are aware that their

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political stability and the success of the state-building process are directly related to their dealings with the international system. This suggests that the leading ASEAN states should be willing to make sacrifices of sovereignty to the organization if doing so enhances their international influence. The fact that they are highly ambivalent on this question indicates two possibilities. First, in keeping with SR, they may simply feel that they are too fragile to take such a risk. The other explanation is more ominous for the continued survival of ASEAN: its members may feel that they can best negotiate international forces either on their own or through other arrangements developed outside of ASEAN. The proliferation of economic agreements between individual ASEAN members and the outside world, as well as the willingness of Myanmar to defy its ASEAN allies, may indicate this is not a far-fetched concern. Nonetheless, the positive impact that a unified ASEAN can have on its members’ international standing is a powerful argument in favour of the organization.

NOTE 1. The ASEAN Agreement on Transboundary Haze Pollution came into effect on 25 November 2003. However, it has not been ratified by Indonesia and did not stop other regional haze events from occurring in 2005 and 2006 (Severino 2006, pp. 112–13).

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34.

FACING UNFAIR CRITICISMS

AHMAD FUZI BIN ABDUL RAZAK

I

t was Tuesday, 20 November 2007. As I stood together with my fellow ASEAN High Level Task Force (HLTF) colleagues in the imposing Banyan Ballroom of ShangriLa Hotel, Singapore to witness the signing ceremony of the ASEAN Charter, I could not help feeling a deep sense of satisfaction. There was every justification to rejoice at a job well done. We have managed to complete our work within the stipulated 11-month time frame. We have proven what a dedicated collective effort could achieve within ASEAN by acting together. The event itself was epochal for ASEAN. It marked a significant stage in the evolution of the 40-year-old regional organisation. CRITICISMS OF THE CHARTER Critics of ASEAN however, were quick to highlight the inadequacies of the Charter. It was belittled as merely a “compendium of ASEAN’s existing principles and agreements

already developed and in force in the last four decades”. It was criticised as not being “bold and visionary” enough and “a huge let-down”. The Charter, it was asserted; contained “no single big idea or single overarching policy to revitalise ASEAN’s appeal to its 500 million people”. Particular criticisms were directed at the absence of specific provisions in the Charter on the mobilisation of resources including the setting up of a “Special Fund” to narrow the development gap within ASEAN as recommended by the Eminent Persons Group (EPG). The retention of the principle of consensus in decision-making and non-interference was also criticised as being not progressive or forward-looking. There was no provision for suspension or expulsion of members for non-compliance. Even ASEAN’s attempt at defining and developing its own identity was ridiculed. The various “blemishes” it suffers would eventually relegate the Charter to nothing more than “a piece of paper”. In the wider

Reprinted in excerpted form from “Facing Unfair Criticisms” in The Making of the ASEAN Charter, Ahmad Fuzi bin Abdul Razak, edited by Tommy Koh, Rosario G. Manalo, and Walter Woon, Copyright © 2009 World Scientific Publishing Co. Pte. Ltd., by kind permission of World Scientific Publishing Co. Pte. Ltd.

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context, comparisons were made between ASEAN and the EU, by looking at what had been achieved by ASEAN on the basis of the Charter, with the EU in Europe. THE SIGNIFICANCE OF THE CHARTER These criticisms need to be addressed. Some of the critics did not fully appreciate the complexity of ASEAN including how ASEAN works as an evolving regional organisation. ASEAN’s institutional building initiatives and improvement of its organisational structure through the Charter process were not fully understood. They also failed to appreciate the totality of the whole exercise. Criticisms of the Charter appeared to be premised more on critics’ disappointment at not seeing what they themselves wanted to see in the document. Realism and pragmatism seemed to be far from their consideration. VIENTIANE AND KUALA LUMPUR It should be appreciated that whilst the Charter proposal was not an entirely new idea, the political decision made within ASEAN to pursue a Charter, as formally reflected in the 2004 Vientiane Action Programme and the 2005 Kuala Lumpur Declaration on the establishment of the ASEAN Charter, was a very significant development. The KL Declaration marked the formal end of whatever misgivings and initial reluctance on the part of some member states, for ASEAN to have such a legal document. FROM EPG TO HLTF It was to ASEAN’s credit that, following the submission and acceptance by the ASEAN Leaders of the Report and Recommendations of the Eminent Persons Group (EPG) in Cebu, the Philippines in January 2007, the task of drafting the ASEAN Charter was delegated to Senior Officials who were familiar with ASEAN’s history, contemporary realities and vision of the future.

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INTELLECTUAL ACCOMMODATION AND CONSENSUS Members of the I-ILTF took great pains to preserve the principle of equality within ASEAN in the course of tediously negotiating the 55 Articles contained in the Charter. No undue pressure of one or more states by other member states was tolerated. Persuasion and the power of arguments were recognised as the basis for compromise and final agreement. No single member state could claim to play the dominant role or that the Charter was based on its original draft. It was entirely a collective effort from the beginning to the end. ASEAN HUMAN RIGHTS MECHANISM Perhaps the single most sensitive issue faced by the HLTF was the drafting of the enabling provision pertaining to the establishment of an ASEAN Human Rights mechanism. The HLTF had to contend with the well-known positions held by member states on the issue including the fact that Indonesia, Malaysia, the Philippines and Thailand had already established their own National Human Rights Commission. Continuous pressure was also being exerted by the relevant NGOs during the drafting process on the governments concerned to the extent that the inclusion or otherwise of a reference to an ASEAN Human Rights mechanism was looked upon as a measure of the relevance and significance of the Charter itself. For a long time “human rights” was considered “taboo” within ASEAN and was never the subject of detailed deliberations. As such, even to discuss it in the manner undertaken by the HLTF was a major progress for ASEAN. The final resolution of the issue among member states certainly spoke well of ASEAN’s increasing recognition of the importance of human rights for the general wellbeing of all citizens of the region, consistent with the notion of transforming ASEAN into a “people-oriented” organisation.

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MOBILISATION OF RESOURCES It was true that no specific provision was made in the Charter with regard to the mobilisation of resources. Many within the HLTF itself were unhappy with its inability to achieve a consensus on this. Various proposals put forth on the table were not even considered. ASEAN currently has to contend with the USD904,000 annual contribution made by each member state for its operating budget and whatever additional funds voluntarily contributed towards the ASEAN Development Fund. In practice, however, each member state had to incur more than their respective annual contribution when account was taken of the financial commitments made in hosting and attending the relevant ASEAN Meetings at various levels and in organising ASEAN-related events throughout the year.

Ahmad Fuzi bin Abdul Razak

garner the necessary political will to do so in conformity with the provision of the Charter. JOINING ASEAN The Charter lists four criteria for membership: (i) location in the recognised geographical region of Southeast Asia; (ii) recognition by all ASEAN member states; (iii) agreement to be bound and to abide by the Charter; and (iv) ability and willingness to carry out the obligations of membership. The only country outside ASEAN which could potentially satisfy all four criteria is Timor Leste. NOT PERFECT BUT BEST ACHIEVABLE

MYANMAR Western observers were particularly critical on the question of Myanmar in relation to the ASEAN Charter drafting process. It was argued that the provisions on decisionmaking which made no reference to “suspension or expulsion” as recommended by the EPG was inadequate in allowing ASEAN to effectively deal with such issues. Such a view reflects a misinterpretation of Paragraph 2 of Article 20 on Decision Making which clearly provides that “where consensus cannot be achieved, the ASEAN Summit may decide how a specific decision can be made”. The spirit behind this formulation is to allow ASEAN Leaders to discuss and ultimately take a stand on any issue other than by resorting to the principle of consensus once the Charter comes into force. Such an option, would allow the Leaders some measure of flexibility in making firm decisions on issues considered sensitive as in the case of Myanmar in the larger interest of ASEAN and the region. The challenge now is for ASEAN Leaders to

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In the final analysis, the ASEAN Charter cannot but reflect the prevailing regional realities. It is not intended to be an ideological thesis but a broad framework of rules, regulations and procedures to govern the conduct of relations involving members of ASEAN. No Charter can be perfect. The language in the Charter too can never be simpler or clearer. Any semblance of ambiguity that exists is creatively intended to achieve consensus which can only be understood and appreciated within ASEAN. The Charter is also as bold and visionary as it can be so as to ensure compliance. Pragmatism, ultimately, is the key word. CHARTER A LIVING DOCUMENT A useful Charter is one that is implementable and fully complied with. Compliance, however, cannot be on a selective basis. Disappointment with any provision of the Charter should not be an excuse for non-compliance or for withdrawal from member states’ commitment to ASEAN.

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The Charter must also be a living document. The provisions on Amendments and Review can take care of whatever inadequacies that currently exist. The so-called “lowest common denominator” can be gradually upgraded over the years as ASEAN matures. ASEAN’s capacity to continue to evolve in meeting changing circumstances should not be underestimated and should not be measured by the degree of similarity with the EU. ASEAN is not about “simply copying” the EU. ASEAN in ASEAN with its own wisdom, practices and evolutionary pace and there should be no apology for that. As ASEAN turns 42 in 2009, the existence of a fully ratified Charter, ready for enforcement, should mark the beginning of a new era for the organisation. It has every right to function well as a rulesbased organisation with, inter alia, clearly defined principles, purposes, legal per-

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sonality, membership, organs, decisionmaking process, settlement of disputes mechanisms, privileges and immunities, protocols and practices, identity and conduct of external relations. ASEAN’S FUTURE Much work, no doubt, lies ahead for ASEAN. Creating an ASEAN Community to cover all the three Security, Economic and Socio-cultural pillars requires the full commitment of all member states. And so is the commitment towards ASEAN’s central position and as the cornerstone in the foreign policy of member states. Such commitments will be strongly rooted now with the existence of the ASEAN Charter which should enjoy a special place within ASEAN as it continues to evolve in the years ahead for the benefit of all members.

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35.

CHALLENGES FACING THE NEW ASEAN SECRETARY-GENERAL

TERMSAK CHALERMPALANUPAP

O

n 9 January 2013, Mr. Le Luong Minh, Deputy Foreign Minister of Viet Nam, succeeded Thailand’s Dr. Surin Pitsuwan as the Secretary-General of ASEAN (ASEAN SG). This article explains what the ASEAN SG is expected to do, and suggests what he should also try to do. DUTIES AND RESPONSIBILITIES IN THE CHARTER Duties and responsibilities of the ASEAN SG are prescribed in the ASEAN Charter’s Article 11. Paragraph (a) of the article states: [The Secretary-General shall] “carry out the duties and responsibilities of this high office in accordance with the provisions of this Charter and relevant ASEAN instruments, protocols and established practices”. According to Article 7 Paragraph 2 (g), the ASEAN Summit appoints an ASEAN SG with the rank and status of Minister, who will serve with the confidence and at the pleasure of the Heads of State and Government of ASEAN upon the recommendation of the ASEAN Foreign

Ministers Meeting (AMM). Article 11 Paragraph 1 states: the appointment is for a non-renewable term of 5 years, based on alphabetical rotation [and consensus], “with due consideration to integrity, capability and professional experience, and gender equality.” Undiplomatically speaking, the ASEAN Foreign Ministers have direct supervision over the ASEAN SG, and any of the ASEAN Leaders can sack him. This is the political reality and institutional constraint under which every ASEAN SG has to accept and learn to live with. Paragraph (b) of Article 11 states: [the Secretary-General shall] “facilitate and monitor progress in the implementation of ASEAN agreements and decisions, and submit an annual report on the work of ASEAN to the ASEAN Summit”. The annual report is submitted to the ASEAN Summit in the second quarter of each year; the ASEAN Summit in the fourth quarter is devoted more to ASEAN’s external relations. One quandary is whether or not the ASEAN SG should also report on delays and shortcomings. Here, the preference of

Reprinted in excerpted form from Termsak Chalermpalanupap, “Challenges Facing the New ASEAN Secretary-General”, ISEAS Perspective 2013/7 (Singapore: Institute of Southeast Asian Studies, 2013), by kind permission of the Institute of Southeast Asian Studies.

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most government officials is for the omission of negative points, and for the emphasis on progress and achievements. This is part of the celebrated ASEAN Way. Some ASEAN Leaders actually encouraged Dr. Surin to tell them the “bad news” in ASEAN, not just the good news. One big item of “bad news” that Dr. Surin raised was this: ASEAN is not getting anywhere nearer to achieving a drugs-free zone by the year 2015. Subsequently, the 20th ASEAN Summit in Phnom Penh in early April 2012 issued a declaration to reaffirm the ASEAN commitment to realizing Drug-Free ASEAN 2015. Thailand hosted a special ASEAN ministerial meeting on 31 August 2012 in Bangkok to also reaffirm the commitment. Yet ASEAN is facing a formidable uphill battle to reach this noble goal. The new ASEAN SG will have to remind ASEAN officials to intensify and speed up their regional cooperation in tackling drug trafficking and drug abuse. Paragraph (c) of Article 11 requires the ASEAN SG to “participate in meetings of the ASEAN Summit, the [three] ASEAN Community Councils, the ASEAN Coordinating Council, and ASEAN Sectoral Ministerial Bodies and other relevant ASEAN meetings”. This is the most important role of the ASEAN SG. He is the only person in ASEAN who has access to the ASEAN Summit, including the Leaders’ “retreat”, and all ministerial meetings, and therefore, the only person who can have a comprehensive overview of ASEAN’s community-building. ASEAN has more than 30 sectoral ministerial meetings dealing with almost every key area of government. The ASEAN SG would usually attend what he considers more important meetings, such as the AMM, the ASEAN Regional Forum, the ASEAN Coordination Council (ACC, which consists of the ASEAN Foreign Ministers), the ASEAN Economic Ministers Meeting, the ASEAN Finance Ministers Meeting, the ASEAN Defence Ministers Meeting (ADMM), the

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ADMM-Plus, and assign one of his four deputies to attend the others. The fourth function of the ASEAN SG is in Paragraph (d) of Article 11 which provides for him to “present the views of ASEAN and participate in meetings with external parties in accordance with approved policy guidelines and mandate given to the Secretary-General”. This Paragraph (d) apparently imposes some constraints on the ASEAN SG, who can only air views that are in accordance with “approved policy guidelines and mandate given”. He is not expected to be, and should not try to become, the foreign minister of ASEAN, or speak for ASEAN on high political issues without consulting the AMM or taking the cue from the ASEAN Chairman. EXTERNAL RELATIONS ROLE The ASEAN SG attends ministerial meetings of APEC and ASEM; he also accompanies the ASEAN Chairman to the annual G-20 summit. In addition, he represents ASEAN in the sectoral dialogue partnership with Pakistan, and in dialogue and cooperation with the UN and other regional organizations. The ASEAN SG receives accreditation of Ambassadors to ASEAN from countries outside of ASEAN. The U.S., Japan, China, and RoK have opened their respective Permanent Missions to ASEAN in Jakarta. The large number of Ambassadors to ASEAN reflects the growing international recognition and interest in ASEAN. CHIEF ADMINISTRATIVE OFFICER OF ASEAN Article 11 Paragraph 3 designates the ASEAN SG as the “Chief Administrative Officer of ASEAN”, similar to the UN SG who is “the chief administrative officer of the Organization” (Article 97 of the UN Charter). But so far there is no formal definition of what is the role of the Chief Administrative Officer of ASEAN.

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The only exception is the ASEAN Foundation in Jakarta. Article 15 Paragraph 2 states: “The ASEAN Foundation shall be accountable to the Secretary-General of ASEAN, who shall submit its report to the ASEAN Summit through the ASEAN Coordinating Council.” Recruitment has been slow and inefficient. Staff turnover is quite high, mainly because the remuneration is not competitive when compared with the UN, ADB, WTO or the business sector in Jakarta. Filling staff vacancies and improving the working conditions at the ASEAN Secretariat is a serious issue which requires immediate attention and action of the new ASEAN SG. Article 8 Paragraph 2 (e) mentions the ACC shall “consider the report of the SecretaryGeneral on the functions and operations of the ASEAN Secretariat and other relevant bodies”. The ASEAN SG thus submits a biannual report on the operations of the ASEAN Secretariat to the ACC through the Committee of Permanent Representatives to ASEAN (CPR) in Jakarta.

without recourse to the provision on Amendments under this Charter.” More importantly, the ASEAN SG has to work closely with the CPR on the allocation of operational budget for the ASEAN Secretariat. Article 20 Paragraph 3 states: “The Secretary-General shall prepare the annual operational budget of the ASEAN Secretariat for approval by the ASEAN Coordinating Council upon the recommendation of the Committee of Permanent Representatives.” Staff vacancies have led to underutilization of budget. This in turn has become an argument against giving the ASEAN Secretariat a larger budget allocation. Another major cause of the small increase is the equal sharing of contributions. Each ASEAN Member State, rich or poor, large or small, new or old, contributes an equal share. The equal sharing is stipulated in the ASEAN Charter, Article 30 Paragraph 2. One rationale for this is that political equality in ASEAN entails equal sharing of financial obligations.

WORKING WITH THE CPR

LEGAL ROLE

Article 10 Paragraph 2 states that Annex 1 listing ASEAN sectoral ministerial bodies “may be updated by the Secretary-General of ASEAN upon the recommendation of the Committee of Permanent Representatives without recourse to the provision on Amendments under this Charter.” Article 12 Paragraph 2 (c) calls on the CPR to “liaise with the Secretary-General of ASEAN and the ASEAN Secretariat on all subjects relevant to its work”. In addition, Article 16 Paragraph 2, requires the CPR to prescribe “Rules of procedure and criteria for engagement [with entities associated with ASEAN] … upon the recommendation of the Secretary-General of ASEAN.” And Article 16 Paragraph 3 states that “Annex 2 [list of the entities associated with ASEAN] may be updated by the SecretaryGeneral of ASEAN upon the recommendation of the Committee of Permanent Representatives

The ASEAN SG shall represent ASEAN in legal proceedings, in accordance with Article 2 Paragraph 1 of the 2009 Agreement on the Privileges and Immunities of the Association of Southeast Asian Nations. This involves exercising legal capacities of ASEAN under domestic law of ASEAN Member States in entering into contracts, acquiring and disposing of movable and immovable property, and in instituting or defending ASEAN in legal proceedings. However, whether ASEAN can be sued for anything is unclear. ASEAN does have the legal personality, as provided for in Article 3 of the ASEAN Charter, and spelled out in greater details in Article 2 of the 2009 Agreement. But ASEAN is an intergovernmental organization with diplomatic immunity, as provided for in Article 3 of the 2009 Agreement, which states in part:

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“ASEAN and the property and assets of ASEAN shall enjoy immunity from every form of legal process except insofar as in any particular case it has expressly waived its immunity.” As the Chief Administrative Officer of ASEAN, ASEAN SG can sign commercial contracts binding the ASEAN Secretariat, employment contracts with recruits joining the ASEAN Secretariat, hold or dispose of assets of the ASEAN Secretariat in accordance with the ASEAN Secretariat Financial Rules of Procedure. ASEAN SG also serves as the depository of TAC documents and ratification instruments of ASEAN agreements. HUMAN RIGHTS ROLE ASEAN SG can bring “relevant issues to the attention of AICHR, and concurrently inform the ASEAN Foreign Ministers of these issues.” This is stated in Point 7.1 of the terms of reference of the ASEAN Inter-governmental Commission on Human Rights (AICHR). ROLE IN DISPUTE SETTLEMENT Article 23 Paragraph 2 states: “Parties to the dispute may request the Chairman of ASEAN or the Secretary-General of ASEAN, acting in an exofficio capacity, to provide good offices, conciliation or mediation.” Article 27 Paragraph 2 assigns ASEAN SG to “monitor the compliance with the findings, recommendations or decisions resulting from an ASEAN dispute settlement mechanism, and submit a report to the ASEAN Summit.” But this deals only with non-compliance arising from ASEAN dispute settlement mechanisms. It doesn’t apply to disputes inside any Member State or bilateral disputes between ASEAN Member States on, for example, territorial claims.

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The new ASEAN SG will likely have little say over the island disputes in the South China Sea. The new ASEAN SG is not expected to speak for Viet Nam. Doing so will erode his credibility, because under Article 11 Paragraph 8 (b), he and his staff shall “not seek or receive instructions from any government or external party outside of ASEAN;” and in Paragraph 8 (c) he and his staff shall “refrain from any action which might reflect on their position as ASEAN Secretariat officials responsible only to ASEAN.” Dr. Surin didn’t have any significant say in the Thai-Cambodian border dispute and skirmish. He reportedly lamented: “This is a dispute between two Buddhist nations over a Hindu temple. What can a Thai Muslim like me do?” Dr. Surin couldn’t find any “space” to defend ASEAN interest during the 45th AMM when Cambodia, the Philippines and Viet Nam clashed over what to say and what to omit from the draft joint communiqué. Their serious disagreement led to the cancellation of the AMM joint communiqué — the first such failure in 45 years of ASEAN. Quite obviously, most ASEAN Member Governments want the ASEAN SG to be more of a Secretary than a General. But in defending and advancing ASEAN interests, the new ASEAN SG will have to try pushing the envelope. The five-year tenure of the new ASEAN SG will go beyond 2015, which is the first major milestone in ASEAN’s community-building process. His success depends on how much and how far the new ASEAN SG will be able to persuade Member States to overcome delays, fix shortcomings and increase the quality of the next set of community-building blueprints beyond 2015, and implement them effectively, so that the evolving ASEAN Community will truly benefit its 600 million people.

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36.

ASEAN GOVERNING MECHANISMS

ADB INSTITUTE

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oday ASEAN operates in a substantially different environment than the one it faced when it was established in 1967. The world has shrunk and its economy has globalized. ASEAN has also evolved. From a focus on regional security, the group’s agenda has gradually expanded to cover many new issues, especially economic. The importance of the economic community is expected to continue growing in relative terms compared with the political-security and socio-cultural communities. ASEAN’s institutional set-up has served the region well so far. Its limitations have, however, become evident as it was designed for a group focused on regional security and handling a limited scope of activities. As ASEAN’s mandate and operations have largely expanded over the years, its institutional framework and governing mechanisms need efficiency updates. They have become inadequate in keeping pace with internal and external developments.

DECISION-MAKING SYSTEM Consensus has been ASEAN’s basic principle for decision making. Although a multitrack, multi-speed approach was often used in implementing agreements, decisions are typically made only when agreement is unanimously reached by all member countries. The principle of consensus decision-making is enshrined in the ASEAN Charter (Article 20), which also cites the importance of consultations to inform decisions, deferring to the Leaders’ Summit to resolve cases when consensus cannot be reached.1 Consensus has worked well to date, especially in dealing with political and security matters. For economic and social issues, however, it often creates unnecessary rigidities. A qualified majority system can in fact be seen as a better substitute to consensus for non-fundamental, operational decisions as it eliminates inefficiencies when resolutions need to be timely made. This is

Reprinted in excerpted form from Asian Development Bank Institute, “Chapter 5: Institutional Architecture”, in ASEAN 2030: Towards a Borderless Economic Community (Tokyo: Asian Development Bank Institute, 2014), pp. 183–210, by kind permission of the Asian Development Bank Institute.

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especially true when matters are of a nonfundamental nature.2 A qualified majority also avoids the possibility of small minorities holding the entire group hostage when dealing with relatively minor issues. As ASEAN activities become more articulated and economic in nature, consensus alone can be too restrictive in malting decisions. Agreeing on day-to-day matters by consensus is cumbersome and a source of avoidable delays. A system using a qualified majority for day-to-day operational decisions, while maintaining consensus for decisions on fundamental issues, was introduced by the Chiang Mai Initiative Multilateralization (CMIM), with percentage shares of financial contributions used as the basic criterion to decide voting powers for members. For example, while ASEAN countries account for only 20% of total MIM contributions, they are granted 28.4% of voting power. The CMIM also uses a two-track decisionmaking system, where consensus is required on fundamental issues — size of the pooled fund, membership, individual member contributions, and lending terms — while a qualified two-thirds majority is enough to decide on operational issues — such as lending details, renewals, and defaults, among others. FINANCIAL CONTRIBUTIONS Closely connected to decision making are financial contributions made by member countries to the ASEAN Secretariat’s budget. Alongside the principle of consensus, the secretariat’s budget is currently equally funded by ASEAN member countries, regardless of their capacity or willingness to contribute. However, given the limited financial resources available from the group’s smallest economies (Cambodia, the Lao PDR, and Myanmar), applying this principle imposes a structurally low budgetary ceiling on the entire group. But the greatly

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enhanced integration plans and increased scope of secretariat operations introduced by the ASEAN Charter and the blueprints forming the ASEAN Community require a corresponding expansion in the secretariat’s budget. It is clear that the way contributions are currently collected does not allow meeting ASEAN’s increased financing needs. Anchoring funding on equal shares not only hampers budget growth: it also makes the group intrinsically dependent on external funding from international donors. In practice, while funds are typically available, donor and ASEAN priorities do not always match. Thus, ASEAN is unable to independently accomplish its plans and realize its strategies as decisions are distorted by accommodating requests from the many external stakeholders contributing to the association’s budget. If ASEAN is to become a mature and thriving institution, member countries should realize that the principle used in funding the budget is obsolete. DELEGATION OF POWERS Moreover, members never felt the need to create a sizable, strong regional technocracy — an ASEAN civil service. During its first 15 years, the ASEAN Secretariat operated with a very small number of dedicated staff, the majority of which were seconded from members’ foreign affairs ministries. While several ministerial meetings were started between the end of the 1970s and the 1980s, initiatives for regional cooperation remained limited, requiring marginal secretariat coordination — with funding almost entirely provided by dialogue partners.3 The need for a better organized regional civil service and for stronger institutions arose as soon as the ASEAN economic agenda gained importance. It is not by chance that the ASEAN Secretariat underwent a major restructuring and expansion in 1992, at the time the ASEAN Free Trade Area (AFTA)

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was introduced. A second fundamental change came in 2007 with the adoption of the ASEAN Charter, the establishment of the CPR, and the introduction of the blueprints for the creation of the three communities that together comp1ise the ASEAN Community. By the end of 2013 ASEAN maintained several key institutional bodies, including various ministerial meetings under the overall ASEAN Community framework. The ASEAN Secretariat is the only common institution with a bureaucracy of approximately 70 openly recruited professionals, 110 technical staff recruited from member countries, and 120 local support staff (or about 300 in all as of 2010). Other ASEAN institutions are run by domestic personnel from line agencies with specific functions and responsibilities limited to their home countries. However, the strategic decision taken by ASEAN leaders to create the ASEAN Community — and the profound changes implied by the introduction of the ASEAN Charter — have yet to be followed by an expansion in the association’s civil service and corresponding enlargement of powers delegated to common institutions. While ASEAN members are not keen to substantially transfer sovereignty from national to regional agencies, the creation of the ASEAN Community — especially the AEC — requires a certain degree of centralized decisions, operations, and human and financial resources to govern the newly created markets. Eventually, ASEAN members must agree on the adoption of common rules and regulations, the provision of a proper feedback system, the introduction of sanctions, and the use of compensating mechanisms for those who are negatively affected by regional integration.

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(such as trade and investment agreements) or commitments to temper potential damage caused by economic interdependence (such as transboundary pollution and human trafficking) is essential for ensuring the effectiveness and credibility of ASEAN as an institution. The group, however, still lacks a proper feedback mechanism, a way to track compliance of members’ agreements, and applying sanctions when commitments are not honored. The ASEAN Charter, however, does not incorporate all EPG recommendations, failing to empower institutions — including the ASEAN Secretariat and the ASEAN Summit — with the possibility to apply sanctions against members that do not comply with their commitments. Therefore, much room remains for introducing reforms and institutional innovation that create a culture of compliance to commitments — to ensure the effective implementation of decisions, honor timelines, and apply the rule of law. Without sanctions, there are no real incentives apart from peer pressure for member countries to respect commitments. In addition, it will be extremely difficult for ASEAN to govern the new markets the AEC creates. The ASEAN Secretariat monitors the AEC through a scorecard system. While the disclosure of scorecards among member countries is meant to exert peer pressure when performance falls short of commitments, the fact that the system relies on members’ voluntary declarations instead of independent external assessments reduces its reliability, as a natural implicit conflict of interest arises. Besides, the absence of sanctions for noncompliance also contributes to delays in implementing the AEC Blueprint.

FEEDBACK, SANCTIONS AND COMPENSATING MECHANISMS

THE SECRETARIAT AND ITS RESOURCES

Monitoring and feedback of member countries’ adherence to cooperation initiatives

The lack of capacity by the ASEAN Secretariat to properly monitor the realization of the

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AEC reflects a more generalized deficiency in the extent of human and financial resources made available by member countries to the secretariat. Limited resources also affect national agencies in charge of ASEAN affairs — along with other regional and subregional institutions involved with the ASEAN process. The total ASEAN Secretariat budget in 2012 was just $16 million — tiny for such a prominent institution. In the same year, the European Commission (EC) budget was approximately $4.5 billion — 280 times larger than that of the ASEAN Secretariat.4 Also in 2012, the total personnel working for the EC was approximately 34,000, including 23,800 directly hired and 9,200 external consultants and service providers. As mentioned earlier, the ASEAN Secretariat employed about 300 people, of which only about 70 were professional staff.5 Comparing the ASEAN Secretariat with the EC may not be appropriate, given the different scope and mandates of the two institutions. Besides, several experts have recently criticized the EC exactly for it size and bloated bureaucracy. Nonetheless, if one considers that ASEAN’s 620 million population is more than 20% larger than the EU’s 500 million, it is easy to conclude that even a 50-fold increase in financial and human resources devoted to the ASEAN Secretariat from existing levels (rising, for example, from an annual budget of $16 million to $800 million) will remain a small fraction compared with resources available to the EC.

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The ASEAN Secretariat has always been lightly funded with relatively few human resources. To be sure, over the years, more powers and resources were added — also an effect of successive reports prepared by “eminent persons” groups arguing that regional cooperation should be strengthened. Indeed, the secretariat can mobilize considerably more resources today than 20 years ago, especially when contributions from donors are added. Still, the available pool of highly-qualified professional staff and the agency’s operational budget remain chronically short of ASEAN’s actual needs. ASEAN CIVIL SERVICE The quality of human resources available at the ASEAN Secretariat varies according to the attractiveness of various jobs. While professional staff and all other positions are openly recruited from the market, individuals have a variety of expertise and formation backgrounds. Several individuals converge to the secretariat from serving as civil servants in one of the member countries. Others come from the private sector or academia. While no regional institution has been established so far to build specific capacity of ASEAN technocrats, giving the history and extent of maturity reached by the association, member countries may be ready to consider the possibility of establishing a dedicated academy aimed at graduating civil servants with specific knowledge and skills on ASEANrelated issues.

NOTES 1. It must be noted however that, while decisions are based on consensus, flexibility is often applied via a multi-track, multi-speed approach — or the application of the so-called “ASEAN minus X” formula — which allows countries not ready to fully embrace economic liberalization, or similar initiatives, to temporarily exclude critical sectors, or proceed at a slower pace in implementing their commitments. 2. For example, decisions on “fundamental” issues are those related to membership and funding, while less strategic issues such as those related to implementing approvved programs, or renewing existing schemes, can be classified as “operational.”

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3. From 1977–1991, only two ASEAN Summits were held, one in 1977 and one in 1987. 4. The 2012 $4.5 billion budget for the administration of the European Commission was only about 3% of the EU’s total budget of more than $150 billion. 5. However, these numbers would increase significantly if all consultants made available by bilateral donors were added.

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Section

VI

ASSESSING ASEAN’S INTERNAL POLICIES

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INTRODUCTION

Sanchita Basu Das

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ince its inception in 1967, ASEAN has been continuously evolving in its efforts at regional cooperation. Over the years, the organization has grown from five to ten member states and has increased both the scope and depth of its cooperation. However, throughout its existence, national sensitivities have been a major factor to consider, and in many cases these have taken priority over the regional agendas. One major success for ASEAN came in December 1997 with the adoption of ASEAN Vision 2020. This provided a long-term direction for its ambitions to gain benefits from greater integration. Using 2020 as the target year for the achievement of an ASEAN Community, this plan proposed to work through three intertwined pillars — ASEAN Security Community (ASC), ASEAN Economic Community (AEC), and ASEAN Socio-cultural Community (ASCC). In 2003, ASEAN leaders embraced individual ‘blueprints’ for these pillars., At the 12th ASEAN Summit in January 2007, the organization decided to bring forward the deadline for achieving an ASEAN Community from 2020 to 2015, given the fast changing global conditions. This volume is thus being published on the very year this ambition is being realized.

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In the field of political and security cooperation, ASEAN has made significant headway. It has evolved towards being a rules-based organization by introducing instruments such as the Treaty of Amity and Cooperation, and perhaps most significantly, the ASEAN Charter. Through mechanisms such as the ASEAN Regional Forum, the ASEAN Plus Three, and more recently, the ASEAN Defence Minister’s Meeting and the East Asia Summit, the ten member countries have succeeded in keeping the world’s major powers engaged in the region. Progress on the economic front has attracted most attention, as was expected. The AEC is to deliver on an integrated market and production space with free movement of goods, services, capital and skilled labour. While much has been achieved in terms of tariff reduction and trade facilitation, ASEAN is not yet an integrated production space. A significant number of economic measures have yet to be carried out by the member economies. Hence, the AEC is often viewed as a ‘work in progress’. In its turn, ASCC measures are largely cross-cutting in nature and are mostly derived from the expected impact of economic integration. They encompass broad issues of welfare and protection of citizens, including

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access to healthcare, education and employment; addressing common challenges to health, and to the environment; and cooperation in scientific and technical fields for economic development and progress. The articles in this section discuss these three pillars, with some conducting valuable

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stocktaking exercises, while others assess ASEAN’s performance as a mechanism for regional integration and cooperation. Most of these conclude that though ASEAN has much to be proud of, the goal of attaining a credible ASEAN Community is still some way off.

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CHALLENGING ASEAN A “Topological” View

DONALD K. EMMERSON

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ecurity and economy have been, and remain, the standard fare of ASEANology. Democracy has been an afterthought in this literature. That is partly why I have chosen, in this article, to feature democracy to the relative neglect of security and economy. I begin by drawing what I hope are some useful analytic distinctions between Southeast Asia as a region and ASEAN as an organization. Next I discuss the challenge of transforming Southeast Asia into something more than a collection of states — that is, a community. I then ask whether the Association can and should favour democracy in Southeast Asia on the one hand, and inside its own organization on the other. I close by returning to my point of departure in the above epigraphs to discuss ASEAN’s delayed response to the 2007 crisis in Myanmar in the context of democracy in the region and in the organization. REGION ≠ ORGANIZATION Southeast Asia the region and ASEAN the organization are not the same thing. It

is not quixotic, however, to question the isomorphism of ASEAN and Southeast Asia that the Association has so successfully cultivated for so long.1 Two objections come to mind. One is spatial, one is social, both are political, and both are, in their own ways, “challenging ASEAN”. The spatial caveat entails this question: What happened on 20 May 2002, when the former Indonesian province of TimorLeste was internationally recognized as an independent state that did not then, and in 2007 still had not, joined ASEAN? By that account, the region trumped regionalism, and from that date onward, ASEAN could no longer claim to represent all of Southeast Asia. Timor-Leste wants to join ASEAN, but ASEAN has been less than eager to let it in. That reluctance reflects four non-technical concerns: that Timor-Leste is either a failed or failing state whose membership could become a headache for the other members; that its abject poverty could burden them materially as well; that its foreign policies might be too heavily influenced by outsiders, notably Australia and Portugal; and that

Reprinted in excerpted form from Donald K. Emmerson, “Challenging ASEAN: A ‘Topological’ View”, Contemporary Southeast Asia 29, no. 3 (2007): 424–46, by kind permission of the Institute of Southeast Asian Studies.

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its leaders’ public criticism of the junta in Myanmar for violating human rights could augur disloyalty to the speak-no-evil-of-afellow-member “ASEAN Way”.2 The irony is that these thoroughly political concerns themselves undermine the explicitly non-political image of Southeast Asia that has been so central to that “ASEAN Way”: the ruling out of political considerations as criteria for extending or refusing membership to an applicant state. The resulting slippage between a spatial Southeast Asia and a political ASEAN constitutes a major challenge to the Association. To this two-dimensional exercise in place-name analysis, or toponymy, I wish now to add a third or vertical dimension, and thereby simulate a fully “topological” or eagle’s-eye view of Southeast Asia in relation to ASEAN. Zoom down to Indonesia; then to Jakarta; then to zip code 12110 in Kebayoran; then to a street named Sisingamangaraja after an ethnic-Batak hero who died 70 years ago, long before ASEAN was even a gleam in Thanat Khoman’s eye;3 and finally to the alphanumeric address 70-A. There, in the building that houses its Secretariat, unquestionably, tangibly, ASEAN exists. But with all due respect, where else in Southeast Asia is its presence so directly evident?4 Viewed “topologically” from above, it is fallacious to equate Southeast Asia the region with ASEAN the organization even if TimorLeste is excluded from both. ASEAN’S REGION? OR THE REGION’S ASEAN? Metonymy is a figure of speech, used for brevity or to avoid repetition, as when “Jakarta” is said to have done this or that — and everyone understands that “the Indonesian Government” not the literal city is meant. Now consider “the ASEAN region”. Who among analysts of ASEAN has not used this

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commonplace name?5 It occurs as well on the ASEAN Secretariat’s website.6 What proportion of the 574 million or so people living in Southeast Asia have no idea what ASEAN is? Researching the knowledge of and feelings towards ASEAN held by those living in “its” own region, and acting on the results, could help avoid comparable disappointment in ASEAN circles, especially now that the Association has escalated its agenda to include transforming Southeast Asia from an ASEAN region into an ASEAN community. It might then be tempting to mount a campaign to “socialize” the Association downward to the base of society. Following this vector of descent, elites would, in effect, tell the mass public what it did not, but really ought to, know.7 But there is merit in spinning the notion of socialization upward, as a matter of selfinterested learning and active involvement by citizens around the region — and not only in ASEAN events and programs but also, to the extent feasible and worthwhile, in its decisions. Related to this critique is the case for reconsidering the traditional prominence accorded in ASEAN to its ministers of foreign affairs. National Secretariats of ASEAN exist in all ten member countries. But each one is a unit within that state’s specialized and jurisdictionally limited ministry of foreign affairs, and responsible not to ASEAN’s Secretary-General — rather more of a secretary than a general, as the insider’s joke goes — but to the foreign minister in that national capital. Can ASEAN transform Southeast Asia into a single “sharing and caring community” with an empathically regional sensibility if the relations among members — relations at the core of that would-be community — are still, organizationally, foreign affairs? If a tyranny of political criteria hurts ASEAN’s ability to generate a regional economic community, those hoping for the

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Association to turn the region into a sociocultural community may have even greater cause to complain. CHALLENGING ASEAN: DEMOCRACY IN THE REGION Conflating ASEAN the organization with Southeast Asia the region precludes clear thought about either one. The point is well illustrated by the two very different ways that democracy challenges the Association: First, can and should ASEAN try to protect and promote democracy in Southeast Asia? Second, can and should ASEAN itself become more democratic? To the extent that Southeast Asia becomes more democratic, other things being equal, pressures will mount from below on both counts: for ASEAN to serve democracy better in the region, and become more democratic in its own organization and procedures. Here, again, is the first question: Can and should ASEAN try to protect and promote democracy in Southeast Asia? The standard, time-honoured, “ASEAN way” of answering this question in the negative has been to invoke and defend the sovereignty of member states, reaffirm the corresponding principle of non-interference, and posit catastrophe — ASEAN’s destruction — if sovereignty is interfered with. This will not do. Sovereignty is not like pregnancy. In the latter case, one is or is not. The former, in contrast, is a spectrum of subjective gradations from “do not even think of telling me what to do” at one extreme, through “I accept your advice” at the other. ASEAN’s long-standing principle of consensus already requires that conversations inside the Association be pitched towards the latter end of this spectrum. How has democracy fared in practice, on the ground in Southeast Asia? Remarkably, the summary status of nine of the ten countries that now belong to ASEAN was, in 1976, exactly what it would be three decades later, in 2006. But except for Indonesia,

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Southeast Asia in the eyes of Freedom House looked the same at the beginning and at the end of this long period of time.8 So, under actual circumstances, is there anything ASEAN can and should do for democracy in Southeast Asia? The first and easiest step would be for the Association to acknowledge explicitly its own limitations: that democracy will rise — or decline — in its member countries primarily because of conditions, events, and actors that are internal to them. In a second step, ASEAN can and should balance reactive and proactive policies on democracy. To the extent that ASEAN is committed by its new charter to democracy in principle, it should be possible for the Association to support democracy in practice, so long as fears of “interference” are allayed. Third and finally, ASEAN should augment its now largely instrumental commitment to democracy as a means to something else, such as regional security, political stability, or economic growth, with support for democracy as a good thing in and of itself — a matter of respecting the rights and dignity of human beings. So long as these steps are undertaken incrementally and to the extent possible upon request, or with at least the grudging consent of the concerned member state, it may even become possible someday to envision, alongside the security, economic, and socio-cultural communities that ASEAN plans to build, a fourth and explicitly political community in which, at least, Freedom House’s “not free” designation would no longer fit any member state. CHALLENGING ASEAN: BEYOND CONSOCIATION? Still unanswered is the second question of democracy: Can and should ASEAN itself become more democratic? The national model that in my judgment works best as a template for interpreting

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ASEAN the regional organization is consociational democracy. Consociation may be pictured, topologically, as a landscape comprising a ring of several or more neighbouring mountains of different heights and sizes. Consultation occurs between the elites that are incumbent on the topmost slopes and peaks. For the first decade of ASEAN’s existence, the organization’s original five mountains loomed high above an empty plain. In 1976, by creating a low-profile Secretariat for itself, ASEAN modestly elevated this plain into a basin. It was not until 1992 that ASEAN even had a Secretary-General in the sense of its own chief of staff. Only then could one even begin to entertain the possibility that someone with the latter job title might someday, just possibly, occupy the peak of one truly and massively regional ASEAN mountain — a majestic eminence level with, higher than, or even conceivably integrating into its own flanks all the mountains belonging to it. There are two kinds of democracy in operation here: vertical inside memberstates, horizontal inside the organization. DEMOCRACY AND CONVEXITY There is no necessary contradiction between vertical and horizontal democracy. However, the greater the socio-economic, cultural, and political cleavages that distinguish one member country’s population from another’s, other things being equal, the greater the probability that vertical democracy will constrain the freedom and therefore the ability of elected elites to reach the consensus needed to make horizontal democracy work.

Donald K. Emmerson

One consequence of this logic, discernable in the history of ASEAN, is the creation of an opportunity for unelected or spuriously elected consociational elites to acquiesce to a consensus inside the room, but then avoid implementing its directives upon leaving the room, secure in the impunity that autocracy at home continues to bestow — pending anger and challenge by the next round of “people power” or reformasi on the capital city’s streets. So far in ASEAN’s history, consultation has been understood in strictly horizontal terms, as a conversation among the ruling elites, and especially the foreign ministers, of the member states. But there is nothing in the documents on which ASEAN relies, or is likely to rely, to prevent the organization from widening the scope of consultation to include voices from outside the cockpits of regimes. Consider the polite appeal to the heads of ASEAN governments made by 92 current and two former legislators in the ASEAN Inter-parliamentary Myanmar Caucus in August 2007. They called for “reforms” and “a resolution of Myanmar’s problems” through “the active and effective participation of ASEAN” for the sake of “regional cooperation”.9 Yet there was nothing to stop the leaders of the Association from publicly seeking guidance from member governments, and from their societies as well, as to what it should or should not do. But it will not be easy to use the organization’s horizontal democracy to induce the vertical kind. Indeed, if the basin — the Secretariat — does grow more convex, it is hard to imagine that the heads of state and government arrayed on the mountain tops will merely sit back and watch it rise.

NOTES 1. For an overview of how Southeast Asia came to be equated by ASEAN with its own ten member countries, see Rodolfo C. Severino, Southeast Asia in Search of an ASEAN Community (Singapore: Institute of Southeast Asian Studies, 2006), pp. 41–43.

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2. In wording and tone, this list differs from, but relies partly on, the candid account by Severino, Southeast Asia, pp. 76, 78, 81–82. Often cited by ASEAN diplomats wishing to conceal these underlying reasons is the technical concern that Timor-Leste lacks the skilled personnel and sufficient funds respectively needed to attend ASEAN meetings and meet the financial obligations of membership. 3. In 1967 Thanat Khoman, then Foreign Minister of Thailand, hosted the inaugural meeting of ASEAN in Bangkok. 4. The ASEAN name is of course used by many organizations, including ASEAN-designated centres that work on specialized topics. An ASEAN Centre for Energy, for example, can be found on the 6th floor of another building in Jakarta, while an ASEAN Centre for Biodiversity occupies room 3F in a building on the Los Banos campus of the University of the Philippines. ASEAN has discussed establishing an ASEAN Centre for Combating Transnational Crime. But none of these existing or proposed centers exemplifies ASEAN as centrally or as comprehensively as does its secretariat in Jakarta. As for the Southeast Asia Regional Center for Counter-Terrorism, inaugurated in Kuala Lumpur in 2003, it is not an ASEAN affiliate, which illustrates my point that ASEAN and Southeast Asia are not the same thing. 5. A search of the billion-plus library items catalogued at as of 7 October 2007 showed, as expected, that in the titles of books and articles published in English over the first four decades of ASEAN’s existence (1968–2007), the words “Southeast Asia” (including “South East Asia”, “South-East Asia”, and “South-east Asia”), entered in quotation marks to ensure exact matches, appeared more than twice as often as did “ASEAN”. By these same criteria, however, “ASEAN region” was more than twice as common as “Southeast Asian region”. In book titles listed on Amazon.com as of the same day, “ASEAN region” was more than six times more frequent than “Southeast Asian region”. These may be trivial results. An author, editor, or publisher could well have rejected “Southeast Asian region” as redundant because Southeast Asia was already obviously a region, by definition and widespread assumption, compared with the attractive novelty and brevity of an “ASEAN region”. Should this skew in the discourse persist and deepen, however, it could become marginally harder to re-imagine Southeast Asia as a region with a history, a character, and a future independent of the Association that speaks in its name. 6. “Overview: Association of Southeast Asian Nations” (2006), . 7. A good example of downward socialization is Know Your ASEAN (Singapore: Institute of Southeast Asian Studies, 2007), which poses and answers 40 questions about ASEAN. The 40th question asks “How does one learn more about ASEAN?” and answers, “The best way of learning more about ASEAN is by going to the ASEAN Secretariat’s Web site, http://www.aseansec.org” (p. 50). Fair enough, but how many of the nearly 600 million people living in Southeast Asia have internet access and fluency in English? Whereas ASEAN is officially monolingual in that language, the region is spectacularly polyglot. 8. The Philippines was classified as being “free” in 1987–89 and 1996–2004; Thailand enjoyed that status in 1989–90 and 1998–2004. The full time-series data set, including category definitions and methodological caveats, is available under “Analysis: Freedom in the World Historical Rankings” at . An earlier and also sobering use of Freedom House’s rankings is my “Region and Recalcitrance: Rethinking Democracy through Southeast Asia”, Pacific Review 8, no. 2 (1995): 223–48. 9. ASEAN Inter-parliamentary Myanmar Caucus, “Open Letter to the Heads of Government of ASEAN, China and India”, August 2007, .

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38.

THINKING AND FEELING ASEAN The Challenges of Integration and Identity

MOE THUZAR

INTRODUCTION: ASEAN’S QUEST FOR REGIONAL INTEGRATION In December 1997, the ASEAN Vision 2020 statement outlined the notion of a single community in Southeast Asia, which, by 2020 would be “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.” It was the first attempt to pull together the different spheres of regional cooperation — political, economic and social — that had, up to then, pursued largely separate paths in progressing the Association’s goals in each of the areas. The 9th ASEAN Summit in 2003 defined the three “community pillars” that formed the foundation for a single integrated ASEAN Community, which are “closely intertwined and mutually reinforcing for the purpose of endurable peace, stability and shared prosperity in the region”. The “deadline” for achieving this was shortened from 2020 to 2015 at the 12th ASEAN Summit in 2007.

One can argue that ASEAN is already a community, mainly because the member states — and the numerous dialogue and development partners — have willed it to be so. Yet, there are views expressing doubt about ASEAN’s ability to create a single market and production base by 2015. Analysts attribute this gap between commitment and implementation to a lack of identification with mutual benefits under regional cooperation. ASEAN sceptics point to the tendency of ASEAN members to prioritise national interest over regional commitment. ASEAN INTEGRATION GOALS ASEAN’s first decade was focused largely on consolidating the Association’s foundations, and establishing the necessary mechanisms and processes for regional cooperation. The years 1977 to 1997 were ASEAN’s expansion years. External relations through the Dialogue Partner system were established, expanding steadily to the current number of

Reprinted in excerpted form from Moe Thuzar, “Thinking and Feeling ASEAN: The Challenges of Integration and Identity”, in Building ASEAN Identity on a Transnational Dimension, edited by Yasushi Kikuchi and Vesselin Popovski (Tokyo: United Nations University, 2014), pp. 50–66, by kind permission of the United Nations University.

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ten full Dialogue Partners and one sectoral partner.1 These two decades were also the years of expanding ASEAN membership. The present decade spanning 2008 up to the ASEAN Community’s planned announcement in 2015 constitutes ASEAN’s community-building years, where documents including the ASEAN Charter (which entered into force in 2008), the Community Blueprints for each sphere of cooperation, and the Initiative for ASEAN Integration (IAI) Work Plan all emphasise joint effort for mutual benefits in achieving peace and prosperity for ASEAN’s peoples. PEACE ASEAN as a political and security community has been the Association’s raison d’être. The diplomatic ASEAN has worked for preventing conflict from escalating into war in the region; keeping the major powers engaged in Southeast Asia through processes such as the ASEAN Regional Forum (ARF), the ASEAN Plus Three, and more recently, the East Asia Summit (EAS); and establishing a rules-based foundation for inter-state relations through instruments such as the Treaty for Amity and Cooperation (TAC) in Southeast Asia and the ASEAN Charter. Yet, even diplomacy could not assist ASEAN to reach common position regarding the activities of claimant states in the South China Sea, at the 45th ASEAN Ministerial Meeting (AMM) in July 2012. Although a statement on ASEAN’s sixpoint principles on the South China Sea was issued by the ASEAN Foreign Ministers after the AMM, the furore in the media over the issue highlighted that ASEAN communitybuilding cannot afford to be overshadowed by national (or bilateral) interests.

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area is now essentially in place although domestic acceptance and enforcement of regional commitments is an ongoing topic of debate. ASEAN’s external economic relations have met with greater success; several FTAs with countries throughout the world, including with China and India, are in place. The latest initiative to accelerate ASEAN integration is the Master Plan on ASEAN Connectivity, adopted in October 2010. The Master Plan is seen as the vehicle through which the ASEAN Communitybuilding can be accomplished, by narrowing the development gap among member states and cultivating a deeper sense of community among the peoples of ASEAN through greater exchanges and contacts. This is an implicit recognition that economic integration is not possible without some form of regional identity among officials implementing the various schemes and plans, to dispel mutual suspicions (which are the main obstacle to any effort at closer integration). The importance of national commitment to regional goals becomes evident in the financing of the Master Plan. A US$485.2 million ASEAN Infrastructure Fund (AIF) was launched with contributions from the ASEAN members and from the Asian Development Bank (ADB) in May 2012. The target amount is US$13 billion.2 The ASEAN Economic Community (AEC) implementation — tracked through a scorecard launched in 2008 — has been the most visible to monitor, mainly due to the quantitative (and quantifiable) targets. The AEC Scorecard mainly monitors process outcomes rather than actual impact of regional integration measures. The measure of ASEAN economic integration should be in the assessment of benefits to the people in the ASEAN member states.

PROSPERITY ASEAN cooperation in trade and economy has made some efforts towards finding a common ground between national interests and regional benefit. The region’s free trade

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PEOPLE The ASEAN Socio-Cultural Community (ASCC) measures are largely cross-cutting human and social development issues arising

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from the impact of economic integration. Broadly, they range from social protection for ASEAN peoples; better coordination of social development responses in national development priorities; and facilitating labour mobility in ASEAN through regional coordination mechanisms on skills development and recognition. ASCC priorities also highlight the need for dialogue with the economic sectors, especially on inter-related topics that touch on the impact of trade and economic competitiveness. The biggest challenge, however, is that to the man in the street, ASEAN’s progress is not immediately visible. Considerably more effort is required in this sphere before the average Southeast Asian citizen can identify with the sense of community that ASEAN’s vision seeks to imbue in the people. An encouraging development is the nascent sense of community developing among the younger generation in ASEAN member states. A survey carried out in 2007 among undergraduate students of 10 ‘leading’ universities in the region (one from each ASEAN member) indicated that about 75 per cent of the respondents felt that they were citizens of ASEAN, although at individual country-levels there was considerable diversity in the attitudes towards ASEAN and its processes, ranging from the ambivalent and sceptical (in Singapore and Myanmar) to strong enthusiasm (in Cambodia, Lao PDR and Vietnam). ATTITUDES TOWARDS AND AWARENESS OF ASEAN The 2007 survey findings showed some interesting insights on how ASEAN is perceived by young educated ASEAN nationals, who were some of the first to come of age in the twenty-first century. Responses from the survey suggested that students across the region had a relatively high knowledge of ASEAN. They considered themselves “ASEAN citizens” and demonstrate generally positive attitudes towards the Association. These

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attitudes ranged from the very enthusiastic to positive and ambivalent to sceptical.3 The following summaries of the survey findings highlight the similarities and differences in attitudes towards, and awareness of ASEAN in the region. • ASEAN-positive attitudes were strongest among students in Cambodia, Laos and Vietnam. Students from Thailand, Indonesia, Malaysia, Brunei, and the Philippines exhibited a largely positive attitude toward ASEAN. Students in Singapore had a somewhat ambivalent attitude toward ASEAN, while students in Myanmar were distinctly split between ASEAN-enthusiasts and ASEAN-sceptics. • Awareness or knowledge of ASEAN was strongest in Vietnam, Laos, Brunei, and Indonesia; and weakest in Singapore, the Philippines and Myanmar. Students in the Philippines and Myanmar had less knowledge of ASEAN relative to their peers in the other countries. • Students from mainland Southeast Asia (Cambodia, Laos, Myanmar, Vietnam and Thailand) and maritime Southeast Asia (Brunei, Indonesia, Malaysia, the Philippines and Singapore) were generally more familiar with other countries from within their own subSingapore, Thailand and Malaysia ranked first, second and third as most desirable destinations for travel. Singapore was ranked the top destination for work. • Television, school, newspapers and books were the most common sources of information among all students from all countries. The internet and radio ranked second to the more traditional sources of information.4 With the exception of Singapore and Thailand, travel ranked relatively low as a source of information. Movies and music also ranked low. • In ranking aspects of integration and cooperation,5 students rated economic cooperation, tourism, and development assistance as the most important areas.

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Thinking and Feeling ASEAN: The Challenges of Integration and Identity

Students also regarded poverty reduction and natural resource and environmental management as transcending national boundaries and interests. The achievement of an integrated regional community thus depends on the extent to which the citizens of ASEAN member countries ‘think and feel’ ASEAN and their preparedness to support regional initiatives to this end. CONCLUDING THOUGHTS: THE CHALLENGES OF BUILDING A REGIONAL IDENTITY The ASEAN story highlights the challenge of finding a common ground for diverse identities in a region with a chequered colonial past. The fundamental challenge lies in bringing together the separate strands of group and national identity under the rubric of longer-term political, economic and social sustainability. Challenges or constraints to identity-building at the regional level stem from the challenges each of the Southeast Asian nations face in nation-building (including finding national identity) in the post-World War II years when many emerged from a colonial past.6 Building a regional identity is premised on several assumptions. These include an awareness of ASEAN’s rationale and fundamental principles, as well as an understanding of ASEAN’s processes and institutions. Additionally, the citizens of ASEAN nations need to feel a sense of participation in the community-building process. Initiatives for community-building may also be constrained by the perception that a regional identity is being superimposed on the existing multiple layers of culture, history and ethnicity. The perception of ASEAN as an elitist organisation suggests a barrier to forming a regional identity. Quayle (2013) points out that while there is value

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in the durability of ASEAN as a diplomatic community developed on the basis of elite solidarity, the ASEAN diplomatic culture lacks the depth to reach out to the wider audience in the region.7 Severino (2006) also highlights that ASEAN cannot be a “Community in its truest and deepest sense” without the people in the region “imagining themselves as part of an emergent functional whole”. The challenge lies in the messaging or communication of information on ASEAN to the citizens in member states. The diplomatic ASEAN seeks to inform the people of ASEAN facts, figures and success stories. The premise seems to be “tell people about ASEAN and they will be enthusiastic”.8 However, there is still a gap between the pronouncements made on ASEAN regionalism and in the actual practice of participatory or deliberative processes in formulating and implementing these pronouncements. This is where what Quayle describes as the cosmopolitan ASEAN comes in, which she defines as “engaging the whole person and encouraging debate”. The ASEAN Curriculum Sourcebook, produced in 2012,9 is a positive step towards encouraging the emergence of the cosmopolitan ASEAN citizen. Its main value lies in the topicality of the learning activities. There is no glossing over the ‘sensitive’ issues that ASEAN faces today: ethnic and religious conflicts; migration; human rights; the difficulties of consensus; and the hard choice member states face between national and regional interests. Identifying with ASEAN, therefore, invokes familiarity with the reality of ASEAN’s evolutionary trajectory. Regional identity is the topmost layer of the multi-layered national identities that history, religion, culture and traditions have formed and entrenched over centuries. Building a regional identity thus requires participation from different national perspectives, and the inclusion of difficult, yet necessary, relationships and experiences across national borders.

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NOTES 1. The ten Dialogue Partners are: Australia, Canada, China, the European Union, India, Japan, Republic of Korea, New Zealand, Russia, and the United States. Pakistan has sectoral dialogue relations with ASEAN. 2. http://www.asean.org/news/asean-secretariat-news/item/asean-infrastructure-fund-targets-us13billion-towards-asean-connectivity. 3. The survey lead investigators note that although the scepticism comes mainly from students in Myanmar, it is only from one particular segment of the respondents there. Overall, Myanmar students retain a positive attitude toward ASEAN. 4. It should be noted that in 2007, the social media revolution had not yet swept across Southeast Asia, considerably levelling the media landscapes in different ASEAN members. 5. Cultural exchanges, economic cooperation, development assistance, educational exchanges, security and military cooperation, political cooperation, sports competitions, and tourism. 6. Shaw, Brian J., Diverging Identities in a Dynamic Region in “Southeast Asian Culture and Heritage in a Globalising World: Diverging Identities in a Dynamic Region”, edited by Rahil Ismail, Brian J. Shaw, Ooi Giok Ling Ashgate Pub Farnham, England; Burlington, VT 2009. 7. Quayle, Linda, Promoting “Diplomatic” or “Cosmopolitan” Culture?: Interrogating ASEAN-Focused Communication Initiatives, edited by Ian J. Storey. Contemporary Southeast Asia 35, no. 1, April 2013, Singapore: ISEAS. 8. Quayle, Linda, 2013, op. cit. 9. ASEAN, 2012. ASEAN Curriculum Sourcebook. http://www.asean.org/resources/publications/aseanpublications/item/asean-curriculumsourcebook.

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ASEAN Political Security Community

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39.

ACHIEVING AN ASEAN SECURITY COMMUNITY

JOSE T. ALMONTE

EVENTS AND TRENDS DRIVING OUR COUNTRIES TOWARD CLOSER UNION Both security issues and economic opportunities are driving the ASEAN states toward closer union. The first of these security issues is increasing instability and conflict in the region. We are seeing a distinct worsening of ethnic, cultural, and religious tensions in Eastern Indonesia, Southern Thailand, and Southern Philippines. All of these conflicts are liable to spill over across national borders and into the region. Already a regional terrorist movement objectifies the emergence of ideologicalreligious fundamentalism among our Muslim communities. Yet another problem is Southeast Asia’s rise as a strategic playing field of the longterm political competition between the United States and China, in the context of Beijing’s apparent effort to recover its traditional centrality in East Asia. An ASEAN security community will enable the countries of the region to assert their

collective interest before the big powers more forcefully than anyone of them could do on its own. Increase in Regional Trade is both a Problem and an Opportunity The sharp increase in regional trade and East Asia’s emergence as an autonomous region of vigorous growth pose both a problem and an opportunity. In 2004 alone, the International Monetary Fund (IMF) expects emerging East Asia — China, Hong Kong, Indonesia, Korea, Malaysia, Singapore, Taiwan, Thailand and the Philippines — to average 7.1% GDP growth. Within Southeast Asia, this expansion of regional trade has sharpened the disparity between the original ASEAN-6 and the four newer members. Within the individual countries, the rapid pace of industrialization and urbanization is intensifying social issues of poverty, inequality, and environmental degradation.

Reprinted in excerpted form from Jose T. Almonte, Towards One Southeast Asia: Collected Speeches (Quezon City: Institute of Strategic and Development Studies, 2004), by kind permission of the Institute of Strategic and Development Studies and Jose T. Almonte.

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The increase in regional interdependence is also stimulating a movement toward an East Asian Economic Grouping of the ASEAN-10 plus China, Japan and Korea. This Economic Grouping is likely to be in place by 2010. Its completion will signal the northward shift of the region’s center of economic gravity, to the bigger and more technically advanced economies of Japan, Korea and China. This economic trend, too, compels ASEAN to unify — if it is to strengthen its bargaining power relative to its Northeast Asian neighbors. These instabilities, conflicts, and economic trends are all stimulating new thinking, new insights and new proposals for ASEAN to consider its progress toward a security community. But some among us would perhaps say that ASEAN is not responding fast enough and resolutely enough to these proposals. An ASEAN Peacekeeping Center by 2010 To say that inter-state conflict in Southeast Asia has become virtually unthinkable would still overstate reality. But those of us old enough to remember how things were 30 years ago, can testify to how beneficial ASEAN’s sheer presence has already been for regional security. Thus people of my generation are inclined to be more patient than our younger colleagues are over ASEAN’s ‘failure’ to move decisively toward a security community. I don’t think anyone would dispute Indonesian Foreign Minister Hassan Wirajuda’s assertion that there is a “crying need” for ASEAN to strengthen its mechanisms for conflict resolution. With the hard lesson of East Timor in mind, Indonesia has proposed setting up an ASEAN Peacekeeping Center by 2010 and a regional peacekeeping force by 2012. So far Jakarta’s proposal — made in February [2004] — has apparently received only a ‘cool reception.’ But I can appreciate the usefulness of such a concept to ASEAN’s future. And I agree with Paul Evans that, while the idea

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faces perplexing operational hindrances, it is indeed “an important aspiration for ASEAN.” In my view, the Indonesian Government has set a security landmark for ASEAN to reach on its journey toward community — a goal just as important as the economic landmark rep­resented by AFTA, ASEAN’s Free-Trade Area, which ASEAN has already achieved. Without minimizing the difficulties of multilateral security cooperation, I do not think a regional Peacekeeping Center is beyond ASEAN’s capabilities. Political Will Comes from Political Strength Whenever ASEAN fails to decide quickly enough on a regional problem, people commonly dismiss the association as lacking “political will.” But the reason isn’t always that simple. After all, “political will” arises from political strength and ASEAN still must generate the political strength which comes from solidarity and mutual trust. Those who say ASEAN lacks political will forget that, at the time the five original members of ASEAN agreed to come together, Indonesia was in a virtual state of war with both Singapore and Malaysia as a result of konfrontasi; while Manila and Kuala Lumpur were estranged over Sabah. In fact, Jakarta and Kuala Lumpur did not even have formal diplomatic relations when they signed the ASEAN agreement in August 1967. For its founders, ASEAN was an arranged marriage in the best Asian tradition. Even on the most delicate issue — that of state sovereignty — things are changing. ASEAN states are no longer so sensitive about neighbors “intruding” into their “domestic affairs.” Consider how Kuala Lumpur is hosting Manila’s peace negotiations with its Moro Islamic Liberation Front (MILF) separatists; and how quickly Bangkok has received a high-level Malaysian delegation anxious to talk about the recent spate of violence in mostly Muslim Southern Thailand.

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Achieving an ASEAN Security Community

PRACTICAL METHODS TO ACHIEVE AN ASEAN SECURITY COMMUNITY In my view, our ‘Draft Plan of Action for the ASEAN Security Community’ by itself covers all the possibilities — in setting norms, preventing conflicts, and in resolving them, including post-conflict peace building — that the association might conceivably face. Where I believe a great deal more work needs to be done is in the political realm. ASEAN needs to intensify political confidencebuilding mechanisms required for closer regional cooperation. ASEAN needs to also set itself a political landmark goal. At regional level, even coordination on counter-terrorism still exists largely on paper. Formally it is a matter only for the five states that subscribe to the Kuala Lumpur Agreement; and they have set up little more than a committee to facilitate multilateral responses to terrorism. And while the Malaysian Government has set up a Southeast Asian Regional Center for Counter-Terrorism, its activities have so far been limited to capacity-building for the Malaysian security forces. Already the lack of coordination has been responsible for minor tragedies being enacted, as border controls are tightened up in a region where national frontiers have always been porous For instance, the deportation of undocumented migrants from Borneo and peninsular Malaysia has uprooted thousands of nominal Filipinos and Indonesians who have, for centuries, customarily moved freely to settle frontier lands along this great inland sea which is Southeast Asia’s maritime heartland. Practical Achievements that Create a Sense of Common Purpose The European Union’s example of unification that proceeds step by step — “through practical achievements that create a sense of common purpose” — is well-worth ASEAN’s close study.

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Like one Europe, an ASEAN community “will not be built in a day, nor as part of an overall design. It will be built through the practical achievements that first create a sense of common purpose.” The plural communities of Southeast Asia may lack an over-arching civilization similar to that which facilitated the unification of Western Europe. But the past three decades prove the very act of sitting down together — inspired perhaps by social values derived from a shared culture that promotes consultation and consensus — can begin to build solidarity. So can the common fear of intrusive outside powers. Every Southeast Asian culture has a variation of the Malay saying, “When the elephants fight, the mouse deer gets trampled.” That the western powers intervened in East Timor because ASEAN could not; and that the financial crisis of 1997–98 hit so hard because ASEAN failed to deal with it — these lessons should stir all our countries to work harder together — to deal with ASEAN’s weaknesses and to shore up its strengths. Like the European statesmen who conceived the European Union, our statesmen must strike pragmatic bargains that will lead — at a pace congenial to all our countries — to a Southeast Asian community. There are many such “practical achievements” we can undertake together that will build up our own “sense of common purpose.” Certainly we must strengthen our cooperation on counter-terrorism and enhance maritime safety, particularly on our strategic sea-lanes of communication. Our countries should also begin to speak with one voice at the World Trade Organization — not for charity but for fairness from the rich countries. Erecting the Three Pillars of ASEAN Community The best way to appreciate the Indonesian proposal for a peace-keeping force is to look

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at it in the context of the Bali Concord II. The Bali Concord binds the Southeast Asian states to building an ASEAN Community. This Community is to be founded on three pillars-political and security cooperation, economic cooperation, and socio-cultural cooperation. There is little that is controversial in socio-cultural cooperation. It should be relatively easy to organize an ASEAN Socio­ Cultural Center. Economic cooperation has already been objectified in AFTA — which should now work toward becoming a fullfledged common market. The ultimate expression of security cooperation would be a regional peace-keeping force such as Jakarta envisions. And in political cooperation we might start off our land-mark goal by transforming the ASEAN Inter-Parliamentary Organization (AIPO) into a full-fledged ASEAN Parliament — on the model of European, Latin

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American, and African Parliaments already established. Already AIPO has behind it a quartercentury of “preparatory work” for a regional parliament. It has established working procedures that are not lacking in substance and foresight. Best of all, it has defined interstate relations at the level of parliamentary interaction-and made the region’s political elite accustomed to dealing with each other through AIPO’s yearly dialogues and exchanges. A common market, an ASEAN Parliament, a regional peacekeeping force, an ASEAN Socio-Cultural Center — these could all become mutually reinforcing components of ASEAN’s efforts to ensure durable peace, political stability and shared prosperity in our portion of the globe. I am not sure if there is a best way to achieve an ASEAN Security Community. But I have a small suggestion: Never Give Up.

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40.

TURNING POINTS BEYOND THE COMFORT ZONE?

MELY CABALLERO-ANTHONY

CONTROVERSY OVER MYANMAR AND CAMBODIA’S MEMBERSHIP ASEAN was mired in controversy over the admission of new members. Just as ASEAN was preparing for the ASEAN Ministerial Summit in July 1997 and its thirtieth anniversary celebrations, Cambodia was caught in a power struggle. Cambodia’s second prime minister, Hun Sen, staged a coup to oust Prince Ranariddh as first prime minister. As a consequence, ASEAN decided to delay Cambodia’s admission into ASEAN. ASEAN’s decision was to drive home the point that no leadership or form of government by violent means was ever to be encouraged. The deferment of Cambodia’s membership juxtaposed against the admission of Myanmar earned ASEAN a lot of flak for its inconsistency and double standard. ASEAN’s position was that while Myanmar’s political conditions were regarded as internal matters of the state, Cambodia’s case was viewed differently. The latter was regarded as one that had serious implications for ASEAN since Cambodia broke the regional norm of the non-use of

force. As a consequence, ASEAN insisted that Cambodia met certain conditions before its admission, which included among others, the holding of free and fair elections and the establishment of the Cambodian Senate. ASEAN also formed the ASEAN Troika to deal with efforts at restoring political stability in Cambodia.1 However, ASEAN’s drawing of a distinction between the cases of Myanmar and Cambodia based on the norms of noninterference and non-use of force was not lost on its critics. Controversy notwithstanding, the Cambodian episode eventually led to the formal establishment of the ASEAN Troika in 1999. As defined by its experience in Cambodia, the ASEAN Troika was to be an ad hoc body comprising the ASEAN Foreign Ministers of the present, past, and future chairs of the ASEAN Standing Committee (ASC). The positions would rotate in accordance with the ASC’s chairmanship. The purpose of the Troika was to enable ASEAN to address urgent and important political and security issues in a timely manner. However, the mandate of the Troika

Reprinted in excerpted form from Mely Caballero-Anthony, Regional Security in Southeast Asia: Beyond the ASEAN Way (Singapore: ISEAS, 2005), by kind permission of the Institute of Southeast Asian Studies.

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as stipulated in the Troika paper had to be compatible with the principles enshrined in the TAC, particularly the core principles of consensus and non-interference in domestic affairs of states.2 THE REGIONAL HAZE PROBLEM The regional challenges brought on by the financial crisis were exacerbated by the onset of the haze problem that enveloped most of Southeast Asia between 1997 and 1998. The environmental damage brought on by the haze problem became a test case of ASEAN’s ability to deal co-operatively with problems in one country that had severely affected its neighbours. Although the environmental disaster happened in Indonesia, it inflicted considerable damage to neighbouring countries like Singapore, Malaysia, and Brunei. At the height of the problem, it was estimated that Malaysia and Singapore suffered about $1 billion losses in economic activity, such as tourism, air travel, and immediate health cost.3 Against the flak that the Indonesian Government received from the international community, former Indonesian President Soeharto appeared on television to apologize for the country’s inability to avert the regional disaster. As part of the regional efforts to mitigate the impact of the environmental problem,4 ASEAN instituted the Regional Haze Action Plan (RHAP) which the ASEAN Ministers of the Environment endorsed in 1997. The RHAP called for each ASEAN member to develop a National Haze Action Plan that would require each of them to report its plans to combat fires and haze in their respective environment. ASEAN also put into place a joint regional technical assistance project with the Asian Development Bank to assist member countries requiring technical support in fire-fighting procedures. In spite of the regional agreement and co-operation that have been instituted, the recurrences of fires and the attendant haze problem

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continued to affect several states in the region. Some of the factors cited [as causing] the ineffectiveness of the RHAP has been the lack of sufficient institutional support to prioritize environmental law and policymaking in ASEAN, plus the omission of the Indonesian national system.5 The serious challenges that confronted ASEAN brought on by the crippling effect of the financial crisis, the crisis in Indonesia, the problems in Cambodia, plus the haze problem, among others, brought to the core the inadequacy of the organization to respond to new security challenges. But while the crisis in its many forms was a painful reality check for the region, most of the criticisms about the growing irrelevance of ASEAN pointed more to the obstructive nature of its norms rather than the problem of institutional capacity.6 To many critics, the lack of institutions in ASEAN was a function of its strict adherence to the principle of non-intervention. As events unfolded, the call to rethink this mechanism was no longer confined to outsiders but became an issue within ASEAN itself. INTRAMURAL CHALLENGES TO ASEAN’S NORM OF NON-INTERFERENCE Whatever intramural differences that may have occurred during the period of crises appeared to have heightened when one of ASEAN’s members openly challenged the principle of non-interference. Before the annual ASEAN Ministerial Meeting was held in Manila in July 1998, reports about Thailand’s proposal of the “constructive intervention” policy emerged. Regional newspapers carried stories about the Thai Foreign Minister’s spokesman, Kobsak Chutikul, explaining Thailand’s initiative. Chutikul was reported to have quoted Thai Foreign Minister Dr Surin Pitsuwan who remarked that “it was time to modify the principle of non-intervention in ASEAN, or at least to reach a new understanding on the

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Turning Points Beyond the Comfort Zone?

principle which is too strict.”7 The timing of the Thai pronouncement which came a year after former Malaysian Deputy Prime Minister Anwar Ibrahim mooted the idea of “constructive involvement” in 1997, indicated the calls for change within the organization. Anwar’s proposal was in response to the events in Cambodia that year.8 We recall that during that period, Cambodia’s formal entry into ASEAN was delayed due to the domestic conflict brought about by the power struggle between Cambodia’s first and second prime ministers. While the two proposals, which came sequentially, spoke on the issue of noninterference, a comparison of these two proposals actually reveals important differences in the nature of intervention suggested. Anwar Ibrahim’s “constructive intervention” proposal called for a proactive policy of involvement and assistance to Southeast Asia’s weaker nations in order to prevent their internal collapse. Anwar outlined the specifics of this policy in an essay carried by Newsweek magazine in July 1997. These were: • direct assistance to firm up electoral processes; • an increased commitment to legal and administrative reforms; • the development of human capital; and • the general strengthening of civil society and the rule of law. Note, however, that other than the specific proposal of strengthening civil society, the rest of the proposals seemed no different from the existing ASEAN practice of helping and supporting its members. ASEAN’s role in Cambodia was a good example.9 On the other hand, Surin’s proposal of “constructive intervention” which was renamed, “flexible engagement” a month later seemed to suggest a marked difference in the way ASEAN should practice the non-interference principle. His proposal,

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contained in the Thai Non-Paper on the Flexible Engagement Approach stated that, Many domestic affairs have obvious external or transnational dimensions, adversely affecting neighbours, the region and the region’s relations with others. In such cases, the affected countries should be able to express their opinions and concerns in an open, frank and constructive manner, which is not, and should not be considered interference in fellow-members’ domestic affairs … ASEAN countries should have sufficient self-confidence in one another, both to discuss all issues once considered ‘taboos’ with one another with candour and sincerity and to speak out on such issues in good faith when necessary and appropriate.10

Essentially, the paper reflected two fundamental differences in ASEAN’s current practice of inter-state relations. Firstly, the manner by which communication and diplomacy was to be conducted. While the ASEAN way advocated quiet diplomacy, characterized by private discussions and use of oblique language, Surin’s proposal called for open and frank discussion. Secondly, the proposal seemed to set out a broad set of domestic issues where “interference” was justified especially when they impact on bilateral, regional, and extra-regional relations. However, Surin’s proposal did not spell out the parameters between domestic affairs and the issues that justified “open” discussion by members. While there was obvious concern for the environmental problems that have affected the major capitals in the region brought about by the forest fires of Indonesia’s Kalimantan and Sumatra provinces, and for the increasing fears of the effects of cross-border migration by receiving countries like Malaysia, Singapore and Thailand which were exacerbated by the region’s financial crisis, the other areas and issues with cross-border effects have not really been defined by Surin (not to mention

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the fact that within ASEAN there was a lack of consensus on this matter). Among the ASEAN members, it was only the Philippines that openly supported the Thai proposal. Whatever official debate that transpired on the proposal for flexible engagement effectively stopped at the ASEAN Ministerial Meeting in Manila in July 1998 when ASEAN ministers declared that ASEAN, in the light of new security challenges, would be practising “enhanced interaction”. This new lexicon apparently meant that ASEAN could have more open exchanges on issues which have cross-border effects like the haze problem while respecting the principle of non-interference. The former Indonesian Foreign Minister Ali Alatas summed up ASEAN’s position when he said: If the proposition is to replace the principle of non-intervention or in any way to tinker with it, then Indonesia won’t accept. However, if the proposition is that ASEAN … taking into account all the changes in the world, should be more active in dealing

Mely Caballero-Anthony with one another on problems that may originate in one country but may have an impact on the other ASEAN countries, then by all means let us talk about it.11

Given the ASEAN history on dealing with issues, it was therefore not surprising that the initial proposal of “constructive intervention” was shot down and that the ASEAN members settled for an accommodated position of “enhanced interaction”. On reflection, one could surmise that whatever controversy that may have arose over Surin’s proposal was the fact that crucial issues of regional concern were not going to be discussed. The problem was that the proposal suggested a change in the way problems were to be discussed. Essentially, the Surin proposal called for open and frank discussion — a departure from the ASEAN way of quiet diplomacy. Moreover, while the proposal had also argued for ASEAN to be more actively involved, it actually did not sanction members to freely interfere in each other’s internal affairs. Herein lies the ambiguity of this norm.

NOTES   1. For a detailed account of ASEAN’s initiatives in getting Cambodia to agree to its terms to restore political stability in the country, see Juanito Jarasa, “The ASEAN Troika on Cambodia: A Philippine Perspective”, in The Next Stage: Preventive Diplomacy and Security Cooperation in the Asia-Pacific, edited by Desmond Ball and Amitav Acharya (Canberra: Strategic and Defence Studies Centre, Australian National University, 1999), 00. 209–14.   2. See “The ASEAN Troika”, http://www.aseansec.org/11841.htm.   3. Simon Tay, “The Environment and Security in Southeast Asia”, in Beyond the Crisis: Challenges and Opportunities, edited by Mely C. Anthony and Mohamed Jawhar Hassan (Malaysia: Institute of Strategic and International Studies, 2001), p. 154.   4. During the haze crisis, fire-fighters from Malaysia and Singapore came together to help battle the forest fires in Indonesia’s Sumatra and Kalimantan provinces.  5. Ibid.   6. See, for example, Jeannie Henderson, Reassessing ASEAN, Adelphi Paper 323 (London: International Institute for Strategic Studies, 1997).   7. “Thailand to Pursue ‘Constructive Intervention Policy’ ”, New Straits Times, 8 June 1998.   8. The Malaysia Government had, however, said that this initiative was only from Anwar Ibrahim and did not reflect the position of the government. Although not explicitly denied by the government in the local newspaper, officials from the Foreign Ministry quite willingly clarified the government’s position. This was also revealed to the author by a Malaysian diplomat in one of track two meetings held where the author was a participant.

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 9. The author had argued this point in her earlier paper. See Mely C. Anthony, “ASEAN: How to Engage or Cooperate”. Paper delivered at ASEAN-ISIS Conference on ASEAN 2020: Vision, Crises and Change, Singapore, 21–22 July 1999. 10. See Thailand’s “Non-Paper on the Flexible Engagement Approach”, Press Release 743/2541, Thai Ministry of Foreign Affairs, 27 July 1998, at www.tahiembdc.org. 11. “ASEAN Ministers Converge in Manila for Yearly Meeting”, Asian Wall Street Journal, 27 July 1998.

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ASEAN Economic Community

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41.

IMPLEMENTING THE ASEAN ECONOMIC COMMUNITY BLUEPRINT

HADI SOESASTRO

I

t has taken ASEAN a whole decade to translate its vision of an ASEAN economic community into a blueprint. The beginning was the ASEAN Vision 2020 that was adopted by the ASEAN leaders in December 1997 in Kuala Lumpur. The vision envisaged “a stable, prosperous and highly competitive ASEAN economic region in which there is a free flow of goods, services, investment and freer flow of capital, equitable economic development and reduced poverty and socio-economic disparities” by the year 2020. The Hanoi Plan of Action was issued as a first step to implement the vision. A further boost came from the Summit in Bali in October 2003, when the leaders signed the Declaration of ASEAN (Bali) Concord II. They declared that the ASEAN Economic Community (AEC) shall be the goal of regional economic integration as outlined in the ASEAN Vision 2020. In December 2005, the ASEAN Leaders discussed the acceleration of the AEC to 2015.

Subsequently, the High Level Task Force (HLTF) on ASEAN Economic Integration took up the matter and recommended to the ASEAN Economic Ministers (AEM) that the establishment of the AEC be advanced from 2020 to 2015. They also requested the ASEAN Secretariat to develop “a single and coherent blueprint for advancing the AEC by identifying the characteristics and elements of the AEC by 2015 consistent with the Bali Concord II with clear targets and timelines for implementation of various measures as well as pre-agreed flexibilities to accommodate the interests of the CLMV and other concerned Member Countries”. The AEM endorsed the recommendation and agreed to propose the acceleration of the AEC to the leaders at their Summit in January 2007 in Cebu, the Philippines. At the ASEAN Summit in November 2007 in Singapore, the leaders adopted the AEC Blueprint. They stated that each ASEAN member country shall abide by

Reprinted in excerpted form from Hadi Soesastro, “Implementing the Asean Economic Community Blueprint”, in ASEAN Community: Unblocking the Roadblocks, edited by the ASEAN Studies Centre (Singapore: Institute of Southeast Asian Studies, 2008), pp. 30–38, by kind permission of the Institute of Southeast Asian Studies.

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and implement the AEC by 2015. They also tasked the concerned Ministers, assisted by the ASEAN Secretariat, to implement the AEC Blueprint and to report regularly on the progress of its implementation through the Council of the AEC. THE BLUEPRINT The AEC Blueprint is the first of its kind for ASEAN. The Blueprint has been crafted to realize the AEC, defined by its four main characteristics, namely, a single market and production base, a highly competitive economic region, a region of equitable economic development, and a region fully integrated into the global economy. This clearly shows the comprehensive nature of the Blueprint. To ensure its successful realization, there needs to be a common understanding of the essence of each of the above characteristics. The idea of a single market and production base is essentially about providing consumers in the region with an expanded market from which they can fulfil their consumption needs and producers in the region with an expanded space in which they can undertake their production activities without having to worry about national (administrative) boundaries within the region. Activities in this expanded market can exploit economies of scale and the differing comparative advantages of the constituent members in the region. Creating this expanded market requires that all barriers to trade in goods and services as well as investment be fully removed. ASEAN’s decision to form AFTA and subsequently to create a single market and production base, by removing barriers to cross-border economic transactions, are fundamental measures to create a competitive economic region. The establishment of a free trade area was not meant to create an internal market in the region but to turn the region into an attractive production

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and export platform for global and regional (ASEAN) investors. In addition, several measures will need to be undertaken at the regional level to continuously increase the region’s attractiveness to global investments. These include the development of a regional framework on competition policy, regional cooperation on intellectual property rights (IPR), and regional cooperation in infrastructure development. As ASEAN moves towards deeper economic integration, greater emphasis needs to be placed on developing an appropriate competition policy regime. The globalization of business also highlights the importance of competition issues. A competition framework assists in the healthy development of the private sector and in the sound handling of anti-competitive behaviour. Healthy competition in the ASEAN region ensures the attainment of a competitive economic region. Infrastructure development in the ASEAN region is a key catalyst for international competitiveness. It also plays a critical role in the economic development and growth of the members. Regional cooperation in infrastructure development can produce a more efficient system of transportation and telecommunications and energy networks. It can promote regional integration and contribute to narrowing the development gap within the region. Economic integration must also be accompanied by specific efforts to reduce development gaps as manifested by large disparities in income, poverty incidence and other dimensions of human development both among member countries and within member countries. Trade and investment liberalization does not automatically reduce development gaps. In fact, in the short term it might aggravate the problem. A development agenda needs to be introduced to strengthen the less developed parts in the region to facilitate further trade and investment liberalization and domestic restructuring.

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Any regional integration requires the provision of regional public goods. These public goods can be in the form of technical assistance, grants-in-aid, concessionary loans (ODA), preferential market access without reciprocity, and other privileges. The provision of these regional public goods is often referred to as an “enabling clause” with the objective of strengthening human and institutional capacity in the less developed members. The key in the provision of regional public goods, however, is to ensure that they benefit all ASEAN members and are seen to help “level up” the region as a whole. There needs to be a special development fund to finance the development of regional public goods. And finally, ASEAN has been at the forefront in promoting and practising the concept of “open regionalism”. It has made great progress in regional economic cooperation and integration while strengthening its links to the rest of the world and deepening its integration with the global economy. ASEAN has taken various initiatives at promoting and taking an active part in wider regional cooperation arrangements and community-building processes. These include the ASEAN Plus Three, the East Asia Summit, the Asia Pacific Economic Cooperation, ASEM (Asia Europe Meeting) and FEALAC (Forum of East Asia and Latin American Cooperation). These efforts are in line with ASEAN’s strategy of concentric circles of cooperation, which helps ensure optimal outcomes for ASEAN’s integration into the global economy. This is an integral part of the efforts to realize the AEC. ASEAN is engaged in a number of ASEAN+1 initiatives (with Australia-New Zealand CER, China, India, Japan, and the Republic of Korea, and prospectively also with the European Union). ASEAN members need to coordinate all these efforts. Several negotiations have been completed. Beyond the negotiations, they

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should develop common strategies and approaches to implementing the agreements in the more difficult and complex areas of services, investment, intellectual property (IP) protection, competition policy, and government procurement. These could reinforce the efforts to realize the AEC. The Blueprint should be seen as a grand plan, consisting of roadmaps to delivering specific outcomes, namely the objectives of the AEC, by organizing sets of deliveries (socalled “core elements”) to be carried out by purposefully designed delivery vehicles (or “actions/measures”), all of which are to be delivered within a certain timeframe (as indicated in the “strategic schedule”). The Blueprint has identified 17 core elements of the AEC and included 176 priority actions to be undertaken within a strategic schedule of four implementation periods (2008–2009, 2010–2011, 2012–2013, and 2014–2015). IMPLEMENTING THE BLUEPRINT The AEC Blueprint is a clear departure from ASEAN’s tradition, as it has not been its practice to devise a blueprint to achieve its objectives. In the past, the process of regional cooperation and “regional community building” has been kept open-ended, driven by the dynamics of the process itself and often dictated by the slowest mover. With the adoption of the Blueprint, ASEAN is now ready to move into an integration process that is driven by clearly defined end goals and timelines. However, ASEAN is largely still a voluntary organization with decisions being mostly of a non-binding nature. Although the AEC Blueprint has become a binding document for member countries, there is a serious lack of capacity in ASEAN to enforce its decisions either at the regional or at the national level. An ASEAN Charter should be able to change this. The Blueprint is not a detailed agreement that resulted from lengthy negotiations upfront, as was the case with the North

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American Free Trade Agreement (NAFTA), which was a narrow but rather deep integration project. In a sense, the ASEAN process towards realizing the AEC is more like that of the European Union (EU) rather than that of NAFTA. The stark and important difference, however, is that the process of EU integration is driven by strong regional institutions, whereas in ASEAN such institutions still need to be developed. Some details of the plan have been left out, perhaps in recognition of the fact that an agreement on several aspects of “community building” cannot be reached until there is greater confidence and comfort in the process and the existence of a larger and stronger constituency. The existing gaps among member countries appear to be another reason for this. In some areas, the Blueprint has gone rather far, but this was made possible by having a provision for “preagreed flexibility”. Some goals in the Blueprint remain vaguely defined, and “milestones” are still missing. Therefore, in the process of its implementation, signposts will need to be erected along the road to help indicate the progress made towards achieving the goals. Here is where the development of “scorecards” can play a useful, perhaps even critical, role in the successful implementation of the Blueprint. Having the Blueprint also means that the process of regional economic integration will receive greater public scrutiny. ASEAN has made progress in publicizing its many initiatives, but it has a rather poor record in informing the public about the implementation and outcomes of those initiatives. Many observers have complained about ASEAN’s lack of transparency in that sense. This lack of transparency could well be due to the fact that the organization wants to spare member countries the embarrassment of failing to implement their commitments. Perhaps there is greater realization in

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ASEAN now that this lack of transparency could well be the cause of the poor record of its performance. The Blueprint will also help coordinate the many efforts to achieve the objectives of the AEC and to drive forward the process of integration. It provides for a framework to organize a set of peer review mechanisms, based on systematic monitoring and tracking at the regional and national levels that can help erect meaningful “signposts” to indicate progress (or the lack thereof) towards establishing an economic community. Systematic efforts to monitor and track the implementation will contribute to the successful implementation of the Blueprint. In turn, this can help identify areas in which analysis, policy development and technical inputs will need to be organized in the process. ASEAN member countries must now focus their attention on implementing the Blueprint by organizing themselves accordingly. Each member country will have to begin this process by preparing a more detailed “national action plan”. How this will be organized will likely differ from member country to member country, but a clear and strong focal point must be established. At the regional level, the Blueprint outlines the ASEAN bodies that will be involved in the coordination of the implementation of the Blueprint. These will include not only government agencies, but also sectoral bodies, business associations and civil society. The ASEAN Secretariat is entrusted with a major task of reviewing and monitoring the implementation of the Blueprint. It is already devoting about 60 per cent or more of its resources to this task. It definitely needs to be strengthened. However, without the cooperation and serious national efforts on the part of member countries, ASEAN will not be able to pass the challenge of implementing the Blueprint with flying colours.

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42.

TOWARDS AN ASEAN ECONOMIC COMMUNITY BY 2015

DENIS HEW

T

he idea of an ASEAN Economic Community (AEC) was first proposed by then Singaporean Prime Minister Goh Chok Tong at the 2002 ASEAN Summit in Phnom Penh, Cambodia. He envisaged that the AEC would be similar to the European Economic Community of the 1950s. The following year, at the 2003 ASEAN Summit in Bali, Indonesia, ASEAN leaders agreed to embark on this ambitious project, integrate their economies by 2020, and establish the AEC. In line with the ASEAN Vision 2020, the AEC will be a single market and production base with free flow of goods, services, investments, capital and skilled labour. At the ASEAN Summit in Cebu, Philippines, in January 2007, the deadline to realize the AEC was brought forward by five years to 2015. What is the main motivation for ASEAN to embark on this ambitious economic integration project? The loss of economic competitiveness to emerging markets such as China and India has been the major driving force in ASEAN’s efforts to accelerate

economic integration. A study on ASEAN undertaken by McKinsey and Co. a few years ago found that ASEAN had lost its competitive edge to China.1 This became even more evident in recent years, as China overtook ASEAN as the developing world’s top location for foreign direct investment (FDI). Meanwhile, international production networks and global supply chains are being reconfigured to take account of China’s rapid economic expansion and industrialization. India, another potential major competitor to ASEAN, has become a major provider of services, such as information and communications technology (ICT), and is strengthening its manufacturing capabilities. Such developments will have serious repercussions on ASEAN’s economic wellbeing over the longer term if ASEAN remains uncompetitive. Driven by these concerns, a number of initiatives to propel the region towards closer economic integration eventually led to the adoption of the AEC Blueprint at the November 2007 ASEAN Summit in Singapore. The AEC Blueprint

Reprinted in excerpted form from Denis Hew, “Towards an Asean Economic Community By 2015”, in ASEAN Community: Unblocking the Roadblocks, edited by the ASEAN Studies Centre (Singapore: Institute of Southeast Asian Studies, 2008), pp. 15–29, by kind permission of the Institute of Southeast Asian Studies.

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Main highlights from the AEC Blueprint I. Single Market and Production Base

Five core elements: Liberalization

Facilitation

Free flow of goods

Tariff and NTB elimination Synchronized external tariff alignment

Custom integration Standards and technical barriers to trade

Free flow of services

Full market access and national treatment Remove substantially all restrictions on trade in services

MRAs on professional services; professional exchange

Free flow of investment

All industries and services incidental to these industries to ASEAN investors

Transparency; streamlined procedures, avoidance of double taxation; joint promotion

Free flow of capital

Relax capital control measures on Harmonize capital market intra-ASEAN portfolio investments standards; facilitate market driven efforts to establish exchange and debt market linkages

Free flow of skilled labour

Remove discrimination on employment

Harmonization of standards in education and training; MRA on vocational training

Priority Integration Sectors (PIS) • Conduct a biannual review to monitor the status, progress, and effectiveness of the PIS road maps to ensure timely implementation • Identify sector-specific projects or initiatives through regular dialogues or consultation with stakeholders, particularly the private sector.

Food, Agriculture and Forestry • Enhance trade and long-term competitiveness of ASEAN food, agriculture, and forestry products • Promote cooperation with international, regional organizations and private sector

II.

Competitive Economic Region • Develop a competition policy • Strengthen consumer protection • Regional cooperation in Intellectual Property Rights (IPRs) • Regional cooperation in infrastructure development • Complete network of bilateral agreements on avoidance of double taxation • Promote electronic commerce (e-commerce)

III. Equitable Economic Development • Accelerate the development of small and medium-size enterprises (SMEs) • Enhance the Initiative for ASEAN Integration (IAI) to narrow the development gap IV. Integration into the Global Economy • Achieve a coherent approach towards external economic relations, including its negotiations for FTAs and comprehensive economic partnerships (CEP). • Enhance participation in global supply networks.

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essentially lays out a roadmap to accelerate economic integration and realize the AEC by 2015. This includes action plans, targets and timelines to facilitate economic integration and advance the AEC process. In the AEC Blueprint, ASEAN aims to be: (i) a single market and production base; (ii) a highly competitive economic region; (iii) a region of equitable economic development; and (iv) a region that is fully integrated into the global economy.

2010 for the ASEAN-6 and 2015 for the CLMV countries. For products in the priority sectors, tariffs were to be eliminated for the ASEAN-6 by 2007 and 2012 for the CLMV. Although most ASEAN countries have complied with tariff reductions under AFTA, eliminating non-tariff barriers (NTBs) is more difficult. NTBs not only include border measures but also standards, regulations and domestic laws of each member country that prevent the free movement of goods and services across the region. Hence, effectively tackling NTBs and other non-tariff barriers would be crucial if a fully functioning AFTA is to be feasible by 2015.

BUILDING BLOCKS TO SUPPORT THE AEC Achieving deeper economic integration may seem very challenging, but ASEAN has already started the process. ASEAN has already put in place important economic building blocks to support and advance the AEC. These building blocks include the ASEAN Free Trade Area (AFTA), the ASEAN Investment Area (AIA), and the ASEAN Framework Agreement on Services (AFAS). ASEAN FREE TRADE AREA (AFTA) AFTA was launched with the signing of the CEPT Scheme for the ASEAN Free Trade Area on 28 January 1992. This agreement required member countries to reduce their tariff rates on a wide range of products traded within the region to 0 to 5 per cent. ASEAN-5 plus Brunei (ASEAN-6) had already complied with the CEPT scheme by 2003. Vietnam achieved its tariff elimination target in 2006 and Laos and Myanmar in 2008. Cambodia is committed to do so in 2010. To date, tariffs on 99 per cent of products in the CEPT Inclusion List of the ASEAN-6 countries have been reduced to 0 to 5 per cent; tariffs on over 70 per cent have been completely eliminated. In November 1999, the ASEAN Economic Ministers went further in their efforts to realize the vision of a regional free trade area by agreeing to eliminate all tariffs by

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ASEAN INVESTMENT AREA (AIA) The AIA, signed on 7 October 1998, aims to make ASEAN a highly competitive investment area that will attract FDI flows from ASEAN and non-ASEAN investors. This agreement binds member countries to reduce or eliminate investment barriers and grant national treatment to ASEAN investors by 2010 and to all investors by 2020. The AIA aims to encourage investors, particularly from ASEAN countries, to adopt a regional investment strategy and to promote regional production networks. The AIA is thus expected to provide greater scope for division of labour and industrial activities across the region, creating opportunities for greater industrial efficiency and cost competitiveness. Investors can benefit from the AIA through greater investment access to industries and economic sectors, as well as from more liberal and competitive investment regimes that should reduce the transaction costs of doing business in the region. The AIA currently covers the manufacturing, agriculture, mining, forestry and fishery sectors and services incidental to these sectors. ASEAN is currently considering whether to extend national treatment to its present or proposed FTA partners, namely, China,

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Japan, Korea, India, and Australia and New Zealand by 2010. By turning the region into an integrated investment area, the AIA would serve as a natural complement to greater trade integration under AFTA. The AEC Blueprint also highlights the need to create a more comprehensive investment agreement that incorporates not just investment liberalization but also investment protection. In this context, the AIA and the 1987 ASEAN Agreement for the Promotion and Protection of Investment will be reviewed. Clearly, a comprehensive investment agreement will provide the necessary building block for achieving the objectives of the AEC. ASEAN FRAMEWORK AGREEMENT ON SERVICES (AFAS) AFAS, which was signed on 15 December 1995, aims to enhance cooperation in the services sector among ASEAN countries by eliminating intra-regional trade restrictions and facilitate the free flow of services by 2015. Under AFAS, the scope of the liberalization of trade in services goes beyond that already undertaken under the WTO’s General Agreement on Trade in Services (GATS). In other words, the AFAS is designed to be a GATS-Plus agreement. AFAS uses a positive list approach to services liberalization within a GATS framework. Seven sectors are covered by AFAS — air transport, business services, construction, financial services, maritime transport, telecommunications and tourism. ASEAN has concluded six packages of commitments under AFAS. These packages provide details of commitments from each ASEAN country to the other member countries. However, progress made in services trade liberalization under AFAS has been slow. Member countries have been very cautious in committing themselves to AFAS and have made little progress in liberalizing services trade at the regional level. The ASEAN-X principle is currently being

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applied as a means to speed up the liberalization process. Regional cooperation in the services sector took another important step with the conclusion of mutual recognition agreements (MRAs). MRAs are intended to facilitate the freer movement of providers of professional services in the region. ASEAN will use the value of intra-regional trade, the existence of technical barriers, and indications of strong interest on the part of member countries as criteria for identifying the sectors that would be suitable for MRAs. ASEAN concluded MRAs on engineering services in December 2005, on nursing services in December 2006, and on architectural services and on surveying qualifications in November 2007. ASEAN is also considering MRAs in accountancy, medical practice and tourism. STRONGER INSTITUTIONAL STRUCTURE It is also important to note that deeper economic integration in ASEAN cannot be successfully achieved without the establishment of stronger institutional structures. ASEAN still maintains very loose institutional structures and does not operate on the principle of using a formal, detailed, and binding institutional structure to prepare, enact, coordinate, and execute policies for economic integration. The “ASEAN way” of making decisions continues to be very much entrenched: i.e., musyawarah (discussion and consultation) and mufakat (unanimous decision and consensus). ASEAN’s weak institutional structure may be one of the reasons for its relatively slow progress in economic integration. Nonetheless, ASEAN has, in recent years, been moving towards a more structured, rules-based system to regulate and enhance economic relations and integration among its members. Progressive steps have also been achieved in terms of the content and

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directives contained in the newer ASEAN trade and investment agreements since the 1990s, with binding rules and procedures now more clearly set out in such documents. Furthermore, the ASEAN Charter, which was adopted in November 2007, is envisioned to pave the way towards a more rules-based institutional structure for ASEAN.

remain weak so long as its policy-makers are not more flexible in adopting the concept of “pooled sovereignty”, especially in economic matters. Regional cooperation based on the existing consensus-based decision-making process not only undermines institutional development but slows down economic integration. Nevertheless, ASEAN could still be a highly competitive economic region by 2015. It is possible for ASEAN to realize an “AFTA Plus” arrangement in less than a decade if non-tariff barriers are successfully tackled. An “AFTA Plus” AEC would be a fully functioning free trade area with minimal non-tariff barriers and freer movement of goods, services, investments, capital and skilled labour.

CONCLUDING REMARKS So what will the AEC be like in 2015? There is no evidence to indicate that there is any political desire on the part of ASEAN leaders to establish a European-style single market. Although the ASEAN Charter will provide ASEAN with a legal identity, the regional grouping’s institutional structure is likely to

NOTE 1. A. Schwartz and R. Villinger, “Integrating Southeast Asian Economies”, The McKinsey Quarterly, No. 1 (2004).

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43. UNDERSTANDING ASEAN’S CONNECTIVITY

SANCHITA BASU DAS

A

SEAN leaders proclaimed to create an ASEAN Economic Community (AEC) by 2015. While the fundamentals for creating a single market and production base are a work in progress, it is also crucial for ASEAN to facilitate the realization of the ASEAN community through “connectivity”. This is because community building through physical, institutional and personal connectivity is not only expected to reduce business transaction cost, time and travel cost, but also to connect the “core” and the “periphery” in ASEAN, thus distributing the benefits of multifaceted growth wider in the region and reducing the development divide in ASEAN. Moreover, better connectivity within ASEAN is essential for further connectivity with other regions, such as East and South Asia, which will help ASEAN to maintain its centrality in the evolving regional architecture. In 2010, during the 17th ASEAN Summit in Vietnam, the Leaders adopted the Master Plan on ASEAN Connectivity (MPAC). The

plan strives to integrate a region of over 600 million people with a combined GDP of about US$1.5 trillion. THREE LINKAGES AND STRATEGIES The MPAC has three components: a) physical connectivity; b) institutional connectivity and; c) people-to-people connectivity a) Physical Connectivity Currently, in ASEAN, the physical infrastructure, particularly in the less developed members, is characterized by structural weaknesses — low responsiveness to users, organizational inefficiencies, insufficient funding, heavy dependence on official development assistance, low foreign direct investments (FDI), and lack of environmental awareness. Most ASEAN countries are also short of the

Reprinted in abridged form from Sanchita Basu Das, “Understanding the MPAC” and “Conclusion and Policy Recommendations”, in Enhancing ASEAN’s Connectivity, edited by Sanchita Basu Das(Singapore: ISEAS, 2013), pp. 3–8 and pp. 175–85, by kind permission of the Institute of Southeast Asian Studies.

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“soft” infrastructure (ICT), which are important prerequisites for the next stage of development. This calls for the upgrading of existing infrastructure, the construction of new infrastructure and the harmonization of regulatory framework. The key strategies for enhanced physical connectivity include the completion of the ASEAN Highway Network (AHN); fully implementing the Singapore-Kunming Rail Link (SKRL); establishing an efficient and integrated inland waterways network; forming an integrated, efficient, and competitive maritime transport system; building integrated and seamless multimodal transport systems; accelerating ICT infrastructure and services development in member states; and prioritizing the processes to resolve institutional issues in energy infrastructure projects. b) Institutional Connectivity While ASEAN has been successful in eliminating tariffs, it is still struggling with the issue of non-tariff barriers (NTBs) to trade and investment. While some such barriers are necessary — for example, to protect the environment or the health of humans, animals and plants — others unnecessarily distort trade flows and restrict competition. To address this, ASEAN must harmonize standards and conformity assessment procedures, and operationalize key transport facilitation agreements to reduce the costs of moving goods across borders. In addition, ASEAN member states must fully implement their respective National Single Window towards realizing the ASEAN Single Window by 2015. Key strategies to enhance institutional connectivity include fully operationalizing the three Framework Agreements on transport facilitation; implementing initiatives to facilitate interstate passenger land transportation; developing the ASEAN Single Aviation Market; developing an ASEAN

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Single Shipping Market; eliminating barriers to merchandise trade to accelerate the free flow of goods within the region; accelerating the development of an efficient and competitive logistics sector, in particular transport, telecommunications, and other connectivity-related services in the region; substantially improving trade facilitation; enhancing border management capacities; increasing Member States’ openness to both intra-regional and extra-regional investment under fair investment rules and strengthening institutional capacity where necessary to improve coordination of policies, programmes, and projects between the regional and subregional levels. c) People-to-People Connectivity This entails deeper intra-ASEAN cultural interaction, greater intra-ASEAN people mobility through progressive relaxation of visa requirements and development of mutual recognition arrangements (MRAs) to facilitate the ongoing efforts to increase greater interactions between the peoples of ASEAN. Key strategies for people-to-people connectivity include promoting deeper intraASEAN social and cultural understanding and encouraging greater intra-ASEAN people mobility. CURRENT STATE/GAPS IN CONNECTIVITY ACROSS ASEAN A) Transportation Road and Rail Infrastructure: The two flagship projects — AHN and SKRL — suffer from several missing links and substandard work quality. AHN is targeted for completion in 2015, while the completion of SKRL is likely to be extended to 2020. Once these links are built, it will connect both mainland ASEAN and ASEAN with China and India. Maritime Network: Although ASEAN has forty-seven designated ports, there are

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a number of challenges in providing an efficient shipping network service in the region. According to the UNCTAD Liner Shipping Connectivity Index, except for Singapore and Malaysia, ASEAN countries rank poorly relative to China and Hong Kong. Most of the gateway ports of the ASEAN member states are “fairly full”, implying investment needs for capacity expansion. Air Transport: The connectivity through air is the most developed in the region. The airports of ASEAN capital cities are sufficient in terms of runway lengths to accommodate the existing operation of aircraft. However, some of these airports still face problems in providing airport facilities, particularly warehouses. b) Telecommunications Mobile and Broadband Connectivity: In seven out of ten ASEAN states, mobile connectivity is above 80 per cent and in many cases, one person may own more than one mobile phone. On home broadband, Singapore, Brunei and Malaysia are the leading countries and one-third of the people are connected. However, real connectivity is much higher than the figure released by regulators. This is because many people go to Internet cafes or surf the Internet from the office. Hence there is lot of opportunity for local companies to do business in the digital world. Although telecommunications is a very capital intensive industry, there is lot of benefits for an economy as it brings in FDI and generates direct employment. Currently there are several barriers in adopting broadband technology in ASEAN. It is not easy to build the hard infrastructure in some countries as there is poor electricity infrastructure or copper theft. Getting a license is often cumbersome and expensive. Mobile broadband is still a negative proposition for companies, as wireless networks require significant investment to support high mobile data traffic. ASEAN

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countries also suffer from the unavailability of good quality, affordable smartphones, which are prerequisites for mobile broadband connectivity. c) Information and Communication Technology (ICT) Internet penetration is at very different stages of development in ASEAN member states. While Singapore and Malaysia have more than a 50 per cent penetration rate, Laos and Cambodia are below 2 per cent. This disparity shows that a large segment of the ASEAN population is not “connected”. ASEAN is also challenged by the ICT divide between “youth” and “official” ASEAN. The youth of ASEAN are at the forefront of the global social network revolution. Indonesia is among the top five countries in Asia in terms of Facebook users. Against this, “official” ASEAN is still struggling with ICT. d) Energy infrastructure Under the ASEAN Connectivity initiative, there are two major energy infrastructure projects, the ASEAN Power Grid (APG) and the Trans- ASEAN Gas Pipeline (TAGP). APG aims to help member states meet increasing demand for electricity and improve access to energy services. But there are several challenges. ASEAN countries are at different stages in the reform of their respective power markets. While at one end there is the vertically integrated power market with monopoly utility model (Brunei, Cambodia, Laos, Myanmar), at the other, there is the privatized/market friendly model (Singapore, the Philippines). Again, there is a tremendous spread across electricity tariffs with Laos being very cheap (US4.5 cents/ kWh) and Cambodia the most expensive (US14.4 cents/kWh). The difference is mainly due to various generation mixes that the countries draw their electricity from as well as installed capacity. Moreover, the

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countries are very different from each other in terms of legal and financial matters. TAGP aims to develop a regional gas grid by 2020, by interconnecting existing and planned gas pipelines of member states and enabling gas to be transported across borders. The realization of TAGP is expected to encounter substantial financial and legal complexities, most of which are easier to handle on bilateral basis rather than multilateral. One special challenge for TAGP is that the regional gas supply is dwindling. Countries like Indonesia and Malaysia, who were once significant LNG exporters, are now looking at ways to supply in their own countries. This is because, in recent times, there have not been any new discoveries of large gas fields. RESOURCE MOBILIZATION The Asian Development Bank (ADB) estimates that ASEAN countries will require infrastructure investment of US$596 billion during 2006–15. According to the ADB, only one-fifth of the requirements has been met so far. Resource mobilization is a concern, as currently 30–40 per cent of the regional funds are expected from public and government contributions, and 10–12 per cent from banks, with almost an entire half of the necessary US$60 billion per annum left to be covered by private investors. To meet this financing requirement, ASEAN is exploring both traditional and new ways of resource mobilization. This includes commitments for funding and loans from international institutions and several dialogue partners, engaging the private sector through approaches like Public-Private Partnership (PPP). The new ways of generating funds include establishment of the ASEAN Infrastructure Fund (AIF), setting up of a regional and domestic capital market like the Credit Guarantee Investment Facility (CGIF), which is a US$700 million of trust fund among ASEAN+3 countries, managed by the ADB.

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a) ASEAN Infrastructure Fund The AIF is a mechanism in which the ASEAN member states and ADB work together through pooling funds — and promoting the use of ASEAN savings — to foster infrastructure development within the region and make the MPAC a reality. The AIF will have three main development outputs: i. Support the implementation of the MPAC; ii. Provide additional financing for enhanced infrastructure; and iii. Enhance private sector participation in infrastructure development through PPPs. b) Public-Private Partnerships Another crucial source of funding is the private sector and one way to involve them is through the PPPs. PPP describes a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies. Prior to the 1997–98 financial crisis, ASEAN relied heavily upon the private sector for much infrastructure investment, especially in energy. In ASEAN, the hydropower sector in Laos provides a recent example of publicprivate partnership. POLICY RECOMMENDATIONS As infrastructure needs are not uniform in the region, harmonious infrastructure development is crucial. Governments have to identify the infrastructure gaps and then plug them accordingly. While the Master Plan has ascertained the stretches of road for regional connectivity, it has missed the smaller details. For example, it did not consider rural connectivity, which is essential to eliminate the rural-urban divide and to distribute the benefits of economic integration to all.

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The policies related to legal and regulatory frameworks should be harmonized and synergized among ASEAN member countries. Private sector participation is a key component in the development of ASEAN connectivity as there are limitations to public resources. PPP has huge potential. PPPs bring together the best of the knowledge and expertise of the private sector, and the funds and institutional reach of the public sector. In this vein, it should be beneficial for ASEAN to involve more industrial heads and entrepreneurs during project and financial decision-making processes under ASEAN connectivity. It should also prioritize a small number of regional projects that will deliver quick wins and build momentum, attracting the private investors.

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It should also be noted that the investment needs of ASEAN such as physical infrastructure have to be translated into commercially viable projects for private investors to take an interest. In this regard, there has to be a higher quality of information on investment opportunities in the ASEAN countries that are made available to the public. In addition, governments must create an enabling environment that assures investors of predictability, a level playing field, low transaction costs and fair rates of return commensurate with the risks they take. Finally ASEAN must ensure good governance. The regulatory framework has to be strengthened to make sure that capital is used appropriately for infrastructure development.

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ENHANCING THE INSTITUTIONAL FRAMEWORK FOR AEC IMPLEMENTATION HELEN E. NESADURAI

INTRODUCTION The institutional structure supporting the ASEAN Economic Community (AEC) project remains limited. ASEAN member states are well known for resisting any form of centralized authority to manage and complete the integration process.1 This chapter explores how best to design regional institutions to enhance AEC implementation. THE POLITICAL ECONOMY OF ASEAN INTEGRATION: UNDERSTANDING ASEAN’S PREFERENCE FOR FLEXIBILITY Three features characterize ASEAN’s approach to regional economic liberalization and integration, seen in both the AFTA project initiated in 1992 and the current AEC project. First, ASEAN governments have generally been forthcoming in initiating ambitious plans and programs on economic cooperation and liberalization.

Second, despite ambitious commitments, implementation of these commitments has faced problems, with member governments sometimes failing to meet set targets and/ or ignoring them, asking for revisions to original targets and/or seeking exemptions from them. Third, ASEAN governments have always preferred relative limited institutional structures that in the end are unable to impose stronger discipline on member governments to adhere to the commitments, action plans and timelines to which they themselves earlier agreed. The interplay between external competitive pressures and domestic factors in shaping the evolution of AFTA and the AEC provides valuable lessons for this chapter. For instance, both AFTA and the AEC were initiated by ASEAN governments, which saw in these two projects the chance to secure national economic growth by enhancing the competitiveness of the ASEAN region as a whole, particularly as a site for investment.

Reprinted in excerpted form from Helen E. Nesadurai, “Enhancing the Institutional Framework for AEC Implementation: Designing Institutions that are Effective and Politically Feasible”, in The ASEAN Economic Community: A Work in Progress, edited by Sanchita Basu Das, Jayant Menon, Rodolfo Severino, and Omkar Lal Srestha (Singapore: Institute of Southeast Asian Studies, 2013), pp. 411–41, by kind permission of the Institute of Southeast Asian Studies.

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However, these same governments were also constrained in how far and how fast they could commit to regional integration, because they had to take into account domestic socio-economic and socio-political priorities, including domestic business demands for exemptions from regional liberalization schedules.2 INSTITUTIONS FOR INTEGRATION: THEORETICAL INSIGHTS AND THE ASEAN EXPERIENCE Institutions can very simply be defined as governance arrangements comprising sets of norms, rules, procedures, and organizational structures that aid collective action. Depending on their design, institutions can aid implementation of integration commitments. This can occur through ensuring that clearly defined commitments are agreed upon and effectively monitored, so that instances of non­compliance can be addressed while the propensity for non-compliance reduced either through reputational effects or material costs. The report of ADB’s flagship study on Institutions for Regional Integration identifies decision-making rules and a set of various “commitment devices” to be especially helpful aid to implementation.3 In addition to these two institutional categories, “facilitating institutions” are equally vital in bolstering integration.4 Decision Rules Decision making, which is fundamental to the effectiveness of any institution or organization, can occur through a variety of rules. In ASEAN, consensus rarely means all ten members have to agree on the joint action; consensus is not synonymous with unanimity. However, cooperation can be blocked if even one member state opposes the project.5 Consensus decision making will remain a key feature of ASEAN decision making although, the ASEAN Charter accords ASEAN leaders

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the right to use voting on issues that cannot be resolved through consensus.6 Commitment Devices Commitment devices are useful in facilitating agreement on, and implementation of, integration commitments, especially amongst a heterogeneous group. ADB flagship study identifies a number of these devices. One such device, the mobilization of political leaders, is said to help ensure cooperation by entrenching the commitment to the collective project deep within the political executive.7 However, as the APEC and the ASEAN experiences reveal, the initial public commitment by top political leaders to cooperative projects has not been sufficient to ensure compliance with commitments thus made. A second commitment device is legalization, which comprises three components: the precision of commitments, whether these are legally binding and whether the authority to interpret, monitor and enforce commitments has been delegated to a third party such as a standing secretariat.8 Although many AEC commitments are legally binding, there is only a limited degree of precision in terms of targets and timelines outlined in the AEC Blueprint, which has identified 17 policy aims and 176 priority actions to be completed within four implementation periods beginning in 2008 and ending in 2015.9 Moreover, the Blueprint supports flexible implementation through “pre-arranged flexibility”.10 While the ASEAN Secretariat has been accorded the task of monitoring members’ compliance with their AEC commitments, the Secretariat has no delegated authority to punish non-compliance.11 There are only protocols that allow for negotiated compensation when original commitments are modified or withdrawn or if aggrieved parties invoke the enhanced dispute settlement mechanism.12 However,

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the enhanced DSM (dispute settlement mechanism) remains a limited mechanism for a number of reasons. For instance, the ASEAN Senior Economic Officials Meeting (SEOM) has the right to decide, by consensus, not to establish a panel to hear a dispute (Article 5).13 The third commitment device identified by ADB is “the enfranchisement of nongovernment actors”.14 One way to enfranchise such actors is to accord them locus standi in dispute settlement.15 A more informal enfranchisement mechanism is to accord “voice” to non­state actors. The two monitoring devices in ASEAN — the AEC Scorecard and the NTB Database — are limited instruments because of ASEAN’s reluctance to allow private sector inputs. Two versions of this Scorecard have been developed: a confidential version that was revealed only to Leaders, Ministers and officials in October 2009 and a “businessfocused public version” that was made public in April 2010.16 When the public version records that 73.6% of set targets of the AEC have been achieved, it is, in fact, only referring to the proportion of AEC-related legal instruments that have been domestically ratified rather than the attainment of actual liberalization targets.17 Encouragingly, the second Scorecard released at the ASEAN Summit in April 2012 tracked both domestic ratification and implementation of commitments. It also solicited the private sector for its views on the various barriers, including non-tariff barriers, that firms have encountered in ASEAN. The Secretariat’s dialogues conducted with firms from three priority sectors — the automotive, electronics and textiles industries — will also be used to update the NTB Database.18 Although business actors can be valuable allies in driving implementation of integration initiatives, the converse is also possible if domestic businesses demand protection or delays in regional liberalization as both the AFTA and AEC experiences outlined in Section 2 show.

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Thus, a fourth commitment device suggested by ADB is the use of side payments or redistributive transfers to those groups disadvantaged by regional integration. The Initiative for ASEAN Integration (IAI) is significant as a form of development assistance, although its potential has not been fully realized. In ASEAN, the differentiated AFTA/AEC completion timetable, both aimed at securing the commitment to integration of the new/poorer members of ASEAN — the CLMV countries of Cambodia, Lao People’s Democratic Republic, Myanmar and Viet Nam — should be regarded as a useful commitment device. Facilitating Organizations and Structures Aside from decision-making procedures and commitment devices, “facilitating institutions” provide “advisory, technical, administrative and financial support” for regional integration.19 The most important of these institutions is, of course, the ASEAN Secretariat, which directly coordinates all of ASEAN’s many functions and activities in addition to taking on a greater role in monitoring regional integration. Termsak Chalermpalanupap, Director of the Political Security Directorate at the ASEAN Secretariat, names “lack of coordination” as a serious weakness in ASEAN, a problem that extends also to ASEAN coordination of economic integration.20 While ASEAN has recognized the importance of enhancing co­ ordination amongst its many different programs by establishing various coordination councils, the Secretariat’s Termsak argues that these “organizational extensions” are “events, not agencies, and periodic occasions, not permanent offices”.21 Moreover, he points out that ASEAN’s limited financial resources restrict the actions it can take in order to further integration. Other facilitating institutions external to ASEAN that can support the AEC process

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include ADB, UN-ESCAP, the Economic Research Institute for ASEAN and East Asia (ERIA), the ASEAN-ISIS network of regional think tanks, and the ASEAN dialogue partner network of countries. One category of external institutional structure with ambiguous effects on ASEAN’s capacity to complete regional integration comprises the bilateral and plurilateral free trade agreements (FTAs) and similar economic partnership agreements that ASEAN governments have negotiated individually and collectively with non-ASEAN members. However, these FTAs could as well divert the attention and resources of ASEAN members away from AEC matters.22 ENHANCING REGIONAL INSTITUTIONS FOR ASEAN ECONOMIC INTEGRATION First, AEC institutions are designed to maximize flexibility for ASEAN member states, in effect institutionalizing a relatively high degree of national autonomy even while putting in place various organizational structures and mechanisms to aid the integration process. Second, there is limited use made of feedback mechanisms to drive integration forward. Third, the ASEAN institutional structure is overloaded with a good deal of coordinative activities as well as more substantive tasks involving research, analysis, technical support and monitoring, made worse by limited resources at the disposal of the Secretariat. In view of these features and realities, the following four reform areas are suggested. Maintaining Flexibility but Minimizing Ambiguities ASEAN’s core institutional structures and processes are unlikely to be altered, as these support national policy autonomy for each member. However, ambiguities emerging out of flexible approaches to AEC implementation should at least be

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minimized, for instance, by providing more precise implementation action plans that are also time­bound with clear end-dates. Maximizing Monitoring and Feedback through Effective Use of Independent Information The ASEAN preoccupation with securing a substantial degree of national policy autonomy (or sovereignty) within cooperative projects like the AEC suggests that other ways must be found to press member governments to make good on AEC implementation. One such means to enhance individual country commitment to implementing the AEC is by improving existing monitoring and feedback devices so that decision­makers have access to more and different kinds of information, and especially independent information, in order to make decisions on AEC compliance. In ASEAN, while there is considerable research and policy advice provided by think tanks and research institutes, there is limited consultation with the private business sector and even less with NGOs and local groups that may be affected by regional integration. More Effective Use of Redistributive Transfers and Information from Non-Business Stakeholders The ASEAN experience also reveals that poor implementation of integration initiatives reflects the unwillingness of member governments to accept some of the “losses” associated with liberalization and integration, even short­ term ones. ASEAN states have usually disregarded information on the adverse consequences of liberalization and integration, believing that to even acknowledge these would be to invite all manner of protectionist demands. Assessment and incorporation of these adverse effects by the Secretariat could enable more focused redistributive transfers in the

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form of regional development assistance to these affected groups, so that the fruits of regional integration are ultimately more equitably distributed. Streamlining the Organizational Structure to Support Regional Integration The ASEAN Secretariat will have to work within the present inter­ governmental coordinative framework as member governments are reluctant to turn the Secretariat into a centralized office with enforcement authority. In this regard, the conversion of the previous surveillance office to the ASEAN Integration Monitoring Office (AIMO) is encouraging, but AIMO should concentrate on monitoring regional integration and leave regional financial surveillance to the ASEAN Plus Three Macroeconomic Research Office (AMRO). Two urgent tasks remain. One is to review and enhance ASEAN members’ financial contributions to the Association, especially to support the enormous coordinative and other substantive tasks the Secretariat undertakes. Relying on external donors to support tasks that ASEAN needs to get done is not sustainable over the long run and if ASEAN wants to be taken seriously as an independent actor in regional politics. A second urgent task is to conduct a comprehensive analysis of the economic, political, social, foreign-policy and administrative impacts of the range of

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bilateral and plurilateral FTAs on member states and on the AEC. CONCLUSION This chapter draws lessons from a political economy analysis of ASEAN economic integration to offer a number of practical and politically feasible suggestions on how institutions in ASEAN could be fashioned to enhance AEC implementation. The chapter uses the three institutional categories of decision­making, commitment devices and organizational structures to identify the strengths and limitations of AEC institutions in the light of present­ day ASEAN political realities. The chapter also suggests four areas where reform could be more productively concentrated: (a) maintaining flexibility but minimizing ambiguities; (b) maximizing monitoring and feedback through the more effective use of independent information, especially from businesses; (c) making more effective use of redistributive transfers and information from non-business stakeholders; and (d) streamlining the ASEAN organizational structure as well as external institutional structures to more effectively support regional integration. A key theme of these suggestions is the use of effective monitoring and feedback instruments to motivate member governments to make policy choices that support AEC implementation.

NOTES  1. Termsak Chalermpalanupap, “Institutional Reform: One Charter, Three Communities, Many Challenges”, in Hard Choices: Security, Democracy and Regionalism in Southeast Asia, edited by Donald K. Emmerson (Singapore: Institute of Southeast Asian Studies, 2009).   2. Hal Hill and Jayant Menon, “ASEAN Economic Integration: Features, Fulfillments, Failures and the Future”, ADB Working Paper Series on Regional Economic Integration, no. 69 (December 2010).   3. See ADB, Institutions for Regional Integration: Towards an Asian Economic Community (Manila: Asian Development Bank, 2010), pp. 103–8.  4. ADB, Institutions for Regional Integration, p. 118.  5. Severino Jr., quoted in Stephan Haggard, “The Organizational Architecture of the Asia-Pacific:

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Insights from the New Institutionalism”, ADB Working Paper Series on Regional Economic Integration, no. 71 (January 2011) p. 16.   6. Chalermpalanupap, “Institutional Reform”, p. 104.  7. ADB, Institutions for Regional Integration, p. 105.  8. Kenneth W. Abbot and Duncan Snidal, “Hard and Soft Law in International Governance”, International Organization 54, no. 3 (2000): 421–56.   9. ASEAN Studies Centre, The ASEAN Community: Unblocking the Roadblocks (Report No. 1) (Singapore: Institute of Southeast Asian Studies, 2008); Hadi Soesastro, “Implementing the ASEAN Economic Community Blueprint”, in The ASEAN Community: Unblocking the Roadblocks (ASEAN Studies Centre Report No. 1) (Singapore: Institute of Southeast Asian Studies, 2008), pp. 34–35. 10. ASEAN, ASEAN Economic Community Blueprint (Jakarta: ASEAN Secretariat, 2007), p. 36, . 11. ADB, Institutions for Regional Integration, p. 107. 12. ASEAN Secretariat, ASEAN Dispute Settlement System (Jakarta: The ASEAN Secretariat, 2009). Other institutional innovations are discussed in Yoshimatsu, “Collective Action Problems”. 13. ASEAN, Protocol on Enhanced Dispute Settlement Mechanism, Vientiane, 29 November 2004 . 14. ADB, Institutions for Integration, p. 107. 15. Haggard, “Organizational Architecture”, p. 27. 16. ASEAN Secretariat, ASEAN Annual Report 2009–2010 (Jakarta: The ASEAN Secretariat, 2010), p. 23. 17. ASEAN Secretariat, ASEAN Economic Community Scorecard (Jakarta: The ASEAN Secretariat, 2010), p. 14. 18. See ASEAN Secretariat, ASEAN Economic Community Scorecard: Charting Progress Towards Regional Economic Integration (Phase 1: 2008–09 and Phase 2: 2010–11) (Jakarta: The ASEAN Secretariat, 2012), p. 3. 19. ADB, Institutions for Integration, p. 118. 20. Chalermpalanupap, “Institutional Reform”, p. 117. 21. Ibid., p. 121. 22. Ibid., p. 114.

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45.

WHAT IS A SINGLE MARKET? AN APPLICATION TO THE CASE OF ASEAN PETER J. LLOYD

T

he 2003 Declaration of ASEAN Concord II declared “The ASEAN Economic Community shall establish ASEAN as a single market and production base”. The achievement of the declared goal of a single market can be made only if political decision-makers and bureaucrats understand fully the meaning of a single market and the measures required to implement it. The meaning of the term, therefore, requires careful examination. A SINGLE MARKET = THE LAW OF ONE PRICE The idea of a single market comes of course from the European Economic Community (EEC)/EU. Initially the EEC created by the 1957 Treaty of Rome was a Common Market. This European concept of a common market was expressed in terms of the “four freedoms”, that is, freedom of trade in goods, services, capital, and labour. A Common Market required the abolition of all border

restrictions on the movement of goods, services, capital, and labour. It also required the establishment of “common policies” in four designated areas: external trade, agriculture, transport, and competition. The Single European Act describes the Single Market as “an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured”. The central idea of a single market is that there should be no discrimination according to source in the regional markets for goods, services or factors, thus creating a market that should be a single market with no geographic segmentation. It was realized that the cross-border freedoms were not sufficient for foreign suppliers to have access equal to that of domestic suppliers. The elimination of border controls, important as it is, does not of itself create a genuine common market. Goods and people moving within the Community should not find obstacles inside the different member States as opposed to meeting them

Reprinted in excerpted form from Peter J. Lloyd, “What is a Single Market? An Application to the Case of ASEAN”, ASEAN Economic Bulletin 22, No. 3 (2005): 251–65, by kind permission of the Institute of Southeast Asian Studies.

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at the border. The restriction of imports by measures applying beyond-the-border is usually couched in terms of the principle of National Treatment. National Treatment is the rule that a good or factor that crosses the border should receive the same treatment as a like product produced domestically or a like factor owned by domestic residents with respect to taxes and charges and regulations. Is national treatment enough to ensure a single market? For goods, the interpretation of this term has been given great precision by the development of the law in the General Agreement on Tariffs and Trade (GATT) and later the World Trade Organization (WTO). In considering whether National Treatment has been granted to an imported good, the WTO considers three elements: it compares “like products”; it considers all government measures in the sense of “a law, regulation, or requirement affecting their internal sale, offering for sale, purchase, transportation, distribution or use”; and it then requires that the treatment of the imported product be “no less favourable” than the treatment of the like domestic product(s). Thus, the scope of the government measures is broad. It applies if the discrimination is implicit rather than explicit, that is, there is no explicit discrimination against foreign goods but, because of some characteristic of the foreign good, it is subject to a higher tax rate. It applies even if the measures are not mandatory or if they result from actions initiated by private parties. The important consideration is that the measure has an effect on decisions of private firms with respect to the sourcing of products. There are exceptions to the National Treatment rule in the GATT/WTO. The most blatant is subsidies. A subsidy paid to a group of domestic producers is a negative tax and, as such, subsidies should, in principle, be treated in the same way as domestic commodity taxes. Full National Treatment requires the elimination of subsidies restricted to domestic producers. However, all subsidies

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were exempted from the National Treatment requirement. The second notable exception is government procurement of goods. At the time GATT was negotiated, subjecting these measures to National Treatment was regarded as an unacceptable restriction on national sovereignty, and consequently they were exempted and continue to be so. Increasingly, it has been realized that even full National Treatment is not enough to remove all measures which inhibit crossborder trade or factor movements. With some exceptions, standards for industrial products, the environment and other areas are not discriminatory; they apply equally to goods produced domestically and goods imported. However, in some cases, to meet these standards, foreign producers have to modify their products or incur extra costs. The solution to these barriers to trade is the harmonization across member countries of the relevant laws or regulations. To distinguish this set of policies from other policies intended to eliminate discrimination the term across-borders measures is used. They are an extension of beyond-the-border measures. Harmonization of laws and regulations across member countries has become more common in RTAs. Examples are the harmonization of standards such as those relating to industrial products, food, health and safety, and conformity assessment. However, any regulatory policies used in common by member countries are candidates for possible harmonization. Differences in national circumstances and priorities may dictate differences in national standards. Harmonization can mean common standards, that is, a single area wide standard. But it can also mean minimum standards. The EU 1992 measures introduced another approach based on the mutual recognition of each other country’s standards. The EU used this approach for some product standards and for labour market standards

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such as the recognition of labour market qualifications. Mutual recognition has the considerable advantages of allowing each nation to retain its own national standards and thereby avoiding negotiation of common or minimum standards, and requiring little bureaucracy and enforcement via courts. National Treatment is achieved by the mutual recognition of the distinct national standards. With several approaches, harmonization is best described as a convergence of standards rather than the establishment of single standards. To give precision to the concept of a single regional market, economists have defined a single market as one in which the Law of One Price must hold in all goods, services and factor markets; see, for example, Lloyd (1991) and Flam (1992). That is, there should be a single price in the region-wide market for every tradable commodity and factor, expressing all prices in a common currency and adjusting for the real costs of moving goods or factors between locations. This definition allows for the real costs of moving goods or factors from one location to another. This definition of a single market can be applied to any set of countries. This may be a region comprising several countries as above or just one country or the whole world economy. The establishment of a single market, therefore, is much more demanding than the establishment of a common market. WHAT IS REQUIRED FOR THE LAW OF ONE PRICE TO HOLD? The conditions for the Law of One Price to hold in one market are much more demanding than is generally recognized. These conditions are relevant to regional trading agreements as they show what policies must be in place if a region is to be a single market. Consider a commodity market which is a national market or a part of a national market. By restricting one’s attention at the

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moment to trade within a nation, one is abstracting from international trade aspects of the Law of One Price. These non-trade aspects are more basic than the traditional focus on trade aspects. First, a single market requires a competition law and other competition policies to promote competition. In the absence of perfect competition, markets will be segmented by having different prices in different segments of a market which will not equalize prices across segments. Second, a single market also requires full information for buyers and sellers, or less demanding, for arbitrageurs. Positive costs of gathering in formation lead to deviations from the Law. If these two conditions are met, spatial arbitrage will establish a single price within the nation, adjusting for the costs of transport between locations. One must be careful with the definition of price. Transport takes time and some commodities require costly storage. With non-instantaneous transport and positive storage costs, commodity spot prices will deviate from the Law for One Price even if there is perfect arbitrage and no barriers to trading. The law should be interpreted in terms of the equality between the spot price in one location and the expected future price minus storage costs in another location. (See Williams and Wright 1991.) When a single market crosses national borders other conditions are required. A single market crossing national borders requires the removal of all border restrictions and full National Treatment with respect to taxes and other state charges and regulations. These steps may need to be supplemented by the harmonization across national borders of laws and regulations which otherwise prevent a single price from ruling among the countries. In goods markets, these standards include industrial products, health and safety of persons, and the environment, policies relating to particular sectors such as industry or transport. The laws include business

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laws that differentiate between foreign and domestic supplies. In labour markets, full National Treatment requires measures such as the recognition of foreign labour market qualifications. In capital markets, it requires full national treatment with respect to taxes and business laws and regulations. It implies the absence of such measures as performance requirements that apply to foreign-owned enterprises but not like domestic enterprises. If all of these conditions are met, there are no impediments to the sale or purchase of commodities and factors imported from other countries. Perfect arbitrage will then establish a single price for a like product or factor that can be traded across borders. In the markets for services, some services can be traded across borders. Those covered by GATS Modes 1 (Cross-border Movement) and 4 (The Movement of Natural Persons) are inherently tradable. In these markets, the Law of One Price will hold if all of the conditions are met. In services markets supplied by the Mode 3 (Consumption Abroad) such as international tourism, the Law will hold in the country in which the services is delivered. Other services cannot be traded in a way in which arbitrage can establish one price; for example, those

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supplied by the mode of commercial presence. In these cases, however, there will be a tendency towards convergence of price across borders due to factor price equalization in a single market and to competition from substitutes supplied by other modes; for example, financial services supplied by the mode of commercial presence in the country in which the consumer is located compete increasingly with financial services supplied by mode 1, especially services provided to business customers. The adoption of a single market is a large step in the evolution of ASEAN. It will require clarification of the markets included in the ASEAN Single Market and the extent of deep integration envisaged. The objective of a free trade area with limited commitments to removing beyond-the-border measures that inhibit cross-border trade is a much more limited goal with no definite end-point in terms of the coverage of measures. This objective can be pursued through modalities based on consensus. However, the objective of a single market is quite definite in terms of the ultimate coverage of measures, namely, all measures required to remove discrimination against other ASEAN suppliers of goods, services, and factors.

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46.

NON-TARIFF BARRIERS A Challenge to Achieving the ASEAN Economic Community MYRNA S. AUSTRIA

INTRODUCTION A significant milestone of economic integration in the ASEAN region is the substantial progress in tariff liberalization. The achievement in tariff reduction, however, has been marred by non-tariff barriers (NTBs). First, they have replaced tariffs as protective measures for domestic industries (World Bank 2008). Second, the bulk of intra-regional trade transactions among the ASEAN economies is driven by the global production networks of multinational companies in the region.1 Efficiency in moving goods across borders has thus become crucial in capturing and creating trade opportunities arising from the vertical and horizontal operations of these networks (Austria 2004). Third, behind-the-border interventions have increasingly emerged as the new form of protectionism since the recent global economic crisis (Wermelinger 2011).

NON-TARIFF BARRIERS AND MEASURES: DEFINITION AND CONCEPTUAL ISSUES Broadly defined, non-tariff measures (NTMs) refer to any measure, other than tariffs, that distorts trade. In general, distortions include border and behind-the-border measures that arise from government regulatory policies, procedures and administrative requirements which are imposed to serve a particular purpose. While the pursuit of domestic policy objectives is legitimate, NTMs have the potential to become NTBs. This could arise when such measures specifically discriminate against imports or foreign firms; when they are imposed explicitly to protect domestic industry; when they are not applied uniformly among trading partners; or, when they include unjustified and/or improper application of sanitary and phytosanitary (SPS) measures and other technical barriers to trade.

Reprinted in excerpted form from Myrna S. Austria, “Non-Tariff Barriers: A Challenge to Achieving the ASEAN Economic Community”, in The ASEAN Economic Community: A Work in Progress, edited by Sanchita Basu Das, Jayant Menon, Rodolfo Severino, and Omkar Lal Srestha (Singapore: Institute of Southeast Asian Studies, 2013), pp. 31–94, by kind permission of the Institute of Southeast Asian Studies.

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ASEAN INITIATIVES TO ADDRESS NTMS AND NTBS The commitment to eventually phase out or eliminate NTBs in the region has always been an integral part of the trade liberalization program. Starting in 2004, The High Level Task Force (HLTF) on ASEAN Economic Integration outlined specific recommendations with regards to NTMs: a. Establish ASEAN Database of NTMs by mid-2004; b. Set clear criteria to identify measures that are classified as barriers to trade by mid-2005; c. Set a clear definitive work program for the removal of the barriers by 2005; and d. Adopt the WTO agreements on Technical Barriers to Trade and on Sanitary and Phytosanitary and Import Licensing Procedures and develop implementation guidelines appropriate for ASEAN by the end of 2004. The ASEAN Database on NTMs was first established in June 2004. Also, the criteria for identifying NTBs were established on 27 September 2005: • Red Box — NTMs that are not transparent, discriminatory, without scientific basis, and would require immediate elimination. • Amber box — NTMs that are transparent but discriminatory and affect highly traded products in the region. • Green box — NTMs that are transparent and non-discriminatory, are imposed for public health or safety or religious or national security reasons, are WTOconsistent and reasonable In August 2006, 20th AFTA Council adopted the roadmap for the integration of the priority sectors. In addition to the recommendations of the HLTF, the roadmap set a work program for the assessment of

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existing NTMs and identification of NTBs. The elimination of NTBs would be done in three tranches: • Brunei, Indonesia, Malaysia, Singapore and Thailand by 1 January of 2008, 2009 and 2010; • Philippines by 1 January of 2010, 2011 and 2012; • Cambodia, the Lao PDR, Myanmar and Viet Nam by 1 January of 2013, 2014 and 2015 with flexibilities up to 2018. In addition, there would be regular reviews and assessments of NTMs based on the criteria set by the AFTA Council beginning January 2008. In November 2007, the AEC Blueprint for the elimination of NTBs was issued: a. Enhance transparency by abiding by the Protocol on Notification Procedures and setting up an effective surveillance mechanism; b. Abide by the commitment to a standstill and roll-back of NTBs; c. Remove all NTBs by 2010 for ASEAN–5 (Brunei Darussalam, Indonesia, Malaysia, Singapore and Thailand), by 2012 for the Philippines, and by 2015 with flexibilities to 2018 for CLMV, in accordance with the agreed Work Program on NTBs elimination; d. Enhance transparency of NTMs; and e. Where possible, work toward having regional rules and regulations consistent with international best practices. The ASEAN member states have recently embarked on a more integrated and holistic approach to ensure the free flow of goods in the region. The ASEAN Trade in Goods Agreement (ATIGA) was signed in 2009. ATIGA consolidates and streamlines all provisions in CEPT-AFTA and other protocols related to trade in goods into one single legal instrument. It entered into force in 2010 and supersedes CEPT-AFTA.

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What are the actions required in ATIGA? The ATIGA makes very explicit that a member state should not adopt or maintain any NTM on the exportation and importation of any good to and from any other member state. In areas where NTMs are permitted, each member state should ensure transparency. At the same time, member states shall review the NTMs in the database with a view to identifying NTBs for elimination following the timelines set out in the AEC Blueprint. ASSESSMENT OF IMPLEMENTATION OF INITIATIVES Little progress has been made in the implementation of the initiatives on NTMs and NTBs. ASEAN NTM Database The ASEAN NTM Database is a compilation of notifications submitted by the member states and will form part of the ASEAN Trade Repository. The notification is a list of NTMs each member state imposes on its imports according to HS Code and NTM type. First, the notification details vary significantly among the member countries. Most do not provide the purpose of the NTMs or the manner of their implementation. The information is crucial in determining whether the NTMs are justifiable and necessary and, hence, should be permitted. Second, the database is not up-to-date. As of February 2012, the database includes 2009 for Indonesia, Malaysia, Myanmar, the Philippines, Singapore and Thailand; 2010 for Brunei, Cambodia and Viet Nam; and 2011 for Lao People’s Democratic Republic. Thus, it may not serve the purpose of providing timely and accurate information. Third, the database is not web-based; but rather a separate Excel file for each member country. The mechanism makes compliance with prescribed regulations difficult because the facility is not user-friendly.

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Fourth, the database does not make an inventory of NTMs that have been eliminated as NTBs. This makes monitoring of progress in the elimination of NTBs impossible. Identification and Elimination of NTBs Limited progress has been made here. There is lack of common definitions and approaches in identifying NTBs from among the NTMs because of conflicting perceptions of individual firms across the member countries. This is due to the wide variety of purpose for the same NTM across them. Likewise, the inadequate information on the justification of the NTMs (whether legitimate or not) and their enforcement (whether uniformly across trading partners, etc.) make it also impossible to identify which of the NTMs are barriers to trade (NTBs). In the absence of this critical information, the NTMs can be easily used to protect domestic industries or applied discriminately; and thus become NTBs. It is interesting to note, however, that during the ASEAN Economic Ministers Meeting in August 2011, the Ministers agreed to start with three priority sectors, including automotive, electronics and textile, in identifying NTMs that may serve as barriers to trade in these sectors. The Economic Ministers agreed that dialogues with regulators and the private sector will be undertaken toward identifying the NTMs that hamper the flow of goods in the region. Standards and Regulations Some progress has been achieved in this area. ASEAN’s approach is to align its standards and regulations with international standards acceptable at the multilateral level. Harmonization of standards has been completed for electrical appliances (58 standards); electrical safety (71 standards); electromagnetic components (10 standards); and rubber-based products (3 standards). Progress is underway for pharmaceuticals.

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The harmonization of standards for the other priority sectors is still on-going. On the other hand, harmonization of technical regulations has been completed for the cosmetics and electrical and electronics sectors. The harmonization of standards for automotive, medical devices, traditional medicines and health supplements is still underway. Overall Assessment The slow progress in the implementation of initiatives to address NTMs and NTBs could be caused by a combination of factors. First, identifying and eliminating NTBs from among the NTMs are often not straightforward tasks as some of the government regulations have evolved over time in response to political-economic developments in the ASEAN economies. Second, the initiatives require willingness and commitment of regulators of each economy to collaborate. The commitment to a standstill and roll-back of NTBs has been there since 1987. The lack of progress provides evidence of the weak political support to address NTBs. Third, the development divide among the member economies constrain them to deliver the milestones for the various initiatives. There could be a variety of purpose among the economies in using a particular NTM; thus, achieving a consensus for their elimination can be a long drawn-out process. Finally, supply-side capacity constraints, as shown by the differences in the infrastructures for standards and conformance of the member countries, can make the harmonization and alignment of standards and regulations slow, if not difficult, to achieve. POLICY RECOMMENDATIONS: DEALING WITH NTBS

Myrna S. Austria

definition of NTBs and common approaches of identifying NTBs. Given the very slow progress in identifying NTBs from among the NTMs, a critical step is to subject all existing NTMs to a compliance review to ensure that they are transparent, non-discriminatory, and minimizes trade restrictiveness. To mitigate the increase of NTBs, any new notification or modification of existing technical regulations should be subjected to a regulatory impact analysis before it is accepted as an NTM. Web-Based Facility for Reporting, Monitoring and Eliminating NTBs This is critical to increasing transparency and compliance with government regulations and administrative procedures and requirements. The establishment of the ASEAN Trade Repository (ATR) is a welcome step in this direction. The model for the ATR is still being worked out. To lower the chance of NTMs becoming NTBs, the NTMs should be tagged as those consistent with WTO agreements and international standards. Each NTM should also be linked to the relevant regulations or legal texts in the interests of transparency. Harmonization of National Standards The best way to deal with technical barriers to trade is the harmonization of standards and mutual recognition agreements. This is to ensure that the standards are not country-specific and that they are not beyond internationally recognized standards. While work has started in this area, the number of sectors and products covered is very small.

Common Definition of and Approaches to Identifying NTBs

Strengthening of Human and Institutional Capacities

The ASEAN government regulators and private sector should work toward a common

The key to compliance with standards and technical regulations is for the private sector

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and relevant industry associations to work with national institutions to strengthen national standards setting. At the same time, technical assistance should be provided to

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firms to help them meet technical standards. Technical assistance becomes crucial during the adjustment process to new standards and conformity assessments.

NOTE 1. Global Production Network (GPN) is a production scheme where the labor-intensive segments of technologically complex production are separated from the capital- and skill-intensive segments and are located in developing countries, linked through international subcontracting or outsourcing arrangements.

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47.

TOWARDS A TRULY SEAMLESS SINGLE WINDOWS AND TRADE FACILITATION REGIME IN ASEAN BEYOND 2015 JONATHAN KOH and ANDREA FELDMAN MOWERMAN

1. INTRODUCTION

2. TRADE FACILITATION IN ASEAN

Trade facilitation is an ever-evolving term that has changed its elements and connotations as the world has become more integrated and production more fragmented. Investing in trade facilitation creates benefits for the government as well as the private sector. Trade facilitation reforms can generate significant welfare gains for the economy as a whole. The APEC Economic Committee has estimated that trade facilitation measures committed to date will add 0.25% of real GDP to APEC (about USD$46 billion in 1997 prices) by 2010, compared to economic gains from trade liberalization measures (tariff removal) amounting to 0.16% of real GDP (about USD$30 billion)” (Wao and Wilson, 2000). Reducing trade transaction costs is a necessary complement to economic liberalization for developing countries to effectively participate in regional and global markets.

The Association of Southeast Asian Nations (ASEAN) member countries, have made a series of commitments in order to be able to facilitate trade amongst themselves and more recently their main trade partners. Decreasing tariffs and duties relieves some of the burdens existing for intra-ASEAN trade, but the core inconveniences are related to activities that need to take place in order for cargo to be mobilized amongst countries. As it will be noted below, non-tariff barriers, such as licensing, excessive cargo manipulation, red tape, and bureaucratic procedures can increase the cost of trading goods up to an additional 60% of the cost of cargo at origin. This is not a real issue when the goods traded are of high added value, i.e. electronics, technology goods, fine leather goods, but when the cargo traded is of low added value (agricultural goods, basic textiles and apparel) a steep increase in price caused by external factors can mean a decrease in

Reprinted in excerpted form from Jonathan Koh and Andrea Feldman Mowerman, “Towards a Truly Seamless Single Windows and Trade Facilitation Regime in ASEAN Beyond 2015”, ERIA Discussion Paper 2013-29 (Jakarta: Economic Research Institute for ASEAN and East Asia, 2013), by kind permission of the Economic Research Institute for ASEAN and East Asia (ERIA).

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competitiveness for the goods produced in these countries, or even worse, the complete shutdown of trade in those areas. Indeed, “software” issues — such as processing traderelated documents and fulfilling clearance requirements by customs and other technical control agencies — account for more than 50–60 percent of the total time to export and import in many countries around the world”.1 2.1 From ASEAN to AEC: Trade Specific Commitments The AEC blueprint traces the path to full-on ASEAN economic integration and is focused not only on trade-related facilitation, but rather includes areas of potential regional convergence such as movement of skilled labor, trade in services, foreign direct investment etc. In regards to trade facilitation specific commitments, it was stipulated that all ASEAN member states will abide by and implement the improvements included in the text by the year 2015. For some countries this has meant sharing their knowhow and international best practices related to trade procedures (i.e. Singapore, Malaysia etc). In other cases this has meant massive amounts of investment and training, to be able to shift trade customary procedures up to par (i.e. Indonesia, Malaysia, Thailand, Philippines). As it was noted in the introduction of the paper, solving the “soft” trade issues can generate great benefits to traders and exporting countries. As noted by the World Bank’s Trade Logistics Reforms Viewpoint, “trade logistics reforms have a notable effect on the ability of countries to export and import cost-effectively and to become effective players in competitive global and regional markets. Second, trade facilitation enhances the productivity of firms. And third, targeted reforms can enable firms to use scarce working capital more effectively by allowing leaner inventories, lowering the

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carrying charges in transit and storage, and reducing pilferage and damage”.2 In regards to trade-specific commitments, in accordance to the AEC blueprint, what is sought for are “simple, harmonized and standardized trade and customs, processes, procedures and related information flows (which) are expected to reduce transaction costs in ASEAN (and) which will enhance export competitiveness and facilitate the integration of ASEAN into a single market for goods, services and investments and a single production base”.3 In more specific terms, trade facilitation reforms include: • Integration of customs structures • Modernization of tariff classification, customs valuation practices and origin determination • Establish an ASEAN e-Customs • Improve customs clearance processes • Strengthen human skillsets • Adopt risk management and audit-based controls There are a series of additional commitments, but the ones explained above are directly related to the successful implementation of an ASEAN Single Window as a platform for electronic trade in the ASEAN region, offering traders and regional governments security and celerity for their trade transactions at a regional level. 2.2 ASEAN Single Window In December 2005, the ten ASEAN member States signed an “Agreement to Establish and Implement the ASEAN Single Window” (“ASW Agreement”). This was followed by a “Protocol to Establish and Implement the ASEAN Single Window” (“ASW Protocol”) in December 2006. These treaties envisage that the ASEAN member states will first operationalize their National Single Windows (“NSWs”)

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by specified deadlines, before proceeding to accomplish the more complex task of establishing the ASEAN Single Window (for which no deadline was provided in the treaties). The ASEAN Single Window (“ASW”) is defined in the agreement as “The environment where National Single Windows of Member Countries operate and integrate”, where “The National Single Window is a system which enables: • a single submission of data and information; a single and synchronous processing of data and information; and • a single decision-making for customs release and clearance. A single decisionmaking shall be uniformly interpreted as a single point of decision for the release of cargoes by the Customs on the basis of decisions, if required, taken by line ministries and agencies communicated in a timely manner to the Customs” The original timeline for the implementation of first six AMS namely Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore and Thailand to complete its respective National Single Windows (NSW) by 2008, while remaining four AMS, the CLMV countries (Cambodia, Lao PDR, Myanmar and Vietnam) to complete their NSW by 2012. Subsequently these timeline have been pushed to 2012 and 2015 respectively. A National Single Window plays a vital role in meeting the trade facilitation objectives of governments which, in simple terms, are to reduce clearance times at the border. The objective of the ASEAN Single Window, therefore, is not to impose any regulatory requirements at the regional level. It simply provides an environment for National Single Windows to operate and integrate. In the ASEAN Single Window, ASEAN member states have agreed to implement an advanced form of Single Window integration i.e. the one that generates full seamless

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connectivity between national Single Windows. According to the AEC blueprint, “the implementation of measures of simplifying, harmonizing and standardizing trade and customs, processes, procedures and the application of ICT in all areas related to trade facilitation would be paramount in the ultimate creation of an ASEAN Single Window”.4 When all ten National Single Windows have been integrated through the ASEAN Single Window, it would not be unreasonable to expect ASEAN to be the easiest region in the world to trade with. 2.2.1. ASEAN Single Window Timelines The ASEAN Single Window will allow the ASEAN member states to standardize trade related processes (licensing, documentation, inspections processes etc.) in such a way that third party traders and governments communicate with all countries in block. ASEAN member states have agreed that their NSW will be fully operational by the year 20155 prior to beginning the implementation of the ASW. Ideally, the role of the ASW is to integrate the NSW of all ASEAN member states and create a single platform in which traders and government agencies submit trade (cargo) related information in a single space and all approvals, processing and payments necessary are done in a seamless manner. 3. 2015 ASSUMPTIONS AND ASEAN MEMBERS NSW REALITY Based on the Protocol detailed above, by the year 2015 all 10 ASEAN member states must have fully functional NSW that can be interconnected amongst themselves to form the ASW. Clearly, this is a task that is easier said than done, mostly given the existing disparities among the ASEAN countries in regards to the automation of government systems.

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Towards a Truly Seamless Single Windows and Trade Facilitation Regime in ASEAN Beyond 2015

4. USAID PROGRAM Given the disparities detailed above, USAID has decided to support the implementation of the ASW. Parallel to these specific IT-related components, member countries are currently in the process of analysing the existing legal gaps (mainly countries that are yet to implement their NSW) and issuing the necessary legislation, based on the regional best practices, in order to be able to implement the ASW in a seamless manner. Additionally, government representatives involved in the ASW have done extensive consultations with the private sector in order to begin assessing the capacity building needs traders and their intermediaries may have with the implementation of NSW and further the ASW. As can be noted above, there are still significant monetary and human efforts that need to take place in order to make the dream of all ASEAN countries having a functional NSW by 2015. 5. EXAMPLES OF SUCCESSFUL CASES OF REGIONAL INTEGRATION INITIATIVES It is important to note that there are examples of success in digital integration amongst developing countries in other regions of the world. Latin America, Africa and Asia all have success cases that are showcased worldwide as international best practices and can be replicated in other regions. 6. RECOMMENDATIONS FOR THE SUCCESSFUL DESIGN AND IMPLEMENTATION OF THE ASEAN SINGLE WINDOW There is no clear road to follow to successfully implement ASW in the short term. Singapore, on the one hand has no need to protect nascent or local industries as there is a very limited exporting sector, while

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countries like Cambodia or the Philippines have strong protectionist policies which can potentially create burdens to trade within the region. The ASW should seek to reduce time, documents and cost to trade, while keeping local and security interests as priorities for all member countries. Singapore, Malaysia, Indonesia, Philippines, and Thailand have already built a functional NSW which means that there is B2G and G2G communication — all agencies involved in trade transaction have been linked to the platform in order to be able to interact through it with the business community. Parallel to the above, given that there is no clear definition of the activities that will take place within the ASW platform, ASEAN countries have all embarked in different roads of government agency integration to the system. In the first place, phasing the implementation of high-impact trade related improvements generate tangible results in the short term, thus creating momentum as to the success and positive impact that these implementations bring to society. When this momentum and approval is created, proposing or implementing greater in depth reforms is less bureaucratically heavy, as public and private sector have already been sensitize and have an understanding of the efforts made. 7. CONCLUSIONS Based on the analysis provided and the proven viability of the implementation of these facilitation measures, it can be concluded that, not only is the ASW an effort that will benefit the public and private sector in the short term, but rather it’s the first of many automation initiatives to be implemented by ASEAN countries to improve their connectivity and interaction with the global business environment. This interaction includes B2B, B2G and G2G interaction in

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such a way to be able to connect the entire trade community. An additional aspect to be developed in the future for the ASW is the possibility to widen the scope or increase the depth of integration with other countries, not

necessarily full-fledged members of ASEAN (India, China, NZ, and Australia). This will allow for not only regional seamless trade, but rather for smoother international trade, where supply chains can be lean and all trade transactions efficient.

NOTES 1. 2. 3. 4. 5.

WB Viewpoint. Trade Logistics Reforms Viewpoint WB. AEC Blueprint. AEC Blueprint. Brunei Darussalam, Indonesia, Malaysia, Philippines, Thailand and Singapore agreed their NSW would be fully functional by 2008.

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48.

AN ASSESSMENT OF SERVICES SECTOR LIBERALIZATION IN ASEAN

DEUNDEN NIKOMBORIRAK and SUPUNNAVADEE JITDUMRONG

INTRODUCTION ASEAN has made a remarkable achievement in liberalizing trade in goods. The progress made in liberalizing trade in services, however, has not been as impressive. Liberalization efforts in services in the past have been focused on two areas: the promotion of trade services by using the GATS approach of request and offer of liberalization by services sector and the promotion of flows of skilled labour through the establishment of Mutual Recognition Arrangements (MRAs) of professional services. ASEAN FRAMEWORK AGREEMENT IN SERVICES ASEAN has completed seven packages of commitments to liberalize services trade thus far. But negotiations for the past fifteen years have resulted only in marginal liberalization of trade in services in ASEAN.

Lim (2008) quantified commitments made in AFAS compared to those made in the GATS. Table 1 illustrates the Sectoral Coverage Ratio (SCR) of AFAS commitments. SCR is defined as the ratio of GATS + AFAS sectoral coverage in the numerator and the GATS sectoral coverage in the denominator. That is, the larger the ratio, the more advanced are commitments made in the AFAS as compared with those made in the GATS. The minimum ratio, which is one, indicates that concessions made in the regional forum under the AFAS are not any more advanced than those made in the multilateral forum under the GATS. As can be seen, except for Brunei, Myanmar and the Philippines, the SCR figures for member countries are marginally greater than one. The low SCR scores for Cambodia and Vietnam, however, can be explained by their already advanced liberalization commitments made in WTO (due to their relatively late accession) rather than their

Reprinted in excerpted form from Deunden Nikomborirak and Supunnavadee Jitdumrong, “An Assessment of Services Sector Liberalization in Asean”, in ASEAN Economic Community Scorecard: Performance and Perception, edited by Sanchita Basu Das (Singapore: Institute of Southeast Asian Studies, 2013), pp. 47–78, by kind permission of the Institute of Southeast Asian Studies.

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unwillingness to open up their services sector at the regional level. Table 1 shows quantitative indicators of individual ASEAN country’s GATS commitments index.1 As mentioned earlier, Cambodia and Vietnam obtain the highest scores of 49.08 and 30.15, respectively. Brunei and Myanmar made very little concession in the GATS, while larger ASEAN economies such as Indonesia, the Philippines, Thailand, Malaysia, and Singapore, receive scores that range from the lowest at 9.52 for Indonesia to highest at 25.4 for Malaysia. For these countries, barring the Philippines, AFAS commitments are only marginal to those made in the WTO as the SCR figures are between 1.09 for Singapore and 1.56 for Indonesia. ASEAN’s average SCR score is only 1.58. Although Brunei and Myanmar made marked concessions in the AFAS over those made in the GATS, their commitments in the GATS were negligible to begin with such that commitments in the AFAS, too, were marginal. As a result,

the net liberalization indicators (shown in column 3) for these two countries remain rather low compared with those of other member countries. Only the Philippines made meaningful progress in liberalizing her services trade under AFAS. MUTUAL RECOGNITION ARRANGEMENTS (MRAS) The AEC addresses the importance of MRAs by enabling the qualifications of professional services suppliers to be mutually recognized by signatory member states; hence, facilitating easier movement of professional services providers in the ASEAN region. It should be noted that MRAs do not warrant unrestricted flow of foreign professionals as domestic rules and regulations would still apply. As of July 2011, ASEAN has concluded seven MRAs. However, each MRA is different, as follows:

TABLE 1: Liberalization Commitment in Services Trade under AFAS Compared with those made in the WTO (1) GATS Commitment

(2) SCR ((WTO + AFAS)/AFAS)

(3) (1) * (2)

Brunei Darussalam

4.35

3.38

14.70

Cambodia

49.08

1.21

59.38

Indonesia

49.52

1.56

14.85

Malaysia

25.40

1.26

32.00

Myanmar

44.94

3.00

14.82

Philippines

14.08

3.03

42.66

Singapore

22.66

1.09

24.69

Thailand

19.73

1.35

26.63

Vietnam

30.15

1.09

32.86

ASEAN average

13.0

1.58

20.53

Lao PDR

—

Source: GATS commitment index compiled from the World Trade Indicator, the World Bank (2008) and SCR scores from Lim (2008).

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1. MRAs on engineering and architecture provide recognition for registered ASEAN professionals by providing harmonized standards and qualifications; 2. The MRA on nursing was designed to strengthen professional capabilities by promoting the exchange of expertise, experience, and best practices; 3. MRAs on Accountancy and Surveying services lay down the broad principles and framework for the negotiating bilateral and multilateral MRAs; and 4. MRAs on medical and dental professions are based on bilateral registration processes. In sum, ASEAN MRAs provide the “tools” for ASEAN member countries to promote mobility of professionals within the region on a voluntary basis, rather than prescribing binding commitments. The extent to which these MRAs impact the ASEAN economy will depend on member countries’ willingness to liberalize professional services. THE AEC BLUEPRINT The AEC envisions ASEAN as a single production base which requires the free flow of goods, services, investment, capital, and skilled labour. To promote the free flow of services, liberalization will be achieved through five consecutive more rounds of negotiations, where remaining restrictions on trade in services are to be removed progressively until 2015, when substantially all restrictions shall be removed. The minimum number of new sub­ sectors2 for each round has been spelled out and priority sectors targeted for earlier liberalization have been identified. According to the AEC Blueprint, the following actions need to be taken by the member countries to achieve the free flow of services by 2015: 1. Remove substantially all restrictions on trade in services for four priority

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services sectors, air transport, e­ASEAN, healthcare, and tourism by 2010, and for all other sectors by 2015; 2. Schedule packages of commitments according to the following parameters: i. No restrictions for mode 1 (cross border supply) and mode 2 (consumption abroad), with exceptions due to bona fide regulatory reasons; ii. Allow for foreign (ASEAN) equity participation3 of not less than 51 per cent for the four priority sectors in 2008, 70 per cent in 2010; for other sectors, 49 per cent in 2008, 51 per cent in 2010 and 70 per cent in 2015, except for logistics services the target year is 2013; iii. Remove other mode 3 (commercial presence) market access limitations by 2015. 3. Complete MRAs in architectural services, accountancy services, surveying qualifications, medical practitioners by 2008, and dental practitioners by 2009. Implement MRAs expeditiously according to the provisions of each respective MRA and identify MRAs for other professional services by 2012, to be completed by 2015. It should be noted that the liberalization milestones stipulated in the AEC are to be implemented by rounds of negotiations in the AFAS. AEC service liberalization targets are to be implemented through four consecutive rounds of negotiations in the AFAS (eighth to eleventh packages) that are expected to be completed every two years until the year 2015. Table 1 reveals that service liberalization targets established in the AEC are far from those that are required to support full integration of member economies. First, liberalization in Mode 3 (commercial presence) envisions only 70 per cent of ASEAN equity share, i.e., wholly owned

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foreign (ASEAN) companies are still not allowed. Second, liberalization of Mode 4 (movement of natural persons) is confined to movement of professionals only, while unskilled labour is excluded. And even then, the goal established to promote the movement of professional services does not prescribe any liberalization obligations, but rather an agreement framework to facilitate liberalization. In short, the AEC services liberalization target is far from ambitious. Nevertheless, these liberalization targets are binding on member countries.4 However, the AEC allows for flexibility in complying with these commitments. Section 3 of the Blueprint states that in meeting clear targets and timelines, there should be “pre­agreed flexibilities to accommodate the interests of all ASEAN Member Countries”. This has translated into section 21(ix) under the free flow of services section, which stipulates as follows: Allow for overall flexibilities,5 which cover the sub­ sectors totally excluded from liberalization and the sub­sectors in which not all the agreed parameters of liberalization of the modes of supply are met, in scheduling liberalization commitments. The scheduling of liberalization commitments in each round shall be accorded with the following flexibilities: • Possibility of catching up in the next round if a Member Country is not able to meet the parameters of commitments set for the previous round; • Allowing for substituting sub­sectors that have been agreed to be liberalized in a round but for which a Member Country is not able to make commitments with sub­sectors outside the agreed sub­sectors; and • Liberalization through the ASEAN Minus X formula.

This flexibility provision is nothing but vague. First, it is not clear how the 15 per cent flexibility will be measured and quantified

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in practice. Second, while the inventory of restrictions to trade in services have been compiled and continuously updated, there has been no disclosure and assessment of this very important database on which the design of the flexibility conditionality is based. Third, while section 20 of the AEC stipulates that there shall not be “backloading” of commitments, allowing catching up of commitments will no doubt lead to such a problem. Fourth, it is not clear how a member country can switch out of a prescribed liberalization commitment by substituting with other sub­sectors not subject to liberalization. Can, say, a member switch out of commitments to open up a priority sector such as telecommunications (e­ASEAN) by making compensatory commitment in a less economically significant service sub­ sector such as leasing or advertisement? If so, what would be the use of specifying “priority sectors”? Finally, the option of “Liberalization through the ASEAN Minus X formula” appears to be saying that if a member country cannot comply with the liberalization thresholds and the deadlines established, then it can always opt out. The flexibility clause seems to dilute what is supposed to be “binding” commitments into nothing more than those based on “best effort”. COMPLIANCE WITH THE AEC BLUEPRINT ASEAN’s decision to abandon the request and offer approach to negotiating services trade liberalization agreement in favour of an approach that provides for clear quantitative liberalization targets and milestones as prescribed in the AEC Blueprint is laudable. However, the built-in flexibility which is both vague and broad undermines the attainment of free flow of services by 2015, as envisioned in the AEC Blueprint. The AEC Blueprint indicates that the service liberalization goals are to be achieved through five consecutive rounds

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of negotiations until the year 2015. As of today, ASEAN has concluded only one round of negotiations which produced the 7th service liberalization package in February. The conclusion of the 8th package has been delayed several times. Comparing commitments made in the 7th package with the milestones as prescribed in the AEC Blueprint , it is clear that every member country, barring Singapore, has fallen behind the liberalization goals in terms of foreign equity participation (Mode 3) in 2008 and in 2010. As for Mode 1 and Mode 2, the AEC envisioned no restrictions except for bona fide regulatory reasons. Here, with very few exceptions, members have largely complied with this commitment. The only problematic area is construction where cross border services remain unbound for many member states. On the contrary, all member countries, barring Singapore, fail to raise the foreign equity level in keeping with the schedule established in the AEC

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Blueprint. If there is no marked improvement in commitments in the 8th package, then it would be highly unlikely that the region will be able to meet its service investment liberalization goals by the year 2015. CONCLUSION This chapter makes four important discoveries. First, the service sector liberalization goals established in the AEC are far from ambitious with the partial liberalization of foreign equity share in Mode 3. Second, the implementation process remains vague with multiple flexibilities, some of which are opaque. Third, actual implementation is already far behind the milestones established in the AEC, perhaps because of the flexibility clause that permits back­ loading of liberalization commitments. With these discoveries, the AEC is unlikely to make any meaningful difference to the ASEAN services trade in the foreseeable future.

NOTES 1. The GATS commitments index ranges from 0 (unbound or no commitments) to 100 (completely liberalized) for 155 service subsectors as classified by GATS in the four modes of trade in service. A simple average of the sub­sectoral scores was used to generate aggregate sectoral scores. 2. There are in total 128 services subsectors based on the WTO GATS W/120 classification. 3. Note that according to Article 6 in AFAS, the definition of “ASEAN investors” includes legal person owned or controlled by non­ASEAN persons which are “engaged in substantive business operations” in an ASEAN country. Therefore, a company registered under the laws of an ASEAN is also entitled to the privileges offered under the AFAS. This concept is consistent with that used in the GATS. However, The GATS does not provide for a clear definition of a substantive business operation. ASEAN has yet to codify the key word “substantive”, without which the scope of investment liberalization in the region cannot be properly assessed. 4. Article 24 of the Charter of the Association of Southeast Asian Nations stipulates that “disputes concern the interpretation or the application of ASEAN economic agreements shall be settled in accordance with the ASEAN Protocol on Enhanced Dispute Settlement Mechanism”. The latter is based on the WTO dispute settlement mechanism. 5. The 15 per cent figure for overall flexibility will be reviewed upon the completion of the inventory of limitations in 2008.

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49.

FINANCIAL INTEGRATION CHALLENGES IN ASEAN BEYOND 2015

MARIA MONICA WIHARDJA

F

inancial integration challenges in ASEAN beyond 2015 can be grouped into two broad classes. The first class of challenges are the regulatory and infrastructure challenges of financial market integration itself. The second pertains to monetary and fiscal policy regimes and how they are impacted by as well as how they impact on an integrated financial market in the region. ABOUT ABIF As a part of the AEC Blueprint, ASEAN Central Bank Governors endorsed the ASEAN Banking Integration Framework (ABIF) on April 7, 2011. Against that background, as the ASEAN financial sector is generally bankdominated, the banking sector is a key driver in the financial integration process. The initiative for ASEAN financial integration could be traced back to the Roadmap for Monetary and Financial of ASEAN (RIA-Fin) established in 2003. As stated in RIA-Fin, financial integration in

ASEAN is facilitated through the following initiatives: • Financial Services Liberalization (FSB), i.e. progressive liberalization on financial services; • Capital Account Liberalization (CAL), i.e. removal of capital controls and restrictions to facilitate freer flow of capital; • Capital Market Development (CMD), i.e. building capacity and laying the longterm infrastructure for development of ASEAN capital markets. In April 2011, ASEAN Central Bank Governors accepted the results of the commissioned study by the team of consultants led by Professor Yung Chul Park as a reference for the ASEAN financial integration process. Central Bank Governors also endorsed the ASEAN Financial Integration Framework (AFIF) which is based on the agreed Broad Thrusts (i.e. three dimensions of FSL namely equal treatment, access and environment,

Reprinted in excerpted form from Maria Monica Wihardja, “Financial Integration Challenges in ASEAN beyond 2015”, ERIA Discussion Paper 2013-27 (Jakarta: Economic Research Institute for ASEAN and East Asia, 2013), by kind permission of the Economic Research Institute for ASEAN and East Asia (ERIA).

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milestones for ASEAN5 and BCLMV, clear set of preconditions and safeguards, financial stability, capital account liberalization, capacity building and shared responsibility, and integrated payments and settlements). Currently, ABIF is based on four guiding principles: bringing economic benefits and financial stability for individual countries and the region, allowing flexibilities by adopting a double-track implementation for ASEAN5 and BCLMV, and achieving multilateral liberalization by 2020 (e.g. measured by the number of ASEAN commercial banks presence in ASEAN). To ensure a successful implementation of ABIF, four pre-conditions have been agreed upon. The first is harmonization of principles of prudential regulations. The second is building financial stability infrastructure. The third is providing capacity building for BCLMV. The fourth is setting up agreed criteria for ASEAN Qualified Banks (QAB) to operate in any ASEAN country with a single ‘passport’. THEORETICAL FOUNDATION OF ABIF In the language of ASEAN Framework Agreement on Services (AFAS), banking integration can be measured by cross-border bank flows (Mode 1 of AFAS), consumption abroad (Mode 2 of AFAS), commercial banks presence (Mode 3 of AFAS), and movement of natural persons (Mode 4 of AFAS). ABIF concept of integration is commercial presence of QAB and it has been adopted as the benchmark for ASEAN Banking Integration by 2020. Banking liberalization is a part of the AEC Blueprint via the financial services commitment. It involves removing barriers in cross-border bank flows (Mode 1 of AFAS), consumption abroad (Mode 2 of AFAS), commercial banks presence (Mode 3 of AFAS), and movement of natural persons (Mode 4 of AFAS). In regards to service liberalization, the AEC Blueprint adopts

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liberalization through the “ASEAN-X” formula — where countries that are ready to liberalize can proceed first and be joined by others later — and the “pre-agreed flexibilities” (the Safeguard Framework) approach — where a particular country maintains a list of restrictions based on the pledged sub-sectors identified for liberalization in the following years — to accommodate the interests of all ASEAN countries. Cooperation in the context of ABIF may include: information sharing, consultation, technological transfers, learning from each other’s success and failures, and surveillance. Coordination in the context of ABIF may include cross-border crisis management protocol and even stronger policy coordination such as interest rate, exchange rate and fiscal policy coordination. LEGAL FOUNDATIONS OF ABIF Where is ABIF in regards to the legal framework of ASEAN? If we can agree that ABIF is extended from AFAS (e.g. “AFAS+”), then the 2004 amendment to Article IV of AFAS may provide a legal framework for ABIF. It states: “Two or more Member States may conduct negotiations and agree to liberalize trade in services for specific sectors and sub-sectors.” ABIF may start from a bilateral commitment between countries that are ready to implement ABIF (given the ABIF Framework has been completed) and any country that is ready to join may join. This “ASEAN2+X” approach is actually synonymous to AEC services liberalization formula of “ASEAN-X”. The “ASEAN2+X” formulation is in fact “older” than the “ASEAN-X” formulation and was the rationale behind the adoption of the “ASEAN-X” formula. While the “ASEAN-X” formula was adopted for AEC 2015, the “ASEAN2+X” formula was already adopted in the Framework Agreement on Enhancing ASEAN Economic Cooperation (signed on January 28, 1992)

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and in the ASEAN Framework Agreement on Services (signed on 15 December 1995). Hence, the legal foundation of ABIF through AFAS is legitimate given that ABIF sticks to the elements and principles of AFAS. HARMONIZATION OF PRINCIPLES OF PRUDENTIAL REGULATIONS Harmonization of principles of prudential regulations is needed to create a level playing field. Harmonizing principles of prudential regulations remains a big challenge. Singapore, adopting the relatively highest prudential regulations, including the adoption of Basel II.5 and highest paidup capital for conventional foreign bank branches, is far ahead from some of its BCLMV counterparts. Difficulties also arise since ASEAN countries are diverse in regards to their financial sector depths and systemic risks, and therefore need different levels of austerity in regards to prudential regulations. The question remains how to harmonize the principles of prudential regulations without lowering the prudential standards that may put a threat to the regional financial stability, but at the same, without putting the prudential standards too high that may be irrelevant and even adverse to other countries previously adopting lower prudential standards. Double-track implementation may be unavoidable. FINANCIAL STABILITY INFRASTRUCTURE Building financial stability infrastructure as a pre-condition to ABIF is a necessary crisispreventive measure. From the stock-take, it seems that macroprudential policy has not been comprehensive, fully integrated or even adopted in most of BCLMV countries. For example, unlike their ASEAN5 counterparts, BCLMV countries have not yet integrated crisis management in the definition of macroprudential policy. Moreover, none of

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BCMLV countries indicated that they have conducted macroprudential stress tests. In regards to deposit insurance, only Brunei among BCLMV covers foreign currencies while none of BCLMV countries adopt riskbased premium rates. What needs to be emphasized is here that financial stability infrastructure may start from the establishment of such infrastructure in each of individual countries, but eventually there have to be some regional financial stability infrastructure, such as regional macro-prudential monitoring and surveillance (should be under AMRO now), regional crisis management protocol, regional payment and settlement system, and regional financial safety net (should be under CMIM now). Future standard prudential regulations and financial stability architectures for ASEAN as a whole (which will adopt a doubletrack approach for ASEAN5 vs. BCLMV) will be reflected in the Qualified ASEAN Banks criteria and these will be subject to hard bargaining by individual ASEAN countries. The impacts of ABIF on ASEAN5 and BCLMV will be differentiated. BCLMV countries with poorer institutional qualities than some of their ASEAN5 counterparts may attract less bank lending, despite integration. THE IMPACT OF BANKING INTEGRATION ON MONETARY AND FISCAL POLICIES There are a few channels of how an integrated banking system can become a transmission of monetary policy. Firstly, an integrated banking system could become a transmission channel of monetary policy through policy rate adjustments. Secondly, an integrated banking system could become a transmission channel of monetary policy through capital flows and exchange rate adjustments. Thirdly, an integrated banking system could become a transmission channel of monetary policy through increased cross-

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border lending activities of foreign banks that could stimulate credit expansion in the domestic economy. For a regional ASEAN banking system, banking resolution, cross-border banking supervision and deposit guarantee system are needed. Under ABIF, ASEAN countries must decide whether it would be the host or home country that will pay for a bank restructuring and for what types of banks (branches, subsidiaries, etc.). This will impact fiscal policies in either the home and host countries. Banking integration will necessitate independent central banks that could enforce prudential financial regulations. POLITICAL CHALLENGES TO ACHIEVE ABIF The ABIF process seems to have been dominated by domestic political backlashes. These have slowed down the ABIF process and risked it ending in a deadlock. ABIF was supposed to be preceded by some necessary pre-conditions, namely harmonization of prudential regulations to create a level playing field and building financial stability infrastructure to ensure sufficient crisisprevention and crisis-management measures to mitigate and minimize risks and other unintended consequences associated with a more integrated banking system. However, progresses on these two pre-conditions have somehow been slow. What have been relatively more active and progressing are the working groups on capacity building and Qualified ASEAN Banks (QAB). Even though ABIF has been signed by the ASEAN central bank governors, as ABIF negotiation progresses, some countries have shown some signs of slowing down in their reforms towards banking integration. Under the previously multilateral negotiation framework, only banks with QAB criteria can enter all ASEAN countries, however, under bilateral negotiation

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framework, through bargaining between two countries, non-QAB banks can also penetrate other countries. Moreover, while some countries are pursuing reciprocal treatments (e.g. Indonesia), other countries are increasing barriers for foreign banks to enter (e.g. Singapore’s recent Qualifying Full Bank requirements). This has resulted in a slow-down of ABIF. ASEAN BANKING INTEGRATION FRAMEWORK: BEYOND 2015 In the language of ASEAN Framework Agreement on Services (AFAS), banking integration can be measured by cross-border bank flows (Mode 1 of AFAS), consumption abroad (Mode 2 of AFAS), commercial banks presence (Mode 3 of AFAS), and movement of natural persons (Mode 4 of AFAS). Currently, ABIF concept of integration is commercial presence of QAB and it becomes the benchmark for ASEAN banking integration by 2020. Second is about the pre-conditions in ABIF. The aforementioned four preconditions may look contradictory to AFAS that promotes services liberalization from the perspectives of the abovementioned four modes. It may look contradictory since ABIF may increase regulatory and prudential barriers instead of promoting banking liberalization. But, ABIF can be seen as ‘AFAS+’. While AFAS promotes banking liberalization via the four modes, ABIF provides the “soft infrastructure” (harmonized regulation) and “hard infrastructure” (financial stability infrastructure). Third is about the benefits, opportunities, costs and risks of ABIF. In a short term, theoretically, ABIF should bring the promised benefits and the costs of ‘tied hands’ or inflexibilities to respond to domestic issues. Fourth is about the strategies to maximize the benefits/opportunities and minimize the costs/risks. Firstly, ASEAN should accelerate the operation of regional financial safety

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net. The current ASEAN+3 (ASEAN + China, South Korea, and Japan) Chiang Mai Initiative Multilateralization (CMIM) have uncertainties over procedures and is untested. CMIM now has two instruments: a Short-Term liquidity facility — CMIM Precautionary Line — as a crisis prevention mechanism and a Medium-term crisis resolution facility — the CMIM stability Fund. Clearly, the size of the reserve pooling fund is too small for the Plus Three and the ASEAN5 countries (even for the smaller BCLMV countries in crisis). Hence, CMIM

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cannot be a substitute to the IMF but maybe a complement. Secondly, ASEAN should be re-thinking about the differentiated impacts of ABIF on ASEAN5 and BCLMV. In regards to global banking standards, such as those that are set by the Basel Committee on Banking Supervision (BCBS), there is no need for ABIF to re-invent regional banking standards. Financial regulatory reforms such as those of the Financial Stability Board and Basel reforms, which are driven as a reaction to the European and the US financial and banking crises, apply to all countries including ASEAN countries.

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50.

FREE FLOW OF SKILLED LABOUR IN ASEAN

CHIA SIOW YUE

INTRODUCTION The AEC provides for market access for ASEAN skilled labour. “Free flow of skilled labour” affects the implementation of the ASEAN Framework Agreement on Services (AFAS) through allowing foreign service suppliers, and the ASEAN Comprehensive Investment Agreement (ACIA) through allowing employment of foreign corporate personnel to accompany FDI. The AEC Blueprint focuses on action to implement Mutual Recognition Arrangements (MRAs) for major professional services. It is obvious that recognition of qualifications is not enough to ensure market access in ASEAN. We need to also look at policies and regulatory frameworks affecting skilled labour mobility, and highlight the various policy and regulatory constraints and impediments.1 POLICIES AND REGULATORY FRAMEWORKS ON SKILLED LABOUR MOBILITY IN AND AMONG ASEAN COUNTRIES ASEAN governments have facilitated inflows of professional manpower for various

reasons, including to: facilitate FDI by permitting entry of foreign business people and professionals to accompany FDI; meet short-term skills shortages; facilitate structural/industrial upgrading; meet commitments under GATS and FTAs; and promote health and education services. Provisions in AFAS AFAS provides for regulatory convergence and regulatory harmonization including MRAs. AFAS Article 5 — Domestic Regulation (on qualifications): With the objective of ensuring that measures relating to qualification requirements and procedures, technical standards and licensing requirements do not constitute unnecessary barriers to trade in services, the Parties shall jointly review the results of the negotiations on disciplines in these measures pursuant to Article VI.4 of GATS, with a view to their incorporation into the Agreement.

Reprinted in excerpted form from Chia Siow Yue, “Free Flow of Skilled Labour in Asean”, in ASEAN Economic Community Scorecard: Performance and Perception, edited by Sanchita Basu Das (Singapore: Institute of Southeast Asian Studies, 2013), pp. 107–35, by kind permission of the Institute of Southeast Asian Studies.

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AFAS Article 6 — Recognition (on qualifications): • For the purposes of fulfilment of their respective standards or criteria for the authorization, licensing and certification of service suppliers, each Party may recognize the education or experience obtained, requirements met, or licenses or certification granted in another Party. • Two or more parties may enter into, or encourage their relevant competent bodies to enter into, negotiations or recognition of qualification requirements, qualification procedures, licensing and/or registration procedures for the purposes of fulfilment of their respective standards or criteria for the authorization, licensing or certification of service suppliers; • A Party to an agreement or arrangement of the type referred to in paragraph 1 shall afford adequate opportunity for other interested Parties to negotiate their accession to such an agreement or arrangement or to negotiate comparable ones with it.; and • A Party shall not accord recognition in a manner which would constitute a means of discrimination between countries or a disguised restriction on trade in services. AEC Blueprint on “Free Flow of Skilled Labour” In general, types of natural persons allowed, with certain conditions, for temporary presence in ASEAN countries are: business visitors for sales negotiations; intra-corporate transferees (executives, managers, specialists, others), executives, managers, specialists, technical experts, certain professionals, certain types of skilled workers, and other types of persons such as consultants and chefs.

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Reference to the free flows of skilled labour in the Blueprint may be found in A2. Free Flow of Services and A5. Free Flow of Skilled Labour: • On the free flow of services by 2015, ASEAN is working towards recognition of professional qualifications. ASEAN is also working towards harmonization and standardization, with a view to facilitate their movement within the region and • On the free movement of skilled labour, ASEAN is working to facilitate the issuance of visas and employment passes for ASEAN professionals and skilled labour; facilitate the free flow of services; enhance cooperation among ASEAN University Network (AUN) members to increase mobility for both students and staff within the region; and strengthen the research capabilities of each ASEAN Member Country in terms of promoting skills, job placements, and developing labour market information networks among ASEAN member states. The timelines are: – Complete MRAs for major professional services, including Priority Integration Services (PIS) sectors of e-commerce, healthcare, air travel, tourism and logistics by 2008; – Develop core competencies for job/ occupational skills required in PIS by 2009; and – Develop core competencies (concordance of skills and qualifications) for job/occupational skills in all service sectors by 2015. ASEAN University Network (AUN) The AEC Blueprint lists as one of its actions towards free flow of skilled labour as enhancing cooperation among AUN members to increase mobility for both students and staff within the region.

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The AUN structure comprises a Board of Trustees, Participating Universities and Secretariat.2 The AUN Secretariat is based at Chulalongkorn University in Thailand. At the Second AUN Rectors’ meeting in March 2010, progress of the implementation of the ASEAN Credit Transfer System (ACTS) was discussed. Quality of the courses offered by AUN member universities is essential to the success of ACTS. ACTS face severe problems of differences in the languages of instruction, differences in standards of faculty members and student entry requirements among universities (not only across countries, but also within countries), and differences in university resources to fund exchanges of staff and students. Hence, significant exchanges of staff and students are limited. ASEAN Mutual Recognition Arrangements (MRAs) AFAS Article V (Mutual Recognition) states that a member state may recognize the education or experience obtained, requirements met, or licences or certifications granted in another member, for the purpose of licensing or certification of service providers. Normally there are five primary/basic components of an MRA — definition, recognition provision, recognition mechanism, dispute settlement provision, and capacity building provision. The AEC Blueprint’s strategic schedule for MRAs are: • 2008–09:  Complete MRAs currently under negotiation, that is, architectural services, accountancy services, surveying qualifications, medical practitioners and dental practitioners (2008); • 2010–11:  Identify and develop MRAs for other professional services by 2012–13; and • 2014–15:  Full implementation of completed MRAs (2015).

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The following MRAs have been concluded: 1. Engineering services, signed in December 2005; 2. Nursing services, signed in December 2006; 3. Architectural services, signed in November 2007; 4. Framework for surveying qualifications, signed in November 2007; 5. Medical practitioners, signed in February 2009; 6. Dental practitioners, signed in February 2009; 7. Framework for accountancy services, signed in February 2009; and 8. Ongoing negotiations on tourism professionals. Major difference between MRA and MRA Framework is in terms of objectives - while the MRA aims at facilitating the mobility of designated professionals, the MRA framework limits itself to facilitating only the negotiations of MRAs, by providing a structure towards the conclusion of such MRAs. For accountants and surveyors, member countries agreed to a framework by which their qualifications could be recognized, and have encouraged member states to negotiate MRAs among themselves covering these lines of work. Additionally, an MRA also aims at promoting the exchange of information and enhance cooperation in respect of the mutual recognition to promote the adoption of best practices on standards and qualifications in a particular profession and to provide opportunities for capacity building and training. Typical processes in implementation preparation of MRAs involve setting up implementation committee and its rules and procedures; setting up secretariat for implementation; establish recognition/ assessment mechanism; compilation of related domestic rules and regulations. Typical processes in implementation involve

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review of recognized institutions, review of applicants, and the establishment of work programme. The Economic Community Scorecard (May 2012) reported that MRAs for engineers and architects have been implemented, “while work is underway to effectively operationalise the other professional MRAs (nursing, medical, dental, accountancy, and surveying). This result is somewhat puzzling, as Tilleke & Gibbins reported that Thailand has yet to adopt domestic legislation to implement the ASEAN MRAs. Tilleke & Gibbins (29 February 2012) note that on MRAs, the general approach is that, to be eligible to work in the host country, the skilled worker must meet the requirements applicable in the skilled worker’s country of origin. These would include appropriate qualification, professional registration and/or licence, minimum experience, satisfaction of continuing education requirements, lack of professional misconduct and no pending investigations thereof, and perhaps other requirements such as medical examinations or competency assessments. Tilleke & Gibbins cautioned that these agreements do not function to override local laws. The agreements are applicable only in accordance with prevailing laws and regulations of the host country. Practically, this means that member countries can still impose significant restrictions on skilled labour mobility. For example, in Thailand the Alien Employment Act remains in force. And Thailand has yet to adopt domestic legislation to implement the ASEAN MRAs. A major challenge is certification of professional qualifications skills across ASEAN countries with different educational systems and standards. MRAs are designed to facilitate mobility of professionals in the regulated or partially regulated occupations. Medical doctors and nurses clearly belong to the first category in all ASEAN countries. IT professionals belong to an unregulated category with no legal requirements for

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registration or licensing, or even a requirement to comply with professional standards set up by a corresponding professional body. Aside from the need to amend domestic law, the development of MRAs presents significant challenges for some lines of work, given the differences in educational standards across member countries. To address this issue, there are also efforts to develop core competencies and qualifications for various lines of work. Quality assurance refers to pre­employment requirements, health and security clearance, personal and professional references. These are normally required by receiving countries and prospective employers. Language proficiency (in the national language of receiving country) is usually required in certain professions, such as medical, nursing, teaching and legal to ensure efficient delivery of service and protect consumers. It acts as a serious barrier to skilled labour mobility. In countries where English is one of the state languages and a language of instruction in the tertiary system (Singapore and Philippines) the mobility of healthcare and teaching professionals is greatly facilitated. Likewise, prospects of working abroad for healthcare professionals from Myanmar are greatly facilitated by their English language skills. On the other hand, lack of English language skills is a major impediment to international mobility of Indonesian and Thai professionals. Entry into Japan of healthcare professionals under various bilateral EPAs (economic partnership agreements) with ASEAN member states, requires that the foreign nurses undergo appropriate language training before they qualify for a Japanese licence/registration. CONCLUSION Skilled labour mobility is essential for effective implementation of services liberalization and FDI liberalization as well as a goal in itself for deeper ASEAN economic integration.

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Further, as more ASEAN countries strive to move up the technological ladder, liberalizing trade in goods and services and in FDI is not enough, and a larger pool of professional and skilled manpower becomes necessary. Until such time when domestic educational and training institutions are able to supply the necessary high level manpower, countries will have to depend on “foreign talents”. Effective cooperation among the ASEAN University Network in terms of mobility of students and staff remain limited, reflecting the sharp differences in curricula and standards among the institutions, lack of an ASEAN “role model” and the limited financial resources for student and staff exchange. MRAs appear to be the main tool for skilled labour mobility in ASEAN. However,

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negotiating for recognition is a complex and time­-consuming process given the wide differences in development levels among ASEAN countries. Effective implementation of these MRAs poses even further problems. ASEAN member states should try, as far as possible, to remove the various regulatory impediments to freer flow of skilled labour. For a start, more information exchange and transparency and simplifying visa and employment pass applications would help. Amending constitutional provisions would be extremely difficult. However, it would be hard to envision an ASEAN single market and production base by 2015 or later without the free flow of skilled labour to deliver on services and FDI liberalization.

NOTES 1. See Chia (2011) for detailed analysis of these impediments to ASEAN skilled labour mobility. 2. The initial participating leading universities of ASEAN are Universiti Brunei Darussalam; Gadjah Mada; Universiti Sains Malaysia and Universiti Malaya; University of the Philippines; National University of Singapore and Nanyang Technological University; Burapha University of Thailand.

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51.

TOWARD A SINGLE AVIATION MARKET IN ASEAN Regulatory Reform and Industry Challenges ALAN KHEE-JIN TAN

OVERVIEW The ten member states of the Association of Southeast Asian Nations (ASEAN) have identified a 2015 deadline to establish an ASEAN Single Aviation Market (ASAM) for the liberalization of air transport services in the region. Also referred to as the “ASEAN Open Skies” policy, the aim is to have the ASAM in place by the time the proposed ASEAN Economic Community (AEC) takes effect in 2015. Over the years, the concept of progressive liberalization of air transport services has been reaffirmed at successive high-level fora, particularly at the annual ASEAN Transport Ministers’ Meetings (ATMs). In November 2004, building upon earlier discussions, the 10th ATM in Phnom Penh, Cambodia, adopted an Action Plan for ASEAN Air Transport Integration and Liberalization 2005–2015 (ASEAN, 2004). This Action Plan, together with an accompanying document known as the Roadmap for Integration of Air Travel Sector (RIATS), laid down the now-

familiar target date of 2015 for achieving an effective “open skies” regime for the region. At this juncture, it is critical to appreciate what exactly the various “freedoms” entail. To take an example, a Singapore carrier flying between Singapore and Bangkok, Thailand would require the “first freedom” to overfly Malaysian airspace and the “second freedom” to stop in Malaysia for fuel and supplies, if necessary. The actual commercial opportunities are covered by the subsequent “freedoms”. All these “freedoms” or rights are granted by states to each other through bilateral negotiations, often with flight and capacity limits. MAAS, MAFLPAS AND MARKET ACCESS LIBERALIZATION At the 13th ATM held in Singapore in November 2007, the Transport Ministers reaffirmed their commitment toward the RIATS goals and agreed to expand RIATS

Reprinted in excerpted form from Alan Khee-Jin Tan, “Toward a Single Aviation Market in ASEAN: Regulatory Reform and Industry Challenges”, ERIA Discussion Paper 2013-22 (Jakarta: Economic Research Institute for ASEAN and East Asia, 2013), by kind permission of the Economic Research Institute for ASEAN and East Asia (ERIA).

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to implement the ASEAN open skies policy by 2015 as part of the formal ASEAN Single Aviation Market (ASAM). Since then, the RIATS commitments for passenger services have been successfully incorporated into two formal legal agreements for ASEAN member states’ acceptance. These are the Multilateral Agreement on Air Services (MAAS) and the Multilateral Agreement for Full Liberalization of Passenger Air Services (MAFLPAS), adopted in 2009 and 2010 respectively. The idea of relaxing market access rights within and between sub-regions demonstrates ASEAN’s incrementalist philosophy of starting with modest goals first and pursuing more ambitious relaxations at a later stage. What is obvious is that the designated points in the sub-regions covered by Protocols 1 to 4 are mainly secondary cities. In terms of air traffic volume and market potential, Protocols 5 and 6 have much greater economic impact as these cover the ten capital cities and are not bound by subregional proximity. STATE PARTIES TO THE MAAS, MAFLPAS AND IMPLEMENTING PROTOCOLS It must be remembered that the MAAS and MAFLPAS Implementing Protocols that spell out the above market access “freedoms” are legal instruments that stand separately from their “parent” MAAS and MAFLPAS agreements. Hence, these Protocols must be individually accepted by member states before they can take effect for those states. Obviously, if all 10 ASEAN member states accept and become contracting parties to the MAAS and MAFLPAS agreements and all their Implementing Protocols, an unlimited third, fourth and fifth freedom regime between and among all international points in ASEAN will be in full and immediate effect. However, that is not currently the case, as shall be assessed below.

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Both MAAS and MAFLPAS have now entered into force after receiving the acceptance of the minimum number of three member states for each agreement. In the case of MAFLPAS and its Protocols 1 and 2, Cambodia, Indonesia and Lao PDR have not become state parties. Indonesia’s position can be traced to its leading carriers’ active lobbying of their government to continue protecting their international operations against those of rival airlines from neighbouring ASEAN states. However, the Indonesian airline industry, through the Indonesian National Air Carriers Association (INACA), consistently opposes efforts to open up the ASEAN air travel market. Such dynamics have also led the Indonesian government to propose only five points for an “open skies” policy — the major cities of Jakarta, Surabaya, Medan, Makassar and Bali. Even if falling short of full relaxations, it will effectively open up a sizeable amount of the international market into and out of Indonesia, given that the five cities (particularly the capital, Jakarta) account for the bulk of international traffic into the country. The reality is that some airline quarters in Indonesia remain resistant to offering full and unlimited access into Jakarta, especially for Singapore, Malaysian and Thai carriers. This is consistent with the “partial” or selective open skies policy advocated by INACA. Due to the Indonesian carriers’ relatively limited international operations, most travellers from Europe, North America and Northeast Asia travel into and out of Indonesia on foreign carriers’ sixth freedom operations. The largest operator in this regard is Singapore Airlines, which channels these travellers through its hub, Singapore Changi Airport. In recent years, the highly successful Malaysian low-cost carrier AirAsia has also begun to transport the budget-

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minded segment of travellers in this same manner through its hub at Kuala Lumpur International Airport. The lobbying influence of the airlines must, however, be contrasted with the position of other stakeholders in the Indonesian economy. As might be expected, sectors such as the tourism industry greatly welcome the economic advantages that liberalization might bring. As such, the aero-political landscape in Indonesia is highly complex: it would be inaccurate to assume that efforts to liberalize the air transport industry are resisted by all the major stakeholders in Indonesia. For now, though, the airline industry clearly has the upper hand in lobbying the government to continue protecting its interests. SEVENTH FREEDOM AND DOMESTIC OPERATIONS: AN INCOMPLETE ASAM If the relatively modest third/fourth and fifth freedom relaxations analyzed above do not even enjoy full acceptance from all ASEAN member states, prospects are even bleaker for any future relaxation to “seventh freedom” and cabotage restrictions. The seventh freedom refers to the right of a carrier to connect two international points outside of its home country. Domestic carriage or “cabotage” remains highly sensitive for large countries with a huge domestic base. Consequently, AirAsia (a Malaysian carrier) cannot base a fleet in Singapore to ply routes between Singapore and third countries as these would be seventh freedom operations that compete head-on with the Singapore carriers. How does this explain AirAsia’s well-known operations in Thailand, Indonesia and the Philippines that allow it to operate from and within these countries? What happens in reality is that AirAsia has incorporated subsidiaries in those countries that are technically local airlines.

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This operating model is one effective method that industry players use to get around governmental prohibitions. In effect, it allows the AirAsia group to circumvent the seventh freedom prohibition (such rights are not allowed under bilateral or multilateral agreements) and to effectively operate such flights out of their Bangkok, Jakarta and Manila hubs under a well-known common brand. OWNERSHIP AND CONTROL RESTRICTIONS The above “circumventions” remain, of course, inconvenient and less than ideal. This is because the AirAsia group has to resort to establishing overseas subsidiaries (and accepting only a minority shareholding in each of these) instead of operating in its own right. This means that foreign interests’ stakes in a local carrier cannot exceed 49% of shareholding. That said, the requirement of “effective control” is less clear. On the one hand, the CEOs of these subsidiary carriers are typically individuals with local nationality, and their respective boards have majority local representation (Tan, 2009). Yet, there is little doubt that managing expertise and strategic decisions do emanate from the parent foreign airline that is the minority owner, particularly because the local majority shareholders typically have no aviation experience. The member states should work toward a regime that allows for carriers bearing a trans-ASEAN ownership structure to be recognized automatically, instead of at the discretion of each individual member state. AN EMERGING “THREAT”: THE NEW ASEAN-CHINA AIR TRANSPORT AGREEMENT For now, MAAS and MAFLPAS are the “high points” of air services liberalization in ASEAN.

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Toward a Single Aviation Market in ASEAN: Regulatory Reform and Industry Challenges

If and when accepted by all ten member states, both agreements will effectively usher in fully unlimited third, fourth and fifth freedom operations for all ASEAN carriers from their home points to all international points in the region. At the same time, the liberalization of seventh freedom and domestic/cabotage operations has not even been contemplated yet, let alone the relaxation of ownership and control rules. In the long term, this shortcoming will potentially create barriers for ASEAN airlines’ competitiveness vis-à-vis airlines from outside the region. One clear example of this is the landmark ASEAN-China Air Transport Agreement (ATA) adopted in 2010 between the ASEAN states, on the one hand, and China, on the other. In essence, the problem is that the ATA was concluded with China before the ASEAN states achieved internal liberalization of its air services market. The remaining five ASEAN countries have the option to accept the ATA whenever they feel ready. The near-term advantage for the ASEAN airlines is significant. They now have unlimited penetration into all of China, with the exception of the three excluded points. However, the reality is that there will be long-term systemic disadvantages for the ASEAN carriers. This is because under the ATA’s third and fourth freedom regime, these carriers can only operate to the Chinese points from points in their own territory. Hence, if all ten ASEAN countries eventually become state parties, the Chinese airlines will still remain the only carriers that can connect any point in China with any point in ASEAN. This presents a serious network imbalance: one that stems from the ASEAN countries’ own inability or unwillingness to treat themselves as a true single or common market. For ASEAN, the E.U. lesson is wholly relevant and applicable. The member states must similarly band together before they can take on the likes of bigger, unified markets such as China.

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AIR FREIGHT (CARGO) SERVICES Within ASEAN, the RIATS commitments as regards air freight services have been formalized in an agreement called the Multilateral Agreement on Full Liberalization of Air Freight Services (MAFLAFS). While foreign carriers’ air freight operations are generally less sensitive for states than passenger services, it does not mean that all states readily grant unlimited market access for foreign carriers. CONCLUSION Despite all the problems and shortcomings faced, ASEAN’s hope is that member states will in time recognize that it is in their collective interest to forge a truly single aviation market and a common position for negotiating air services with other countries. However, even the most optimistic observer will concede that time is not on ASEAN’s side. The reality is that progress toward a meaningful ASAM is certain to be slow, with big players like Indonesia continuing to hold out on relatively modest issues like third and fourth freedom passenger rights and even air freight services. Such dynamics breed the instinct for protectionism amidst a “winners vs. losers” paradigm, even as challenges loom in the form of competition from outside the region. In the meantime, there are several factors that may hopefully provide the momentum for change beyond 2015 and that might strengthen aviation’s contribution toward the ASEAN Economic Community. First is the growing confidence of Indonesian carriers such as Garuda and Lion Air. Second, there is the pressure created by the provincial governments, tourism authorities and business community to allow greater direct access into regional cities. Third, as identified above, there is the pressure created by the agreements with

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larger countries outside the region such as China. Fourth, industry response is critical and should not be under-estimated. One example is how AirAsia pioneered the crossborder joint venture/subsidiary model — while still imperfect, it allows the airline

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to get around the “seventh freedom” prohibition and to operate region-wide from multiple hubs using a common, wellrecognized brand. In this way, AirAsia has come as close as it can presently get to being an ASEAN “community carrier”.

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ASEAN Socio-Cultural Community

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52.

AN ASEAN COMMUNITY FOR ALL Exploring the Scope for Civil Society Engagement TERENCE CHONG

T

his section offers a broad picture of the diverse landscapes in Southeast Asia in which the relationship between civil society and state varies according to the political system, historical circumstances and societal complexion of different countries. It seeks to identify common trends and idiosyncrasies in order to provide a regional overview of civil society in Southeast Asia. THE ROLE OF THE STATE IN ASEAN MEMBER COUNTRIES Throughout the 10 ASEAN member states, the state continues to be the most crucial player in setting the conditions for civil society. The state has the power, through the institutional capacities at its disposal, to determine the character and agenda of civil society organisations (CSOs). However, while the state is a primary player in contemporary societies, the everyday reality on the ground may not necessarily reflect this. As the country chapters indicate, in some countries, civil society has emerged

as the key facilitator of public services and education. Here, civil society has either taken over or strongly supplements the state’s traditional role in providing public services. In other cases, the state may indirectly determine the agenda of CSOs through government policies, which may further entrench economic, political, ethnic, religious or cultural divisions in society. Whether in the areas of the economy, housing, or politics, minority groups may be marginalised, resulting in the emergence of CSOs to offer representation. In such instances, civil society-state relations may be strained. CIVIL SOCIETY-STATE WORKING RELATIONSHIPS: TACIT UNDERSTANDING, ADVOCACYORIENTED AND MEDIATED In light of the diverse conditions, there is no single ASEAN norm or regional modus operandi with regard to civil society-state collaboration or co-operation. CSOs in

Reprinted in excerpted form from Terence Chong, “Executive Summary”, in An ASEAN Community for All: Exploring the Scope for Civil Society Engagement, edited by Terence Chong and Stephanie Elies (Singapore: Friedrich-Ebert-Stiftung, 2011), pp. 9–20, by kind permission of Friedrich-Ebert-Stiftung Office for Regional Cooperation in Asia.

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the ASEAN member countries have had to adapt to and negotiate the specific political and historical terrain in their respective countries. The working relationship between CSOs and the state may best be characterised as one of ‘tacit understanding’ where there is a convergence of interests between CSOs and the state, especially in the area of public service delivery. The authoritarian state may not have the capacity, expertise or the (political) will to effectively deliver basic public services such as health and education, and thus relies on CSOs and/or international non-government organisations (INGOs) to fund and deliver such basic services. In other country reports, the working relationship described may be characterised as more advocacy-oriented and potentially conflictive in nature where CSOs, by representing marginal groups, petition and champion the interests of these groups, usually in opposition to state or business interests. Such CSOs, particularly local nongovernment organisations (NGOs), may be more advocacy-oriented, and seek to highlight the plight of different marginal groups. Much of the advocacy work centres on rights issues such as human rights, indigenous rights, women’s rights, sustainable development and environmental concerns. Finally, the civil society-state working relationship may be perceived as a ‘mediated’ one where CSOs enjoy some autonomy but operate largely under the political and legal conditions set by the state. In such instances, the regulations governing CSOs are clear and abided by, while law and order concerns are generally given high priority. It is important to note that these characterisations are neither mutually exclusive nor are they meant to typify civil society in particular countries. They are broad and common modes of civil society-

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state relations found across the country reports and may play out within the same national civil society landscape. CSO NUMBERS: AN EDUCATED GUESS The number of CSOs in many ASEAN countries is fluid. There are several reasons for this. As we have seen, many NGOs are not officially registered. Official numbers may also be outdated. Furthermore, there are many NGOs which are dormant, existing only in name but largely inactive; while others cease to exist after a short duration or merge with other NGOs. In some cases, there is no distinction between NGOs; international NGOs (INGOs), national NGOs (NANGOs) or professional associations in the registration process, thus conflating the numbers greatly. In short, collating the number of CSOs in Southeast Asia is not more than an educated guess. Nevertheless, these following figures serve to offer a broad picture. According to the respective country reports, Brunei has about 727 registered societies; Cambodia has 1,495 registered NANGOs; Indonesia has about 9000 registered CSOs; Laos has around 250 NGOs and NANGOs; Malaysia has approximately 58,738 registered societies; Myanmar estimates the number of NANGOs to be between 300 and 2000; Philippines has 115,331 registered CSOs; Singapore has about 7,111 registered societies; Thailand has an estimated number of 13,179 CSOs; and finally Vietnam has around 4,157 professional associations. CSO INTERESTS: KEY TRENDS Given the different stages of economic development across the region, it is unsurprising to find a wide variety of CSO themes and interests.

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An ASEAN Community for All: Exploring the Scope for Civil Society Engagement

Firstly, CSOs, especially those concerned with agricultural, climate change, environmental, and sustainable development issues are ubiquitous across the region. A typical scenario would be that of Myanmar where “a number of CSOs have been working on environmental issues for about a decade, promoting sustainable development, environmental conservation and adaptation to climate change notably through community forestry, the creation of natural reserves and the plantation of mangroves in coastal areas.” In such cases, these CSOs may be seen as custodial-oriented whereby the livelihood of farmers, miners, fishermen, or natural resources like forests and minerals are to be safeguarded. Secondly, human rights CSOs are active across the region regardless of economic development and political regime. Such CSOs may engage in the championing of political and gender rights, sexuality issues, and personal freedom issues. The Philippines chapter notes that “The experience of human rights abuses under the Marcos dictatorship had resulted in many human rights organisations. These organisations have continued even after the fall of the dictatorship because human rights abuses persist.” Thirdly, credit and microfinance is growing in importance among CSOs. There are also a number of CSOs engaged in livelihood programmes and, more recently, social enterprises. The Philippines chapter shows that “livelihood, social enterprises and microfinance are actively championed. Co-operatives and non-profit microfinance institutions have been providing financial services to citizens and organisations that would have otherwise been unable to access loans from existing banking institutions.” Fourthly, health and safety concerns regarding sex workers have also become important CSO themes. Increased travel networks and globalisation have

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compounded this issue. As the region’s economies become more intertwined the outflow of migrant workers and sex workers from less developed countries into more developed ones has made it necessary for CSOs to tackle accoutring problems such as abuse, contractual violations, and health and safety concerns. Finally, above and beyond these trends, it is also important to note that INGOs play a crucial role in many countries across the region. In such cases, the state is either unwilling or unable to deliver public services such as education and health, and must thus rely on international agencies or donors to supply expertise and funds. Many local CSOs also may not have the infrastructure or staff to deliver such services. CSO HUMAN RESOURCE: COMPETING FOR THE MIDDLE CLASS AND THE REGENERATION PROCESS In addition to inadequate funding, human resource continues to be a key challenge for CSOs in Southeast Asia. Without the requisite number of staff or the efficient allocation of expertise, CSOs cannot function, and may even become a hindrance to the community. In terms of human resources, CSOs in the region face three general challenges. The first challenge is the lack of staff and skills to train, develop and nurture qualified members to run NGO programmes in a clear and efficient manner. According to the Indonesia chapter “the majority of NGOs (61 per cent) have staff with fewer than 10 persons.” Secondly, although the middle class is gradually expanding in Southeast Asia, engaging members from this middle class remains a big challenge for CSOs. This is because CSOs compete with the private sector which offers better career opportunities and higher wages. The third challenge is regeneration. Even

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if NGOs manage to employ full time staff or hire the required expertise to conceive and implement their programmes, many of these NGOs struggle to retain them and nurture future NGO leaders. CSO TRANSPARENCY: CULTURE OF PROFESSIONALISM AND NEED FOR DOWNWARD ACCOUNTABILITY Many CSOs often demand transparency and accountability from governments and businesses. Such demands are legitimate and important, and should not only be made of governments and business, but of CSOs themselves too. More can and should be done to improve transparency and accountability among CSOs. In many cases, there is little or no transparency or accountability at all. One broad trend is the absence of the culture of professionalism from many CSOs. Very often decisions are made through personal contact and informal means, with very little documentation. Contractual documentation is rare as transactions may take place based on personal understandings. Another trend, linked to the first, is that many local NGOs are driven by strong personalities, often resulting in the lack of institutionalised transparency or oversight in decision-making processes. In many cases, prominent individuals have become the face of NGOs, and are synonymous with them, thus tying the fortunes of these NGOs to their own career highs and lows. In addition, many CSOs are not registered and are thus not subjected to accountability procedures. Even for the ones that are registered, the information submitted is general and not detailed, while the sheer number of CSOs make it unlikely that the state would follow-up on the accuracy of the information submitted by these CSOs. Furthermore, transparency is often narrowly defined by NGOs as the yearly issuance

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of broadly worded annual reports while accountability is narrowly defined as financial accountability. CONCLUDING REMARKS: CHALLENGES FOR THE FUTURE Though diverse in experience, civil society in Southeast Asia may be said to have played a variety of roles from doing advocacy work, delivering public services, shouldering custodial responsibility, and monitoring state institutions. CSOs have also been crucial to the representation of marginal communities, the protection of the environment, and the raising of public awareness over issues such as gender, education and health. Looking into the future, the chapters also suggest several challenges that may affect the way CSOs perform their different roles. Firstly, as countries experience a broadening of the middle class, the impending challenge would be to attract more highly educated and skilled individuals into civil society work in the hope that some may emerge as leaders and key personnel of CSOs. The second challenge is the on-going competition for funds. This challenge is more serious for CSOs that have long been dependent on international funding. Changing geopolitical interests have meant that international donor agencies have re-prioritised their allocation of funds. Furthermore, countries like the Philippines and Thailand, long dependent on international funds, have found that their changing status from ‘recipient’ country to ‘emerging donor’ country has ramifications on the amount and frequency of international funds they receive. Finally, many CSOs can afford to do better in the area of transparency and accountability. Whether they lack the personnel to organise and present information and accounts, or that their non-registration with

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the state relieves them of the responsibility, or that they do not want to reveal administrative and organisational inefficiencies, many CSOs

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still have a long way to go before they reach international norms of transparency and accountability.

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53.

CIVIL SOCIETY AND THE ASEAN COMMUNITY

MAY-ANN LIM

INTRODUCTION

ASEAN-CSO ENGAGEMENT TO DATE

With the deadline to achieve an Association of Southeast Asian Nations (ASEAN) Community by 2015 drawing near, there has been an increased urgency to ensure that ASEAN leaders’ commitment to “promote ASEAN peoples to participate in and benefit fully from the process of ASEAN integration and community building”1 does not go unfulfilled. Unfortunately, there are still gaps in our knowledge that need to be filled if policymakers are to make better-informed decisions about how to improve the quality and impact of dialogue between ASEAN and civil society organisations (CSO). This chapter’s objective is to identify the opportunities and challenges for ASEANCSO engagement. This will be done in the context of existing and developing ASEAN processes (such as the ASEAN Socio-Cultural Community Roadmap).

ASEAN engagement with CSOs is currently at a crossroads as the work by member states laid out in the ASEAN Socio-Cultural Community Roadmap accelerates. CSOs have also taken strides in developing their own discursive processes, with the three traditional tracks of CSO discussions, namely, the ASEAN-ISIS network’s ASEAN People’s Assembly (APA), the ASEAN Civil Society Conference (ACSC), and the ASEAN People’s Forum (APF), now amalgamated into what is currently known as the ACSC/APF. Unfortunately, recent events between the ASEAN Secretariat (ASEC) and CSOs have shown that there is still work to be done to improve the relationship between these two actors. At an ASEAN-CSO interface session in February 2009 following the ACSC/APF, one government official protested the inclusion of a particular CSO representative.2 At the

Reprinted in excerpted form from May-Ann Lim, “Civil Society and the ASEAN Community”, in An ASEAN Community for All: Exploring the Scope for Civil Society Engagement, edited by Terence Chong and Stephanie Elies (Singapore: Friedrich-Ebert-Stiftung, 2011), pp. 25–32, by kind permission of Friedrich-Ebert-Stiftung Office for Regional Cooperation in Asia.

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next ACSC/APF in October of the same year, five out of 10 civil society representatives (selected by their peers) were rejected from another official interface session between ASEAN and CSO representatives and their ASEAN heads of government. The actions of ASEAN officials were seen as undermining the democratic efforts of civil society to speak for their constituents.3 The difficulties of ASEAN-CSO engagement since 2009 could be considered a blessing in disguise, as it spurred both CSOs and ASEC into recognising the potentially damaging consequences if the broken relationship was left to fester, thus galvanising CSOs and ASEC into taking steps to mend and enhance their relationship. As such, we can observe an openness in ASEAN to improve the existing engagement tracks, and a heightened awareness from the CSOs that they play no small role in the reshaping of their sphere of influence on ASEAN-level policies. ASEAN CSOs have continued to convene the annual ACSC/ APF, and since 2009, their participation in the ASEAN meetings has been noted by their country officials and media alike. OPPORTUNITIES, CHALLENGES AND RECOMMENDATIONS While there seemed to be poor or no involvement from national CSOs in ASEAN or on ASEAN-related issues, there are positive signs that civil society is growing in national and regional stature. EXPANDING EXISTING PROCESSES It has been observed that CSOs have been asked to mobilise resources for ASEAN issues, and have been doing this via existing processes such as the ACSC and the APF. This move to expand current discussion efforts could also include existing institutional arrangements such as the ASEAN

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Foundation, the ASEAN CSR network, the defunct ASEAN People’s Assembly (APA), the ASEAN Country Permanent Representatives (CPR), and others. ESTABLISH PLATFORMS FOR COMMON THEMATIC ISSUES The interests and foci of ASEAN CSOs are broad, and align at all levels of CSOs, from those working at a local and national level, and those working at a regional (or even international) level. Some noted themes that civil society have adopted are: human rights — including women and child rights; indigenous peoples; labour and migrant workers; trade issues; extractives industries (mining, gas, oil); the environment; climate change and climate justice; freedom of information; Myanmar; disability; agriculture; credit and microfinance; and health and safety (particularly concerning sex workers). These concerns mirror those listed in all ASEAN Community Blueprints. For example, one of the aims of the ASEAN Economic Community Blueprint is to help build a region of ‘equitable economic development’, and concerns itself with improving trade-related issues such as free flow of skilled labour, managing food, agriculture and forestry, and building infrastructure.4 These are parallel to the issues discussed by CSOs, such as migrant worker rights, the environment and climate change, and microfinancing. Comparing other blueprints show that there is an opportunity to align the work that CSOs and ASEC are doing so that resources can be shared and the work aligned. The ASEAN Political Social Community Blueprint counts among its foci, human rights, developing institutional frameworks for free flow of information between ASEAN states, promoting good governance, and strengthening ASEAN humanitarian assistance.5

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Some synergies have already borne fruit. For example, much work has been put into the establishment of the AICHR in 2009, which would not have been possible without the sustained voices of ASEAN CSOs, and the co-ordinated efforts of ASEAN officials, individual governments and policymakers. ENHANCING LOCAL COMMUNICATIONS A key finding is the important role played by the state (or government) in determining the character and agenda of CSOs. Unfortunately, discussions with CSOs and academics have also shown that there seems to be no structured process for consultations between civil society and governments when it comes to ASEAN issues. The lack of a common modus operandi has been to the detriment of both CSOs and governments, as both groups try to navigate unchartered waters of communication. In high power-distance societies as most ASEAN countries seem to be, the observed forms of negotiating CSO government relationships — such as tacit understanding and petitionoriented discussions — could limit the effectiveness of development efforts. STRENGTHENING THE ASEAN SECRETARIAT Some observations which have been made of the ASEC are that there are organisational issues which should be looked into, such as high staff turnover and language difficulties. There is also the perception that the ASEC could benefit from further empowerment. As mentioned earlier, governments tend to overlook ASEAN agreements as they are not legally binding. A way forward for the ASEC would be to shore up its internal organisational structures and processes, in

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order to better communicate and implement its agreements and policies. CONFIDENCE-BUILDING: IMPROVING CSOS’ CO-ORDINATION, CAPACITY, AND EXTERNAL RELATIONS Many issues plague CSOs, from problems with co-ordinating themselves regionally, the limits of their institutional capacities, and the cumulative effects on their external relations with other actors, as well as each other. This next section will discuss a number of recommendations to build confidence in the CSO sector. ORGANISATIONAL CO-ORDINATION There are a number of thematic platforms that have been built-up over the years, which function well to consolidate CSO efforts to consult, organise events and campaigns, and submit recommendations for ASEC consideration. For example, the Solidarity for Asia Peoples’ Advocacies (SAPA) Task Force on ASEAN and Human Rights and the Working Group for an ASEAN Human Rights Mechanism contributed to the establishment of the AICHR. However, there are limits to the reach of these platforms as they only form when a critical mass for a particular topic or theme has been achieved, and their lobbying is limited to the networking capacity of the group in question. No central agency coordinates all CSO efforts to engage — thematic, geographic or otherwise. This limits the influence that CSOs have on other CSOs, their national governments, and the ASEC. This lack is compounded by the poor communication between local CSOs and regional CSOs. To date, regional meetings such as the ACSC/APF have functioned as broad-based discussions where statements on various

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concerns are formulated and presented to policymakers in an interface session between CSO representatives and their government leaders. Even if all CSO interests were represented, the current arrangement does not guarantee that the outcomes of discussions will be effectively distributed to policymakers and/or heard by the right person(s), if at all. The creation of a central, co-ordinating structure or body, and an accreditation process for CSOs would be a step in the right direction. The setup of the coordinating body and the accreditation process should be initiated by ASEAN CSOs, and run independent of influence from other actors, such as governments and the ASEC. SELF-ORGANISATION ON THE NATIONAL LEVEL These processes of co-ordination could be undertaken at different levels simultaneously. On the national level, an accreditation process could be initiated by CSOs to register themselves within their country, taking into account the differing working relationships between ASEAN countries and their CSOs. This could incorporate improvements and clear guidelines on other internal institutional processes that have been found lacking, such as guidelines on transparency, governance and reporting. REGIONAL LEVEL CO-ORDINATION EFFORTS On the regional level, the ASEAN accreditation process should be revised and guidelines/rules for listing and participation updated. These could be based on the accreditation process used for the ACSC/ APF registrations (which already exist), and the ASEC and CSOs could work together

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to establish joint agreements on codes of conduct for registration. Further to this, an online accreditation process could also be developed to aid the thematic discussions, possibly using the EU model for consultation, and establishing an Advisory Council under the UN ECOSOC. BUILDING INTERNAL/ ORGANISATIONAL CAPACITY Beyond co-ordinating efforts of CSOs on a national and regional level, a large part of the critique on CSOs rests on the fact that in many cases, they are their own worst enemy. Criticisms of CSOs include a lack of governance, professionalism, and fundraising. CSOs are also plagued with issues of leadership transition, organisational regeneration and succession. Building the capacity and professionalism of CSOs should be one of the first institutional steps that all CSOs should take. This lack of confidence stems from the fact that there are differences in political agendas between governments and local CSOs, but CSOs should work on elevating their institutional standing by improving institutional processes, such as: i. Develop formal ways of documenting and communicating internal decisionmaking processes and administrative operations (such as hiring processes); ii. Build robust accounting systems; iii. Improve professionalism and staff retention by training staff well; iv. Creating feedback, reporting and accountability mechanisms to engage their stakeholders. RAISING AWARENESS ON ASEAN Unfortunately, the knowledge of ASEAN is not very widespread in the region. With the

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acknowledgement of the ASEAN Secretariat, CSOs such as the Southeast Asian Committee for Advocacy (SEACA) and SAPA have also organised or conducted country sensitisation workshops on ASEAN and ASEAN issues such as Myanmar.6 CSOs should be included in these education efforts so that they may better understand the avenues they have for participating in community-building efforts within and beyond their country. GOVERNMENTS AND COUNTRY PERMANENT REPRESENTATIVES WORKING WITH CSOS While CSOs should be continuously selfcritical about their role and relationships to the government, governments should, in turn, be fair to the process and provide feedback mechanisms to do justice to the participatory process of community-building. This could involve the CPRs, who could work with civil society and other ombudsman watchdogs to monitor and identify critical gaps in public service. GREATER MEDIA PARTICIPATION There are some efforts to redress this lack of interest in ASEAN activities and educate journalists on what ASEAN is and what it does for the region. The Southeast Asian

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Press Alliance (SEAPA), which is affiliated with SAPA, has been conducting annual workshops on ASEAN with journalists and editors from within the ASEAN region. Two iterations of the ASEAN Media Forum have also been organised by the Asian Media and Communication Centre (AMIC). The first Forum in 2009 discussed “Harnessing the Media for ASEAN Integration”, and the next in November 2010 examined the theme “Developing Regional Media Collaborations for ASEAN Community Building”.7 These are efforts to reach out to key people in the Asian media to aid in broadening the knowledge of media representatives on current ASEAN affairs. CONCLUSION The recommendations made in this paper are threefold: strengthen CSOs’ internal processes for the purposes of sustainability and credibility; to build the capacity of both CSOs and other stakeholders to trust and engage each other in a meaningful manner; and to develop a more robust structure and environment for future engagement to occur. Further discussions similar to those already held may be needed to replot and remap the CSO sector after a number of years. These discussions and difficulties will make the foundations for a stronger, inclusive ASEAN Community for all ASEAN peoples.

NOTES 1. Roadmap for an ASEAN Community 2009–2015 (2009), ASEAN Secretariat, Jakarta. 2. Moe, W 2009, ‘Civil Society Representatives Challenge Asean Leaders on Burma’, in The Irrawaddy, viewed 4 October 2011, . 3. Johnston, T. and Brown, K. 2009, ‘First Day of ASEAN Summit Hits Snags on Human Rights, Other Issues’, in The Washington Post, viewed 4 October 2011, , and Chongkittavorn, K. 2009, ‘Split between ASEAN Leaders and Civil Society Groups Widens’, in The Nation, viewed 4 October 2011, . 4. ASEAN Economic Community Blueprint 2009, ASEAN Secretariat, Jakarta. 5. ASEAN Political-Security Community Blueprint 2009, ASEAN Secretariat, Jakarta.

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6. Legaspi, E.P. 2009, SEACA holds Burma/Myanmar Country Processes on ASEAN, viewed 4 October 2011, . 7. AMIC 2010, 2nd ASEAN Media Forum, viewed 4 October 2011, . The ASEAN Media Fora were co-organised by the Friedrich-Ebert-Stifung.

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54.

THE EVOLVING ASEAN HUMAN RIGHTS SYSTEM The ASEAN Human Rights Declaration of 2012 GERARD CLARKE

INTRODUCTION On November 18, 2012, heads of state of the Association of Southeast Asian Nations (hereinafter “ASEAN”) met in the Cambodian capital of Phnom Penh and adopted the ASEAN Human Rights Declaration (hereinafter “the Declaration”).1 The ASEAN Human Rights Declaration, which now represents an important component of that system, consists of three constitutive parts and in the next three sections following ASEAN background, each is examined in turn. First, it consists of politics, or a political context, in which changing political conditions in ASEAN, including its commitment to human rights, provide an enabling environment for the development of the system and its most significant achievement to date: the Declaration. Second, it consists of a process in which different stakeholders compete to exert influence over the system, including the Declaration. Third, it consists of a product: the Declaration itself.

BACKGROUND: ASEAN AND ITS HUMAN RIGHTS SYSTEM As in some other multi-lateral organizations, the language of ASEAN diplomacy refers to three distinct “tracks” or institutional layers;2 Track One covers governmental and intergovernmental bodies; Track Two, nongovernmental bodies enjoying official ASEAN recognition; and Track Three, independent bodies, including civil society organizations, which interact with ASEAN organs. POLITICS: THE POLITICAL CONTEXT TO THE DECLARATION ASEAN’s composition as a disparate group of countries creates distinct political challenges in the development of the ASEAN human rights system — differences that are evident in the subsidiary Declaration of 2012. These political challenges arose particularly from the expansion in membership in the late 1990s, with the accession of poorer and more authoritarian states.

Reprinted in excerpted form from Gerard Clarke, “The Evolving ASEAN Human Rights System: The ASEAN Human Rights Declaration of 2012”, Northwestern Journal of International Human Rights 11, no. 1 (2012): 1–27, by kind permission of Northwestern University School of Law, Northwestern Journal of International Human Rights.

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The Evolving ASEAN Human Rights System: The ASEAN Human Rights Declaration of 2012

One key cleavage in ASEAN divides the “ASEAN Six” (Indonesia, Thailand, the Philippines, Malaysia, Singapore and Brunei) from the “CMLV countries” (Cambodia, Myanmar, Laos and Vietnam) or the more economically-prosperous states from their poorer, and historically conflictravaged, neighbors. In the case of human rights, therefore, the “ASEAN Six” versus the “CLMV” split, and variations of it, can make it difficult to reach agreement within ASEAN, hindering the development of new initiatives. Despite these differences between member-states and the cleavages to which they give rise, plans for an ASEAN Community were crystallized in the ASEAN Charter adopted on November 20, 2007. As a core principle, the Charter calls for “respect for fundamental freedoms, the promotion and protection of human rights and the promotion of social justice”, giving rise to political and legal obligations on the part of member-states.3 Commitment to the establishment of an ASEAN human rights body in the 2007 Charter, however, was a significant step for ASEAN Heads of State. According to governmental representatives on the Charter drafting panel and to academics tracking its progress, the proposed body was the most divisive issue that it faced,4 and almost brought down the proposed Charter. The final provision for an ASEAN Human Rights Body in the 2007 ASEAN Charter was, therefore, the result of a multi-actor political battle, one of the most significant in ASEAN’s recent history. The system, at present, centers on the ASEAN Intergovernmental Commission on Human Rights (AICHR), the ASEAN Commission on the Promotion and Protection of the Rights of Women and Children (ACWC), and the ASEAN Committee on the Implementation of the ASEAN Declaration on the Protection and Promotion of the Rights of Migrant Workers (ACMW).

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On paper, ACWC and ACMW share many of these characteristics. Like AICHR, each is defined as inter-governmental and consultative.5 But in subtle respects, they differ. In contrast to AICHR, where governments, in all but two cases, have appointed trusted diplomats or civil servants as representatives, ACWC and ACMW are characterized by more independent representatives, especially those from Thailand, Indonesia and the Philippines. Additionally, ACWC and ACMW also differ from each other. ACWC, for instance, benefits from the fact, noted above, that every ASEAN member state has ratified both the CRC and CEDAW, underpinning a consensus on the substantive rights in both conventions.6 ACMW, however, is a Committee rather than a Commission and tackles a much more contentious issue in the context of intraASEAN politics, pitting migrant-receiving against migrant-sending countries. Ironically, perhaps, “Track Two” institutions, autonomous bodies that enjoy formal ASEAN recognition, occupy a clearer position in the ASEAN human rights system than the NHRIs, marking the system out from its regional peers. The Working Group on the ASEAN Human Rights Mechanism (WG-AHRM) and the ASEAN Institutes of Strategic and International Studies Colloquium on Human Rights (AICOHR) have been instrumental in the evolution of the ASEAN human rights system to date.7 ‘Track Three’ institutions, independent organizations that are not formally recognized by ASEAN, occupy the most ambiguous place in the ASEAN human rights system, but an important one, in the context of ASEAN’s ambition to establish a “people-oriented” community by 2015. Terms of reference for both AICHR and ACWC, however, oblige them to relate to a range of stakeholders, including civil society organizations (CSOs). The drafting of the ASEAN Human Rights Declaration therefore took place against a tumultuous political back-drop in which

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ASEAN member states varied significantly in their commitment to binding international human rights standards and to the broader objectives of democratic reform and ASEAN community building. PROCESS: DRAFTING THE DECLARATION The process that led to the adoption of the Declaration underlines not only the evolving and plural nature of the ASEAN human rights system but the political struggles that shape it. Alongside international standards, the group was also required to take account of “national and regional particularities and mutual respect for different political, historical, cultural and religious backgrounds within ASEAN,” as well as “the balance between rights and responsibilities.”8 Despite completion, however, the draft revealed profound debates within the Drafting Group. Echoing the story of the ASEAN Charter of 2007, the political struggle to draft the Declaration was fought on two main fronts. First, key members of the “ASEAN Six,” mainly Thailand and Indonesia (supported by WG-AHRM), championed a progressive Declaration that embraced universal human rights standards, in opposition to the “CMLV” countries (sometimes in alliance with Singapore, Malaysia and Brunei) which sought a more conservative document, limiting the application of these standards in ASEAN. Second, ASEAN foreign ministers and AICHR representatives, seeking a consensus within ASEAN and to contain expectations, battled against the activist civil society networks keen to dramatically expand the reach of universal human rights standards in ASEAN. The final product from this process, the 2012 ASEAN Declaration on Human Rights, provides further evidence of these cleavages, yet the AHRD is a stage in a journey rather than a destination and

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evidence suggests that these cleavages may well be managed productively and creatively in the years ahead. PRODUCT: THE CONTENT OF THE DECLARATION The ASEAN human rights system consists of norms as well as institutions, giving it a cognitive or normative as well as a structural dimension.9 The ASEAN Human Rights Declaration is, therefore, a critical component of the system. First, the Declaration contributes to the process of norm generation, especially in the politicalsecurity pillar, which promotes democracy, human rights and good governance in ASEAN.10 Second, the Declaration will help to balance the three pillars, for instance by helping to ensure that the relatively advanced economic pillar is balanced by substantive political-security and socio-cultural pillars. The Declaration underlines the plural as well as the evolutionary nature of the ASEAN human rights system, its normative plurality echoing the institutional plurality explored above. The Declaration champions many norms embedded in international human rights instruments, including respect for individual human rights and contains a clear enunciation of the duties of ASEAN member-states to respect, promote and fulfil the human rights and freedoms which it sets out. It counter-balances this elaboration of individual rights and freedoms, however, through an elaboration of the duties of individuals to larger communities and to their institutional embodiment in the form of the state. Inevitably, the elaboration of individual duties and of third generation rights will provoke concerns that it supports a “culturalrelativist” approach to international human rights law, rooted in the “Asian Values” discourse of the 1990s. The system represents an effort by certain member-states to create a buffer between global bodies such as the

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The Evolving ASEAN Human Rights System: The ASEAN Human Rights Declaration of 2012

U.N. Human Rights Council and national institutions,11 or in the case of Singapore and Brunei, to circumvent the need for national human rights institutions.12 The first nine articles (arts. 1–9) of the Declaration cover “General Principles” and are the most controversial. Four are drawn from the 1948 UDHR,13 linking the Declaration to universal principles, one from the JCAMM 1993,14 and one from the VDPOA.15 Parts of other provisions can be traced to the Bangkok Declaration 1993 and the JCAMM 1993.16 Nevertheless, in Article 7, the Declaration seeks to distinguish regional human rights standards from universal standards and from those in other regional systems, providing that “the realisation of human rights must be considered in the regional and national context and bearing in mind different political, economic, legal, social-cultural, historical and religious backgrounds.” These provisions generated controversy prior to the adoption of the Declaration, with regional and international human rights CSOs seeking changes to them.17 These provisions represent continuity in the thinking of ASEAN leaders over the last 20 years (the JCAMM 1993 called for a “balance between the rights of the individual and those of the community”) but also a departure, since the catch-all provision that the exercise of human rights can be limited by the “requirements” of the “general welfare of [people]” (as well as the more specific caveats that accompany it) goes beyond that in previous ASEAN documents.18 This may be a concession to conservative states to secure their support for universalist provisions in the Declaration. In the first substantive part, the next sixteen articles (Articles 10–25) set out civil and political rights. Significantly, they speak of the rights of “persons” rather than “individuals,” reflecting antipathy to the putative Western emphasis on individual rights.19

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In the second part, Articles 26–34 set out economic, social and cultural rights, maintaining and arguably reinforcing an unhelpful binary distinction from the Cold War between first (civil and political) and second (economic, social and cultural) generation rights in the ICCPR and the International Covenant on Economic, Social and Cultural Rights (ICESCR) (1966). Again, the articles draw on and reaffirm the UDHR, but not the ICESCR. While Articles 10–25 and 26–34 set out first and second generation rights, Articles 35–38 set out third generation rights,20 including collective rights to development and to peace, a significant iteration of the demand of many developing countries that Western peers acknowledge claims arising from third generation rights.21 In the third substantive part of the Declaration, articles 35–37 set out a right to development to be enjoyed by “every human person and the peoples of ASEAN.” This right is primarily asserted vis-á-vis ASEAN member-states: Article 35, for instance, provides that “the lack of development may not be invoked to justify the violations of internationally recognised rights,” an assertion on the part of “ASEAN Six” countries vis-á-vis the “CLMV” countries. CONCLUSION Like its African counterpart, for instance, the ASEAN system is institutionally weak and normatively distinctive, marking both out from the European and InterAmerican systems with their powerful Court and Commission respectively and their clear assertion of the primacy of individual human rights. It is duty-oriented, counterbalancing the rights of individuals with corresponding duties to states and wider communities. It sets out substantive “positive” rights (especially economic and social rights), and more tentative “negative” rights (or civil liberties), framed by support

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for government intrusions such as the use of capital punishment and limitations on the grounds of “general welfare,” “public morality” and other criteria. It promotes controversial third generation rights, including collective rights to development and to peace. These features may suggest that it espouses a cultural-relativist position, in opposition to the universalist norms of international human rights law, and therefore outside the interdependent structure of regional and global human rights systems, proposed by Sheldon (see Section 1, above). But this argument is flawed on two main grounds. First, despite notable victories for conservative forces during the drafting process, the declaration represents a delicate balance between universalist and cultural relativist norms, representing inevitable (and necessary) debate and political contestation within AICHR and the ASEAN human rights system about the role of human rights

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and democracy in the ASEAN integration process. Second, the Declaration represents regional support for, rather than a radical departure from, international human rights law, with its clear reaffirmation of the main provisions of the UDHR. The product, the Declaration itself, however, is less important than the process that led to it and the political context that framed it, as they have a critical bearing on the continuing evolution of the ASEAN human rights system, of which the Declaration is a subsidiary and, in some respects, temporary part. The ASEAN Human Rights Declaration of 2012 represents a practical expression of this principle. Far from a cultural relativist body, it is a tangible step in a structured, inclusive and evolutionary process to build an ASEAN human rights system that promotes and protects the rights of 570 million people in South-East Asia, and helps to ensure their security, well-being and distinctive cultural identities.

NOTES  1. ASEAN Human Rights Declaration, Association of Southeast Nations (Nov. 18, 2012), http:// www.asean.org/news/asean-statement-communiques/item/asean-human-rights-declaration (hereinafter “Declaration”).   2. Multi-track diplomacy is an established approach or perspective in international relations, which champions broad-based or inclusive diplomacy. See generally Louise Diamond & John McDonald, Multi-track Diplomacy: A Systems approach to Peace (1993).   3. ASEAN Charter, art. 2 (2)(i).   4. According to the Brunei representative, the proposed AHRB was “the most explosive and tense of all” considered by the drafting panel. Pengiran Dato Paduka Osman Patra, The Making of the Asean Charter (T. Koh, R. G. Manalo & W. Woon eds., 2009). See also Allan Collins, Building a People-Oriented Security Community the ASEAN Way (2013).  5. See, e.g., ASEAN Commission on the Promotion and Protection of the Rights of Women and Children, Terms of Reference of the ASEAN Commission for the Promotion and Protection of the Rights of Women and Children § 4, § 3.6 (2009).   6. Although tensions nevertheless exist, including Islamic laws in Brunei which set the age of criminal responsibility at seven and allow for marriage at the age of fourteen and in some cases lower, outside standards set in the Convention on the Rights of the Child. Brunei is a party to the Convention but has entered reservations in the case of relevant provisions. See Brunei Darussalam: National Laws, Child Rights Information Network, http://www.crin.org/resources/infodetail.asp?id=27116.   7. See Collins.  8. Excerpts from the Drafting Group’s Terms of Reference are provided in Solidarity for Asian People’s Advocacy Task Force on Asean and Human Rights, A Commission Shrouded in Secrecy:

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A Performance Report on the Asean Intergovernmental Commission on Human 2010–2011 12 (2012), http://www.crin.org/docs/acsis_final-online-version.pdf.  9. The text of the ASEAN Human Rights Declaration is available at http://www.asean.org/news/ aseanstatement-communiques/item/asean-human-rights-declaration. 10. Asean, Asean Political-Security Community Blueprint § II(7) (2009), http://www.asean.org/ archive/5187-18.pdf. 11. Some of which object to the intrusive scrutiny of the Universal Periodic Review process over-seen by the UN Human Rights Council. 12. Anonymous interview with the representatives of one Southeast Asian NHR (May 2011). 13. Articles 1, 2, 3, 5 echo UDHR Articles 1, 2, 6 and 7, 8, respectively. 14. Article 6 draws on JCAMM 1993 § 17. 15. Article 7 draws on VDPOA 1993 art. 5. 16. Including Articles 6 and 9. 17. See, e.g., Civil Groups Reject ‘Flawed’ Human Rights Declaration Draft, Bangkok Post (Sept. 25, 2012), http://www.bangkokpost.com/news/local/313856/civil-groups-reject-flawed-human-rights declaration-draft. 18. Again, this echoes the ACHRP (1981), including art. 27 (2) which provides that that “[t]he rights and freedoms of each individual shall be exercised with due regard to the rights of others, collective security, morality and common interest.” 19. This antipathy can be traced back to the Bangkok Declaration 1993 which “express[ed] concern that [international human rights] mechanisms relate mainly to one category of rights,” i.e. civil and political rights. 20. “Third generation” rights, also known as group or solidarity rights, are distinct from individual human rights in advancing claims to collective rights. They are controversial, in part, because the collective entity to which a putative right applies, e.g. states or a “peoples,” is contested. 21. Many Western countries voted against, or abstained from, the UN General Assembly vote on the Declaration on the Right to Development (1986) and continue to oppose some or all of its provisions.

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55.

DIVIDED OR TOGETHER? SOUTHEAST ASIA IN 2012

BRIDGET WELSH

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he year 2012 has brought to the fore the difficult realities of a region adapting to a more competitive global environment. With intensifying great power rivalry in the region, continued global economic uncertainty and legitimacy challenges of Southeast Asian leaders, the strains of maintaining consensus within ASEAN, promoting shared economic opportunities and maintaining stability while meeting governance demands have become more prominent. While regional politics in the past year illustrated some of the serious obstacles the region as a whole faces in working collaboratively, developments also highlighted new initiatives that are being introduced to promote the welfare of Southeast Asians. From a regionwide lens, the dominant story of the year was ASEAN. In this fortyfifth year of ASEAN’s founding, this was perhaps one anniversary best forgotten. The failure of the organization to sign a basic communiqué in the July meeting in Phnom Penh and the limited traction on the code of conduct agreement with China over the

contentious South China Sea issue at the East Asia Summit in November showcased the divisions among member states rather than a strengthening regional architecture. After the years during which ASEAN developed stronger regional ties and excelled itself on the international stage under the chairmanships of Indonesia and Vietnam, 2012 was a wake-up call of the hurdles ahead for ASEAN under comparatively weaker chairs of the region’s smaller countries. Under Cambodia’s chairmanship, the dominant mode was one of limited consensus, showcasing division rather than unity. The primary source of division reflects divergent views of the role of China in the region. From 2008, China has become more assertive in its territorial claims in the South China Sea. China’s presence has extended economically as well, including stepping up efforts to control oil and gas production. Differences between the South China Sea claimant Philippines and strong China-ally and this year’s ASEAN chair Cambodia in particular were quite pronounced, limiting the ability of member states to reach common

Reprinted in excerpted form from Bridget Welsh, “Divided or Together? Southeast Asia in 2012”, in Southeast Asian Affairs 2013, edited by Daljit Singh (Singapore: Institute of Southeast Asian Studies, 2013), pp. 3–16, by kind permission of the Institute of Southeast Asian Studies.

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ground. The year passed without the passage of a code of conduct after the ten-year period allocated to address this matter expired. Part of this was due to developments outside of Southeast Asia. Both China and the United States consciously opted for a more competitive dynamic in their relations with the region. The United States set the course by deepening its “pivot” approach to Asia, renamed “rebalancing” at the June Shangri-La Dialogue.1 China on its part also ratcheted up its involvement in the region, and reacted to the U.S. interventions which openly challenged its increasing presence in the region. China’s mode continued to be one focused on bilateral ties, as China increased international aid and loans to individual countries and made its presence felt with high-level visits. Rather than lead, ASEAN was forced to react to ongoing great power rivalries. Cambodia, arguably China’s closest ally in the region, brought to the fore the underlying divisions over China. The difficulties at the elite level over China, however, are not as marked among Southeast Asian publics. The third wave of the Asia Barometer Survey data of national surveys conducted in East Asia from 2010 to 2012 highlights that there is a more positive view of China’s rising influence among general publics. While the survey results suggest that the United States continues to have significant soft power, considerably more than China, the views of ordinary Southeast Asians reveal more accommodative views of China’s role in the region. In the comparison between the great power rivals, however, U.S. soft power remains dominant, despite China’s rising influence. These findings suggest that not only are there differences among Southeast Asians over China and the United States in the region, there are differences between publics and their elites. Another important highlight of 2012 involved the signing of the ASEAN Human

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Rights Declaration (AHRD). The AHRD includes forty different articles that outline principles and goals that extended from civil and political liberties and economic, social and cultural rights to the broader goals for ASEAN in protecting these rights.2 From any account this document is historic in that it represents the first time ASEAN and many of its member states openly and collectively affirmed a commitment to human rights. A number of important rights were included in the AHRD, notably education, freedom from arbitrary arrest and security, and some measures addressed transnational issues such as human trafficking. Minimally, the attention to human rights reflects the ongoing effort to strengthen the regional architecture and to include more attention of the organization to the welfare of ordinary citizens. This document was not without its problems. There are many loopholes for states that effectively remove the obligation of states to protect rights. These include the right of any government in the region to suspend human rights for real or claimed grounds of “national security, public order, public health, public safety and public morality”. Member states were also given considerable leeway in applying these standards with the adoption of the phrase that human rights “must be considered in the regional and national context”. Rights were furthermore to be balanced with “duties”, denying the universality of rights as inalienable. These qualifications on the scope of freedoms in the AHRD reflect the intense debate among member states over the Declaration. It is thus not surprising that the AHRD received considerable criticism for not meeting international standards. There was opposition to the idea that rights are not universal, but rather are regional and country specific. Division was also the theme that emerged over trade, as there is emerging competition over economic cooperation and integration. This was showcased at the East Asia Summit

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in December where ASEAN officially launched the Regional Comprehensive Economic Partnership (RCEP) in which China is the dominant economic powerhouse. This framework is being pitted against the U.S.-led Trans-Pacific Partner-ship (TPP). This is an important third arena of underlying division in ASEAN, the strategy to adopt towards free trade and economic integration. Should the approach be through region-focused integration, or be more global and transnational in scope? Should the path be one grouped as a loose framework, as envisioned by RCEP, or one based on a foundation of standards? These questions are not likely to be answered easily or consistently. The differences in ASEAN over economic integration are similar to those over rights and security in that at their heart they involve the protection of national interests, as perceived by those in power. Of the three arenas, the process of trade liberalization is perhaps the most contentious domestically, as it pits sectors against each other and pressures state-owned enterprises to open up and become more competitive. In 2012, the conflicts over trade were framed as part of the regional great power rivalry, RCEP versus TPP, but in fact the reality is that divisions over trade and economic integration are much broader and go well beyond the issue of which globally promoted trade framework to adopt. The year 2012 also witnessed divisions of a different kind within individual countries in Southeast Asia. The most prominent headlines on conflict involved violence on the peripheries of Myanmar, Thailand, Indonesia, and the Philippines. Myanmar dominated the headlines internationally, as it continued its process of political liberalization over the year. In June, however, the reports were less favourable, as news centred on the sectarian riots in the Rakhine (Arakan) state between Muslims and Buddhists. Despite international pressure, the

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situation in the Rakhine state remains tense with large numbers of displaced people.3 The persistence of conflict on the periphery was also an issue in southern Thailand. The nature of the violence has taken a worrying sharp ethnic turn, with most of those killed civilians and many of those targeted due to their religion and occupation. One group that has been especially hit has been Buddhist teachers in the south.4 Calls are increasing for a different approach towards peace, with increasing calls for international intervention. The lack of coherent domestic strategy could be seen in Papua as well, as almost daily killings have become the norm. Papua has a long-standing conflict that has its roots into the 1960s, but current developments, including failed efforts to promote and protect special autonomy have exacerbated tensions.5 It is in the Philippines, however, where a bright spot for peripheral conflicts shined. In October, the Moro Islamic Liberation Front (MILF) and the Philippine government signed the Bangsamoro framework agreement. This deal was brokered by the Malaysian government and holds the promise of peace between parties who have been fighting for decades. While it is too early to say whether this framework will last, the document is a breakthrough in stemming violence and offers a road map for broader peace. ASEAN as an organization has recognized the importance of reducing conflict in these uncertain times. In November it launched the ASEAN Institute for Peace and Reconciliation (AIPR) led by Indonesia. This Institute aims to promote conflict resolution. It faces an uphill task given the persistence and increases in violence over the year. Nevertheless, this common purpose stands out amidst the many divisions in the region. The shared goal of addressing division is perhaps one of the striking features of Southeast Asia of 2012. Since the 1997 Asian financial crisis Southeast Asian countries

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Divided or Together? Southeast Asia in 2012

have faced rising inequalities. While most of the region has recovered from this crisis and even weathered the subsequent 2008 U.S.-induced financial crisis, they have not been able to stem the widening divide within Southeast Asian societies. Growth has largely not been accompanied by rising equality, as wages levels have remained stagnant for large shares of Southeast Asians. What has deepened in 2012 has been the increasing use of populist strategies to address these inequalities. The broad pattern has been an evolution in the region’s politics away from patronage to populism, a pattern that involves a breakdown of personal face-to-face ties towards greater dependence on the state and government coffers for services and benefits. As governments in the region have faced more domestic demands, including pressures from the expansion of social media, more have turned to short-term populist measures to appease citizens and shore up their electoral fortunes. This expansion of populist measures raises questions about the nature of development in the region. The move is one from longterm to short-term measures. Many of the initiatives are aimed at having an immediate “feel-good” effect. For recipients, the money is often spent so fast that its effect is short-lived with limited impact on the

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economic inequalities in society. There is clearly a real impact on budgets, with rising deficits due to the spending. Yet, at the same time, governments are putting money into economies, driving consumption, and importantly in countries where the focus has been on housing and education, reallocating funds directly to citizens for investments in human capital and public welfare. It is too early to determine whether the populist initiatives will yield substantive gains for citizens. Ironically, however, politics has moved from hierarchical networks towards greater equality, as people’s needs have reasserted their prominence reminiscent of the goals of early Southeast Asian leaders. Populism may be a product of divisions in society, and even foster different divides between citizens and governments, it is nevertheless putting people first in many of the countries of Southeast Asia. It is thus fitting to close the discussion of 2012 with recognition of the together-ness of the region. Now with over 600 million people and comprising the ninth largest economy in the world with a US$2.1 trillion combined GDP, Southeast Asia is facing difficult challenges on security, rights, economic integration, terrorism, and peripheral conflicts.6 At the same time there are forces pushing the region towards shared goals of prosperity, stability, and empowerment.

NOTES 1. Donald K. Emmerson, “Challenging ASEAN: The American Pivot in Southeast Asia”, East Asia Forum, 1 January 2013. 2. . 3. International Crisis Group, “Myanmar: Storm Clouds on the Horizon”, Asia Report No. 238, 12 November 2012. 4. Human Rights Watch, “Thailand: Rebels Escalate Killings of Teachers”, 17 December 2012 . 5. International Crisis Group, “Indonesia: Dynamics of Violence in Papua”, Asia Report No. 232, 9 August 2012. 6. Sanchita Basu Das and Termsak Chalermpalanupap, “Can ASEAN Keep Aiming for New Goals Without Having Reached Old Ones?”, ISEAS Perspective, 17 December 2012.

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56. THE ASEAN SOCIO-CULTURAL COMMUNITY

CAROLINA S. GUINA

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our years since the 10th ASEAN Summit in Vientiane in 2004, the ASEAN SocioCultural Community (ASCC) — one of the three pillars of the ASEAN Community — has remained as elusive as ever. The ASCC, as articulated in the Vientiane Action Programme (VAP), embodies the ultimate ASEAN aspiration to improve the quality of life of its peoples, promote equity in sharing the benefits of growth, and foster a shared cultural identity. To be sure, the VAP was unequivocal in specifying the strategies to fulfil these aspirations — building a community of caring societies that address the issues of poverty and equity, promoting sustainable management of the environment and natural resources, managing the social impacts of economic integration, and promoting an ASEAN identity. But the ASEAN process that would implement these strategies has not been easy to put in place. From the outset, it was envisaged that each of the three pillars of the ASEAN Community — political, economic and socio- cultural —

would be guided by a blueprint that would set concrete and time-bound targets. While the blueprint of the ASEAN Economic Community (AEC) has been completed, that of the ASCC is still a work-in-progress, and ASEAN countries have yet to agree on its structure and implementation modality. Some countries have expressed unease about having to commit to specific milestones; others have suggested that an update of the VAP would be sufficient in lieu of having a blueprint. The unease about having an ASCC blueprint, which implies some degree of precision in terms of targets and timing, is rooted in a number of reasons. Social sector initiatives have been carried out primarily through project-based (functional) cooperation since the early years of ASEAN. In many cases, functional cooperation projects have been designed without the benefit of rigorous sector analysis, often resulting in poorly designed projects with limited and largely unsustainable benefits.

Reprinted in excerpted form from Carolina S. Guina, “The ASEAN Socio-Cultural Community”, in ASEAN Community: Unblocking the Roadblocks, edited by the ASEAN Studies Centre (Singapore: Institute of Southeast Asian Studies, 2008), pp. 65–70, by kind permission of the Institute of Southeast Asian Studies.

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The ASEAN Socio-Cultural Community

Countries realize that a blueprint that would simply compile or aggregate these projects will not be meaningful. Furthermore, the number of ASEAN functional cooperation areas (sectors) has increased considerably, making it difficult to prioritize projects. The lack of a unifying sector framework in most cases has diminished the coherence and focus needed to plan for a strategic trajectory of cooperation. Many projects evolve simply out of a common or shared need without a sufficiently strong rationale for cooperation at the regional level other than the sharing of information or expertise. More importantly, ASEAN lacks the financial resources which it could allocate independently to priority projects. Most functional cooperation projects depend on donor support that is circumscribed by the preferences of the funding entity. Although the VAP reflected the political commitment of member countries to contribute to a common pool called the ASEAN Development Fund, this has not been fully set up at the present time. The imperatives of a concrete, doable and meaningful plan of action for the ASCC are now compelling ASEAN member countries to rethink both the strategy and modalities for the implementation of social sector initiatives. The Millennium Development Goals (MDGs) has been considered as a possible unifying framework for cooperation projects on education, health, gender and poverty reduction. The plan is to ask ASEAN member countries to commit to advancing or topping up their existing commitments to the MDGs by 2015 (MDG plus). The MDG framework, however, is not comprehensive enough to cover the goals of environmental sustainability and ASEAN cultural identity. On another plane, the stakeholders (national and local governments, communities, private providers of education and health services, civil society in general) involved in ASCC are not only diverse within member states, but are also diverse across member states in terms of maturity and capacities of social

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institutions. This diversity has made countries reluctant to commit themselves to specific milestones on the basis of which they could be held accountable. For the ASCC to move forward, it is important for the ASEAN processes to recognize a number of key factors, namely: (i) that national initiatives will fundamentally drive the manner and extent to which the basic ASCC concerns of poverty, equity and quality of life will be addressed; (ii) that the pace of national initiatives will vary, depending on the stage of development of the legal, regulatory, and institutional frameworks in each state; and (iii) that the linkages between national and regional initiatives will have to be clearly established, not only to generate synergies, but also to make a clear case for pursuing certain initiatives at the regional level. These factors are embedded in the VAP, albeit in rather imprecise terms, and should be able to guide the design of the ASCC implementation modalities. If national initiatives are recognized as the driving force for realizing ASCC goals and objectives, governments should be given the leeway to define for themselves how shared goals at the regional level will be met. In terms of an implementing modality for the ASCC Plan of Action, this implies setting broad goals at the regional level and allowing each member country, within its own development context, to determine its own pace and set of milestones for reaching these goals. For example, the goal of promoting universal access to education can translate into different programmes in each ASEAN member country, depending on the constitutionally mandated role of the state, the institutional and legal frameworks for the public and private provision of educational services, and the sources of funds for supporting the education budget, among other factors. The programmes, and by extension the milestones, towards the shared goal of facilitating access to educational services will necessarily vary among the

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countries. The ASCC will therefore be a composite of plans and programmes that are part and parcel of the national development agenda. As national initiatives are implemented, the vision of the ASCC will gradually evolve. Instead of being driven by a rigid blueprint, the ASCC will emerge out of the synergies of national actions, just like a tapestry woven out of threads of different hues, textures and patterns. Despite the predominance of nationally driven initiatives for the ASCC, there are cases where a collective approach is necessary. Addressing the problem of environmental degradation is one that compels collective effort on account of the externalities involved. The prevention of communicable diseases, the control and prevention of HIV/AIDS, and the prevention of human trafficking have clear transnational dimensions that warrant a regional approach. Managing the social impacts of economic integration may require a higher level of cooperation in terms of harmonizing standards for accrediting skills training institutions, monitoring the labour markets, and setting up minimum programmes of social insurance at the regional level. The programmes and projects in these areas are much more complex to design and execute, and would generally require a combination of national measures, complemented by regionwide interventions. The development gaps among member states will matter in attaining the goals of the ASCC. ASEAN leaders at the 2004 Vientiane Summit recognized that deeper economic integration has to be accompanied by technical and development cooperation to address the development gaps among member countries. The report of the Eminent Persons Group (EPG) on the ASEAN Charter also made a similar assertion — that ASEAN’s ability to achieve its long-term economic goals would depend on how the development gap is addressed. Narrowing the development gaps among ASEAN member countries

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and within countries will be a fundamental building block towards the goal of an ASCC. The Initiative for ASEAN Integration (IAI) provides the framework for narrowing the development divide, by, among other means, assisting the newer members meet their ASEAN commitments and through various capacity-building efforts. Both in a broad and a specific sense, the IAI will play a pivotal role in how the ASCC evolves. What then would be the role of regional cooperation in this process? Regional cooperation will play essentially three roles in the evolution of the ASCC. First, it can provide the platform for advocacy in promoting the shared goals of prosperity, equity and peace; sustainable development; and an ASEAN cultural identity. Second, it can leverage political commitments and apply peer pressure to the delivery of national programmes. Third, regional cooperation can complement or add value to nationallevel initiatives through new knowledge and collective experience and joint efforts in developing regional approaches and institutions. To realize these roles would require a proactive ASEAN Secretariat to identify opportunities that would bring about positive and meaningful synergies from seemingly disparate national actions towards the goals of the ASCC. The ASEAN Secretariat will need to strengthen its oversight role of the ASCC. It will need to do this in two areas: (i) identifying opportunities for adding value to national initiatives at the regional level; and (ii) monitoring the collective impacts of nationally driven action plans in support of the ASCC. With regard to item (i), the ASEAN Secretariat will need to focus its capacities on the formulation and design of regional projects that would add value to national initiatives, rather than focusing on its present gatekeeper role of appraising and approving projects. This will emphasize the ASEAN Secretariat’s facilitative role, and will serve to enhance consistency and coherence

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The ASEAN Socio-Cultural Community

across the ASCC programmes. For item (ii), the ASEAN Secretariat would need to design and implement a monitoring system that focuses on programme and project impacts (at the national level) and a system of aggregating these impacts at the regional level. There should be less effort devoted to monitoring the progress of projects. Ultimately, the social cohesion that is envisaged in the ASCC will have to evolve

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over the long term, as national social institutions become more developed in the course of development and as the process of economic integration promotes greater social interaction. Greater interaction, people-to-people contact, and social mobility will hopefully build a better understanding of values and traditions among ASEAN peoples with diverse historical experiences and a wealth of cultural heritage.

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57. ASEAN SOCIO-CULTURAL COMMUNITY An Assessment of its Institutional Prospects

JULIO S. AMADOR III

INTRODUCTION The Southeast Asian region’s1 quest for community-building is ambitious in its thoroughness, encapsulating both the traditional realms of political-security relations and economic integration and seeking to further produce a common social and cultural community. The socio-cultural diversity of ASEAN member-states has not stopped its leaders from conceptualizing a community that will somehow forge unity and solidarity amongst the different peoples in Southeast Asia. There is a dearth in studies that focuses on the third ASEAN community: the [ASEAN Socio-Cultural Community] ASCC. Because it is the newest among the communities, this is understandable. There have been previous studies on functional cooperation in ASEAN including the problems of putting people at the center in regional community-building. There is a need however, to see whether community-building in functional areas, which are the main priorities in the ASCC, can be institutionalized.

In order to assess the viability of the ASCC, the following are asked: 1. Who and what social entities are allowed to exist under the ASCC? 2. What regulations are being sought to regulate the everyday activities of the ASCC? 3. What procedures are envisioned to guide the interaction of actors in the ASCC? 4. Would all of these reduce uncertainty and generally constrain the political and social behavior of the actors? 5. In the case of shared regional identity, what are the possible consequences of institutionalization? INSTITUTIONALISM IN ASEAN: A BRIEF REVIEW OF LITERATURE Douglass North defined institutions as humanly devised constraints that structure political, economic and social interactions.2 The main purpose of institutions is to reduce uncertainty in exchange.3 This can be understood to mean building confidence

Reprinted in excerpted form from Julio S. Amador III “ASEAN Socio-Cultural Community: An Assessment of its Institutional Prospects” (Pasay City, Philippines: Foreign Service Institute, 28 February 2011), by kind permission of Julio S. Amador III and the Foreign Service Institute, the Philippines.

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in transactions or negotiations allowing contracting parties to dialogue on almost equal terms.4 Informal rules can be just as binding as formal rules. The concept of the “ASEAN Way”, which means that decisions are made through consensus and that noninterference in the internal affairs cannot be violated, is an example of such an informal rule. This rule stems from the inception of ASEAN where the founding states sought to stabilize their regional affairs to ensure that they have a free hand in dealing with their internal problems.5 Non-interference and consensus were formalized as the rules that structure ASEAN’s future actions. International institutions have a more developed definition given by John Duffield.6 For Duffield, international institutions constitute or create actors and endow them with capabilities or simply imbue them with essence and substance. International institutions also have functions that seek to regulate the everyday behaviors of actors.7 Rules and norms are prescriptive when they obligate actors to behave in certain ways. They are proscriptive when they prevent actors from engaging in certain activities. Lastly, rules and norms are permissive when they allow but not obligate actors to do certain activities such as selfdefense or tariff regulation.8 International institutions possess procedural functions. Procedural norms differ from regulative functions in that the latter is more concerned with the relationship between the actors and the physical world. Sometimes, the lines do blur. International institutions provide rules and processes that allow actors to build trust among and between them. Without institutions, actors in the international system may not have mechanisms for dialogues or cooperative activities. In ASEAN, the founding members have had several differences amongst themselves. From its foundation in 1967 to its first summit

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in 1976, ASEAN member-states had to overcome mutual suspicion and animosities through greater interaction.9 Institutions in ASEAN constitute 1) the actors within ASEAN both the formal and informal ones; 2) shape the behavior of the state actors; and 3) establish processes that guide the activities of the actors. In the most formal institution that the ASEAN has, which is its charter, membership is limited to states. These states are represented by their governments who in turn represent their peoples.10 Rights and obligations are given to member-states, which reinforces their existence as the constituted actors in ASEAN regional institutions. However, formal institutions cannot prevent the existence of nongovernmental organizations. As early as 1972, ASEAN engaged the ASEAN Chambers of Commerce and Industry (ASEAN-CCI) allowing business inputs into economic issues.11 Track-II discussions between officials of memberstates in unofficial capacity with the policy research and academic community, were also encouraged.12 Other CSOs active in human rights and democracy were engaged belatedly. It is important to define that ASEAN is not only an organization; it is an institution, for it constitutes actors and processes. ASEAN regulates its member-states’ activities through norms and other processes and provides guidelines for behaving towards outside entities. ASEAN also provides ways for member-states to arrive at solutions to common problems and guide the relationship among member-states and ASEAN itself. It reduces uncertainty among its members and those states from outside which interact with it.13 THE ASEAN SOCIO-CULTURAL COMMUNITY There are three communities envisioned by ASEAN that will foster community-building

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in Southeast Asia. The first is the ASEAN Political Security Community (APSC), which aims to bring ASEAN’s political and security relations into a higher plane.14 The second is the ASEAN Economic Community (AEC), which is the goal of regional economic integration.15 The third community is the ASEAN Socio-Cultural Community (ASCC). [It] intends to “contribute to realizing an ASEAN Community that is people-centered and socially responsible with a view to achieving enduring solidarity and unity among the nations and peoples of ASEAN by forging a common identity and building a caring and sharing society which is inclusive and harmonious where the well-being, livelihood, and welfare of the peoples are enhanced”.16 In the 10th ASEAN Summit, the Philippines initiated the ASCC to complement the AEC. In the 12th ASEAN Summit, the Philippines put the ASCC as the central proposition in the Chairperson’s statement.17 In the 13th ASEAN Summit in Singapore in November 2007, the Leaders agreed to develop a blueprint for the ASCC. The Philippines crafted a Plan of Action (PoA) to implement the ASCC.18 [This] PoA19 has four core elements:

welfare and protection, social justice and rights, ensuring environmental sustainability, building the ASEAN identity; and narrowing the development gap.20 The ASCC may be a bolder attempt at regional community-building than the APSC and the AEC. It is social re-engineering at a regional level. It wants to harness the economic and political strengths of member states towards achieving a vision of a regional community which has a low development and economic divide. The six characteristics of the ASCC can be best described as aiming for complete human security in ASEAN. In a region where several states are still very much at the developmental stage, the attempt at building a socio-cultural community is indeed very bold. Serious resources have to be set aside. Improved coordination mechanisms have to be developed, and greater inter-state cooperation within the framework of ASEAN has to be promoted. ASEAN member-states have to balance human security with economic and political security.

• Building a community of caring societies to address issues of poverty, equity and human development; • Managing the social impact of economic integration by building a competitive human resource base and adequate systems of social protection; • Enhancing environmental sustainability and sound environmental governance; and • Strengthening the foundations of regional social cohesion towards an ASEAN Community in 2020.

Formally, the ASCC can constitute the actors that are endowed with identities within it. Primarily, these actors are the member-states of ASEAN. Secondarily, a limited number of CSOs are recognized and associated with the ASCC through the ASEAN Charter. And last, mass media is endowed with an identity within the ASCC for information dissemination and sharing. Aside from the ASEAN Charter and sovereignty as formal regulations, the ASCC Blueprint also regulates the activities that can be done by the ASCC. The ASCC has also enacted rules of procedure for the ASCC Council and it may do so again for other actors within the ASCC. As the rules and procedures are respected by the ASCC, it can be argued that uncertainty

These four core elements are further operationalized under the ASEAN SocioCultural Community Blueprint into six characteristics: human development, social

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is reduced. The regularity of meetings allows member-states to deepen confidence in their interactions and in the process reduce uncertainty in their relationships. Member-states are willing to comply with their commitments to the ASCC Blueprint and regularly report on the progress of implementation despite issues such as lack of resources.21 TOP-DOWN IDENTITY BUILDING AND INSTITUTIONALIZATION? Institutionalization is a highly formalized process in ASEAN. Multiculturalism is a given and accepted practice. However, under the ASCC, what is implemented is top-down identity-building with the member-states through their governments determining the end-state, objectives and processes. The ASEAN elite believe that regional identity-building is necessary to regional community-building and that the latter does not stop at political and economic stability but must include the well-being of the peoples of ASEAN. This is not to say that ASEAN has suddenly become more peopleoriented in practice. However, the official documents are clear that in the plans for an ASEAN community, regional identity is important. An issue that is brought about by deepening institutionalization in the ASCC is the potential conflict between multiculturalism and regional identity-building. Regional identity-building is more complicated than nation-building considering that ASEAN member-states are all multicultural and multi-ethnic. The process of building a regional ASEAN Community through its “imagination”, which is necessary for a regional common identity to develop, is an elite and government-led initiative and may not necessarily be a project of the governed and the common people of ASEAN. The official records of the ASCC Council and the SOCA fail to reflect on whether

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the individual person who is a citizen of an ASEAN member state is concerned with regional identity-building. There is an assumption that building a shared regional identity is central to ASEAN’s communitybuilding efforts and that this should be something that the member-states should fully support and implement. In deepening the institutionalization of the ASCC, shared regional identity-building will become a contentious issue. There is a need to balance the vision of the elites with the individual citizen’s aspiration. PROSPECTS FOR THE FUTURE The ASCC as an institution constitutes formally the Governments of memberstates as the recognized entities. There is no social contract that provides peoples of ASEAN with an escape clause when the “Community” fails. The states, through the governments, have chosen to create a sociocultural community that may be unknown to the peoples of ASEAN. While “imagined communities” assume that people do not need to know everyone else in a given community but only know that they exist and that they have commonalities, the ASCC has not been “imagined” enough by the peoples that supposedly form it. The building of a regional ASEAN identity will be contested not only as an indication of state-society conflict but more deeply, between the “Community” that is being created by ASEAN and the individual. CONCLUSION The ASCC is highly institutionalized complete with actors, regulations and processes. The member-states themselves prefer institutionalization as a means of reducing uncertainty through greater communitybuilding. Institutionalization in the ASCC may be a case of a cart being put before the horse, as identity-building within ASEAN is necessary

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before a community can really be created. The contestation that will inevitably occur in the construction of an identity is going to be a

Julio S. Amador III

very long and difficult process considering the native diversity and inherent multiculturalism in the ten member states of ASEAN.

NOTES  1. The Southeast Asian region is defined in this paper as those nation-states belonging to the Association of Southeast Asian Nations. The ten-member countries are: Brunei, Cambodia, Laos, Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. While TimorLeste is geographically in the region, ASEAN’s claim as the defining regional organization means that in this paper at least, Timor-Leste will be kept out since it has no formal role in institutional building in Southeast Asia.   2. Douglass C. North. “Institutions.” Journal of Economic Perspectives 5, no. 1 (1991): 97–112.  3. Ibid.  4. Information asymmetry however, is almost always a constant factor but levels may vary among countries.  5. For two historical reviews of ASEAN with contrasting conclusions, refer to Noel M. Morada. “ASEAN at 40: Prospects for Community Building in Southeast Asia.” Asia-Pacific Review (Taylor and Francis) 15, no. 1 (2008): 36–55 or Rodolfo C. Severino. “ASEAN Beyond Forty: A Balance Sheet.” Contemporary Southeast Asia (ISEAS) 29, no. 3 (2007): 406–23.  6. John Duffield. “What are International Institutions?” International Studies Review (Blackwell Publishing) 9 (2007): 1–22.  7. Ibid.  8. Ibid.   9. Severino. ASEAN Beyond Forty. 10. Leaving for the moment the question of legitimacy of various authoritarian states, the Weberian definition is presumed in this paper. 11. For a more in-depth discussion of NGO and ASEAN engagement see Alan Collins. “A People Oriented ASEAN: A Door Ajar or Closed for Civil Society Organizations?” Contemporary Southeast Asia (ISEAS) 30, no. 2 (2008): 313–31. 12. Ibid. 13. For an excellent discussion of ASEAN’s role in reducing uncertainty in the region see Chin Kin Wah. “Introduction: ASEAN Facing the Fifth Decade.” Contemporary Southeast Asia (ISEAS) 29, no. 3 (2007): 395–405. Wah acknowledges the relationship between the domestic and the regional in ASEAN as well as other dynamics that occur in the region. 14. ASEAN. 2009. “ASEAN Political Security Community Blueprint” in Roadmap for an ASEAN Community 2009–2015. Jakarta: ASEAN Secretariat pp. 5–20. 15. ASEAN. 2009. “ASEAN Economic Community Blueprint” in Roadmap for an ASEAN Community 2009–2015. Jakarta: ASEAN Secretariat pp. 21–66. 16. ASEAN. 2009. “ASEAN Socio-Cultural Community Blueprint” in Roadmap for an ASEAN Community 2009–2015. Jakarta: ASEAN Secretariat pp. 67–94. 17. Gloria Macapagal Arroyo. “Chairperson’s Statement of the 12th ASEAN Summit: One Caring and Sharing Community.” ASEAN Secretariat. January 13, 2007 (accessed April 26, 2010). 18. Office of the Press Secretary. Backgrounder: ASEAN in Brief. 2009. http://www.ops.gov.ph/asean2009/ backgrounder.htm (accessed April 26, 2010). 19. See the full plan of action in ASEAN. “The ASEAN Socio-Cultural Community (ASCC) Plan of Action.” ASEAN Secretariat. http://www.aseansec.org/16832.htm (accessed April 26, 2010). 20. ASCC Blueprint in Roadmap for an ASEAN Community p. 68. 21. See for example the Report of the SOCA Chair to the ASCC Council, 29 April 2011, Jakarta.

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58.

EXECUTIVE SUMMARY OF THE MID-TERM REVIEW OF THE ASEAN SOCIO-CULTURAL COMMUNITY BLUEPRINT (2009–2015) THE ASEAN SECRETARIAT

A. INTRODUCTION 1.  The ASEAN Socio-Cultural Community (ASCC) Blueprint’s primary goal is “to contribute to realising a people-centred and socially responsible ASEAN Community by forging a common identity and building a caring and sharing society.” The ASCC Blueprint is structured into 6 characteristics. The Blueprint contains an implementation schedule and a coordination mechanism delegating roles to the ASCC Council, Sectoral Ministerial Bodies, Senior Officials Meetings and other ASEAN-affiliated bodies and associated entities. ASCC is required to identify and address resource requirements, and to enumerate a communications plan to enhance awareness and raise funds. 2.   The ASCC Council oversees the implementation of the ASCC Blueprint and ensures coordination of efforts, including across the other Communities. The ASEAN Secretariat (ASEC) is tasked to monitor and review the implementation of the ASCC

Blueprint. The ASCC Blueprint calls for a midterm review whenever necessary. The MidTerm Review (MTR) of the Implementation of the ASCC Blueprint officially commenced in June 2013. The regional-level assessment to collect data from primary documents, data sources and interviews ran from 27 June until 31 August 2013. 3.  The purpose of the MTR is to assess (i) whether the measures and actions in the ASCC Blueprint have been effectively implemented at the national and regional levels; (ii) whether implementation of the ASCC Blueprint has contributed to achieving the goals of the ASCC; (iii) the means of implementation; (iv) institutional mechanisms in ASEAN Member States (AMS) and the ASEC; (v) the availability and efficacy of financial resources and potential financing gaps; and (vi) to provide recommendations to enhance timely and effective implementation of the ASCC Blueprint by end-2015.

Reprinted in excerpted form from ASEAN Secretariat, Mid-Term Review of the ASEAN Socio-Cultural Community Blueprint (2009–2015) (Jakarta: ASEAN Secretariat, 2014), by kind permission of the ASEAN Secretariat.

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B. METHODOLOGY 4. The MTR is implemented by a Regional MTR Working Group composed of regional and national MTR focal points and representatives of the ASEC, with technical advisory services provided by national consultants appointed by AMS where necessary, and by appointed regional consultants, Asia Partnership for the Development of Human Resources in Rural Areas (Asia DHRRA). The main documents reviewed were the latest ASCC Scorecard received on 28 June 2013 and the latest implementation-focused monitoring system report dated 20 June 2013. The MTR was enriched by reports from the national assessment process of the MTR, conducted simultaneously with the regional process. 5. The regional consultants conducted interviews that provided additional perspectives of ASEC staff members, the current Secretary-General, the three Deputy Secretaries-General, the Committee of Permanent Representatives (CPR) to ASEAN, former Secretaries-General of ASEAN, Dialogue Partners, Senior Officials and relevant representatives from civil society. 6. Five assessment criteria were employed to assess the extent of the implementation: relevance, effectiveness, efficiency, sustainability and impact. For each of the five criteria, a five-scale ranking was developed to assess the extent of the fulfilment of the criteria. 7. The MTR recognised limitations in relation to the availability and quality of primary reference documents. The relatively short period of time constrained the MTR from conducting a deeper review. C. PROGRESS OF IMPLEMENTING THE ASCC BLUEPRINT AT REGIONAL LEVEL 8. The ASCC Blueprint implementation is generally positive where about 90% of all the action lines have been addressed. There

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have been many challenges in the course of implementing the Blueprint at the national and regional levels. But there are continuing efforts to improve and fast-track meeting the 2015 targets and prepare for post-2015 challenges. From a mid-term review process, the gains thus far are considerable. Characteristics: An Overview 9. With 57 out of 61 action lines (~93%) addressed, the implementation of the human development characteristic is positively progressing towards its goal. Statistics1 show the average number of school years completed by the adult population increased from 7.5 years for ASEAN-6 and 4.6 years for CLMV in 2005 to 8 years and 5 years respectively in 2010. The literacy rate of the youth population across ASEAN-6 countries inched closer to 100 percent while the CLMV countries have significantly improved their literacy rate from around 81 percent in 2009 to 92 percent in 2010. The gap between the ASEAN-6 and the CLMV countries in terms of the Human Development Index (HDI) has been decreasing over the past decade. 10. In the social welfare and protection characteristic, activities relevant to 91 out of 94 action lines (~97%) have been implemented. HDI rose from the ASEAN average rate of 0.635 in 2005 to 0.657 in 2010. Absolute poverty (people living on less than PPP$1.25 a day) in ASEAN declined significantly between 2000 to 2010, from around 45 to 16 percent in CLMV countries and from around 29 to 15 percent in ASEAN-6. Implementation appears to be on track. 11. In the social justice and rights characteristic, implementation is steady with 21 out of 28 actions (~79%) addressed. This characteristic focuses on rights for the vulnerable and marginalised in ASEAN. Institutional mechanisms have been strengthened with the establishment of the ASEAN Commission on the Promotion and Protection of the Rights of Women

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and Children (ACWC), and the ongoing development of an ASEAN instrument for the protection and promotion of the rights of migrant workers. The ASEAN Children’s Forum serves as a platform for children’s participation at the regional level. The ASEAN Decade of Persons with Disabilities 2011–2020 has been translated into joint efforts. A feature under this characteristic is the continuing engagement with civil society. 12. There is high relevance of the implemented activities and projects towards ensuring environmental sustainability. AMS’ Environmental Performance Index (EPI) scores in 2010 and 2012, reflect good and well-maintained environmental health and ecosystem vitality, with AMS reporting an above average EPI score of 57.95 in 2010 and 56.63 in 2012 (range of 0 to 100). While such achievements have transcended ASEAN’s overall cooperation in the environmental sector, there is still a considerable amount of work to be done towards 2015. 13. The goal of achieving an ASEAN identity has progressed through various confidence-building activities among AMS with primary focus given to capacitybuilding. The completed and ongoing actions and projects address 48 of the 50 actions (96%). Events such as the ASEAN Festival of Arts, ASEAN Cities of Culture, Best of ASEAN Performing Arts, ASEAN Quiz, ASEAN Studies courses, ASEAN Corners or the ASEAN Day celebration are popular and powerful instruments in raising ASEAN awareness. Awareness of ASEAN is also being inculcated in schools through the ASEAN Curriculum Sourcebook initiative. The achievement of targets is commendable in some elements but needs improvement in others, especially in terms of dissemination of information. ASCC Financing 14. Member States contribute to the implementation of the ASCC Blueprint,

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at both regional and national levels, in the following ways: (a) cash contributions to specific regional budgets and funds; (b) ASEAN-wide funds, e.g., ASEC Operating Budget (AOB), ASEAN Development Fund (ADF); (c) ASCC-related funds : e.g., ASEAN Science and Technology Fund; ASEAN Haze Fund; ASEAN Biodiversity Fund; AADMER Fund; Operational Fund for the AHA Centre; ASEAN Youth Programme Fund; and Singapore-ASEAN Youth Fund; and (d) financial and in-kind contributions to regional projects and meetings. 15. ASEAN partners with ASEAN Dialogue and External Partners to augment its own resources. They contribute through supporting regional programmes and projects/activities; providing technical assistance; and setting up additional funds for specific purposes such as for capacitybuilding. 16. Given the diversity of financing and co-sharing modalities, there is some difficulty in accounting for and estimating all the resources used to implement the ASCC Blueprint. There is financial support for regional programmes and projects in sectors such as Culture and Information, Science and Technology, Youth, Environment, Disaster Management, and ACCSM’s ASEAN Resource Centres’ operations and projects. A comprehensive study of the overall availability and magnitude of cash and inkind contributions of AMS, and the assistance provided by Dialogue and Development Partners, should be undertaken. D. PROGRESS OF IMPLEMENTING THE ASCC BLUEPRINT AT NATIONAL LEVEL 17. AMS have satisfactorily progressed in implementing the five characteristics on human development, social welfare and protection, social justice and rights, environment sustainability and ASEAN identity awareness. There is increasing evidence of regional and national

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development and cooperation programmes being mutually supportive. 18. The implementation of the ASCC Blueprint by the AMS reflects consistency with national priorities. The high degree of coherence enables national policy frameworks to be strengthened and reinforced. At the same time, some AMS mentioned bottlenecks occurring with regards to funding, expertise and human resources. Coordination with different sectoral bodies is also challenging. 19. Challenges faced by AMS in the implementation of the ASCC Blueprint relate to financial and human resources, technical expertise or language proficiency, coordination and cross-sectoral mechanisms, problems on the use of the ASCC monitoring tools, and awareness of the ASCC Blueprint among government officials and the general public. E. OBSERVATIONS 20. 33 action lines, or 9.73% of the total 339, fell into the category whose outcomes are not under the direct control of an ASCC sectoral body. 21. There is an immediate need to pursue consolidation and prioritisation across sectors in light of the need to fast-track implementation of targets towards 2015. F. PRIORITY RECOMMENDATIONS 22. Priority recommendations for consideration: a) The ASCC Blueprint’s implementation should be prioritised, keeping in mind the need to re-cluster overlapping targets and the option of cross-sectoral, crosspillar cooperation. b) Enhancement of ASCC Monitoring Tools. There is a need to further refine the scorecard for the ASCC Community and the implementation-focused monitoring system for the ASCC Blueprint. A

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corollary to this is setting up a data bank for ASCC at regional and national levels. c) Knowledge Management System. ASEC should be calibrated to take on this function and build its capacity for more effective processing of data and information in aid of policy making, programming, and resource generation and development. d) Coordination and Cross-Sectoral Mechanisms at the regional and national levels in some countries, or to strengthen existing ones, especially for cross-sectoral issues. e) Resource Mobilisation. Further in-depth analysis would be required to determine the extent of funding requirements to implement the ASCC Blueprint and crosscutting issues. A resource mobilisation strategy that is in line with key priority areas for implementation is needed. f) Multi-sectoral and Multi-stakeholder Approaches. There is no one-size-fits-all approach in pursuing new partnerships. One recommendation is strengthening the role of the SOCA to coordinate the work of the different sectors, and on issues which cut across the other Community Councils. g) Communication Strategy. ASEAN should expedite the release of the ASEANcommunity-wide communication strategy/plan. h) Special Consideration for CLMV Countries, to support implementation, and in support of project development to succeed more in resource mobilisation. i) Lastly, Commitment to Implement Recommendations. A core group from the SOCA, sectoral body representatives, and ASEC could be created to prioritise action points. G. WAYS FORWARD, BEYOND 2015 23. The post-2015 scenario for the ASCC pillar would have to be closely linked to two

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main developments: namely, the coming into being of the ASEAN Community, and the post-2015 development agenda at the global level. 24. ASCC can take a leadership role in defining distinctly regional positions and strengthen ASEAN centrality in the areas under its purview. H. CONCLUDING COMMENTS 25. The MTR of implementation has implementation has juncture. While many

the ASCC Blueprint shown progress but reached a critical stipulated action lines

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are achieved or on track, it is important to closely monitor ongoing action lines including those still under formulation to ensure that concerted and timely actions are taken. Altogether, the process — from the national to the regional level — has helped build confidence, infuse excitement, and brought the ASCC community closer, the momentum of which should propel ASEAN to its set goals. The ASEAN Chair in 2015 coincides with the final review of the ASCC Blueprint, bringing closure to the current Blueprint while paving the way for the introduction of a successor strategic framework.

NOTE 1. ASEAN Community Progress Monitoring System 2012 (ASEAN, 2013).

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Section

VII

ASSESSING ASEAN’S EXTERNAL INITIATIVES

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INTRODUCTION

Malcolm Cook

O

ver the last decade, ASEAN’s role in managing economic, diplomatic and security relations between its member-states and outside major powers has expanded significantly, as has the number and depth of ASEAN-based wider regional groupings. In 2005 — building on the longstanding dialogue partner relations and the early successes of the ASEAN Regional Forum (ARF) and the ASEAN+3 process — ASEAN established the East Asia Summit (EAS). In 2010, it established the ASEAN Defence Ministers Plus process. By 2011, both new groupings had the same membership: the ASEAN member-states, the United States, China, Japan, South Korea, India, Russia, Australia and New Zealand. The last decade has also seen ASEAN become the primary platform for its member-states’ external trade diplomacy with the successful negotiation of five ASEAN+1 trade agreements and, in 2013, the commencement of the ASEANbased Regional Comprehensive Economic Partnership (RCEP) negotiations between ASEAN and its +1 trade partners. The Southeast Asian states’ more active use of ASEAN as a platform to engage major extra-regional powers has been reciprocated by these powers and their growing diplomatic and financial commitment to ASEAN. China, Japan and South Korea are members of all

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these wider ASEAN-led groupings and have successfully completed ASEAN+1 trade agreements with ASEAN. The United States and Russia are members of the ARF, EAS and ASEAN Defence Ministers Plus process. The first part of this section includes Herman Kraft’s article, which looks at the increasing importance of ASEAN centrality over the last decade. The article by Mohamed Jawhar Hassan looks at ASEAN’s successful trust-building amongst its members, while Ian Storey’s article focuses on the largest and most newsworthy challenge to ASEAN centrality — the maritime boundary disputes between China and ASEAN member-states in the South China Sea. The next part looks at the growing number of ASEAN-based wider regional bodies and ASEAN’s emerging role as a model for other South-South regional bodies. The securitybased ARF, the first of these, is facing growing questions about its continued relevance while the finance-oriented ASEAN+3 process has deepened considerably with the negotiation of the Chiang Mai Initiative Multilateralization. The broader ASEANbased regional groupings established in the last decade — the EAS and ASEAN Defence Ministers Plus process — are still in the process of finding their proper place, particularly in relation to existing and overlapping regional institutions such as APEC and the Shangri-

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la Dialogue. Finally, this part looks at the progress of the ASEAN+1 trade agreements and the relationship between the ASEAN-led RCEP negotiations and the more advanced US-led Trans-Pacific Partnership ones.

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The final part covers recent and potential future developments in ASEAN’s relations with the most important and involved major powers: China, Japan, South Korea and the United States.

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59.

TRUST-BUILDING IN SOUTHEAST ASIA What Made it Possible?

MOHAMED JAWHAR HASSAN

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hen Southeast Asia emerged slowly from the clutches of colonialism in the last century it was a region riven with conflict and instability. On the domestic front, renewed nation-building was often a painful process that had to contend with insurgencies, secessionist movements, political unrest, civil strife and coups. Relations among states were frequently bad too. Historical enmities bred by past conflict, territorial sovereignty issues and disputes over land and maritime borders undermined bilateral relations and regional peace. Border incidents, armed confrontations and disruptions in diplomatic ties were normal features of the prevailing environment. Vietnam even invaded its neighbor, Cambodia, in 1978 and occupied the country for a decade. Major power conflicts and the Cold War also divided Southeast Asia into communist and non-communist halves. Southeast Asia is very different today. The countries of the region are largely at peace with themselves and with each other. There has been a sea change in the level of trust among them. The remaining territorial disputes are muted and are being handled

peacefully through diplomacy, negotiations and international arbitration. Applying the model postulated by Emanual Adler and Michael Barnett in their book Security Communities (1988), the 10-member Association of Southeast Asian Nations has transformed itself from a “nascent” to a firmly “ascendant” security community. Indeed, war today between neighboring ASEAN states (such as the Indonesian “confrontation” with Malaysia in 1963–1966 and Vietnam’s invasion of Cambodia) is generally unthinkable, and ASEAN is evolving into a security community in the classic Deutschian sense. Despite some lingering problems aggravated by residual territorial disputes and other occasional bilateral issues, progress towards the creation of an ASEAN Economic Community by the end of 2015 and thereafter is set to further strengthen the bonds of trust and the emergence of a credible community in Southeast Asia. There is another, profoundly significant dimension to the achievement of these Southeast Asian states. This is their remarkable ability to attract all the major, middle and lesser powers outside Southeast Asia to

Reprinted in excerpted form from Mohamed Jawhar Hassan, “Trust-Building in Southeast Asia: What Made it Possible?”, Global Asia 8, no. 3 (2013): 52–56, by kind permission of Global Asia.

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join various ASEAN-centered platforms for regional co-operation and trust- building in East Asia and the Asia-Pacific region. The ASEAN Regional Forum, ASEAN Defense Ministers Meeting Plus, ASEAN Plus Three process and the East Asia Summit all contribute to trust and confidence in the wider region, both directly and indirectly. The ability to foster regular constructive dialogue and substantive co-operation among the contending parties […] is no mean achievement. That this is being done by a grouping of largely developing countries that are small or at best middle powers, is remarkable indeed. It would be hard to find a parallel in any other part of the world. A LEGACY OF CO-OPERATION What has made all this possible? It would be stretching the imagination to assert that ASEAN was responsible for all of these achievements. Certainly, ASEAN itself contributed little to strengthening domestic peace and stability in member countries, except in an indirect way by creating a conducive external environment. This, after all, was not ASEAN’s purpose. Trust-building in Southeast Asia owes much to bilateral mechanisms of co-operation and conflict management. Many security problems in the region are bilateral in nature and are addressed through bilateral avenues rather than through the region-wide ASEAN mechanism. Issues such as security along the common borders of Malaysia and Thailand and Malaysia and Indonesia are, for instance, addressed by their respective General Border Committees rather than being brought to the ASEAN table. Likewise, bilateral territorial disputes are managed by the respective parties, and if there is mutual agreement, by submission to the International Court of Justice rather than to ASEAN. This also explains why ASEAN often did not take a leading role in the management of issues that were essentially bilateral or even

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sub-regional in character. This has led some scholars and observers to unfairly criticize ASEAN for allegedly skirting problems and “sweeping things under the carpet.” Until ASEAN becomes, if it ever does, a supranational entity in which elements of national sovereignty are voluntarily arrogated to the regional body, many sub-regional and bilateral problems will continue to be addressed at these levels. An appreciation of this fundamental fact will help in the understanding of what can and cannot be properly expected of ASEAN. Dependence on bilateral channels also implies that there needs to be strong political will among the respective leaders, governments and peoples to earnestly address issues bilaterally. An excellent example was provided by President Suharto of Indonesia. It was his statesmanship, that helped bring an end to Indonesia’s konfrontasi with Malaysia and restore trust between the two countries. ASEAN GAINS CREDIBILITY Turning to ASEAN itself, I would like to highlight six factors that contributed to ASEAN’s emergence as a credible organization for regional co-operation and trust building: First, there was a genuine and compelling desire among the founding states to establish a regional organization based on peaceful principles and norms of inter-state behavior to moderate tension and conflict and promote co-operation for mutual peace and prosperity. Upper most among the concerns was Indonesia, which dominated the region both geographically and in terms of population and which had launched konfrontasi. It is no coincidence that ASEAN was launched soon after konfrontasi ended in 1966. It was to Suharto’s credit that he saw merit in the idea that Indonesia could play a more constructive and less domineering role in the region by being a member of a body like ASEAN.

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Trust-Building in Southeast Asia: What Made it Possible?

Second, the smaller, freshly independent and developing countries of Southeast Asia derived a greater sense of security towards each other and with outside powers from membership in ASEAN. Their voices were better heard and they felt more empowered in international affairs. Their sense of confidence and empowerment increased as ASEAN grew in influence and stature in the Asia-Pacific region through the various wider groupings it anchored. Trust was more easily fostered among all parties in this environment. Third, ASEAN was politically blind in choosing its members. It eventually welcomed all the states in the region, irrespective of their political ideology and political system. This was critical to the success of ASEAN as an inclusive trust-builder. Had democracy been a condition of membership in 1967, ASEAN would have failed to get off the ground, for Indonesia and Thailand were not democratic at the time and the Philippines came under martial law in 1972. Had democracy been a requirement, Brunei and Myanmar would also not have been able to join later. Had ASEAN excluded communist or socialist systems, it could not have expanded to include Laos and Vietnam, and it would have failed to bridge the dangerous ideological divide in Southeast Asia. If the ultimate objective of a co-operative regime in a politically diverse region is mutual peace and prosperity, it must be prepared to be politically agnostic. ASEAN, though, has become a little more ideological since the ASEAN Charter was adopted in November 2007. It has begun to gently nudge the regional community towards greater democracy and better observance of human rights. The preferred method, however, is diplomacy and moral suasion, not sanctions. This has helped preserve ASEAN cohesion and mutual trust. Fourth, is ASEAN’s constructive norms and principles of co-operation, in particular respect for the principle of non-interference.

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Observance of this principle was of cardinal importance to ASEAN’s founders, and to countries that later became members. Victims of European colonial imperialism and Japanese invasion and occupation, the Southeast Asian states were particularly sensitive about foreign intervention. Countries such as Cambodia and Laos were further wary of encroachment and poaching of territory by their more powerful neighbors. The Southeast Asian countries, therefore, joined ASEAN to strengthen their sovereignty and independence from foreign intervention. Hence, some countries have resisted the push from various quarters in recent years to declare the principle of non-intervention no longer relevant and realistic in a more globalized world. While acknowledging the limits of the principle, they fear that absent even the normative protection afforded by the principle, they will become easy prey to intervention by the world’s more powerful states under various guises and pretexts. Fifth, ASEAN’s principle of neutrality and non-alignment, along with the low level of major-power rivalry in the region since the end of the Cold War, helped ASEAN states build trust among themselves and with outside powers of all hues. ASEAN states are not altogether non-aligned. Thailand and the Philippines are alliance partners of the US, and Singapore has close military ties with the US also. Malaysia and Singapore are also parties to the Five-Power Defense Arrangement with the United Kingdom, Australia and New Zealand. But these ASEAN states have not targeted their defense alliances at each other or at external powers. With the retreat of US military forces from Vietnam in 1973 and the end of the Cold War, Southeast Asian states were generally left to themselves to maintain military co-operation with their traditional partners without incurring the suspicion of other regional states and major powers. Even US treaty

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partners such as Thailand have developed close and fruitful relations with China. However, the resurgence of China and the US military’s “rebalance” or “pivot” to Asia is beginning to upset the equilibrium. China’s recent, more assertive stance in the disputed areas of the South China Sea is also causing nervousness among Southeast Asian claimants, especially the Philippines and Vietnam, causing them to develop stronger strategic and military ties with the US. Japan is also seeking to develop closer military cooperation with countries like the Philippines in response to China’s policy in the East China Sea. ASEAN is now in a quandary. The sharpening of major-power rivalry in the region would pose serious challenges to its commitment to remain neutral and non-aligned when some of its members tilt more heavily towards some of the external powers. Ties among member countries will likely become strained under such circumstances and sustaining trust will be more problematic. Sixth, ASEAN’s comprehensive model of community-building that embraces extensive co-operation in the political/security, economic and social/cultural fields has created a sound foundation for trust-building. Habits of regular dialogue; functional cooperation across diverse areas; development assistance to Cambodia, Laos, Myanmar and Vietnam through the Initiative for ASEAN Integration to close the development gap among members; and mutual assistance in times of humanitarian crisis are gradually fostering a sense of community in which mutual trust can be enhanced. In this environment for region-wide cooperation, even when governments and their

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peoples are temporarily at loggerheads over specific issues, such as the Thai-Cambodian dispute over ownership of the Preah Vihear temple, there is a forum to sustain engagement and friendship. MUCH TO BE DONE The six factors cited above are among the primary elements that facilitate trustbuilding within a multi-layered framework of comprehensive co-operation binding Southeast Asian nations and peoples together. Trust-building is still a work in progress and has to be constantly tended. Trust can easily evaporate, especially over mismanaged territorial disputes and perceived slights to national dignity. Difficult issues such as Preah Vihear on the ThaiCambodia border, the Ambalat sea block between Indonesia and Malaysia, Lahad Datu between Malaysia and the Philippines and even stray incidents of mistreatment of domestic helpers from neighboring countries can suddenly generate strong nationalist sentiment that can trigger diplomatic fallout and minor conflict even among the closest of neighbors. Southeast Asia’s experience in trustbuilding is unique to the circumstances in the region. But other regions still in search of a satisfactory degree of trust can perhaps find some important pointers. It is difficult to plant and grow the seeds of trust in a climate of deep suspicion and hostility that is constantly kept on the boil by various parties. Southeast Asia, however, has demonstrated that with patience and perseverance these difficulties can be overcome.

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60.

SOUTH CHINA SEA Glacial Progress Amid On-Going Tensions

IAN STOREY

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he situation in the South China Sea during 2013 remained essentially unchanged. Tensions between the claimants continue to fester, fuelled by rising nationalist sentiment over ownership of the disputed atolls, the lure of potentially lucrative energy resources under the seabed, spats over access to valuable fisheries in overlapping zones of maritime jurisdiction and moves by most of the claimant states to bolster their territorial and sovereignty claims by issuing new maps, conducting military exercises and launching legal challenges. Indonesian Foreign Minister Marty Natalegawa observed that the South China Sea was characterised by a ‘sense of anarchy’.1 The primary axis of contention this year has been China and the Philippines. Bilateral relations nosedived in 2012 when superior Chinese maritime assets forced Manila to concede control of Scarborough Shoal. In January 2013, the Philippines angered China by unilaterally challenging its expansive claims in the South China Sea —

represented by the so-called nine-dash line — at the United Nation’s (UN) International Tribunal of the Law of the Sea (ITLOS). China went on to accuse the Philippines of illegally occupying atolls in the South China Sea, being confrontational and encouraging the United States to “meddle” in the dispute; Manila responded that China’s “massive” military presence around the shoals within the country’s 200 nautical miles exclusive economic zone (EEZ) posed “serious challenges” to regional stability. Beijing even withdrew an invitation to Philippine President Benigno Aquino to attend the 10th ASEAN-China Expo in Nanning in August 2013 because he refused to withdraw the UN legal challenge. As that case proceeds — even without China’s participation — China and the Philippines will remain estranged. In contrast, relations between Vietnam and China were relatively cordial. A resolution to the dispute looks further away than ever. Because the claimants have dug in their heels over perceived territorial

Reprinted in excerpted form from Ian Storey, “South China Sea: Glacial Progress Amid On-Going Tensions”, in CSCAP Regional Security Outlook 2014, edited by Ron Huisken (Kuala Lumpur: Council for Security Cooperation in the Asia Pacific, 2013), pp. 32–35, by kind permission of the Council for Security Cooperation in the Asia Pacific (CSCAP).

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and maritime rights, the compromises and concessions that would be required to achieve a legal or negotiated settlement are currently out of reach. Indeed the political climate has become so ill-tempered that even the proposal to shelve the sovereignty disputes in favour of joint development of resources — which China gives lip service to — is unworkable. Notwithstanding this bleak, and widely shared, assessment, few observers envisage a major war in the South China Sea. All parties have a strongly vested interest in the free flow of maritime trade through one of the world’s most important waterways. This compelling common interest in stability in the South China Sea has acted as a restraint on the claimants’ behaviour. Yet a smallscale conflict over the disputed atolls and their associated resources cannot be ruled out, most likely sparked by a confrontation involving warships, patrol boats or fishing trawlers. The lack of conflict prevention and management mechanisms to contain the risks of escalation is a real concern. Even though the political will to resolve the dispute is clearly absent, all parties recognize the need to better manage the problem and pre-empt conflict. ASEAN and China have been engaging on this issue for two decades, albeit with inconsistent commitment and progress has been correspondingly limited. This comment examines attempts by the two sides to advance the process in 2013 by implementing an existing agreement — the Declaration on the Conduct of Parties in the South China Sea (DoC) — and draw up a new and more robust one, the Code of Conduct in the South China Sea (CoC). IMPLEMENTING THE DoC ASEAN and China signed the DoC in November 2002 following two years of negotiations. It was originally envisaged to be legally binding, but China (and Malaysia) eschewed a legalistic approach and the

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final document became a non-binding political statement. The DoC is designed to reduce tensions, build trust through the implementation of confidence-building measures (CBMs) and create an environment conducive to a peaceful settlement of the dispute. The DoC was made possible because in the late 1990s China had adopted a more accommodating stance over the South China Sea as part of a broader posture of reassurance toward ASEAN (widely referred to as China’s “charm offensive”). As the dispute heated up in 2007–2008, however, it became readily apparent that the DoC’s mitigating effects had been greatly overstated. Although an ASEANChina Senior Officials Meeting (SOM) on Implementing the DoC had been established in 2004, followed by a lower-level Joint Working Group (JWG) on Implementing the DoC a year later, these groups had only met infrequently and by 2009 had become stymied by procedural disagreements between Chinese and ASEAN officials. It was not until July 2011 — against a backdrop of rising tensions that called into question ASEAN’s ability to manage regional hotspots — that the two sides reached agreement on a vague set of “Implementation Guidelines”. Though the DoC still “lacked teeth”, in the words of Philippines Foreign Secretary Albert Del Rosario, the guidelines paved the way for discussions to begin on joint cooperative projects in four of five areas identified in the DoC: search and rescue (SAR); marine ecosystems and biodiversity; marine hazard prevention and mitigation; and marine ecological and monitoring technique (the fifth area is combatting transnational threats). At the 6th meeting of the SOM and 9th of the JWG in Suzhou, China on 14–15 September 2013, agreement was reached in principle to set up a SAR hotline. A Work Plan for the Implementation of the DoC for 2013–2014 was also agreed on, including four meetings of the JWG. Details of how the hotline

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South China Sea: Glacial Progress Amid On-Going Tensions

would operate, and the contents of the Work Plan, have yet to be divulged. Nevertheless, after years of inactivity, the outcome of the Suzhou meeting represented a useful step forward. THE CoC PROCESS As soon as the Implementation Guidelines for the DoC were issued, several ASEAN members began calling for immediate talks on the CoC based on the view that however useful cooperative projects might be, they would have little impact on preventing incidents at sea that could lead to conflict. These members considered that what was needed was a comprehensive agreement on ‘rules of the road’ — a clear articulation of permissible and impermissible behaviour in the South China Sea. By mid-2012, ASEAN had drawn up a set of “proposed elements” for the CoC, including avenues to resolve disputes arising from violations or interpretations of the code. Indonesia subsequently used these proposed elements to draw up a “zero paper” that contained some further new ideas. Although China had indicated in late 2011 that it was willing to begin consultations on the CoC, by mid-2012 it had firmly slammed on the brakes. Chinese officials suggested that, as some ASEAN claimants were repeatedly violating the DoC and that these claimants were seeking to get around China’s insistence on dealing bilaterally with each of the other parties and bring ASEAN in behind their positions (even though ASEAN officially claims that it takes no position on competing territorial claims), the “time was not ripe” to move forward. Chinese officials also indicated that ASEAN’s “proposed elements” and Indonesia’s zero paper could not be the basis for discussions. China’s clear preference to delay substantive engagement on a CoC presumably reflects its prevailing judgement that it sees no good reason to consider negotiating a new

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instrument that would restrict its freedom of action in the South China Sea. What is becoming increasingly apparent is that Beijing is not only claiming sovereignty of the Paracels, Spratlys and other insular features within the nine-dash line, but also ownership of all living and non-living resources therein. As Gao Zhiguo — a Chinese judge at ITLOS — argued in an academic article published in January 2013, the nine-dash line was “synonymous with a claim of sovereignty over the island groups that always belonged to China and with an additional Chinese claim of historical rights of fishing, navigation, and other marine activities (including the exploitation of resources, mineral or otherwise) on the islands and in the adjacent waters”.2 Throughout the year, China’s new leaders broadcast a consistent message: while China is committed to “peaceful development” it is determined to uphold its territorial and maritime claims and that it will respond assertively to those countries that challenge them. And in a speech delivered in June, Foreign Minister Wang Yi stated that “proper solutions must be sought through dialogue and negotiation on the basis of fully respecting historical facts and international law”.3 Thus in China’s new ordering of priorities, history comes before law. In the DoC there is no mention of resolving disputes based on “historical facts”, only “universally recognized principles of international law” including UNCLOS. China’s reluctance to engage is not the only reason why the DoC/CoC process has languished. Disunity within ASEAN has also been a hindrance. While ASEAN does have a bottom-line consensus on the South China Sea — known as the Six-Point Principles4 — unity is a problem because each of its members see the problem differently. Vietnam and the Philippines view the problem as a major national security concern; fellow claimants Malaysia and Brunei are geographically further away from China and tend to downplay tensions; Indonesia and Singapore have both

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called on China to clarify its claims; the four non-claimants in mainland Southeast Asia — Thailand, Myanmar, Cambodia and Laos — do not perceive a direct stake in the dispute and in any case wish to avoid jeopardizing close economic and political links with China by taking positions inimical to Beijing’s interests.5 This lack of solidarity was publicly exposed in July 2012 when, under Cambodia’s chairmanship, ASEAN failed to issue a joint communique for the first time in its history. Consensus could not be reached on whether specific incidents in the South China Sea such as the stand-off at Scarborough Shoal should be mentioned. In 2013 the Philippines also came under criticism for submitting its legal challenge at the UN without consulting its ASEAN partners. When Brunei took over the chair in January it said that the CoC would be a priority. However, until China was ready to declare that the time was ripe, there could be no movement. In April–May China did change position, slightly. In informal talks with ASEAN in April, and during a swing through the region in May, Wang Yi announced that China was ready to begin consultations (not negotiations) with ASEAN on the CoC. China’s decision seems to have been motivated by the new leadership’s desire to improve relations with Southeast Asia which have been damaged by rising tensions in the South China Sea.

Ian Storey

ASEAN has called for an “early conclusion” of the CoC, but Wang Yi has dismissed these calls as “unrealistic” and that China is in “no rush”.6 Thus far, China has agreed to consultations on the CoC, in a “step by step” manner under the framework of the DoC.7 In Suzhou, at China’s insistence, the SOM agreed to delegate formal consultations on the CoC to the lower-level JWG. China also successfully pushed for the creation of an Eminent Persons Expert Group (a technical experts group at either Track 1.5 or Track 2 level) to compliment the JWG. Both decisions are viewed by some ASEAN officials as means to prolong the CoC process. Agreement between ASEAN and China to establish an SAR hotline, and the commencement of talks on the CoC, represents a modicum of progress towards better managing the South China Sea dispute. Hopefully more progress can be achieved in 2014 under the chairmanship of Myanmar. Yet our expectations must be realistic, for two reasons. First, the complex and contentious issues facing ASEAN and Chinese officials means that framing the CoC will be a long, drawn out process. Second, as noted, China is not enthusiastic about a code, opposes an “early conclusion” and will never sign an agreement that constrains its freedom of action in an area in which it believes it has sovereignty based on “historical facts”. Accordingly chances are that the CoC will be largely symbolic and unlikely to change the central drivers of the dispute.

NOTES 1. “ASEAN needs ‘more effective’ code with China over sea row”, Kyodo, 10 July 2013. 2. Zhiguo Gao and Bing Bing Jia, “The Nine-Dash Line in the South China Sea: History, Status, and Implications”, The American Journal of International Law, Vol. 107, No. 95 (2013), p. 108. 3. “Exploring the Path of Major Country Diplomacy with Chinese Characteristics”, Remarks by Foreign Minister Wang Yi at Tsinghua University, 27 June 2013. 4. See 5. Ian Storey, “Asean is a House Divided”, Wall Street Journal, 14 June 2012. 6. “China warns against rush to set code of conduct in South China Sea”, Xinhua, 5 August 2013. 7. “Premier Li’s keynote speech at 10th China-ASEAN Expo”, Xinhua, 4 September 2013.

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61.

DRIVING EAST ASIAN REGIONALISM The Reconstruction of ASEAN’s Identity

HERMAN JOSEPH S. KRAFT

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he process of East Asian regionalism received a shot in the arm in 2008 with the proposal made by Australian Prime Minister Kevin Rudd about restructuring the Asia-Pacific regional architecture. This was followed by the proposal made by Japanese Prime Minister Yukio Hatoyama on an East Asian community. There are substantive differences between the two concepts (one being that the former has been much more developed over time while the latter has been left for further discussion). Both, however, have attracted quite a bit of attention, not primarily because of their substantive content but more because of their implications for how currently existing regional institutions seem to be falling short of expectation thus creating the need to explore alternative arrangements. In an indirect way, this is reflective of how much its partners are beginning to grow weary of the ASEAN Way and of the way ASEAN has driven the process. The very success, however, of ASEAN in managing intra-ASEAN relations to the point

of being able to make the prospect of conflict between ASEAN member states unlikely (as well as its involvement in the Cambodian conflict) gave it an international stature out of proportion to the status of its individual member states. This was in fact recognized by its dialogue partners when they accepted the idea that the Association should chair the post-Cold War forum that would oversee discussions and dialogue on the security of the Asia-Pacific region. The fact that it was also called the ASEAN Regional Forum (ARF) when it was established in 1994 more than stamped the ASEAN mark upon it — it signified the adoption of ASEAN norms (especially the consensus-based method of decision-making) as the foundation for what was effectively a nascent attempt at extra-ASEAN regionalism. That it did so with much misgiving did not detract from its determination to show the applicability of the ASEAN “model” to a wider Asia-Pacific scope.1 This started ASEAN on its way to a significant shift in the evolution of its identity

From: “Driving East Asian Regionalism: The Reconstruction of ASEAN’s Identity” in ASEAN and the Institutionalization of East Asia, Herman Joseph S. Kraft, edited by Ralf Emmers, Copyright © 2012 Editorial selection and matter Ralf Emmers; individual chapter Herman Joseph S. Kraft, Routledge, reproduced by permission of Taylor & Francis Books UK.

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— from an association dedicated to keeping the Southeast Asian region free from being enmeshed in great power rivalries to one which accepted its “centrality” in a wider East Asian and Asia-Pacific regionalism, a process that would entail accepting the involvement of and engaging the major powers in the context of the region.2 SENSITIVITIES ABOUT RELEVANCE AND EFFICACY The increasing emphasis on the central role that ASEAN plays in East Asian regionalism and what it means to ASEAN itself was in full display in the ASEAN states’ reaction to the proposal presented in 2008 by Australian Prime Minister Rudd on the regional architecture of the Asia-Pacific region and, to a lesser degree, the statement made in 2009 by Japanese Prime Minister Hatoyama Yukio on the establishment of an East Asian community (Rudd 2008; Hatoyama 2009). Both were noteworthy for the lack of recognition of the continuing significance of ASEAN as the driving force in their visions of Asia-Pacific regionalism. Rudd in particular seemed to downplay any role for ASEAN in his vision. At the Shangri-La Dialogue on May 29, 2009, he noted that there was a need for a regional body that would bring together the key leaders of the region to engage on the breadth of challenges across various areas of concern that would be facing the region in the future (Rudd 2009). He identified Indonesia, India, China, Japan, and the US as comprising this leadership group together with some unspecified “other countries.” Given its prominence in East Asian and AsiaPacific regionalism, the absence of ASEAN in this short list of regional “leaders” was seen as a snub of the Association. The Rudd and Hatoyama initiatives were seen as effectively diluting the roles of existing institutions in the region, especially ASEAN. During Rudd’s visit to the ASEAN Secretariat in June 2008, ASEAN Secretary

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General Surin Pitsuwan felt it was necessary to remind him that ASEAN has been playing a central role in the evolution of communitybuilding efforts in East Asia and “in the construction of various architectures existing in the region today” (ASEAN Secretariat 2008). Across the region, comments ranged from cold and wary acceptance to emphatic rejection of the Rudd proposal (Frost 2009: 11–12). The reaction was particularly strong in Singapore, whose intellectuals and political leaders took up the cudgels for ASEAN. Ambassador Tommy Koh criticized the idea of effectively replacing ASEAN with a core group of the largest countries in the Asia-Pacific. A similar sentiment was expressed by Simon Tay of the Singapore Institute for International Affairs when he pointed to the dangers of the emergence of a “Directorate of Asia driven by the larger Asian and Pacific powers in collaboration and dialogue with the US that is not a true community of the region — which has many smaller and medium sized nations” (Frost 2009: 11–12). Koh pointed out that ASEAN was still best placed to lead the region. When the Rudd initiative had effectively lost steam (Callick 2010), he insisted that: it is useful for us to reflect on the unique role which ASEAN plays in Asian regionalism. All the big countries of the region would like ASEAN to continue to play the role of convener, facilitator and catalyst. Why? Because ASEAN is neutral, welcoming and has a good track record of nurturing such institutions. Given the rivalry between the big countries, it would be impossible for any one of them to replace ASEAN. The idea to replace ASEAN with a G8 of the Asia-Pacific is both impractical and a violation of the Pacific ethos of equality and consensus. (Dobell 2009)

This statement, together with the rather defensive reaction of ASEAN (led by Singapore) to the two initiatives from Australia and Japan, reflect not just

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Driving East Asian Regionalism: The Reconstruction of ASEAN’s Identity

acceptance of but even more so the apparent internalization of the exceptional role it plays in East Asian and Asia-Pacific regionalism. That this has become part of ASEAN’s selfidentification is shown by its prominence in the ASEAN Charter. Section  12 of Article 1 (and essentially repeated in Section 3 of Article 41) specifically states that ASEAN must maintain its “centrality and proactive role … as the primary driving force in its relations and cooperation with its external partners in a regional architecture that is open, transparent and inclusive” (ASEAN Secretariat 2008). The emphasis given to this role has created the impression that ASEAN has been jealously guarding this prerogative for decades and that it was successful in fending off this latest challenge (Callick 2010). There are two points to this presumption. First is the idea that the ASEAN states have collectively identified with this role for some time now. Second is the point that the Rudd and Hatoyama initiatives are just the latest challenge to this claim to “centrality.” The statement, however, is at best only partially correct. As indicated in the previous section, this role came to ASEAN only with the establishment of the ARF in 1994. Shortly thereafter, ASEAN has had to contend with second-guessing from a number of its dialogue partners. REMAINING “CENTRAL”: HOW DO YOU SOLVE A PROBLEM LIKE ASEAN? Emphasizing what has become the ASEAN advocacy of expanding the security context for East Asian regionalism, President Susilo Bambang Yudhoyono of Indonesia pointed out in an address before the ASEAN Business and Investment Summit 2005 held in Kuala Lumpur that the promotion of human security should be a central agenda in regional community-building in Southeast Asia and the East Asian region (Xinhua News Agency 2005).3 The key point of the expansion of the security context of East Asian regionalism is

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that it illustrates the extent to which ASEAN has been able to provide normative guidance to the process itself. As noted earlier, this is precisely where ASEAN has been most effective in asserting its centrality to East Asian regionalism. Of note in the speech of Yudhoyono is the way he identified the idea of ASEAN centrality as an emerging aspect of ASEAN’s identity. He noted that there were two parts to this new context of ASEAN’s identity. The first is largely normative and has to do with “promot[ing] the values of peace, prosperity and progress beyond the Southeast Asian region.” The second, however, points to the need for ASEAN “to demonstrate that it had the capacity and mechanism not only to prevent and resolve conflicts through peaceful n1eans but also to engage in post-conflict peace-building.” In this context, Yudhoyono emphasized that the key to the building of an East Asian community for which ASEAN is supposed to be the “driving force” is “the success of ASEAN in consolidating its [own process of] community-building” (Xinhua News Agency 2005). The very expansion of the context of security which has been a key plank of ASEAN’s centrality in the regionalism process emphasizes a fundamental issue within ASEAN. The ASC has now become the ASEAN Political Security Community (APSC). The Plan of Action for both, however, pushes the idea of providing regional reinforcement to bilateral cooperation between ASEAN member countries while recognizing the sovereign rights of the member countries to pursue their individual foreign policies and defense arrangements. Yet, the extent of cooperation required for the APSC to work goes beyond the expectations of current levels of cooperation. It will include normative as well as institutional changes within ASEAN itself. Central to the entire enterprise of normative change is the ASEAN Charter. While the focus of the debate over norm-

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change in ASEAN has been over the principle of non-interference, there are related and even more fundamental issues present. The most obvious one is the question of binding norms. Whatever norms are adopted by ASEAN must have binding authority — meaning that the Association must be able to enforce sanctions against non-compliance. At present, the declarations and aspirations that the ASEAN member states have committed themselves to within the context of ASEAN are supposed to be binding, but only in A FTA are there any clear rules against non-compliance. In other cases, everything is left to voluntary observance. Language that demands a more binding observance of whatever is agreed upon carry with it the implication that erring member states can be taken to task by the others for the nonperformance or their responsibilities and obligations to their citizens and residents. PARTING THOUGHTS The kerfuffle over the Rudd and Hatoyama proposals has affirmed two conditions that have been discussed by a number of scholars and policymakers around the region. First, there is official dissatisfaction with ASEAN leadership of the different processes of East Asian regionalism. Second, no matter how much dissatisfaction there is with how ASEAN does business and, consequently, how many (or few) substantive outcomes emerge out of it, there is still very little agreement on an alternative “driver” to ASEAN. The Rudd proposal presented the idea of putting

Herman Joseph S. Kraft

together a regional G8 that would collectively provide guidance and an overarching frame to existing processes. Such a grouping, however, would have required the agreement of the largest powers in the region — a requirement that is unlikely to be fulfilled because of continuing suspicions among the most powerful states in the region. ASEAN’s claim to centrality in East Asian regionalism seems unchallenged. A third condition that has been made evident by this episode, however; shows how much the idea of “centrality” has become a part of ASEAN’s self-identification. Not only is it officially declared as a policy of ASEAN, but it has shown its willingness to assert that identity in the face of challenges posed by other regional players. The problem for ASEAN is whether it can continue to claim that role in the face of increasingly varied challenges to the region that require substantive and material responses. Yudhoyono’s assertion that the seeds of the downfall of ASEAN’s “centrality” are sown within ASEAN itself is a telling consideration. There is much that ASEAN needs to do to strengthen itself, and in the process enhance its credibility to its regional partners. There are no guarantees that a more institutionalized ASEAN would be better able to provide the process of East Asian regionalism with leadership. A more institutionalized ASEAN, however, would give its partners a clearer idea of what to expect. Even better for ASEAN credibility would be a more institutionalized ASEAN with institutions that work.

NOTES 1. Across the years, a number of authors have noted the lack of enthusiasm with which ASEAN took on the task of being the driving force for the ARF. Ba (2007: 95) noted that the apparently natural and logical situating of ASEAN in a wider Asia-Pacific leadership role was at the beginning only undertaken by the former with great reluctance. More to the point, Leifer (1994: 7) pointed out that the establishment of the ARF was the result of “the ASEAN states and its candidate members

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hav[ing] been obliged to expand their strategic horizons in the interest of addressing the problem of common security [italics mine].” 2. Haacke (2006: 135) saw the establishment of the ARF and the leadership role in it foisted upon ASEAN as a break with the ASEAN aspiration of establishing a Zone of Peace, Freedom and Neutrality in Southeast Asia. 3. This meeting was held in conjunction with the various summits involving ASEAN from December 12–14, 2005.

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62.

PAKISTAN, SAARC AND ASEAN RELATIONS

FAIZAL YAHYA

INTRODUCTION Both ASEAN and the South Asian Association for Regional Cooperation (SAARC) have a diverse array of economies at different levels of development and contain a wide range of cultural, religious, and ethnic and linguistic communities. Territorial disputes whether on land or at sea are also a facet of both regions. War has erupted between India and Pakistan on three occasions and there have been almost continuous skirmishes along the Line of Control (LOC), which dissects Kashmir into Pakistani and Indianheld territories.1 ASEAN too has its share of insurgency and separatist conflicts along some of its common borders. The main difference with regards to security problems between the regions is that India and Pakistan are declared nuclear weapons states, which magnify the political tensions in South Asia manifold compared to those in ASEAN. Both regions also display different characteristics as economic groups. The founding of ASEAN was with the participation and blessings of the biggest and most influential member

of the group, Indonesia. In contrast, the founding of SAARC in 1985 was largely the initiative of smaller economies such as Bangladesh and Nepal. The late President of Bangladesh Ziaur Rahman was the main instigator for SAARC’s formation. Together with the support of smaller countries such as the Maldives, he sought consensus from the leaders of India and Pakistan.2 Other impediments to greater intra-SAARC trade are structural because there is also a lack of transportation (land, sea and air) and information dissemination to promote intra-regional trade. SAARC members have to focus on mobilizing their resources to build up their infrastructure to enable greater economic activities.3 However, the lack of political will and prevailing political differences are the biggest obstacle to creating trade complementarities within the SAARC region.4 Unlike SAARC, ASEAN has largely managed to keep problematic bilateral issues between its members from derailing regional initiatives. SAARC’s regional initiatives

Reprinted in excerpted form from Faizal Yahya, “Pakistan, SAARC and ASEAN Relations”, Contemporary Southeast Asia 26, no. 2 (2004): 346–75, by kind permission of the Institute of Southeast Asian Studies.

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have been sidelined when bilateral disputes flared up in the region. This paper argues that SAARC could move ahead by using economic benefits to marginalize the “ghosts of the past”. Kashmir has become the symbol that has divided India and Pakistan for over 50 years, much like the Berlin Wall divided East and West Germany. The fall of the Berlin Wall was due to economic factors around the wall itself, which led to a change in the political climate. Similarly, the creation of the South Asia Free Trade Area (SAFTA) is a step that could marginalize the Kashmir dispute but its ability to foster regional trade has yet to be proven. Previous attempts at enhancing South Asian regional trade through the South Asian Preferential Trade Agreement (SAPTA) signed in 1995 has not been encouraging. The inability of SAPTA to deliver greater trade flows has seen India promoting its own trade relations outside of the region. India through its “Look East” policy is seeking business opportunities with ASEAN, China, Japan and South Korea. The 12th SAARC Summit held in Islamabad in January 2004 brought renewed expectations that the group will move ahead with its economic agenda. In 1997, ASEAN and SAARC came to share a common border with the inclusion of Myanmar as part of ASEAN. Both regional organizations also manage one of the world’s busiest trade routes and have a combined regional population of 1.5billion people. As potential markets for producers and consumers, both regions have the capacity to enhance their trade linkages with each other. The economic growth rates of India and Pakistan alone have been averaging 6 to 8 per cent since the late 1990s, which is higher than those of the ASEAN economies. By 2020 India expects to be the fourth largest economy in the world in terms of purchasing power parity (PPP) after China, the United States (US) and Japan.5 South Asian leaders have discussed how SAARC could benefit from the experiences

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of ASEAN. In this regard, member countries of ASEAN had held consultations in New York on the sidelines of the United Nations General Assembly (UNGA) in 1998 and 2001. There is scope for both groups, which have two-thirds of the world’s population and common membership in many organizations such as the Non-aligned Movement (NAM), WTO and G-77 to cooperate in their consideration for candidatures for UN organizations.6 KASHMIR AS THE “BERLIN WALL” Relations between India and Pakistan were at a low ebb after the attack on the Indian parliament in December 2001. Things have since simmered down with what seems to be slow but steady diplomacy to move things ahead. Former Indian Prime Minister Vajpayee started the thaw in bilateral relations with a well-timed and landmark speech in April 2003 in Indian administered Kashmir, saying he was willing to look forward after 18 months of hostility.7 At the Third Conference of SAARC Information Ministers in Delhi in November 2003, Prime Minister Vajpayee called upon South Asian Countries to promote economic cooperation despite political differences.8 President Musharraf of Pakistan followed up later in the year with an offer to set aside Pakistani demands for a referendum in the Kashmir dispute in return for a serious dialogue with India.9 At a meeting organized by the Federation of Indian Chambers of Commerce and Industry (FICCI), Indian and Pakistani business communities supported the thaw in bilateral relations and urged both countries to open more rail and air links to facilitate movements of goods and people between the two countries.10 The Indian External Affairs Minister Yashwant Sinha who was at the meeting underscored the need for India’s neighbours to become full partners in the endeavour to make more economic progress.11

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AN ASEAN MODEL The reference to ASEAN as a possible model for SAARC to follow tends to conceal the fact that even if ASEAN is not a useful model for SAARC, ASEAN could be used as a “bridge” to foster rapprochement between India and Pakistan. India’s Look East policy has been successful since its implementation in the early 1990s and India has progressed from the limited sectoral dialogue partnership with ASEAN in 1992 to full dialogue partnership in 1995, membership into the strategic ASEAN Regional Forum (ARF) in 1996 and eventually to an India-ASEAN summit status in 2002.12 At the second IndiaASEAN summit in Bali, Indonesia in October 2003, India acceded to the Treaty of Amity and Co-operation (TAG) in ASEAN and signed a declaration to combat terrorism. India also raised trade expectations by proposing a Free Trade Agreement (FTA) with ASEAN by 2012 that would substantially increase the US$12 billion trade between them (as at the end of 2002).13 ASEAN provided a motivating factor for India to improve ties with China to such an extent that their respective navies have engaged each other in search and rescue operations in November 2003.14 As emerging economic giants, China and India have a common interest in keeping one of the world’s busiest sea-lanes, the Straits of Malacca, free from impediments. The involvement of the Indian navy in security patrols and naval exercises with those of respective ASEAN navies is generally accepted among major powers in the region as a positive contribution towards peace and stability in the region. Pakistan took more interest in engaging East Asia in the late 1990s and became a Sectoral Dialogue Partner of ASEAN in November 1997 but it has been unable to advance beyond this framework, unlike India. Sectoral Dialogue Partner status was conferred on Pakistan at the Inaugural Meeting of ASEAN and Pakistan in Islamabad

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from 5 to 7 November 1997. The Foreign Minister of Pakistan at the time, Gohar Ayub Khan underlined the importance of the Sectoral Dialogue Partnership and Pakistan’s emphasis on having a closer relationship with ASEAN. In turn, then ASEAN Secretary General Dato’ Ajit Singh, expressed the willingness of ASEAN to work with Pakistan in identifying areas and modalities that could further their collaboration for the mutual benefit of both parties.15 The Inaugural ASEAN-Pakistan meeting also adopted the Terms of Reference (TOR) of the ASEAN-Pakistan Joint Sectoral Cooperation Committee (APJSCC). The APJSCC has the authority to oversee and facilitate cooperation between ASEAN and Pakistan. Furthermore, the APJSCC would also have the authority to convene sub-committees or working groups to assist the APJSCC itself to develop specific areas for collaboration. The ASEAN Secretariat has also established an ASEAN Islamabad Committee (AIC) to facilitate the process of Sectoral Dialogue. The AIC comprises of the various heads of ASEAN diplomatic missions accredited to Pakistan.16 The APJSCC convened its first meeting in Bali, Indonesia on 5 February 1999. During the Bali meeting, ASEAN and the APJSCC agreed to facilitate direct contacts between their respective government agencies. Furthermore, the priorities of the ASEAN Hanoi Plan of Action and Pakistan’s 2010 perspective plan would be matched and specific areas of cooperation are likely to be in these areas: food processing technology, environmental protection, water resource management, narcotics control, non-conventional energy research, remote sensing and geographic information system (GIS).17 Significant progress has been made in Pakistan’s trade with ASEAN. Pakistan’s trade exchanges with ASEAN have increased from US$1,078.21 million in 1993–94 to US$1,556 million in 1997–98. However, in percentage terms measured against its total trade the

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growth has been incremental. This is because Pakistan’s exports to ASEAN have only shown a marginal increase from US$261 million in 1993–94 to US$285 million in 1997–98. On the other hand, Pakistan’s imports from the region have increased from US$817 million to US$1,270 million in the same period (increase of 55 percent). Through linkages with the ASEAN member countries, Pakistan would like to expand its ties with the region by gaining Full Dialogue status and entry to the ASEAN Regional Forum (ARF), the Association of Pacific Asian Cooperation (APEC) and the Asia Europe Meeting (ASEM).18 To implement his “Eastward” strategy, President Musharraf has visited several ASEAN member countries in May 2001. For example, Musharraf made an official visit to Vietnam, the first to that country by a Pakistani leader since 1972 and he also visited Brunei Darussalam, Malaysia, Singapore and Thailand. Treading on a path that would have irked Western nations, Musharraf also visited Myanmar in May 2001, the first visit by a non-ASEAN member country since Myanmar joined ASEAN in 1997. Significantly, in military terms, Pakistan was the first country to supply Myanmar with arms in 1988 when sanctions were imposed on Myanmar for disallowing the results of an election which opposition leader Aung San Suu Kyi’s political party had won by a landslide.19 In geostrategic terms, Musharraf’s visit to Myanmar is crucial because of China and India’s interest in that country. It would be to Pakistan’s advantage to ensure that Myanmar is aware of its interests when undertaking strategic dealings with Asian giants China and India. ISLAMIC TIES Pakistan has also tried to strengthen its ties with ASEAN by appealing to Muslim sentiments in the region. This is in line with the strong Islamic ideology in Pakistan’s foreign policy that has seen it supporting

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the cause of Muslims worldwide such as an independent Palestinian state.20 Moreover, the 1973 Constitution of Pakistan imposes an obligation on the government to develop closer relations with other Islamic countries. Using this approach, for example, Pakistan is keen to promote bilateral economic ties with Thailand based on trade, investment and cooperation in science and technology,21 by sponsoring a number of scholarships for Thai Muslims. Indonesia as the largest Muslim country in the world also has strong ties with Pakistan through the OIC. Among all the member countries in ASEAN, Malaysia has the closest relations with Pakistan. At the second meeting of the Pakistan-Malaysia Joint Commission in October 2000, Pakistani Foreign Minister Abdul Sattar said that there were a number of promising sectors for mutual collaboration between the two countries.22 Pakistani leader Musharraf previously emphasized this when he visited Malaysia in March 2000. Pakistan could also serve as a gateway for Malaysian businessmen in the South, West and Central Asian regions. ASEAN REGIONAL FORUM The Kashmir dispute and bilateral relations between India and Pakistan not only affects SAARC but ASEAN as well. Pakistan has tried in the past but failed to convince ASEAN to elevate its status to a full dialogue partner and has not been allowed into the ARF.23 Members of the ARF were concerned that the admittance of Pakistan will lead the organization to be held hostage to the Kashmir dispute. The ARF has other sensitive issues to deal with such as the maritime and land border disputes without the addition of a problem that has spanned over five decades. As part of Pakistan’s geostrategic orientation to promote its economic expansion, Pakistan’s Chief Executive General Pervez Musharraf, was vigorously pursuing his “Eastward Looking Policy” which could not only open doors for more

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economic opportunities for Pakistan but also to counter the “Look East” influence that India has propagated in the Southeast Asian region. The ASEAN initiative to include Pakistan in ARF was mooted by Malaysia and received endorsements from fellow Muslim members Indonesia and Brunei as well as the other ASEAN members. Among ASEAN’s Indochinese members, Cambodia, Myanmar, Laos and Vietnam (CMLV), Laos has come forward strongly to support Pakistan’s entry into ARF. For the Muslim countries who are also members of the OIC and ASEAN, Pakistan’s concept of “enlightened moderation” as articulated by President Musharraf at the 10th Summit level conference of the OIC that was held in Putrajaya, Malaysia from 16 to 18 October 2003, has strong appeal in their anti-terrorism efforts.24 The concept of enlightened moderation has two facets: first, the Islamic world must adopt a process of development and second, the West has to come forward to assist in the resolution of political conflicts involving Muslims and assist Islamic countries in socio-economic development. While in the past India had objected to Pakistan’s entry into ARF, it went with the consensus decision to admit Pakistan as the 24th ARF member on 2 July 2004 at an ARF Ministerial Meeting in Jakarta.25 CONCLUSION A successful implementation of SAFTA would enhance the image and credibility of

Faizal Yahya

Pakistan’s chairmanship of SAARC in the region and internationally. Pakistan will be motivated to promote SAFTA as this will demonstrate its ability to manage and inject dynamism into the regional grouping. While Pakistan has successfully reached one of its foreign policy goals by being accepted into ARF, it has to build on this to become a full ASEAN dialogue partner. Pakistan has considerable influence in the OIC and has strong ties to fellow OIC members Brunei, Indonesia and Malaysia. When the Sultan of Brunei visited Pakistan in July 2004, he announced Brunei’s support for Pakistan in pursuit of the latter’s full dialogue partnership status with the ASEAN.26 To achieve full dialogue status with ASEAN, Pakistan has to enhance its trade links and volume of trade with ASEAN. Currently, Pakistan’s total turnover with the grouping annually stands at around US$1.5 billion compared to that of India which is estimated at US$12.5 billion.27 Based on these figures alone, trade preferences among ASEAN members have gravitated towards the Indian market. From a regional perspective, Pakistan might find it difficult to crack the ASEAN market but it could approach the challenge on a bilateral basis. Pakistan should expand its trading links with various individual ASEAN members like Brunei. The potential for growth in bilateral trade between Brunei and Pakistan covers a range of sectors such as telecommunications, banking, oil and gas, tourism and the hotel industry.28

NOTES   1. 1947, 1965 and 1971.   2. Narottam P. Banskota, Building a South Asian Economic Community (Lewiston: Edwin Mellen Press, 2002) and P.A. Joy, SAARC and Trade Development [New Delhi: Deep & Deep Publications, 1996).   3. Kalyan Raipuria, “SAARC in the New Millerinium: Need for Financial Vision”, South Asian Survey 8, no. 1 (2001).   4. Kishore C. Dash, “The Political Economy of Regional Cooperation in South Asia”, Pacific Affairs 69, no. 2 (Summer 1996).

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  5.   6.   7.   8.

Bhabani Sen Gupta, “India in the Twenty-first Century”, International Affairs 73, no. 2 (1997). “ASEAN and SAARC Hold Consultations in New York”, Daily News, Sri Lanka, 22 November 2001. Sanjoy Majumder, “South Asian Summit Hopes”, BBC News, 2 January 2004. Pallab Bhattacharya, “Rise above Political Divide to Promote Economy”, Daily Star, India, 4, no. 168, 12 November 2003.   9. Zaffar Abbas, “Analysis: Musharrafs Kashmir Risk”, BBC News, 18 December 2003. 10. “Pak Seeks Better Access to Indian Markets”, Business Line, India; 8 July 2003. 11. Ibid. 12. Gautam Murthy, “Asean Ties: India Must Look to the East with Greater Vision”, Business Line, India, 31 December 2003. 13. Ibid. 14. Sunanda Kisor Datta-Ray, “China and India: Sailing Closer?” South China Morning Post, 18 November 2003. 15. “Inaugural Meeting on the Establishment of ASEAN-PAKISTAN Sectoral Dialogue Relations”, ASEAN Joint Press Statement, Islamabad, 5–7 November 1997. 16. ASEAN Joint Press Statement, ibid. 17. “First Meeting of the ASEAN-Pakistan Joint Sectoral Cooperation Committee”, Bali, ASEAN Joint Press Statement, 5 February 1999. 18. Channel NewsAsia, Singapore, 5 May 2001. 19. Sarah Stewart, “Asia’s Military Governments Meet as Pakistan Leader Arrives in Myanmar”, Agence France Presse, 1 May 2001. 20. Shahid M. Amin, Pakistan’s Foreign Policy: A Reappraisal (Oxford: Oxford University Press, 2000), p. 127. 21. “Pakistan, Musharraf to Fly in for Official Visit: Tour of Region Aims to Boost ASEAN Ties”, Bangkok Post, 31 March 2000. 22. “Pakistan Desires Closer Relations with Malaysia: Sattar” (Pakistan Foreign Minister Abdul Sattar), Bernama, Malaysia, 13 October 2001. 23. “Pakistan Urges ASEAN to Admit it as a Dialogue Partner”, India Express,16 December 2003. 24. “Pakistani Premier Holds Talks with Leaders”, BBC News, 14 May 1999. 25. BBC News, South Asia, 14 May 2001. 26. Edward Luce, “India Forsakes World Trade Organisation for Bilateral Trade Deals With Neighbours”, Financial Times, 16 October 2003. 27. “India Calls for Single SAARC Currency, Unified Tariff’’, Hindustan Times (India), 2 January 2004. 28. “Pakistan Looks Forwards to Joining ASEAN”, Pakistan Times, 16 December 2003.

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63.

NEITHER SKEPTICISM NOR ROMANTICISM The ASEAN Regional Forum as a Solution for the Asia-Pacific Assurance Game TSUYOSHI KAWASAKI

E

stablished in 1994 with the membership of eighteen states, the ASEAN Regional Forum (ARF) is the sole region-wide multilateral security institution in the post-Cold War Asia-Pacific. While it is primarily a dialogue forum without binding decision-making and enforcement mechanisms, it has gradually institutionalized numerous confidence-building measures (CBMs) among the member states. As its name strongly suggests, the members of the Association of Southeast Asian Nations (ASEAN) are in the ‘driver’s seat’. Furthermore, the ASEAN states, it is often argued, have successfully transplanted their principles and practices for mutual interaction to the ARF setting. These codes of behavior, often called ‘the ASEAN Way’, are characterized by ‘a high degree of discreetness, informality, pragmatism, expediency, consensus-building, and non-confrontational bargaining style’, in sharp contrast to ‘adversarial posturing and legalistic styles’ found in the West (Acharya 1997: 329). What is the nature of the ARF? In answering this question, specialists have come to loosely

form two competing camps: structural realists on the one hand, and the advocates of what Amitav Acharya (1999: 25, n. 15) calls ‘institutionalism with a constructivist orientation’ (constructivists hereafter) on the other. Structural realists regard the ARF essentially as an epiphenomenon and remain highly skeptical about the efficacy of the multilateral institution in Asia-Pacific power politics.1 Constructivists, on their part, place significant emphasis on a new regional identity being formed, particularly around the ASEAN Way. They argue that old state interests are profoundly transformed to the extent that materialist perspectives like structural realism are becoming increasingly inadequate in the study of the ARF. Power politics in the region, according to constructivists, is changing slowly yet steadily. Each position is epitomized by the two quotations at the beginning of this article. These two dominant perspectives on the ARF have serious limitations, however, because they fail to adequately capture the utilities that the ARF provides to its member states. The ARF exists because it satisfies

Reprinted in excerpted form from Tsuyoshi Kawasaki, “Neither Skepticism nor Romanticism: The ASEAN Regional Forum as a Solution for the Asia-Pacific Assurance Game”, The Pacific Review 19, no. 2 (2006): 219–37, reprinted by permission of the publisher Taylor & Francis Ltd, www.tandfonline.com.

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some needs felt by its member states. Its rules and practices signify internationally agreed solutions for these needs. The member states would have little motivation to spend their precious resources to sustain ARF activities if the ARF did not supply what they demand. In short, the ARF exists because of its functions; its existence serves the member states’ interests. Structural realists focus on the role of state power, and constructivists on the process of socialization. But examining these dimensions of the ARF does not directly help us understand the raison d’eˆtre of the ARF defined in terms of functions — in other words, the member states’ interest in supporting the ARF. This is a serious gap in the study of the ARF. What, then, are the functions that the ARF provides? This article argues that the central function of the ARF is to play the role of an information-clearing house. It presents a systematic conceptual framework to analyze this key function, while borrowing insights from the rational institutionalist literature (e.g. Keohane 1990; Martin 1992; Snidal 1985; Stein 1983).2 From the rational institutionalist perspective, institutions supply solutions for collective-action problems. Relevant to our interests are two generic types of collectiveaction problems: the Collaboration Game (also called Prisoners’ Dilemma) and the Assurance Game often referred to as the Stag Hunt or the Coordination Game (Oye 1985; Stein 1983). To achieve cooperation in the Collaboration Game requires a strong and robust institution as a mechanism to enforce agreements and monitor compliance among players. In the Assurance Game, in contrast, a weak and loose institution is sufficient because cooperation only requires efficient information transmission among players. This article argues that the ARF is an institutional solution for the Assurance Game that emerged in the post-Cold War Asia-Pacific region. Conceptualizing the nature of the ARF with the framework of elementary game

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theory helps us understand the sources of bias in the existing literature on the ARF. On the one hand, structural realists assume that the Collaboration Game (as well as a more pessimistic game called Deadlock) is the only type of strategic game that exists or is significant enough in world politics. Since only a strong institution can solve a collective-action problem in such a game, structural realists see the ARF as powerless and inadequate. Their skepticism about the ARF derives from their predisposed conception of the game that states play. On the other hand, constructivists suffer from romanticism. They view the ASEAN Way as an expression of identity formation among the member states when it is in fact a form of institutional solution for the Assurance Game. Because of their disposition to emphasize norms and identity, they misinterpret the ASEAN Way as a cultural phenomenon and exaggerate the extent to which member states are transcending the rationalist-materialist games that they play. In short, structural realists’ skepticism and constructivists’ romanticism both stem from the fact that these two groups, albeit for different reasons, fail to capture the nature of the Assurance Game. THE ARGUMENT Rational institutionalism offers a coherent explanation of why the ARF has the ASEAN Way and ‘toothless’ CBMs. Its general argument is that states erect and design a particular international institution to facilitate international cooperation in the strategic game in which they engage. In the context of the ARF, ‘toothless’ CBMs are concrete policy measures to achieve and sustain such international cooperation, and the ASEAN Way, as well as the ARF framework itself, is the very institution intentionally crafted by the member states to generate such policy measures. Then, what kind of strategic game are these states

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engaged in? The aforementioned literature on rational institutionalism suggests that it is the Assurance Game, rather than the Collaboration Game. According to the literature, states in the Collaboration Game demand a rule-based, binding, and centralized institution, whereas those in the Assurance Game are content with a convention-based, voluntary, and decentralized institution — an institution like the ARF. Thus, rationalist institutionalism explains the emergence of the ARF in the following way: when the member states faced the Assurance Game in the post-Cold War Asia-Pacific they erected the ARF, characterized by the ASEAN Way, to induce international cooperation. According to this view, the ASEAN Way is performing the very function that the member states expect it to perform. By the same token, the ARF’s ‘weak’ CBMs are more or less designed that way by the member states, given the kind of strategic game in which these states find themselves. In a nutshell, according to rational institutionalism, both the ASEAN Way and information-exchange CBMs are logical consequences given the nature of the Assurance Game. CONCLUSION There is a rational foundation of the ARF, which the existing two dominant groups of analysts have overlooked or failed to articulate. Such a foundation becomes

Tsuyoshi Kawasaki

clear if one employs the analytical lens of rational institutionalism. The ARF, despite its fuzziness and lack of built-in conflictresolution mechanisms, is an effective solution, set up intentionally by the states in the Asia-Pacific region, for a particular type of collective-action problem — the Assurance Game — that these states encountered immediately after the end of the Cold War. This conception of the ARF as a solution for the Asia-Pacific Assurance Game does find empirical support in various features as well as the birth process of the multilateral institution. This is what this article has argued while borrowing the conceptual apparatus from the well-established literature of rational institutionalism. From a rational institutionalist perspective, it is not surprising to find some ARF member states firmly resisting the introduction of more ambitious policy programs beyond CBMs: such programs do not fit with the logic of the Assurance Game. In fact, we may not want to welcome such programs. The logic of rational institutionalism suggests that we would need ‘measures with more teeth’ only when an Assurance Game is taken over by a Collaboration Game. And such a shift in the Asia-Pacific game would be bad news: in the Collaboration Game it is more difficult for players to achieve mutual cooperation (CC). We are surely better off with the Assurance Game — although it may have ‘only’ CBMs.

NOTES 1. I use the term ‘structural realists’ because other sub-schools of realism like classical realism do not dismiss institutions. 2. I use the generic term ‘rational institutionalism’ rather than ‘neoliberal institutionalism’ in this article.

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64.

ASEAN PLUS THREE AND THE RISE OF REACTIONARY REGIONALISM

MARK BEESON

ASEAN PLUS THREE: ITS ANTECEDENTS AND PROSPECTS In this section I examine the forces that have encouraged the development of the nascent ASEAN Plus Three grouping, which includes the much larger economies of Japan, China and South Korea in addition to the ten ASEAN members. The picture that emerges is complex, uncertain and rapidly evolving, but one tentative conclusion appears plausible: formerly quiescent strategic considerations, the absence of which allowed a greater degree of autonomy to develop within East Asia, have resurfaced and look set to play an important role in shaping and delimiting the possible trajectory of East Asian regionalism. A further caveat needs to be added to this claim: the impact of strategic considerations is itself potentially contradictory and will ultimately depend on a number of imponderable strategic developments — especially those revolving around American foreign policy — and the region’s capacity to develop collective responses to them. At this stage, all we can do is spell out some of

the potential contradictory dynamics that are likely to underpin future developments and link them to the region’s specific historical circumstances. Regional Factors The most important antecedent of ASEAN Plus Three is, of course, ASEAN itself. Although ASEAN has provided an important foundation for the development of a wider East Asian grouping, there are some important differences in the formative dynamics of both groupings that merit brief emphasis. ASEAN, as noted earlier, was very much a product of the aftermath of the decolonization process, the Cold War, and the great power contestation that continues to grip the region. Regionalization — or the private sector-driven economic integration manifest in denser trade and investment flows — was not a decisive force in encouraging closer political co-operation in Southeast Asia. On the contrary, intra-regional trade is still modest between the non-complementary

Reprinted in excerpted form from Mark Beeson, “ASEAN Plus Three and the Rise of Reactionary Regionalism”, Contemporary Southeast Asia 25, no. 2 (2003): 251–68, by kind permission of the Institute of Southeast Asian Studies.

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and essentially competitive economies in most of ASEAN.1 It is important to remember that ASEAN is composed of a number of small economies, the structure and development of which have been profoundly shaped by colonialism and latterly by the activities of more powerful economic and political forces from outside Southeast Asia.2 In other words, there have been integrative forces encouraging economic regionalization, but these have emanated from countries like Japan,3 which are outside the smaller ASEAN grouping and are an expression of wider East Asian forces. At the level of regionalization, therefore, an expanded ASEAN Plus Three grouping that takes account of such panregional forces makes intuitive sense. Yet one of the distinguishing characteristics of East Asian regionalization is that it has a relatively low profile. Of the three major drivers of economic integration identified by Dajin Peng4 — regional production networks, ethnic business networks, and subregional economic zones — none has the sort of visibility associated with initiatives like the creation of a single market in the European Union. However, this “informal” style of integration has provided a rationale for a more explicit political corollary as the countries of Southeast and Northeast Asia come to recognize that their economic interests may be advanced through enhanced regional co-operation. The underlying logic of the broader East Asian region’s multitiered developmental experience, in which Japan pioneered an industrialization process that spread initially to South Korea, Taiwan, and then onto Southeast Asia and China, has led to a flurry of initiatives designed to consolidate regional integration. The ASEAN Free Trade Area (AFTA), for example, reflected Southeast Asia’s incorporation into region-wide production networks.5 More recently, both Japan and China have moved to consolidate their economic relations with Southeast Asia through bilateral trade agreements.6

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Plainly, competition rather than cooperation between Japan and China — as they attempt to realize their respective regional leadership ambitions — may have a good deal to do with such initiatives.7 However, the attempt to enhance regional autonomy by institutionalizing and increasing intraregional trade and investment is also a reflection of a more fundamental and enduring reality: the East Asian crisis and its aftermath dramatically brought home to East Asia’s political and economic élites just how dependent they are on external markets and how vulnerable they are to outside political pressures. The crisis was consequently a watershed at a number of levels and led to a number of crucial political and economic initiatives that have given impetus to the ASEAN Plus Three project. The Crisis and Its Aftermath The economic and political crises that struck East Asia generally and South Korea, Thailand, Malaysia and Indonesia in particular toward the end of 1997, have been sufficiently analyzed now to need little elaboration here.8 There are, however, a number of aspects of the crisis that have accelerated and helped determine the subsequent course of regionalism in East Asia which are important to highlight. Perhaps the most significant long-term impact of the crisis was to fundamentally transform established perceptions of the region itself. On the one hand, this was manifest in the panic-stricken exit of mobile capital from the region, as a number of key countries went from being “pin-ups” to “pariahs” in a matter of months as far as the “international investment community” was concerned. A handful of emerging market fund managers, who controlled vast amounts of mobile capital, were instrumental in initially reinforcing and then puncturing the myth of the “Asian miracle”. On the other hand, this transformation in external

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perceptions fed into a painful but ultimately overdue internal reassessment of the costs, benefits and basis of integration into a global economy in which rapid capital movements were not only frequently of a vastly greater scale than individual national economies, but which were inherently unpredictable and destabilizing. Two crucial sets of questions emerged from the crisis which have been central components of subsequent debates about the course and content of East Asian regional integration as a consequence: first, on what basis should the countries of East Asia be economically integrated into the wider global economy? Is it possible for East Asia to develop regulatory mechanisms that might insulate their distinctive forms of state-led economic organization from the undesirable economic and political impacts of participation in the global political economy, while allowing them to take advantage of its benefits? Second, is it possible to create a regional political architecture which would allow regional élites to promote their preferred visions of transnational cooperation whilst simultaneously preserving regional autonomy? This latter question is crucial because one of the most remarkable and revealing aspects of the crisis was the way it was managed: not only were external actors like the IMF and the U.S. Treasury Department the most prominent players in crisis management, but they took the opportunity to push for precisely the sorts of neoliberal reforms they had championed for years to little avail prior to the crisis itself. In other words, the crisis revealed both the continuing vulnerability of the region as a whole to external leverage and the lack of a regional capacity to manage such events. Consolidation or Conflict? It is important to emphasize that the idea of a specifically East Asian grouping to represent the possible collective interests of the

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region is not new or something exclusively associated with the crisis and its aftermath. On the contrary, Malaysian Prime Minister Mahathir Mohamed has long called for the establishment of such an organization. Significantly, however, Mahathir’s proposed grouping, the East Asian Economic Caucus (EAEC), was frustrated by a combination of U.S. opposition and a directly consequential Japanese ambivalence.9 Equally significantly, ASEAN Plus Three has continued to develop momentum despite the fact that it is essentially Mahathir’s vision in another guise. In some ways this should come as no surprise: despite the frequently noted diversity of the East Asian region, Richard Stubbs argues that there are a number of commonalities — the experience of warfare, “Asian values”, common institutions, a distinctive brand of capitalism, and deeper economic integration — which provide ASEAN Plus Three with a potential basis for regional identity and consolidation.10 Moreover, the members of ASEAN Plus Three had already begun to forge common perspectives through inter-regional initiatives like the Asia-Europe Meeting (ASEM). Indeed, the fact that such an exclusively East Asian grouping appeared a more “natural” expression of an identifiable region reveals how misconceived those analyses which continue to focus on a wider “Asia-Pacific regionalism” actually are.11 One of the principal reasons that APEC has failed to fulfil the hopes of its supporters has been its inability to accommodate and represent the very different “Asian” and “Western” impulses contained within it.12 The key question for ASEAN Plus Three is whether the sorts of initiatives it has undertaken will be able to build more successfully on its putative regional identity. In this context, it is revealing that some of the more significant initiatives undertaken within broadly ASEAN Plus Three auspices have been of a fairly technocratic nature. Nevertheless, there is much at stake for

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both intra and inter-regional relations, as the United States’ effective veto of Japan’s original proposal for an Asian Monetary Fund (AMF) demonstrates.13 This rather heavy-handed intervention in the region’s affairs might have been read as an example of an emergent, more coercive form of hegemony, designed to impose neoliberal reform on a part of the world associated with very different patterns of economic organization.14 Revealingly, however, it seems that AMF-style initiatives are not being held up so much by a lack of regional economic capacity, but by doubts on the part of those that might be called on to underwrite such a scheme.15 In this context, China and Japan’s accession to IMF conditionality for any future currency swap arrangements are emblematic of a more pervasive and diffuse form of hegemony in which the interests of financial capital have become increasingly influential, placing major limitations on the precise nature of any distinctive regional response to financial sector reform. To understand this possible obstacle to the development of an encompassing regional policy position, and the inherent conflict of interest between the region’s wealthier and poorer countries it reveals, we need to distinguish between the financial and “real” economies. Global finance is the area of international economic activity that has gone furthest in becoming footloose, stateless and increasingly geared to a transnational regulatory framework.16 Revealingly, and despite the clear evidence about both the impact that highly mobile capital flows have had in precipitating and intensifying the East Asian crisis, there has been little serious attempt to curb such initiatives or establish different, specifically East Asia regulatory regimes.17 True, there are formidable technical obstacles that make establishing currency swap arrangements difficult,18 particularly given the lack of governmental capacity amongst some of

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Southeast Asia’s less developed countries,19 but there would seem to be a more basic alignment of interests across the international financial sector that makes regional solidarity inherently problematic. In this regard, the Chiang Mai initiative of 2000, which was designed to promote regional financial crisis management, may have had a “symbolic importance [that] is hard to overestimate”,20 but thus far, it has been of little practical significance. At the level of the real economy, however, where the distinctive structure of East Asian business and the close links between economic and political élites makes reform more visible, direct and potentially painful, resistance to change is more pronounced and the incentives for regional co-operation to protect broadly similar regional political and economic structures may be greater. The outbreak of intra-regional trade agreements, which have the capacity to accommodate powerful domestic constituencies, becomes easier to understand in this context. Moreover, as John Ravenhill notes,21 preferential trade agreements may have symbolic importance that go beyond their economic worth as they help to consolidate underlying regional relations. The way such contradictory sectoral and national tensions may work themselves out can be seen in the case of Japan: although the financial sector has been increasingly liberalized — often despite, rather than as a consequence of, the wishes of Japanese officials — the government has shown an ability to maintain a degree of insulation for a number of politically powerful constituencies in the real economy through an array of restrictive trade agreements. However, the fact that these trade initiatives are happening predominantly at the bilateral level, or have been bolted on to existing structures like AFTA, suggests that there are still major obstacles to the development of region-wide agreements of a sort that could give greater credibility to ASEAN Plus Three.

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NOTES   1. Chia Siow Yue, “Trade, Foreign Direct Investment and Economic Development of Southeast Asia”, Pacific Review 12, no. 2 (1999): 249–70.  2. Mark Beeson, “Southeast Asia and the Politics of Vulnerability”, Third World Quarterly 23, no. 3 (2002): 549–64.  3. Mark Beeson, “Japan and Southeast Asia: The Lineaments of Quasi-hegemony”, in The Political Economy of South-East Asia: An Introduction, edited by Garry Rodan, Kevin Hewison and Richard Robison, 2nd ed. (Melbourne: Oxford University Press, 2001): 283–306.   4. Dajin Peng, “Invisible Linkages: A Regional Perspective of East Asia Political Economy”, International Studies Quarterly 46 (2002): 424.   5. Helen Nesadurai, “Attempting Developmental Regionalism through AFTA: The Domestic Sources of Regional Governance”, Third World Quarterly 21, no. 2 (2003): 235–54.   6. See John Ravenhill, “The New Bilateralism in the Asia Pacific”, Third World Quarterly 24, no. 2: 299– 318.   7. S. Kakuchi, “Japan Strives to Adapt to a Strong China”, AsiaTimes on-line, (2 April 2003).  8. See, for example, Richard Robison, et al., eds, Politics and Markets in the Wake of the Asian Crisis (London: Routledge, 2000).  9. Glenn Hook, “The East Asian Economic Caucus: A Case of Reactive Subregionalism?”, in Subregionalism and World Order, edited by Glenn Hook and Ian Kearns (London: Macmillan, 1999): 223–45. 10. Richard Stubbs, “ASEAN Plus Three: Emerging East Asian Regionalism?”, Asian Survey 42, no. 3 (2002): 440–55. 11. Richard Falk, “Regionalism and World Order After the Cold War”, in Globalism and the New Regionalism, op. cit., 228–49. 12. Mark Berger, “APEC and its Enemies: The Failure of the New Regionalism in the Asia-Pacific”, Third World Quarterly 20, no. 5 (1999): 1013–30. 13. David P. Rapkin, “The United States, Japan, and the Power to Block: the APEC and AMF Cases”, The Pacific Review 14, no. 3 (2001): 373–410. 14. Walden Bello, “East Asia: On the Eve of the Great Transformation?”, Review of International Political Economy 5, no. 3 (1998): 424–44. 15. John Ravenhill, “A Three Bloc World? The New East Asian Regionalism”, International Relations of the Asia Pacific 2 (2002): 167–95. 16. Susan Strange, “Mad Money: When Markets Outgrow Government” (Ann Arbor: University of Michigan Press, 1998). 17. Mark Beeson, “East Asia, the International Financial Institutions and Regional Regulatory Reform: A Review of the Issues”, Journal of the Asia Pacific Economy (forthcoming). 18. For a discussion of the general issues, see C.H. Kwan, Yen Bloc: Toward Economic Integration in Asia (Washington: Brookings Institution, 2001). 19. See Charles Polidano, “Measuring Public Sector Capacity”, World Development 28, no. 5 (2000): 805–22. 20. Edward Luce and John Thornhill, “East Asia Seeks its Own Voice”, Financial Times, 14 May 2001), p. 20. 21. John Ravenhill, “A Three Bloc World?”, op. cit., p. 181.

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65.

HOW THE EAST ASIA SUMMIT CAN ACHIEVE ITS POTENTIAL

NICK BISLEY and MALCOLM COOK

T

he Cold War provided a stable and simple bipolar global structure within which East Asian states organized their security and foreign policies. The end of the Cold War removed this adversarial but stable global order while the shift of global economic and strategic power now means that how East Asian states organize their strategic affairs will increasingly shape global security. Destabilisers • As anticipated by theorists,1 the speed and scope of the power transition centred on East Asia is transforming relations between the rising major powers, China and India, and the previously more powerful ones, the United States and Japan. India’s growing capacity, its ambition and increasing interest in East Asia have deepened and diversified India’s strategic relations with the United States and Japan. The opposite is largely true when it comes to China’s strategic

relations with the United States and Japan. The US has been the region’s preeminent power for decades, and has a wide range of alliance and security partners who depend on it for their security. The US-China strategic relationship is the most important facet of the power transition process. High-level voices in Beijing regularly describe the US alliance system in the region as a Cold War anachronism. Washington in turn is rebalancing its strategic policy toward Asia with a focus on strengthening and expanding this network. This is indicative of the increasingly competitive basis of current US-China strategic relations and their regional ramifications. • East Asia’s long-standing territorial disputes are flaring up and becoming a more central part of bilateral and regional relations in the region. This is a symptom of an increasingly competitive region and is fuelling a sense of regional insecurity.

Reprinted in excerpted form from Nick Bisley and Malcolm Cook, “How the East Asia Summit Can Achieve its Potential”, ISEAS Perspective 2014/56 (Singapore: Institute of Southeast Asian Studies, 2014), by kind permission of the Institute of Southeast Asian Studies.

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China is the focus of much of the concern. The China-Japan dispute is the most threatening. Both are major powers with advanced war fighting capabilities and Japan’s administration of the disputed islands draws the US into the strategic calculus because of the USJapan security treaty. Stabilisers • Non-military threats are a growing focus of regional states’ strategic and defence policy and of defence force deployment nationally and regionally. These nontraditional security issues range are diverse and range across many ministerial portfolios, and tend to require inter-state cooperation to be addressed. These shared interests provide a promising basis for cooperation even when relations among like-affected states are riven by traditional security concerns. • While the strategic environment is more unstable than during the Cold War, the region’s high level of economic integration and interdependence and broader social connections among almost all East Asian states, and most particularly major powers, are stabilizing forces. There is no existential ideological battle among East Asian states and major powers nor are relations in the region being used as proxies in any global competition or conflict. East Asian states are freer now to develop a regional security order and have greater incentives to try to ensure that does not become an adversarial one. EAS AND REGIONAL ARCHITECTURE This combination of factors has sparked a sustained institution-building boom in East Asia. During the Cold War, this landscape was basically barren whereas today it is crowded with new institutions being built

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or planned almost annually with different mandates and memberships.2 ASEAN has been a lead developer. This started in 1994 with the foreign minister-level ASEAN Regional Forum focused on regional security cooperation and confidence-building. It was followed in 1997 by the economicallyfocused ASEAN+3 process and then by the broader East Asia Summit founded some eight years later. More recently, the ASEAN Defence Ministers’ Plus process and senior official-level Expanded ASEAN Maritime Forum were established. Beyond ASEAN, APEC, ReCAAP, the Proliferation Security Initiative and China’s promotion of CICA are responding to these factors in different ways. The expansion of the EAS in 2011 to include the United States and Russia gives it the best chance to become the lead institution in the East Asian skyline. It was established to reconcile ASEAN’s aims to remain central to Asia’s multilateralism and the broader need to involve the region’s major powers in institutional efforts to shape the postCold War East Asian order. Yet from its very inception, the EAS has been constrained in its influence because of the bargain struck between ASEAN centrality and major power involvement. Birth pains Growing Japan-China competition shaped the nature and functioning of the EAS from its very beginning. China favoured a smaller leaders-level summit featuring only the 10 ASEAN member-states and China, Japan and South Korea brought together by the ASEAN+3 process. Japan pushed for a wider forum including India, Australia and New Zealand with scope for further expansion. ASEAN member-states were split between these two membership options with the one supported by Japan adopted due to concerns about Chinese predominance in the smaller forum. At the time of the formation of the EAS, the ASEAN+3 process was identified by

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its members as the ‘main vehicle’ for East Asian community-building. The Summit’s place in the expanding regional architecture and its relation with the ASEAN+3 process as well as other mechanisms like APEC has been uncertain. Identity Questions Further aggravating the situation, the role of the EAS has not been clearly defined operationally leading to the dual problems of agenda drift and overlap with other institutions both new and old. The EAS presently has an uneasy existence as a forum for leaders’ discussion of strategic issues, as well as a body driving a growing array of functional areas of cooperation. It has established working groups and projects linked to six disparate priority areas — regional economic and financial integration, education, regional disaster response, energy and environment, health and connectivity. Individual EAS summits have further complicated the picture by making declarations and launching initiatives beyond the six priority areas on issues like food security and development. All this overlaps in a messy and uncoordinated fashion with non-EAS processes including the ASEAN Regional Forum and Expanded ASEAN Maritime Forum’s focus on disaster response and the well-advanced ASEAN+3 cooperation on regional financial integration. Being Uninstitutionalized The EAS is very weakly institutionalized, particularly when it comes to its ability to address regional strategic and security concerns. The Summit has no Secretariat (not even within the ASEAN Secretariat), no annual budget, or membership fees to support its expanding agenda and to help ensure coherence and continuity. Predominantly funded by Japan’s Ministry of Economy Trade and Industry, the

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Economic Research Institute for ASEAN and East Asia (ERIA) provides an effective and permanent policy support role for the regional economic and financial integration pillar. With the exception of ERIA, the EAS is under-institutionalized even if it served simply as originally intended as a regional forum to discuss strategic issues. REVIEW RECOMMENDATIONS There is clear interest across the region to renew the EAS. ASEAN’s decision to initiate a 10-year EAS review in 2015, Malaysia’s proposal for the EAS to focus more on Search and Rescue,3 and Prime Minister Abe’s call for a permanent committee to renew the vitality of the Summit itself and link it to the ARF and ADMM4 are some of the high profile examples of member-states seeing the need for the EAS to live up to its founding mandate. There are four reforms in particular that should inform efforts to revitalize the EAS over the next year. • Reaffirm the EAS’ role as the ASEANbased leaders’ forum to discuss regional issues of strategic importance. In this spirit, leaders at the EAS can provide clear guidance for priorities, direction and monitoring of the ASEAN-led functional bodies at a lower level than the EAS such as the ADMM+ process, the Expanded ASEAN Maritime Forum and, with sensitivity towards its larger membership, the ARF. ReCAAP and other non-ASEAN-based organizations led by EAS members could equally be brought under EAS guidance as well. This would entrench a role for the EAS appropriate to its level of membership and help address the worsening overlap among regional institutions. • As the primary regional leaders’ forum, the EAS should develop a series of priority issues on which to focus collaborative efforts. In the first instance, energy

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security and maritime security (including issues broader than disaster relief) show the most promise. Energy security is an area on which the EAS has focused since its inception, which is of vital interest to all EAS members and one where other regional bodies have little track record. Maritime security would allow the EAS to shape a vital area of concern for the region given the importance to all of maritime trade of goods and energy. It would also provide a structure to manage its relations with the ADMM+ process and the Expanded ASEAN Maritime Forum reflecting the leaders-level qualities of the EAS, the ADMM+ as a ministerial grouping and the Expanded ASEAN Maritime Forum as a senior officiallevel one. Governments are organized hierarchically with leaders at the top, so regional organizations should follow the same basic logic. A focus on maritime security would also allow the EAS to address the core issue of precluding the establishment of a stable cooperative regional order where member-states invest in new military and proto-military capabilities in ways that suggest the development of a China-centred security complex. • To support the development of policy initiatives in line with these two focus areas, and to help manage the diplomatic challenges of leadership within a leaders’ level forum, the EAS should consider establishing a Track Two network linked to the Summit process. The initiative would, benefitting from the experience of CSCAP’s work with the ASEAN Regional Forum as well as ERIA’s relative success, help the EAS advance

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work in these two central policy areas in between leaders meetings. An effective way of doing this would be to establish a network of research institutes among the 18 EAS member-states focusing on these two non-traditional security areas that would convene high-level working groups to provide intellectual input into the annual Summits and establish an underlying structure of support for the work of the EAS while avoiding the more cumbersome qualities of international bureaucracies. The network could be formally linked to a permanent committee of the kind suggested by Prime Minister Abe. • Given that eight of the eighteen EAS members are not members of ASEAN, including all the region’s major powers, ASEAN centrality could be creatively reinterpreted to facilitate a more dynamic policy environment. This has worked in the past with CSCAP and more recently with the cooperative exercises in the ADMM+ process and the ARF. EAS membership is very intimately bound up with ASEAN’s processes and values — only ASEAN dialogue partners and states that have signed the ASEAN Treaty of Amity and Cooperation can be invited by the ASEAN foreign ministers to the EAS. Shinzo Abe’s idea of establishing a permanent committee of the 18 members’ representatives to ASEAN that is linked to the summit could help ease this limitation and strengthen non-ASEAN member commitment to the EAS. A second way to do this is to establish a practice of ‘co-sponsorship’ of EAS initiatives by an ASEAN memberstate and non-ASEAN members.

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NOTES 1. A.F.K. Organski and Jacek Kugler, The War Ledger (Chicago: University of Chicago Press, 1980); Steve Chan, China, the US and the Power-Transition Theory: A Critique (New York: Routledge, 2007). 2. See Nick Bisley, Building Asia’s Security (London: Routledge for IISS, 2009, Adelphi No. 408). 3. Prime Minister Najib Razak, Speech at the National Colloquium on Malaysian Chairmanship of ASEAN 2015, Doubletree by Hilton Hotel, Kuala Lumpur, 8 April 2014. 4. Prime Minister Shinzo Abe, Shangri-La Dialogue 2014 Keynote Address, Singapore, 30 May 2014.

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66.

‘TALKING THEIR WALK’? THE EVOLUTION OF DEFENSE REGIONALISM IN SOUTHEAST ASIA SEE SENG TAN

H

istorically an ad hoc, uneven, and for the most part uncoordinated process, Southeast Asian defense cooperation has evolved incrementally from bilateral efforts to the incorporation of multilateral initiatives including ministeriallevel meetings. With unresolved territorial disputes and residual mistrust continuing to color intramural relations despite more than four decades of regionalism, the aims of Southeast Asian defense collaboration have understandably remained limited, focused as they have been on informal confidence building, trust creation, mutual reassurance, and where conditions have permitted, embryonic preventive diplomacy.1 In riposte to a host of nonconventional (or nontraditional) challenges that partly define the contemporary security milieu in Southeast Asia, defense cooperation has expanded beyond dialogical activity to include practical and actionable responses to natural and humanitarian disasters, challenges in the maritime domain, international terrorism, pandemic outbreaks, and the like. The

ASEAN Defense Ministers Meeting (ADMM) framework, for example, is designed to facilitate the upgrading of national and regional capacities for managing specific nonconventional security problems, many of which are transnational in character. However, the inclusion of this “operational” element by no means indicates that ASEAN is ready to formally embrace preventive diplomacy, even less conflict resolution, in any systematic or substantive way. If anything, contrary to past ASEAN practice, the deliberate avoidance of grandiloquent gestures in the ADMM’s narrowly defined remit arguably reflects the desire among ASEAN’s defense practitioners to “talk their walk” — exercise a visionary restraint that is more or less commensurate to actual practice — rather than attempting, and likely failing, to walk their talk. DEFENSE REGIONALISM IN SOUTHEAST ASIA In May 2006 in Kuala Lumpur, Malaysia, ASEAN leaders inaugurated the ADMM.

Copyright © 2012 From “‘Talking Their Walk’? The Evolution of Defence Regionalism in Southeast Asia”, Asian Security 8, no. 3 (2012): 232–50 by Tan See Seng. Reproduced by permission of Taylor & Francis, LLC (http://tandfonline.com).

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The development marked a departure of sorts from the way Southeast Asian states had until then engaged in regional defense cooperation. Four years later in Hanoi, Vietnam, ASEAN leaders launched the ADMM+ grouping composed of defense ministers from the ASEAN countries and eight of the regional organization’s dialogue partner nations.2 For many, the establishment of these forums is no less remarkable especially for a region for which the categorical rejection of collective defense, whether with or without the great powers, has long been a sine qua non of regional organization.3 The existence of the ADMM and its extraregional appendage reveal a contemporary Southeast Asia not loath to institutionalized multilateral defense dialogue and cooperation at the highest levels with major military powers. These forums constitute but the apex of a burgeoning tangled web of disparate initiatives and modalities including meetings of senior officials and uniformed chiefs as well as military-to-military exercises and exchanges, not all centered upon or inspired by ASEAN. Southeast Asia has in fact played host to not only alliances and defense arrangements with outside powers, but equally bilateral and multiple forms of intraregional and extraregional defense cooperation. To be sure, the growing array of defense ties and activities in Southeast Asia does not a Southeast Asian NATO make. Nor is anyone forecasting key advances in defense cooperation with the ADMM and ADMM+8 in place, not least given the historically sluggish pace of security regionalism,4 the general lack of local support for regional institutions in Asia, and a traditional emphasis on process over outcomes in ASEAN-based regionalisms.5 Visions of a “Defense Community”: From Bilateralism to Multilateralism A number of institutional developments took place in the first half of the 2000s that

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arguably paved the way toward the realization of the ADMM, although multilateral security dialogue in ASEAN — with defense sector participation, importantly — took place earlier. The most crucial of these was the ASEAN Concord II (Bali Concord II) of 2003, which laid out the vision for the ASEAN Community comprising economic, security, and social-cultural pillars to be established by 2020. The original appellation for the security pillar, the ASEAN Security Community, has since been amended to the ASEAN Political-Security Community (APSC), whereas the deadline for achieving the ASEAN Community has been antedated — hastily so, in hindsight — to 2015.6 The impressive number of defenserelated meetings, conferences, and activities taking place on a multilateral basis reflects a surprisingly high degree of institutionalization. These include “mil-tomil” modalities, some of which had been initiated as early as 2000, such as the ASEAN Chiefs of Army Multilateral Meeting, the ASEAN Chiefs of Defense Forces (or Chiefs of Staff) Informal Meeting (ACDFIM), the ASEAN Military Operation Informal Meeting (AMOIM), the ASEAN Military Intelligence Informal Meeting, the ASEAN Navy Interaction, the ASEAN Air Force Chiefs Conference, the ASEAN Chiefs of Military Medicine Meeting, the ASEAN Armies Rifles Meeting, the Expert Working Group, and the Workshop on the Use of ASEAN Military Assets and Capacities in HADR. In 2011 alone, at least 10 such meetings took place. And although the abovementioned initiatives are officially described as “outside the ASEAN framework,” the ADMM could arguably be seen as an overarching framework under which some, if not all, of these disparate activities can now be gathered. Whether this burgeoning web of defense activities highlights an ASEAN increasingly dedicated to regional problem solving is highly debatable, however. The relatively narrow parameters of the organization’s

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action-oriented agenda, as the preceding discussion has shown, imply that regional cooperation in HADR and maritime security among ASEAN militaries is as much about the use of ad hoc preventive diplomacy measures for enhancing mutual trust and confidence as it is a nascent experiment in preventive diplomacy. This is not to say that ASEAN defense cooperation thereby constitutes a grand exercise in preventive diplomacy even though HADR [Humanitarian Assistance/ Disaster Relief] and other cooperative forms could conceivably play such a role. Equally debatable is the question of whether they collectively signal the existence of a defense community in Southeast Asia. Moreover, it remains unclear if and how all of them relate together as a synergistic coherent whole. Engaging the Extraregional World: From Neutrality to Open Regionalism A third element of defense regionalism in Southeast Asia, to which the preceding discussion has already alluded, is its commitment to engaging the outside region. Crucially, security regionalism in Southeast Asia has always been open, outward-looking, and inclusive in orientation as evidenced by ASEAN’s active engagement of extraregional powers through its growing list of dialogue partner countries, many of which ASEAN has sought to engage deeper through its various multilateral dialogue arrangements. The creation of the ADMM+8 in 2010 is a salient mark of the importance that the ASEAN countries assign to engaging the external powers — an expression, if you will, of the open and inclusive regionalism that ASEAN has long espoused. The inaugural meeting was held in October in Hanoi. Crucially, the ADMM Joint Declaration that the defense ministers issued at that meeting clarified the purpose of the ADMM+8 which is to “enable the ADMM to cooperate with the non–ASEAN countries to build capacity and better prepare ASEAN to address

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the complex security challenges.”7 The specific challenges ASEAN had in mind are nontraditional security threats, such as natural disasters, pandemics, and the security implications of climate change and environmental deterioration. Crudely put, a key purpose for involving the “+8” dialogue partners is to have them help ASEAN help itself. Although the arrangement involves the participation of eight extraregional powers, the region of concern is effectively Southeast Asia. The growing congruence — and hence the potential for overlap and competition — in the institutional agendas of the ADMM+8 and the ARF is apparent enough. It is uncertain if and how efforts to streamline the regional track in defense cooperation and crucially to enhance coordination in the same area between the two regional arrangements would occur. NO “SOUTHEAST ASIAN DEFENSE MODEL” AS SUCH? There is no question that defense regionalism in Southeast Asia undertaken by ASEAN intraregionally among its member nations as well as extraregionally with outside powers has come a long way since the Cold War period. Neither ASEAN’s nonmilitary origins and development-oriented mandate, on one hand, nor its conscious rejection of collective defense and collective security models on the other have held back the regionalization of defense relations, which has since achieved new heights with the formation of the ADMM and its “+8” appendage. What began as an ad hoc process in defense bilateralism has gradually evolved, equally in ad hoc fashion, into an interlocking “patchwork” or “web” of bilateral and multilateral arrangements that both mirror the convoluted geometry of Asia’s evolving regional architecture and to which it has contributed.8 Do Southeast Asia’s defense relations constitute a model of regionalism for emulation by other regions?

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Can ASEAN’s institutional experience “travel,” other than to its own extraregional spinoffs, including the ADMM+ and the ARF?9 Unlikely, it has to be said, for the following reasons. First, as this article has argued, aside from the grand declaratory claims to which ASEAN-based regionalisms have traditionally been given, the practical aims of Southeast Asian defense regionalism, much like the limited remit of ASEAN itself, have centered more on informal confidence building and trust creation. To the extent that regional defense cooperation has played or sought to play a preventive diplomacy role, it has been restricted to narrowly defined cooperative activities such as HADR or the MSP, which themselves continue to contribute informally to confidence building in the light of lingering suspicions between and among the participating countries. In this regard, the equally narrow functional imperative behind the ADMM and ADMM+ arrangements underscores the modest aims for which

See Seng Tan

defense regionalism in Southeast Asia has been pursued. Second, although ASEAN and other stakeholders of defense regionalism appear to have accepted in principle the need for a measure of streamlining and improved coordination to the convoluted regional security architecture that ASEAN has helped spawn, the overriding concern of ASEAN to preserve its centrality within that architecture in the face of perceived competition from its own dialogue partners and extraregional powers could complicate efforts at architectural renovation.10 Left in ASEAN’s hands, the current convoluted state of defense regionalism is likely to be kept as it is if only because the extant institutional incoherence indirectly prevents the concentration of power and influence by any one great power (be it China or the United States) or a concert of powers, whether within a single institution or, for that matter, a significantly streamlined regional architecture.

NOTES   1. As Leifer once noted, preventive diplomacy in ASEAN “is best defined in dispute-specific terms, [and] has been the notable exception and not the rule in the intramural experience of ASEAN.” In short, ASEAN is by no means “a grand exercise in preventive diplomacy,” although that has not prevented some analysts from representing ASEAN as such. Michael Leifer, “The ASEAN Peace Process: A Category Mistake,” The Pacific Review 12, no. 1 (1999), pp. 25–38; see p. 26.   2. The eight dialogue partners are Australia, China, India, Japan, New Zealand, South Korea, Russia, and the United States — the same membership as that of the East Asia Summit.   3. Describing the norms that underpin security regionalism in Asia, Amitav Acharya, writing in 2003, identified three “path-dependent” dispositions common to regional institutions in Asia, namely, “(1) rejection of any form of multilateral security and defense cooperation, whether with or without great power sponsorship; (2) general acceptance of Westphalian norms of sovereignty, non-interference, and territorial integrity; and (3) a preference for ‘soft’ or non-legalistic and formalistic regional cooperation.” Amitav Acharya, “Regional Institutions and Asian Security Order: Norms, Power, and Prospects for Peaceful Change,” in Muthiah Alagappa, ed., Asian Security Order: Instrumental and Normative Features (Stanford, CA: Stanford University Press, 2003), pp. 210–40; see p. 219.   4. Ralf Emmers and See Seng Tan, “The ASEAN Regional Forum and Preventive Diplomacy: Built to Fail?”, Asian Security 7, no. 1 (March 2011), pp. 44–60   5. On Asian regionalism as process-oriented, not results-oriented, see David Martin Jones and Michael L. R. Smith, “Making Process, Not Progress: ASEAN and the Evolving East Asian Regional Order,” International Security Vol. 32, No. 1 (Summer 2007), pp. 148–84.

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  6. See Yang Razali Kassim, “ASEAN Community: Losing Grip over Vision 2015?”, RSIS Commentaries 87/2011, June 2, 2011.  7. See “Joint Declaration of the ASEAN Defence Ministers on Strengthening ASEAN Defence Cooperation for Stability and Development of the Region,” Hanoi, May 11, 2010. Available at http://admm.org.vn/sites/eng/Pages/jointdeclarationoftheaseandefense-nd-14614.html?cid=229.   8. See Dennis C. Blair and John T. Hanley, Jr., “From Wheels to Webs: Reconstructing Asia-Pacific Security Arrangements,” The Washington Quarterly 24, no. 1 (Winter 2001), pp. 7–17; Victor D. Cha, “Complex Patchworks: U.S. Alliances as Part of Asia’s Regional Architecture,” Asia Policy No. 11 (January 2011), pp. 27–50; and William T. Tow and Brendan Taylor, “What Is Asian Security Architecture?” Review of International Studies 36, no. 1 (2010), pp. 95–116.   9. As Leifer has put it, the ARF represents an extension of ASEAN’s model of regional security. See Michael Leifer, The ASEAN Regional Forum: Extending ASEAN’s Model of Regional Security, Adelphi Paper No. 295 (Oxford: IISS/Oxford University Press, 1996). The same could be said of the ADMM+8. 10. See Kavi Chongkittavorn, “Can ASEAN Centrality Be Maintained at East Asia Summit?” The Nation, November 7, 2011; Benjamin Ho, “ASEAN Centrality: A Year of Big Power Transitions,” East Asia Forum, March 6, 2012.

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67.

ASEAN FTAs State of Play and Outlook for ASEAN’s Regional and Global Integration RAZEEN SALLY

INTRODUCTION Free Trade Agreements (FTAs) have been the centrepiece of trade policy in Southeast Asia over the last decade, for individual countries and for ASEAN collectively. This chapter focuses on “ASEAN+1” FTAs, i.e., FTAs that ASEAN has negotiated collectively with other countries (the PRC, Japan, Republic of Korea, India and Australia-New Zealand). The big question this chapter addresses is whether, and to what extent, ASEAN FTAs further ASEAN’s goals of regional and global economic integration. BENCHMARKS: AFTA, AEC AND BILATERAL FTAs On paper AFTA and its offshoots are strong agreements — exemplars of strong regional economic cooperation. AFTA has some of the simplest rules of origin in the world — 40% of regional value content (RVC) across the board, save for product-specific rules

in textiles and clothing. The next advance was the blueprint for the ASEAN Economic Community (AEC). Then followed the ASEAN Charter, in force since 2008. All this looks good on paper, but the track record indicates otherwise. More importantly, AFTA has made scant progress on non-tariff and regulatory barriers, far bigger obstacles to intra-ASEAN trade than tariffs. Implementation is the biggest deficit. To the realist, these developments are predictable. Political, economic, cultural and institutional gaps in Southeast Asia are historically large, larger than they are in Europe. Hence ASEAN’s method of loose intergovernmentalism — the “ASEAN Way” — is understandable. As of July 2011, the ASEAN countries have 88 FTAs in total that are signed and in effect. If common plurilateral FTAs (mainly AFTA, ASEAN+1 FTAs and the P4 FTA involving Singapore and Brunei Darussalam) are stripped out, they are left with a total of 25 bilateral (country-to-country) FTAs.1

Reprinted in excerpted form from Razeen Sally, “ASEAN FTAs: State of Play and Outlook for ASEAN’s Regional and Global Integration”, in The ASEAN Economic Community: A Work in Progress, edited by Sanchita Basu Das, Jayant Menon, Rodolfo Severino, and Omkar Lal Shrestha (Singapore: Institute of Southeast Asian Studies, 2013), pp. 320–81, by kind permission of the Institute of Southeast Asian Studies.

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At the weaker end of the spectrum are most bilateral FTAs involving ASEAN countries except Singapore. Even the stronger ones, advertised as WTO-plus, are weak in reality. They hardly go beyond tariff elimination; their commitments in services, investment, government procurement and other areas are modest to non-existent. They hardly make a dent in non-tariff and regulatory barriers. The exceptions to the rule are some of Singapore’s FTAs, especially the USSingapore FTA. In the middle of the spectrum is AFTA. It has been a paper success on tariffs, including relatively simple ROOs (rules of origin). At the stronger end of the spectrum are the three US and EU FTAs in East Asia. ASEAN+1 FTAs EU-ASEAN FTA negotiations were launched in 2008 but did not get anywhere, hence the EU’s resort to bilateral negotiations with Singapore, Malaysia and Viet Nam. There has been no US-ASEAN FTA negotiation to date — for the same reasons. ACFTA is Asia’s biggest, most important FTA. It is the world’s third largest by trading volume (after the EU and NAFTA) and the largest by population (1.8 billion). In sum, ACFTA is a relatively weak FTA. It is strong on tariff elimination and has relatively simple ROOs, but that is about the extent of it. It does not really tackle NTBs in goods trade, nor does it liberalize services, investment and government procurement. Japan is ASEAN’s third largest trading partner in goods, and Japanese FDI stock is the second largest in ASEAN. AJCEP is a weak FTA — indeed, weaker than ACFTA. It has longer transition periods for tariff elimination, excludes more agricultural products, and has more restrictive ROOs for many products. Not least, most major nontariff items are simply not covered. Republic of Korea is ASEAN’s fifth largest trading partner in goods, and Korean FDI

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stock is the fourth largest in ASEAN, roughly on a par with the PRC. It resembles ACFTA in its width of coverage. But, like ACFTA, it excludes government procurement, and does not take other issues such as the movement of business persons and intellectual property rights, beyond WTO disciplines. ASEAN’s trade in goods with India, although increasing fast, is still lower than it is with its other FTA partners. AIFTA is the weakest of ASEAN+1 FTAs. It eliminates well under 90% of tariffs, excludes swathes of agriculture, and has long transition periods, considerable variation in bilateral schedules, and restrictive ROOs. Moreover, it hardly covers non-tariff items. ASEAN’s trade in goods with Australia and New Zealand amounted to over US$50 billion in 2009, with New Zealand accounting for only about US$5 billion of it. AANZFTA is probably the strongest of ASEAN+1 FTAs. But AANZFTA is still relatively shallow in that it does not seriously liberalize, or provide much harder WTO plus disciplines on nontariff and regulatory issues such as services, investment, MRAs and SPS. And it does not cover government procurement. How do ASEAN+1 FTAs compare with AFTA? In all, ASEAN+1 FTAs, like the ASEAN countries’ bilateral FTAs, follow two patterns. First, they follow the pattern of partner countries’ FTAs, from weak-and-defensive (Japan and India) to stronger (Republic of Korea, Australia and New Zealand). Second, they follow the ASEAN Way as inscribed in AFTA: they are relatively shallow FTAs that do not venture much beyond tariff elimination. That begs the question of their economic effects. There is little or no evidence that ASEAN+1 FTAs have diverted much trade so far, although it is too early to pronounce definitively, given their recent vintage. But, equally, there is little evidence that these FTAs have created much trade either, aside from asinine correlations between FTAs and increases in bilateral trade volumes in the same period.2 In particular, given that

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NTBs and regulatory barriers are far bigger obstacles than tariffs to intra-Asian trade, one should remain sceptical about the ability of these FTAs to create trade, and associated FDI, in the region.3 POLITICAL ECONOMY AND ASIAN REGIONAL ECONOMIC INTEGRATION But why are ASEAN (and other Asian) FTAs so weak — so trade-light? Countries are at widely different stages of development with competing producer interests, significant barriers to trade with each other, and without a culture of deep cross-border cooperation. Hence, low common denominators in most FTAs. There is much talk in the region of folding bilateral FTAs and ASEAN+1 FTAs into larger, integrated FTAs that would cover East Asia, perhaps include South Asia, and even stretch across the Pacific. APEC’s FTAAP is one such initiative. But it has got nowhere: political and economic differences in such a large, heterogeneous group are manifold and intractable. The TPP is a more realistic initiative, but it sits uncomfortably with — some would say in contradiction to — an Asian regionalintegration agenda. More geographically comfortable — and ambitious — would be an ASEAN+3 (APT) FTA. There is also talk of an ASEAN+6 FTA that would subsume APT plus India, Australia and New Zealand. An ASEAN+6 FTA has been promoted by the Japanese government as a counter to what Japan sees as an inevitably PRC-centered APT. A clean, comprehensive, deep-integration East-Asian or pan-Asian FTA, with simple, generous and harmonized ROOs, would indeed yield benefits. Economic integration would extend beyond manufacturing parts and components in East Asian productionsharing arrangements to encompass final goods and services. This would be flanked by more integrated markets for labor and

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capital. And such integration would spread from East Asia to South Asia. In short, there would be regional production for regional consumption. But the case for a region-wide FTA is flawed, as is the case for strong regional institutions. Start with the economics of a region-wide FTA. It must factor in the continuing, overwhelming dependence of existing (East Asian) regional integration on extra-regional (Western) demand, mediated by regional production networks, processing trade and global supply chains (Athukorala 2009). Intra-Asian trade, and trade between Asia and other emerging markets, is growing faster than North-South trade, but from a low base. It is not going to make a serious dent into reliance on Western demand for final products in the short-to-medium-term. Hence, a region-wide FTA, while promoting intra-regional trade in finished goods, could compromise processing trade linked to extra-regional markets where tariff barriers still exist. The biggest risk is that a region-wide FTA, by maintaining barriers to non-members while freeing up trade among members, would thwart the expansion of global supply chains beyond ICT into other areas of manufacturing, and indeed into services and agriculture (Athukorala and Kohpaiboon 2009, pp. 15–17). Economic holes in the case for a regionwide FTA become wider when political reality intrudes. The reality is that FTAs in the region, — including AFTA, ASEAN countries’ bilateral FTAs and ASEAN+1 FTAs — remain trade-light; there is no serious prospect of them becoming deep-integration FTAs. Rather, the result is likely to be a very low common denominator — another tradelight FTA with complicated ROOs, adding to (not subtracting from) an expanding noodle bowl (Menon 2008, p. 14). The same reasoning — taking account of reality, that is — should make one even more sceptical of a leap to strong regional institutions. It relies too much on the “EU

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model” — which is sui generis and does not fit a far more diverse Asian political, economic and social reality. Rather, working with the grain of Asian reality demands a continued reliance on bottom-up approaches. The primary bottomup approach is unilateral, non-discriminatory liberalization and the competitive emulation it stimulates. Arguably, FTA over-activity has distracted attention from further unilateral trade and FDI liberalization and domestic structural reforms. More realistic would be “soft cooperation” in East and South Asia — modest, incremental reforms that might be achievable.

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CONCLUSION Now to answer the big question asked at the beginning of this chapter: Do ASEAN FTAs promote ASEAN’s regional and global economic integration? My answer is “hardly”. Do they further the cause of ASEAN’s economic integration with the wider Asia and beyond? No, for their content is too trade-light and they have noodle-bowl complications. ASEAN FTAs are a reality and cannot be wished away. The point is to make them as compatible as possible with regional and global integration objectives. The answer is not new grand designs that indulge in wishful thinking and distract attention from what is both feasible and desirable. Rather, it should be modest, incremental reforms that work with the grain of ASEAN and wider Asian realities. These could include the following: • Fill in gaps in tariff elimination, e.g., by reducing exclusion lists, accelerating transition periods and harmonizing bilateral schedules. • Encourage the ASEAN–4 to multi-

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lateralize CEPT tariff commitments to avoid trade diversion and reduce administrative costs from bilateral and ASEAN+1 FTAs. Iron out inconsistencies between ASEAN+1 FTAs and ASEAN countries’ bilateral FTAs with the same external partners. Simplify and harmonize ROOs within and between FTAs, e.g., by substituting AFTA’s 40% RVC rule for productspecific rules wherever possible. Strengthen work programs and implementation systems on NTBs in goods, standards and trade facilitation. Strengthen investor-protection provisions and dispute settlement, including investor-state dispute settlement. Establish third-party mechanisms to assess FTA commitments and outcomes, and make their findings public. Aim for transparency and other rulestrengthening measures that can easily be multilateralized, i.e., made nondiscriminatory. Better market-access commitments on services and investment in the stronger FTAs, such as AANZFTA and AKFTA. If so, multilteralize them through unilateral liberalization.

These, however, are second-order priorities for regional and global integration. Rather, the first priority should be to revive unilateral (country-by-country) liberalization of trade and FDI, now extended to next-generation, behind-the-border reforms. That would spark competitive emulation within and beyond ASEAN. This is indeed a steep hill to climb. But I think it is more scalable than top-down liberalization through international and regional institutions.

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NOTES 1. See . 2. Which one would expect from official statements and newspaper reports, but less so from “independent” academic studies. 3. Pomfret (2007) also comes to the conclusion that the net economic effects of FTAs in the region are likely to be trivial.

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68.

TAKING ASEAN+1 FTAs TOWARDS THE RCEP

YOSHIFUMI FUKUNAGA and IKUMO ISONO

INTRODUCTION In November 2012, the leaders of the ASEAN+6 countries1 agreed to launch a new free trade agreement (FTA) negotiation called the “Regional Comprehensive Economic Partnership” (RCEP). This paper aims at providing rationales for pursuing an East Asian-wide FTA and making policy proposals for the key elements to be negotiated under the RCEP. ASEAN has been playing a substantial role in developing FTAs in East Asia. The Common Effective Preferential Tariff (CEPT) entered into force in 1993 and was replaced by the ASEAN Trade In Goods Agreement (ATIGA) in 2010. The development of FTA networks with ASEAN’s Dialogue Partners has been an integral part in the ASEAN Economic Community (AEC) design. As a result, five ASEAN+1 FTAs have come into force, namely the ASEAN-Australia-New Zealand FTA (AANZFTA), the ASEANChina FTA (ACFTA), the ASEAN-India FTA (AIFTA), the ASEAN-Japan Comprehensive

Economic Partnership (AJCEP) and the ASEAN-Republic of Korea FTA (AKFTA). Moreover, ASEAN is taking further steps to establish the RCEP, which was formerly called “ASEAN++ FTA” and will bring larger advantages for ASEAN countries. We believe that ASEAN should take the leadership role in designing a new regional architecture, using the ASEAN+1 FTAs, the AEC efforts including connectivity and trade facilitation, and various cooperation schemes as building blocks. The three reasons for this belief follow in this section. Most importantly, the current ASEAN+1 FTAs have not yet achieved a fully liberalized region: there is much room for the RCEP to strengthen ASEAN and East Asia as a production base. The level of tariff liberalization is not sufficiently high. Also, rules of origin (ROOs) are not liberal enough in some ASEAN+1 FTAs: while most ASEAN+1 FTAs allow co-equal rules, i.e., more business-friendly rules, some do not. Similarly, services liberalization have

Reprinted in excerpted form from Yoshifumi Fukunaga and Ikumo Isono, “Taking Asean+1 FTAs Towards the RCEP: A Mapping Study”, ERIA Discussion Paper 2013-02 (Jakarta: Economic Research Institute for ASEAN and East Asia, 2013), by kind permission of the Economic Research Institute for ASEAN and East Asia (ERIA).

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only small “WTO Plus” (or “GATS2 Plus”) components in the current ASEAN+1 FTAs. Trade facilitation chapters remain general in most ASEAN+1 FTAs. In fact, the RCEP negotiation framework can give ASEAN a source of additional bargaining power toward a higher target which is not valid under bilateral negotiations. All the FTA Partners3 have strong economic and political incentives not to be excluded from the new regional FTA. Secondly, the existence of several ASEAN+1 FTAs itself creates a “noodle-bowl” (also known as “spaghetti-bowl”) situation4 which potentially hampers the firms’ usages of preferential systems and impairs the potential values of such FTAs. The “noodlebowl” situation can be found in several different areas. First of all, the learning costs in understanding the most preferable trade regime for each business operators (e.g., in terms of tariff rates, ROOs, services and investment limitations and protection standards) can be immense. It can also be costly to meet the different requirements of multiple FTAs (e.g., in ROOs and mutual recognition of standards). Indeed, the utilization rates of ASEAN+1 FTAs are not as high as was expected during their negotiations. The RCEP, being a common free trade framework across the East Asian region, will have more convergent rules which reduce the “noodle-bowl” effects and thus maximize the values of governments’ efforts to create strong production bases in East Asia. Thirdly, the RCEP will help strengthen the “ASEAN Centrality” in the regional architecture discussion in the Asia-Pacific region, which is at risk due to the competing initiatives of the China-Japan-Korea Free Trade Agreement (CJK FTA) and the TransPacific Partnership (TPP). The trilateral FTA is likely to have negative impacts on all the ASEAN economies due to trade and investment diversion. Also, once the

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three large economies have agreed among themselves on certain rules, ASEAN will have a lesser influence in discussion of the new regional architecture. The TPP has already recorded several rounds of negotiations. The implication of the TPP is more complicated economically, because four ASEAN Member States (AMSs) are also involved in the TPP negotiation, i.e., Brunei, Malaysia, Singapore, and Viet Nam.5 However, the political implication may be more straightforward. As an Asia Pacific Economic Cooperation (APEC)-centered initiative, and because the TPP is aimed at creating a highly liberal trade regime with comprehensive issue coverage, “ASEAN Centrality” cannot be maintained if the TPP moves forward but the RCEP does not. POLICY RECOMMENDATIONS Conclude a Comprehensive and High-level RCEP by 2015 This reasoning for the RCEP will lead us to three major points to take into consideration in designing the new architecture. First, the RCEP should aim at a “respectable” FTA, i.e., high-level and comprehensive. In order to bring additional and real gains for ASEAN countries, the RCEP should aim at a higher level than the contents of the current ASEAN+1 FTAs in terms of tariff, ROOs, trade facilitation, services, investment and economic cooperation. Other issues such as IPR protection and competition policy are increasingly important under the second unbundling of economies (Kimura, 2012). Secondly, the new RCEP regime should introduce as many convergent rules as possible so that the noodle-bowl situation will be eased. Lastly, ASEAN should take the lead in making the new framework more attractive than its rivals, i.e., CJK FTA and TPP, so that it can maintain the “ASEAN Centrality”. The speed of RCEP negotiation

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will also be a key in creating an attractive package. ASEAN should move more quickly than other initiatives, and with a clear goal, e.g., conclusion of RCEP negotiations by 2015. Set a Target of 95% Tariff Elimination with a “Common Concession” Approach ASEAN should set an ambitious level of tariff elimination, at least 95% tariff elimination after a transitional period. The 95% criterion will require a number of countries, both ASEAN member countries and FTA Partners, to make further tariff eliminations. This implies room for additional gains arising from the RCEP, despite the existence of ASEAN+1 FTAs. Another challenge in the ASEAN+1 FTA tariff component can be found in the divergence of each ASEAN members’ tariff commitments. ASEAN countries have thus far opened up their markets for different products to different FTA Partners. In order to create a simple, transparent and user-friendly FTA, the RCEP should adopt a “common concession” approach, not a bundle of schedules or exclusion lists for every possible bilateral combination among the member countries.6 Another advantage of a “common concession” approach can be found in cumulation. If tariff schedules are different from country to country even within the RCEP members, regional cumulation rules will become highly complicated and may bring unpredictable impacts on members’ economies. At the same time, the RCEP should provide certain principles for sensitive products. The value of the new pact would become limited even if 95% of tariffs were eliminated, if the other 5% remain very high. Therefore, as in the ATIGA and the ASEAN+1 FTA, a sensitive track approach should be taken to accelerate tariff liberalization, while at the same time allowing flexibility.

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Introduce the “Core NTMs” Concept and Remove Them as much as Possible The value of tariff elimination will be impaired if Non Tariff Barriers (NTBs) persist or are newly introduced. Although the ATIGA requires NTBs to be eliminated, substantial progress has not been made, due to lack of clear definition of “NTBs”. As a result, the Coordinating Council for the Implementation of the ATIGA (CCA) is now discussing ways to identify the “non-tariff measures (NTMs) with barrier effects” (ERIA, 2012). The RCEP should prevent such a situation by clarifying the types of NTBs to be eliminated at the implementation of the new initiative. Recognizing that not all NTMs lack rationales, ERIA is proposing to introduce the concept of “core NTMs” (ERIA, 2012). These measures include quantity control measures, such as import quotas, de-facto quantity control mechanisms through state trading systems, or non-automatic licensing schemes. Allow Co-equal Rules in the ROOs, Set a General Rule of “RVC(40) or CTH” as much as Possible, and Develop Consolidated OCPs The RCEP negotiation will provide a precious opportunity to ease the complexity in ROOs, by using business-friendly co-equal rules as much as possible. First of all, the RCEP should utilize “RVC(40) or CTH” as the general rule, supplemented by alternative (more liberal) rules. This approach is essential for improvement in production networks. ASEAN firms are not fully benefiting from the ASEAN+1 FTAs due to restrictive ROOs, especially those in ACFTA and AIFTA. In addition to the rules themselves, we should also seek an easing of restrictiveness in ROO administration. While a high level of similarities is observed in the ASEAN+1 FTAs, there remain substantial differences

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in details. An ROO template should use a liberal cumulation rule. Furthermore, members should consider applying the new consolidated ROOs in the RCEP to the existing ASEAN+1 FTAs. If the same ROOs apply in the ASEAN+1 FTAs and the RCEP, it will significantly improve the noodle-bowl situation, and thus potentially reduce the transition and administrative costs associated with the ROOs. In this sense, adopting consolidated and business-friendly operational certification procedures is also indispensable. Introduce Concrete and Tangible Trade Facilitation Programs and Address FTA Utilization Issues Trade facilitation is an emerging success story in ASEAN, especially with the targets of National Single Windows and the ASEAN Single Window by 2015 (ERIA, 2012). In addition, ASEAN is taking several more key initiatives in this area, including common tariff nomenclature (known as AHTN), and the ASEAN Trade Repository and trade facilitation agreements. the current ASEAN+1 FTAs have only general provisions and lack specific work programs on trade facilitation, with the outstanding exception of the AANZFTA covering paperless trading, risk assessment, advance rulings and Single Windows (Pellan & Wong, 2011). The RCEP should contain concrete and tangible trade facilitation programs to maximize its economic impacts, learning from the successes and challenges in AEC efforts. One important area should pertain to FTA utilization. The current utilization rates of FTAs have not yet reached a satisfactory

Yoshifumi Fukunaga and Ikumo Isono

level. FTA utilization rates are affected by marginal tariff margins, costs of compliance with rules of origins, as well as time costs for understanding the FTA structure. Reducing the barriers for firms trying to understand a variety of trade-related rules existing in the region, with wider coverage of countries, by providing not only FTA-related information but also broad areas of trade-related policies such as technical regulation is important. Commit to Liberalize Trade in Services at a High Level (e.g., at the level of AFAS Package 7) The AMSs should aim at an ambitious level of services liberalization, much higher than the ambition expressed in AFAS package 5 (e.g., as high as AFAS Package 7). Therefore, in making specific commitments in each subsector and mode, the RCEP members should seek and make tangible commitments that are “plus” to their respective WTO GATS commitments as well as existing ASEAN+1 FTAs. Also, they should create utmost transparency by narrowing the types of limitations allowed in the RCEP. The RCEP members should prioritize the services sectors which contribute to strengthening East Asia’s link with the global production networks, i.e., to create “supporting industries” in services. Such industries should include ASEAN’s “priority sectors” stipulated in the AEC Blueprint, e.g., air transport, e-ASEAN, and logistics services. In addition, transportation, distribution, telecommunication, and financial services should also be in focus, since these sectors will surely expedite the construction of what is called “regional supply chains” in East Asia.

NOTES 1. ASEAN 10 countries, China, Japan, Korea, Australia, India and New Zealand. 2. General Agreement on Trade in Services (GATS) of the WTO.

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3. “FTA Partners” refer to the Dialogue Partners which have already signed their respective ASEAN+1 FTAs, namely Australia, China, India, Japan, Korea and New Zealand. 4. One may argue that information cost is particularly large when a firm learns its first ROO protocol, and thus that the information cost problem is different in nature from the typical “noodle-bowl” situation. However, a firm faces a challenge in selecting the first ROO protocol to learn when there co-exist several ROOs. A common and business-friendly ROO at a regional level (i.e., RCEP) will reduce this “selection cost”. In this paper, we include this problem as a type of “noodle-bowl” situation. 5. In addition, the Philippines and Thailand have indicated their interests in joining the TPP negotiation. 6. If all the AMSs and the FTA Partners, i.e., 16 countries, join the RCEP, this combination will mean 240 tariff schedules (16 countries have 15 schedules). Even assuming one common schedule vis-à-vis ASEAN, the RCEP would still have 106 tariff schedules (10 AMSs have 7 schedules (1 for ASEAN and 6 for the FTA Partners), and the 6 FTA Partners will have 6 schedules (1 for ASEAN and 5 for the other FTA Partners, respectively).

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69.

RCEP AND TPP Comparisons and Concerns

SANCHITA BASU DAS

W

ith the Doha Round getting delayed at the multilateral level and the bilateral free trade agreements (FTAs) generating marginal gains for the private sector, mini-lateral arrangements like Regional Comprehensive Economic Partnership (RCEP) and Trans-Pacific Partnership (TPP) are picking up steam, promising to become the next generation of trade liberalisation process. While it may appear that TPP and RCEP have relatively similar objectives of trade liberalisation and economic integration, the differences are substantive nevertheless. This paper takes a closer look at both these arrangements. COMPARING RCEP AND TPP RCEP, driven by ASEAN, is an FTA between ASEAN and ASEAN’s FTA partners — Australia-New Zealand, China, South Korea, Japan and India.1 It is envisaged to be a highquality and mutually beneficial economic partnership agreement that will broaden

and deepen current FTA engagements. It is expected to be concluded by end-2015 and will involve a region accounting for almost half of the global market and about a third of the world’s economic output. It is based on an open accession clause and welcomes participation by any ASEAN FTA partner who chooses to participate later. TPP, on the other hand, is a US-led process and is presented as a “WTO-plus approach”. Around eleven countries (New Zealand, Singapore, Brunei, Chile, the US, Canada, Australia, Peru, Malaysia, Vietnam, Mexico) have already been negotiating TPP for over a year now, although these do not include major powers like China or India. The US has encouraged other APEC countries to join the negotiations, which are set to be concluded by October 2013. RCEP will be built on ASEAN’s experience and is expected to integrate all five of the ASEAN+1 FTAs into a regional economic framework (Basu Das 2012). Being an ASEAN process, it will be guided by the “ASEAN way” where objectives and commitments

Reprinted in excerpted form from Sanchita Basu Das, “RCEP and TPP: Comparisons and Concerns”, ISEAS Perspective 2013/2 (Singapore: Institute of Southeast Asian Studies, 2013), by kind permission of the Institute of Southeast Asian Studies.

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are driven by a consensus process. RCEP is likely to be more accommodative of the development differences of the member countries, thus providing flexibility and adjusting mechanisms in reaching the common end-goals. In addition to liberalizing trade in goods, services and investment, it will pay more attention to physical, institutional and people-to-people connectivity and to narrowing development gaps and will be built in response to new developments, such as the emerging international production networks. On the other hand, in addition to the trade in goods, services and investment component, TPP is said to have a more demanding set of commitments — intellectual property rights, labour standards, competition policy, investment rules, the environment and the role of state-owned enterprises. These issues may not have any immediate direct traderelated aspects but are marketed as relevant in meeting 21st-century challenges. Since TPP comprises members from different levels of economic development, it will be quite difficult to reach consensus on optimal standards. This is because different labour laws often function as part of the comparative advantage enjoyed by low-labour-cost countries, or intellectual property (IP) regulations may not strike the right balance between owners of IP and users (Table 1). PERCEIVED BENEFITS FROM RCEP AND TPP Since tariff rates have already been lowered for the countries involved, “behind the border” issues or trade facilitation measures may gain prominence. These may include publication of customs laws and regulations, trade procedures and documentation, product standard and conformation and trade-related infrastructure and services. It is possible that agreements between a small group of countries like RCEP and TPP may be able to calm some of the concerns

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of the “noodle bowl” effect of overlapping smaller FTAs and achieve an overarching set of free trade principles. This is particularly the case for ASEAN as besides the regional FTAs, the member countries are also pursuing their own bilateral ones. This has reduced the potential benefits from economic integration since the private sector has to devote attention to different rules and regulations, in turn increasing the cost of utilizing preferential concessions (Kawai and Wignaraja 2011). Regional trading arrangements like RCEP and TPP are expected to support the emerging international production network (IPN). It is claimed that there is a positive relationship between production network and trade integration (Kimura et al., 2007; Ando and Kimura, 2005). POSSIBLE CONCERNS There is some concern about competition between TPP and RCEP, since the regional pacts have similar objectives over trade liberalisation and economic integration. These two agreements may also come into direct conflict due to the rivalry between the US and China, as each of these powers seeks to shape economic cooperation in the Asian region and cement their economic interests (Rowley 2011). Besides, any competition between these two agreements may lead to disunity within ASEAN, which may undermine the organisation’s centrality in the region. While Brunei, Singapore, Malaysia and Vietnam are members of both RCEP and TPP, the rest of ASEAN countries are currently members of only RCEP. It should also be noted that ASEAN FTAs are currently not uniform in structure. On trade in goods, for example, ASEAN and its six FTA partners not only use different tariff classifications for their tariff concessions but also use different schedules for their FTAs with different countries. In addition, tariff concessions from the same country

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Sanchita Basu Das TABLE 1: RCEP vs. TPP

COMPARISONS

CHARACTERISTICS

CONCERNS

RCEP

TPP

RCEP is led by ASEAN to gather together all separate non-ASEAN FTAs.

TPP is led by the US in line with its foreign policy objective of pivot toward Asia.

Born out of ASEAN+1 FTAs with China, India, Japan, South Korea, Australia and New Zealand

Born out of P4 agreement between New Zealand, Brunei, Singapore and Chile in 2005.

Based on open accession clause, where membership can be expanded later as new countries sign FTA with ASEAN.

APEC countries have been encouraged to join negotiations; also open to accession by nonAPEC members.

Negotiations expected to start in 2013 and to be concluded by 2015.

Negotiations started in 2011 and are likely to be concluded by October 2013

Aims to form an integrated regional eco nomic agreement that is deeper than existing FTA co-operations and to support equitable economic development.

Aims to establish regional FTA that can tackle the challenges of 21st century.

Areas include: trade liberalisation in goods, services and investment, technical cooperation, intellectual property, dispute settlement (WTO+ issues)

Areas include: trade liberalisation in goods, services, investment, intellectual property rights, environmental protection, labour, financial services, technical barriers to trade and other regulatory issue (WTO+ issues).

Building on “ASEAN way” and differential treatment depending on level of members’ development may slow progress.

Gold standard 21st century FTA and addresses next generation issues (cross-cutting/new trade challenges).

Conflict developing from tension be- tween China and the US.

Does not include China and India.

ASEAN+1 FTAs have different features and are at different stages of implementation.

May divide ASEAN since not all are not participating in TPP, which may undermine ASEAN’s centrality.

Source: Author’s compilation from various sources.

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RCEP and TPP: Comparisons and Concerns

differ depending on the FTA involved, and tariff elimination rates are different across ASEAN+1 FTAs. Trade in services and investment are not concluded for all ASEAN+1 FTAs either. While agreements on services trade are included in the ASEAN — Australia-New Zealand, ASEAN — China and ASEAN — South Korea FTAs, such was signed for the ASEAN-India FTA in December 2012 and is yet to be included for the ASEAN-Japan FTA. All these are likely to make difficult the consolidation for existing ASEAN agreements and the establishing of common rules and disciplines for further integration under RCEP. The pace of RCEP negotiations is heavily dependent on the progress of the achievement of the ASEAN Economic Community (AEC) Blueprint by 2015. This, in turn, is dependent on domestic reforms, the alignment of the national economies to the regional initiatives and the transparency in ‘behind-the-border’ measures including coordination between negotiating and implementing agencies in ASEAN countries. These domestic policy supports are critical stepping stones for the timely conclusion of RCEP negotiations. In this regard, active participation of the private sector will be crucial. The TPP is being promoted as a “Goldstandard FTA” and is expected to develop a level playing field for businesses in the AsiaPacific by focussing on liberalising ‘behind the border’ measures for cross-border trade and investment, and strengthening regulatory reforms. However, currently, the nine partners are at different levels of economic development (Basu Das and Nyunt Hman 2012). An unprecedented range of WTO Plus issues covered under TPP will require significant reforms in the

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domestic industrial and economic policies of most members. These will make negotiations tough, especially for developing countries in need of fundamental economic reforms and for economies that comprise largely of stateowned enterprises (SOEs). Also, the emerging economies of China and India are not part of TPP. But all current TPP members have important strategic and economic linkages with both. Substantial economic gains can be realised if these two eventually come on board. CONCLUDING REMARKS Both RCEP and TPP are ambitious regional trade arrangements, which are going to involve complex negotiation processes with multiple parties at different stages of economic development and sectors that may or may not be prepared for liberalisation. While it is possible that initially both TPP and RCEP may generate some competition for each other, eventually both are possible pathways to a free trade area of the AsiaPacific (FTAAP).2 RCEP and TPP, if successful, will be unprecedented accomplishments for economic integration in the Asia-Pacific. It will seek not only to deepen regional integration but also to facilitate trade through international production networks. However, the economic value of RCEP and TPP will depend on what is finally agreed upon and included in the final agreement. It will depend on the extent to which the agreement can strive for deeper “behind the border” integration measures, and reach an acceptable compromise on the challenging issues. Implementation integrity from all participating members will also be a key to its potential success.

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Sanchita Basu Das

NOTES 1. http://www.asean.org/asean/asean-summit/item/asean-framework-for-regional-comprehensiveeconomic-partnership (accessed on Jan 1, 2013). 2. http://www.fta.gov.sg/press_release%5CFACTSHEET%20ON%20RCEP_final.pdf (accessed on 31st Dec 2012).

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70.

ENHANCING THE EFFECTIVENESS OF CMIM AND AMRO Selected Immediate Challenges and Tasks REZA SIREGAR and AKKHARAPHOL CHABCHITRCHAIDOL

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ecent crises, particularly the on-going sovereign debt crisis in the euro area economies, has provided momentum to greater regional financial cooperation in the region. Through the establishment of the Chiang Mai Initiative Multilateralisation (CMIM) and the ASEAN+3 Macroeconomic Research Office (AMRO) in March 2010 and May 2011, respectively, substantial headway has been made in this regard. The role of AMRO as a surveillance office for the CMIM is vital to the overall success of regional financial cooperation; without a credible and qualified surveillance capacity, it is difficult to envision an effective CMIM. RECENT COMMITMENTS The CMIM During the Annual AFMGM+3 Meeting in May 2012, several other major new commitments were announced. Responding to the potential need for a larger swap facility,

the CMIM Executive Committee announced the doubling of the swap facility to $240 billion in May 2012. Given the adjusted contribution, while keeping the “purchasing multiples” unchanged, major ASEAN economies (Indonesia, Malaysia, Philippines, Thailand, and Singapore) now have access to approximately $22.76 billion each, an increase from $4.55 billion previously. At the same meeting, an increase in the IMF de-linked portion from 20% to 30% was also announced. A number of ASEAN+3 economies in fact proposed a higher delink portion, but as a group eventually agreed to review the issue again in 2014, with the intention of further increasing the de-linked portion to 40%. During their deliberations, it was acknowledged that one of the key factors behind the doubling of the total swap facility and the rise in the de-linked portion is the recognition of the speedy establishment of the ASEAN+3 Macroeconomic Research Office (AMRO) and the timely delivery of well-received

Reprinted in excerpted form from Reza Siregar and Akkharaphol Chabchitrchaidol, “Enhancing the Effectiveness of CMIM and AMRO: Selected Immediate Challenges and Tasks”, ADBI Working Paper No. 403 (Tokyo: Asian Development Bank Institute, 2013), by kind permission of the Asian Development Bank Institute.

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AMRO surveillance reports by the Executive Committee during the Deputies Meeting in Sendai, Japan in December 2011 and in Phnom Penh, Cambodia in March 2012. Furthermore, reflecting their appreciation of the urgency in anticipating and preventing future financial crisis, the ASEAN+3 Finance Ministers and Central Bank Governors approved the establishment of an additional function for the CMIM — a crisis prevention function, in addition to the crisis resolution function. Under the current framework of the CMIM, a detailed set of operational guidelines was established, which would enable any swap requests to be processed efficiently and in a timely manner, typically within seven days of a request being made. The ASEAN+3 Macroeconomic Research Office (AMRO) In late May 2012, AMRO welcomed its new director. Yoichi Nemoto, a senior official from the Ministry of Finance of Japan, became the second director of AMRO, replacing Benhua Wei, a senior official who had previously worked at the State Administration of Foreign Exchange of the People’s Republic of China. Within less than a year of Mr. Wei’s appointment, a team of about 20 full-time staff had been assembled. In the process, three teams of economists, each headed by a senior economist, relocated to AMRO’s Singapore office from various ASEAN+3 economies. Each team is assigned and mandated to conduct macroeconomic surveillance on a set of ASEAN+3 economies. SELECTED CHALLENGES AND SCOPE FOR AN EFFECTIVE CMIM FACILITY Coordination between Bilateral and Multilateral Swap Facility Arrangements Bilateral and CMIM swap arrangements can indeed complement each other if they

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are well coordinated. More importantly, decisions to extend both bilateral and CMIM swap facilities should be taken consistently and, as much as possible, under one general framework. In particular, a common framework for bilateral and CMIM swap facilities among the ASEAN+3 economies can be agreed upon in a joint memorandum of understanding. As part of broad guidelines, any request from a member of the ASEAN+3 economies for a bilateral swap facility from another member of the ASEAN+3 should first be submitted to the CMIM facility for consideration. In other words, the request should go through an evaluation and decision process under the CMIM framework. Should the request be approved by the CMIM’s Executive Committee, the requesting member economy would then be entitled to receive its available maximum swap amount. In the event that the available CMIM swap amount is less than the amount requested or needed, the bilateral swap can supplement or top-up the difference. Conditionality: Accessibility while Safeguarding against Moral Hazard The lack of any request to draw upon the CMI facility at the height of the 2008 global financial crisis following the collapse of the Lehman Brothers is a clear reminder of this stigma, given the CMIM’s explicit links to the IMF. Yet, those links are crucial under the current setup, as the CMIM will function only if swap providers feel reasonably assured that any funds lent out will be returned. So far, the simple, quick-fix solution has been to make use of existing mechanisms via the IMF. By linking any drawing beyond 30% of eligible funds (as of May 2012) implies that countries need to submit to IMF guidelines, which act as a “de facto” conditionality against lax economic policies. While this was acceptable initially for member countries to sign off on their commitments to the CMIM swap arrangement, this is perhaps one of

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Enhancing the Effectiveness of of CMIM and AMRO: Selected Immediate Challenges and Tasks

the main reasons why use of the CMIM has so far remained off-limits to its members. This suggests a good case can be made for establishing a framework for conditionality with full CMIM ownership. Learning from Global Experiences Why then, would any conditionality be substantially different from the tried-andtested IMF conditionality? The CMIM is intended to deal with short-term shocks to the economy and the balance of payments. This is reflected in the nature of the CMIM’s facilities, such as shorter activation times and loan maturity. In fact, the CMIM’s maturity and supporting period for the IMF de-linked portion is for 6 months and 2 years, respectively, or for 1 year and 3 years, respectively, for the IMF-linked portion. Let us briefly consider some of the IMF’s lending instruments that share similar objectives as the CMIM facilities, in order to draw lessons from how they are set up and from the experience of their use. The IMF maintains an array of facilities, including concessional lending, as well as a whole range of facilities to address an actual or potential balance of payments need. We consider two types of facilities which correspond most closely to the CMIM’s IMF-delinked portion and the CMIM’s IMF-linked portion — the Rapid Financing Instrument (RFI) and the Precautionary and Liquidity Line (PLL). The Rapid Financing Instrument is meant to provide rapid financial assistance, with limited conditionality, to any member facing an urgent balance of payments need. The rapid nature of disbursement and limited conditionality means that amounts provided are small; access under the RFI is subject to an annual limit of 50% of quota and a cumulative limit of 100% of quota. While the size of the CMIM’s IMFde-linked portion is double the amount of the IMF RFI, it would still be useful only for emergency-situation assistance. Therefore,

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the conditionalities for the CMIM’s delinked tranche should be no more stringent than the IMF’s RFI. This was increased in May 2012, from a maturity and supporting period of 90 days and 1 year for the non IMF-linked portion, and 90 days and 2 years for the IMFlinked portion, previously. It may be useful to compare a request for disbursement of the full amount of the CMIM swap facility with the IMF’s recently revamped Precautionary and Liquidity Line (PLL), rather than the IMF’s Stand By Arrangements (SBA). Objectives and time horizons of the CMIM and the IMF’s SBA are different, with CMIM focusing on shortterm adjustments than the SBA. The CMIM was designed to be different from the SBA, to avoid the complex SBA programs that had non-core structural components, which added to perceptions that the programs were too cumbersome and implementation lacked even-handedness. As the PLL is similar to the CMIM in terms of flexibility and accessibility of program, thus making it a useful starting point for designing CMIM conditionality. The PLL uses both ex-ante and ex-post conditionalities, which are similar to the CMIM’s original concept, based on the need for conditions precedent as specified in the Chiang Mai Initiative Multilateralisation Agreement, as well as the need for monitoring criteria for ex-post conditions. Furthermore, PLL qualification hinges upon an assessment that the country has sound economic fundamentals and institutional policy frameworks; is implementing (and has a track record of implementing) sound policies; and is committed to sound policies in the future. Assessment of qualification for the PLL covers 5 broad areas: (1) external position and market access; (2) fiscal policy; (3) monetary policy; (4) financial sector soundness and supervision; and (5) data adequacy. It is no coincidence that the CMIM’s decision-making board recently announced that qualification criteria for the

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CMIM’s own crisis prevention function be assessed in these five areas as well. Having a fixed set of ex-ante criteria (in the five areas listed, for instance) can help improve the timeliness of approval for use of facilities and their disbursement. Setting looser ex-ante criteria in these five areas, with gradually tighter conditionalities, can help a larger number of member countries qualify initially and thus enable them to make use of the CMIM, preventing their exclusion from the beginning. Criteria will need to be country- and case-specific, given huge divergences in the level of economic development among members. AMRO: CONDUCTING INTEGRATED SURVEILLANCE Capacity Building towards an Integrated Surveillance Office Given the openness and interconnectedness of the trade sectors and the financial sectors of the ASEAN+3 economies, wellintegrated surveillance work at AMRO must encompass two areas of coverage: a) bilateral and multilateral surveillance; and b) macroeconomic and financial sector surveillance. By a simple definition, bilateral surveillance focuses more on an individual economy, whereas multilateral surveillance takes more global and regional perspectives. Given AMRO’s relatively small size and budget compared with other multilateral surveillance offices, AMRO needs to carefully leverage upon the benefits and synergies of being a small office in close contact with regional policymakers. Under the present arrangement whereby AMRO economists are involved in production of all major products of the institution, namely the AMRO Regional Economic Monitoring (AREM) report (covering cross-country economic outlook and multilateral surveillance), individual economic surveillance reports (often referred to as bilateral surveillance),

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and thematic research reports under each area study unit, an integrated surveillance process has naturally been established. Another advantage of the present set-up derives from the direct access AMRO has to senior officials in member countries. While critics are quick to criticize the non-public nature of the current peer-review process, it yields several benefits when compared to a completely public process. Providing confidential advice and constructive criticism of policies at the highest official levels throughout the year, rather than making criticism publicly, avoids the creation of barriers to effective communication and cooperation with country authorities. Furthermore, AMRO’s surveillance process has tried to address the shortcomings of policy dialogue processes of the past. First, AMRO’s surveillance reports are submitted on a quarterly basis directly to senior officials of the ministries of finance and the central banks. The surveillance reports are submitted only a week ahead of these high level official meetings. Such a practice allows a frank discussion of issues without the usual revision and pre-screening of controversial issues, which has been common in regional and international policy dialogue, and a hindrance to effective policy dialogue in the past. Second, AMRO surveillance reports and analysis are presented directly to the high-level policy makers in charge of relevant areas. Third, not publishing reports and surveillance results can foster an environment more conducive to an exchange of views and perspectives between the AMRO team and the members’ policymakers in a setting where authorities are more receptive and open to frank discussions and criticism, an often overlooked particularity of Asian culture. Fourth, the non-publication process also facilitates timely dissemination of the reports to all member countries’ officials, and prevents delays arising from requests for revision by the relevant country’s authorities.

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ASEAN’s Major Power Relations

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71.

ASEAN’S ADVENTURES

EVELYN GOH

T

he Association of Southeast Asian Nations (ASEAN) is not a major power in its own right; instead, the imperative of this collection of relatively small countries is to diversify its dependencies by engaging simultaneously with a range of great powers, not to exacerbate its dependence on only one great power. In particular, ASEAN’s push for greater regional integration has been justified as a way to both retain and grant regional legitimacy to U.S. strategic involvement in the region, and to engage and incorporate China as a responsible regional power. The two strands are intrinsically linked: the engagement of China is built upon the reassurance of continued U.S. strategic commitment to the region. For instance, ASEAN’s increasingly enthusiastic bilateral and multilateral engagement with China is underpinned both by its members’ existing relationships with the United States and their desire to use the “China card” to persuade Washington to deepen these relationships. Despite this broad agreement, differences in strategic preferences must be expected

from a grouping of ten diverse countries. ASEAN does not want to enter exclusively into a Chinese sphere of influence. At the same time, governments with significant Muslim populations, such as those in Indonesia and Malaysia, have faced domestic political pressures against identifying too closely with the U.S. “war on terror”; and most ASEAN leaders have also expressed concern with Washington’s apparent obsession with counterterrorism at the expense of other issues such as economic development. The result is occasional tension, such as the row over participation in the East Asia Summit, inaugurated in 2005. Some ASEAN members, such as Malaysia, backed China’s wish to limit the summit to strictly East Asian states. Yet, Japan, Singapore and Indonesia eventually prevailed in their insistence on including Australia and New Zealand as representatives of “Western,” or American, interests. ASEAN is an aspiring major power in East Asia. The association continues to face many collective-action problems even as it moves toward formally institutionalizing its collective identity. Yet it does not pose a fundamental

Reprinted in excerpted form from Evelyn Goh, “ASEAN’s Adventures”, The National Interest, No. 94 (2008): 62–63, by kind permission of The National Interest.

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challenge to American dominance. Instead, one of its key aims is to ensure the continued deep strategic and economic involvement of the United States in the region as a means of diversifying its member states’ dependence on great powers. The question is whether

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the United States can work more closely with ASEAN on issues of critical interest to the latter, especially in the economic realm, and whether it can accept that ASEAN will not always fall in line with the United States on every issue.

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72.

DEVELOPING AN ENDURING STRATEGY FOR ASEAN

ERNEST Z. BOWER and MURRAY HIEBERT

T

he U.S.-ASEAN Strategy Commission was organized by the Center for Strategic and International Studies (CSIS) to provide useful and practical recommendations to American policymakers with the objective of developing a long-term U.S. strategy to deal with the Association of Southeast Asian Nations (ASEAN) countries and the ASEAN organization. ASEAN is vitally important to the United States, but the United States’ current engagement is neither as comprehensive nor as strategic as U.S. interests warrant. FINDINGS 1. The economic, political, security, and people-to-people ties between the United States and ASEAN are fundamental to U.S. economic growth and security. ASEAN’s numbers are compelling: 10 countries,1 more than 620 million people, and a $1.8 trillion gross domestic product. ASEAN is the United States’

fourth-largest overseas market, and U.S. goods exports conservatively account for 440,000 U.S. jobs. Prospects for continued high economic growth in the next several decades are very strong. The United States is the top foreign investor in ASEAN, with $165 billion invested, a third higher than U.S. investment in China and nearly10 times higher than in India. ASEAN has historic, cultural, and commercial linkages with the world’s two largest countries, China and India, and sits in the middle of several strategically important sea-lanes, making the region’s security and stability a core U.S. national security interest. 2. In 2004, the United States was ASEAN’s largest trading partner, with exports to ASEAN of $85 billion and imports of $87 billion, for a two-way total of $192 billion. Currently China is ASEAN’s largest trading partner, with a two-way total of $293 billion in 2010. The United States is now ASEAN’s fourth-largest trading

Reprinted in excerpted form from Ernest Z. Bower and Murray Hiebert, Developing an Enduring Strategy for ASEAN (Washington, D.C.: Center for Strategic & International Studies, 2012). Reproduced with kind permission of the Center for Strategic & International Studies (CSIS), Washington, D.C.

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partner. The implementation in 2010 of the China-ASEAN free trade agreement (FTA) has contributed to a significant increase in China-ASEAN trade and in the investments made by ASEAN in China and China in ASEAN. U.S. companies are at a trading disadvantage with many of their competitors in the region, particularly from the six countries that have signed the so-called ASEAN Plus free trade agreements: Australia, China, India, Japan, Korea, and New Zealand. 3. The United States’ loss of market share in ASEAN can be attributed in part to the fact that since the mid-1990s U.S. business has turned its attention to opportunities in China’s newly opening market and in part to China’s vigorous economic engagement with ASEAN. 4. The United States is perceived by ASEAN’s leaders as lacking a proactive trade and investment policy for the region, which is a deficiency that limits U.S. engagement with Southeast Asia and prevents U.S. companies from realizing opportunities in the region and creating more high-paying, export-related jobs in the United States. Although there have been repeated calls for a U.S.-ASEAN FTA over two decades, the United States today has only one free trade agreement with an ASEAN member country, namely Singapore. The president should propose preparations for future negotiations on a U.S.-ASEAN FTA at the upcoming U.S.ASEAN leaders’ summit in November. By setting this goal, the United States will underline a strategic commitment to promoting its interests in Southeast Asia by engaging in actions that help ASEAN members build capacity to enter the FTA. The effort would also be consistent with and complement U.S. negotiations on the Trans-Pacific Partnership (TPP), which includes eight other countries, including four from ASEAN (Brunei, Malaysia, Singapore, and Vietnam).

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5. The United States is highly regarded by ASEAN’s leaders, who recognize that the U.S. security presence has been a critical factor in providing peace and stability in the Asia-Pacific region since the end of World War II. They are, however, concerned about whether the United States will maintain its security and economic interests in the region. 6. The United States has substantially strengthened its relationship with ASEAN and its members in recent years by signing the ASEAN Treaty of Amity and Cooperation, joining the East Asia Summit (EAS), participating regularly in the ASEAN Regional Forum (ARF) and Post-Ministerial Conference (PMC), appointing an ambassador to ASEAN based in Jakarta, confirming a special envoy for Burma, and holding an annual U.S.-ASEAN leaders’ summit. 7. ASEAN wants the United States to remain actively engaged in the region’s security, but it does not want the United States and China to enter into conflict and confrontation. U.S. interests will be best served by concentrating on playing a proactive and strong role in developing regional security architecture and strengthening economic and trade relationships with U.S. treaty allies and strategic partners. RECOMMENDATIONS 1. The United States should take immediate action to establish its leadership on trade and investment issues in Southeast Asia. ASEAN leaders assess U.S. engagement in Asia by whether the commercial relations at the core of that engagement are strong, balanced, and sustainable. Proactive economic engagement is seen as a fundamental part of a balanced U.S. foreign policy in Southeast Asia. The following steps would send this message effectively:

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Developing an Enduring Strategy for ASEAN

• The president or vice president should lead a CEO-level business delegation to several ASEAN countries to promote new trade and investment opportunities. • The United States must restate its commitment to the TransPacific Partnership agreement. Congressional ratification of the free trade agreements with South Korea, Colombia, and Panama on October 12, 2011, should provide new impetus to the TPP negotiators to reach the “broad outlines” of an agreement ahead of the AsiaPacific Economic Cooperation leaders meeting in Honolulu in midNovember. • The United States should declare its intention to negotiate a U.S.-ASEAN FTA. • State governors should invite delegations of senior ASEAN business leaders to visit to explore ways to increase Southeast Asian investment in the United States.

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5.

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7. 2. In the first year of membership in the EAS, the United States should participate in a “listening mode’’ and support current efforts by important U.S. partners to ensure Asia-Pacific economic integration is inclusive. 3. The United States should declare its intention to institutionalize its annual participation in the U.S.-ASEAN Leaders Meeting. At the summit in November 2011, the president could suggest an initiative to boost education exchanges between ASEAN and the United States and offer to provide technical assistance

to ASEAN members needing capacitybuilding support to prepare for joining a U.S.-ASEAN free trade agreement as well as to those interested in joining the TPP. The United States should sustain a strong and consistent message pressing for free and open navigation in the disputed South China Sea, while managing relations with China through clear, consistent, and candid exchanges. It should avoid a strident stance that would create anxiety in ASEAN capitals. The United States should announce a program to increase substantially the number of ASEAN students who study in the United States and the number of U.S. students who study in ASEAN countries. It should also consider setting a target for educational exchanges covering all of ASEAN. The United States should appoint a U.S.ASEAN eminent persons group tasked with building support in the political, business, education, and civil society communities for increased ties between the United States and the region. The United States should take immediate and concrete steps to streamline inefficient visa security review programs to make it easier for Southeast Asians to travel to the United States for business, collaborative work, study, and tourism without threatening U.S. security. Visa delays hold back business missions to the United States, undercut new trade and investment, limit the number of tourists who visit, and reduce the numbers of students who come to the United States to study. Larger numbers of business, student, and tourist visitors would boost economic growth and create more jobs.

NOTE 1. Brunei Darussalam, Burma/Myanmar, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand, Vietnam.

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73.

NON-TRADITIONAL SECURITY IN CHINA-ASEAN COOPERATION

The Institutionalization of Regional Security Cooperation and the Evolution of East Asian Regionalism DAVID ARASE

INTRODUCTION Security cooperation between China and the Association of Southeast Asian Nations (ASEAN) has not attracted much sustained attention, perhaps because it is not the kind of multilateral security cooperation one sees in NATO, the EU, or the Organization for Security Cooperation in Europe (OSCE). The Western model features treaty-based institutions, formal voting procedures, and binding rights, rules, and obligations for members. China-ASEAN security cooperation lacks these formal institutional traits; it has developed in the area of non-military threats to security. Accordingly, Western security analysts tend to view China-ASEAN non-traditional security (NTS) cooperation as being weak, ineffective, and lacking in strategic importance. The situation is further clouded by the fact that ASEAN is involved in schemes of NTS cooperation with countries other than China (e.g., Japan), and that the U.S. maintains strategic dominance through its military alliances and bases in East Asia.

Nevertheless, Western analysts have the necessary analytical tools to appreciate how China-ASEAN NTS cooperation has become an institutionalized process that affects both the strategic and political future of East Asia. The China-ASEAN “strategic partnership” is managed in an annual cycle of summits and high-level meetings that guides not only NTS cooperation but also the China-ASEAN Free Trade Area (ACFTA). This meeting-driven process constituting China-ASEAN economic and security cooperation has advanced concrete security cooperation schemes far more than either the Asia-Pacific Economic Cooperation (APEC) or ASEAN plus Three processes. Several key observations about the significance of this can be made. The formation of a China-ASEAN security regime internalizes the bilateral asymmetry in power, allowing China to address ASEAN’s security and collective action problems as a leader. China-ASEAN NTS cooperation also facilitates military-to-military cooperation; it expands the offshore role of China’s army and navy.

Reprinted in excerpted form from David Arase, “Non-Traditional Security in China-ASEAN Cooperation: The Institutionalization of Regional Security Cooperation and the Evolution of East Asian Regionalism”, Asian Survey 50, no. 4 (2010): 808–83, by kind permission of the University of California Press.

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Non-Traditional Security in China-ASEAN Cooperation

WHY IS NON-TRADITIONAL SECURITY IMPORTANT? “Non-traditional security” is the term that China and ASEAN use for their cooperation in meeting non-military threats. Areas of cooperation include piracy, smuggling, human trafficking, drug trade, transnational criminal organizations, illegal immigration, cyber-piracy and cyber attacks, terrorism, subversion, and ethnic/religious movements. In addition, there are natural threats such as epidemics, typhoons, earthquakes, and tsunamis that require cooperation in disaster and post-disaster relief, disease control, and food security. One major Chinese survey of NTS had chapters on the following: economic security, financial stability, energy security, environmental security, freshwater security, ethnic minority problems, religious extremism, terrorism, cultural integrity, small arms proliferation, information security, spread of disease, population stability, drug smuggling, illegal immigration, piracy, and money laundering.1 China and ASEAN share the belief that if economic stability and growth falter — which could be precipitated by any number of non-military events — regime survival is potentially at stake. And as they become more economically interdependent, China and ASEAN have a growing rationale for cooperation. THE ASEAN REGIONAL FORUM The ASEAN Way avoids legalistic rules; decisions are taken by consensus rather than by majority vote. This informality and lack of precision is an organizational failure by Western standards but may in fact be strength: it permits members who must above all attend to immediate, local problems but who nonetheless can acknowledge a general governing principle and recognize a collective interest, to move in concert toward a shared goal with the freedom to go

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at different speeds. This kind of flexibility permits multilateral cooperation to take root and maintains a shared identity within a disparate group. The ASEAN Regional Forum (ARF) has provided the basic template upon which the China-ASEAN NTS cooperation process has been built. Both processes have a “track one” program of regular meetings of government officials and a “track two” program of civilian meetings. In the ARF, the top level is ministerial.2 Below this, the most notable track one items are inter-sessional meetings (ISMs). These ISMs comprise Confidence Building and Preventive Diplomacy, Counter-Terrorism and Transnational Crime, Disaster Relief, Maritime Security, and NonProliferation and Disarmament. As the ISMs’ terms of reference indicate, the focus is on NTS cooperation, which is of most practical concern for ASEAN. Under these ISMs a network of working groups, agreements, policy coordination efforts, and relationships has developed. CHINA’S SECURITY COOPERATION WITH ASEAN When it became a full ASEAN dialogue partner in 1996, China adopted a doctrine compatible with ASEAN’s concept of resilience, called the “New Security Concept” (NSC). This approach is comprehensive in scope and emphasizes non-interference, non-use of force, peace through dialogue and cooperation, and development as an integral aspect of security. The NSC first surfaced in 1996 when Chinese Foreign Minister Qian Qichen introduced the concept at that year’s ARF meeting. It was incorporated in China’s 1997 Defense White Paper, which was released at that time. On the occasion of the ARF foreign ministers’ meeting in 2002, Chinese Foreign Minister Tang Jiaxuan stated that China wished to develop NTS cooperation and base its policies on the NSC.3 That same

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year, China issued another position paper explaining NTS at the China-ASEAN summit. China uses the NSC to exercise leadership in NTS, which China sees as a key part of its security strategy.4 The NSC parallels ASEAN’s own security thinking and priorities. But the NSC is also used to implicitly criticize the U.S., which maintains military bases and alliance agreements in the region.5 According to the NSC, such bases and alliances are no longer needed. THE DEVELOPMENT OF NTS COOPERATION The Joint Declaration on Cooperation in the Field of Non-traditional Security Issues was signed together with the ACFTA declaration in 2002. Foreign Minister Tang Jiaxuan distributed a statement of policy on NTS6 and another on the NSC at that year’s ministerial meetings with ASEAN. China signed the South China Sea DOC that same year. At the following year’s summit (2003), both sides signed the Joint Declaration on Strategic Partnership for Peace and Prosperity that was meant to mark a major political step forward in relations. China acceded to ASEAN’s TAC and proposed military to military consultations for the first time.7 At the 2004 China-ASEAN summit meeting, a memorandum was signed that laid out a program for NTS cooperation in greater detail, and China signed the ZOPFAN agreement. Although overshadowed by the ACFTA initiative, NTS cooperation steadily advanced in the following years. CHINA-ASEAN MULTILATERALISM China-ASEAN NTS cooperation follows the ASEAN Way;8 China uses its superior resources and political entrepreneurship to lead. The China-ASEAN partnership is not a formal institution with a mailing address and hired professional staff, at least not yet, but it

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fits the broader definition of an international institution. Keohane and Martin define an international institution thus: “persistent and connected sets of rules, formal and informal, that prescribe behavioural roles, constrain activity, and shape expectations”.9 By this standard, China-ASEAN cooperation can fairly be called an institution or institutionalised process. It also fulfills the requirements of multilateralism: indivisibility (events affect the interests of all), generalized principles of conduct (the ASEAN Way), and diffuse reciprocity (evident in the collective commitment to the process and its norms). To believe that multilateralism requires detailed and legally binding rules set down in a written charter and implemented by a permanent bureaucracy may simply be over-determined. Ruggie notes: “It is important not to (con) fuse the very meaning of multilateralism with any one particular institutional expression of it.”10 On this same point, Caporaso says: “The institution of multilateralism … is grounded in and appeals to the less formal, less codified habits, practices, ideas, and norms of international society.”11 The Concert of Europe is a case of regional multilateralism that ran on an informal, consultative basis, but no one doubts that it was effective at maintaining a regional and world order. As their NTS cooperation broadens and deepens, China is drawn further inside the Southeast Asian circle of amity and conflict, whereas it used to stand solidly apart. It is not unrealistic to expect NTS to broaden into traditional military cooperation. Neo-functionalist theory suggests that when a cooperation institution reaches a frontier of jurisdiction, it will find reasons to expand (“spill over”) into the adjoining new area. This dynamic suggests why China-ASEAN NTS cooperation, which relies primarily on the military in many schemes, can expand incrementally into traditional security areas. But there are also empirical indications that this theory-based prediction is being realized.

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Non-Traditional Security in China-ASEAN Cooperation

THE ROLE OF THE PLA IN NTS Since replacing Jiang Zemin in 2002, President Hu Jintao has developed a new vision for the PLA that directs it to take on “new historic missions” and deal with “diverse tasks.” This mainly refers to extending the global reach of the PLA and a new emphasis on NTS.12 According to a CNA (an organization called the Center for Naval Analysis before it privatized) China analyst, leaders want “a military that is capable of handling overseas nontraditional security issues, such as terrorism, transnational crime, and natural disasters. In other words, Beijing desires a military that is capable of conducting military operations other than war (MOOTW) … both domestic and abroad”.13 The PLA discussed NTS for the first time in the 2002 National Defense White Paper, and the PLA held an All-Army Symposium on Non-Traditional Security Theory at the Academy of Military Sciences in 2006 to disseminate the new concept to the officer corps. Premier Wen Jiabao spoke to ASEAN directly about the need to raise the military profile in NTS, at the 2007 ASEAN-China summit meeting: “We should increase military exchanges and cooperation, pursue institutionalized defense cooperation, strengthen dialogue on defense policy, and promote more cooperation between our militaries in NTS areas.”14 China hosted the First China-ASEAN Dialogue between Senior Defense Scholars in March 2008 and also initiated the annual China-ASEAN Defense and Security Dialogue that includes flagrank officers. In 2010, according to Senior Colonel Zhao Bao, head of the Multilateral Cooperation Section in the Foreign Affairs Office of the Ministry of National Defense, there are over 30 scheduled China-ASEAN defense meetings.15 (In contrast, Japan has had only two senior officials meetings with ASEAN on NTS to date.) The message is that ASEAN need fear nothing from China’s

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naval build-up and that, as stated in China’s 2008 Defense White Paper, institutionalized defense cooperation and military exchanges with ASEAN served shared NTS goals. An example of what comes out of militarized NTS cooperation, besides annual bilateral Chinese defense consultations with Thailand, Malaysia, the Philippines, Indonesia, Singapore, and Vietnam, is the China-Singapore Agreement on Defense Exchanges and Security Cooperation that was signed in January 2008. This led to a joint military exercise in June 2009 that involved 61 soldiers from each side practicing counter-terrorism in Southern China. Xinhua noted that this was “the PLA’s first joint operation with foreign forces in security maintenance.”16 In 2010 China and Thailand are planning a joint military exercise involving around 100 troops on the Thai coast. Prominently inserting the military into NTS roles means that NTS, despite its name, has organic links to traditional security norms and institutions. NTS is, in this sense, militarized, and can lead to closer traditional military cooperation. CONCLUSION This article has explained why, for reasons specific to China and ASEAN, they consider NTS to be a critical concern. Their cooperation process is unfamiliar to Western analysts, but nonetheless, one should be able to recognize the significance of their cooperation and why the form it takes is a political response to regime vulnerabilities and a functional adaptation to the regional context. China-ASEAN NTS cooperation defends exclusive state sovereignty, and shared norms govern an institutionalized process of regularized consultation leading flexibly to various formal agreements. Viewed alone, NTS cooperation creates political partnership and a sub-regional security complex. When viewed in tandem with ACFTA, the NTS cooperation process

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may be seen as part of the most advanced and comprehensive working model of regionalism in East Asia. In comparative perspective, it embodies an approach to security that,

David Arase

compared to the West, is functionally distinct, institutionalized in process more than in form, and reflective of the norms of authoritarian developmentalism.

NOTES   1. Lu Zhouwei, Fei chuantong anquan lun (On non-traditional security) (Beijing: Shishi chu-banshe, 2003).   2. This refers to annual meetings of foreign ministers with each ministerial meeting always preceded by a preparatory vice-ministerial Senior Officials Meeting (SOM). The ARF also sponsors irregular and hoc meetings at this level. Providing the SOM with input are the ARF Security Policy Conference and the Defense Officials Dialogue. In a related development, ASEAN members began an annual ASEAN Defense Ministerial Meeting in 2007 that is building military cooperation to address NTS issues.   3. Speech by Chinese Foreign Minister Tang Jiaxuan at the Ninth ARF Foreign Ministers’ Meeting, Ministry of Foreign Affairs of the People’s Republic of China, 31 July 2002, .   4. Jing-dong Yuan, Asia-Pacific Security: China’s Conditional Multilateralism and Great Power Entente (Carlisle, Penn.: U.S. Army War College Strategic Studies Institute, January 2000); Xia Liping, “Prospects for Cooperative Security in East Asia: Chinese Perspectives”, at the Second Collaborative Workshop on East Asia Regional Security Futures, Nautilus Institute, and the Center for American Studies, Fudan Universtiy at Shanghai, China, 3–4 March 2001.   5. Carlyle A. Thayer, “China’s ‘New Security Concept’ and Southeast Asia”, in David W. Lovell, ed., Asia-Pacific Security: Policy Challenges (Singapore: Institute of Southeast Asian Studies, 2003), pp. 89–107; Thammy Evans, “The PRC’s Relationship with the ASEAN Regional Forum: Realpolitik, Regime Theory, or a Continuation of the Sinic Zone of Influence System?” Modern Asian Studies 37:3 (July 2003), pp. 737–63.  6. China’s Position Paper on Enhanced Cooperation in the Field of Non-Traditional Security Issues, Ministry of Foreign Affairs of the People’s Republic of China, 29 May 2002, at http://www.fmprc.gov.cn/eng/ wjb/zzjg/gjs/gjzzyhy/2612/2614/t15318.htm.   7. Medeiros and Fravel, “China’s New Diplomacy”.  8. Kuik Cheng-Chwee, “Multilateralism in China’s ASEAN Policy: Its Evolution, Characteristics, Aspirations”, Contemporary Southeast Asia: A Journal of International and Strategic Affairs 27:1 (April 2005), pp. 102–22.   9. Robert O. Keohane and Lisa Martin, “The Promise of Institutionalist Theory”, International Security 20:1 (Summer 1995), pp. 39–51. 10. John Gerard Ruggie, “Multilateralism: The Anatomy of an Institution”, International Organization 46:3 (Summer 1992), pp. 561–98, 574. 11. James A. Caporaso, “International Relations Theory and Multilateralism: The Search for Foundations”, ibid., 46:3 (Summer 1992), pp. 599–632, 602. 12. James Mulvenon, “Chairman Hu and the PLA’s ‘New Historic Missions’”, China Leadership Monitor 27 (Winter 2009). 13. Daniel Hartnett, “The PLA’s Domestic and Foreign Activities and Orientation”, Hearing of the U.S.-China Economic and Security Review Commission on China’s Military and Security Activities Abroad (Washington, D.C.: U.S.-China Economic and Security Review Commission, 4 March 2009), .

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14. “China Vows to Enhance Political Trust, Policy Coordination with ASEAN: Premier”, Xinhua News Service, 20 November 2007. 15. “Think Tanks in China, ASEAN to Deepen Ties”, , 30 March 2010. 16. “China, Singapore Hold Joint Anti-Terror Training Exercises, China View, 18 June 2009, .

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74.

CHINA-ASEAN FTA CHANGES ASEAN’S PERSPECTIVE ON CHINA

WANG YUZHU and SARAH Y. TONG

T

he China-proposed Free Trade Agreement (FTA) with ASEAN (Association of Southeast Asian nations) countries 10 years ago was mainly a political decision. Responding to ASEAN countries’ concerns over the possible adverse impacts of China’s World Trade Organization (WTO) access, Premier Zhu Rongji proposed a China-ASEAN FTA, which was accepted readily by ASEAN leaders. The FTA proposal involved two parallel considerations on the part of Premier Zhu. On the one hand, it was to dispel the growing concerns among ASEAN nations of a “China threat”. As a regional power, China’s rapid rise naturally caused uneasiness among its neighbours, who were uncertain about China’s intentions. Economically, such sentiment rose from the fear that, as a WTO member, China would become an even stronger competitor for ASEAN’s export to third markets as well as for ASEAN’s efforts to attract foreign direct investment (FDI). Such fear was especially rampant among Southeast Asian countries hard hit by the 1997 financial crisis which resulted in a

drastic decline in FDI inflow. Indeed, most ASEAN nations and China are similar in their development levels and economic structures. Thus China presents significant challenges to countries like Indonesia that relies on exports of labour-intensive products. On the other hand, the China ASEAN Free Trade Agreement (CAFTA) initiation was also a useful tool to reinforce domestic support for China’s WTO accession. In fact, China’s bid to join the WTO was not totally free of domestic resistance. Some argued that some industries as well as the agriculture sector would suffer from intense import competition. Forming a bilateral trade arrangement with ASEAN offered a good alternative to reduce domestic concerns. Even though the CAFTA initiation was based mainly on political calculations, economic interests were also important from the very beginning. Chinese leaders were fully aware that ASEAN, a large potential market with 500 million people and rich in various natural resources, could play a crucial role in China’s long-run growth.

Reprinted in excerpted form from Wang Yuzhu and Sarah Y. Tong, “China-ASEAN FTA Changes ASEAN’s Perspective on China”, East Asian Policy 2, no. 2 (2010): 47–54, by kind permission of the East Asian Institute, National University of Singapore.

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Somewhat surprisingly, this reactive decision has proved to be quite successful, both diplomatically and economically. As the first FTA of its kind in Asia, the FTA initiative between China and ASEAN gave China a diplomatic advantage. Soon afterwards, Japan, worried that China might dominate the region, was compelled to follow suit. Following the CAFTA initiation, bilateral trade picked up speed quickly. Between 2001 and 2008, bilateral trade between China and ASEAN grew by about 28% a year in nominal terms, from US$42 billion to US$231 billion, significantly faster than that of China’s total trade. The rapid growth in China-ASEAN trade was partly attributed to the FTA and had far outpaced some estimates. It is interesting to note that bilateral trade between China and ASEAN was US$213 billion, a decline of eight percent in 2009 from 2008, considerably smaller than a decline of 14% in China’s total trade. However, CAFTA has also drawn some concerns. For example, with the implementation of the Early Harvest Programme (EHP), certain sectors of some ASEAN countries were negatively impacted due to strong competition from Chinese products. Thailand, whose garlic planters in the northern part felt huge competition pressure from cheaper Chinese garlic, had expressed grave concerns. The Philippines, due to internal pressure, was hesitant to take part in the EHP, and had only joined in 2007 with a very short list of tariff lines. This reminded the Chinese leaders of the need to generate more concrete gains for ASEAN members. In the subsequent years after the signing of the FTA in 2002, China’s import from ASEAN grew much faster than China’s export to ASEAN; China’s trade deficit with ASEAN climbed from US$4.8 billion in 2001 to more than US$20 billion in 2004. Since the mid-2000s, China’s trade relations with ASEAN have remained robust and relatively stable. Currently, export to ASEAN constitutes about eight percent of

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China’s total export, while around 10% of China’s import comes from ASEAN. FROM ECONOMIC INTERDEPENDENCE TO A FTA STRATEGY The emphasis of China’s external economic relations has gradually shifted from building economic interdependence to formulating FTAs. One sign of such a change is that China’s leaders began setting targets for China-ASEAN trade. The successor of Premier Zhu, Wen Jiabao, is more focussed on the building of CAFTA. Encouraged by the favourable development and optimism of CAFTA’s future, Premier Wen set US$100 billion and US$200 billion as the bilateral trade targets for 2005 and 2010, respectively. Both were achieved well in advance. By focussing on economic cooperation, especially bilateral trade, the Chinese government believes that useful economic interdependence can be developed. By encouraging more export from ASEAN to China under the FTA, bilateral trade and the trade imbalance that favours ASEAN will reach a point where ASEAN’s heavy dependence on Chinese market might provide China with more leverage in the bilateral relationship. At the same time, the mutually beneficial cooperation would also encourage a friendly atmosphere for both sides to discuss certain sensitive issues, such as the South China Sea and bilateral territorial disputes. Inspired by such thinking, the China-ASEAN expo was launched to provide an additional forum to further deepen the bilateral relationship. However, good China-ASEAN relation is conditioned on stable China-US relations. Any changes in China-US relations and the subsequent attitude changes in ASEAN towards a rising China would induce a Chinese policy adjustment towards ASEAN. With deepening economic interdependence, bilateral trust between China and ASEAN has been built up steadily with CAFTA contributing significantly to

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such a positive change. Satisfied with the successful experience with ASEAN, China was encouraged to extend the approach to its engagement with other countries and regions, an approach which may be termed a “FTA Strategy”. The “FTA Strategy” was launched in 2007, according to a high ranking official from the Ministry of Commerce. Since then, or even before that, China has signed bilateral FTAs or made similar arrangements with nine countries or regions. Currently, another five bilateral FTAs are under negotiation, while feasibility studies for FTAs with India and Korea are ongoing. These efforts to formulate FTAs were aimed at promoting bilateral economic cooperation while cultivating a friendly international environment for a smooth and peaceful development of China. CAFTA TO PROMOTE ECONOMIC INTEGRATION The 2008 crisis diverted the leaders’ attention away from promoting further interdependence. In fact, global economic imbalances were highlighted as a cause of the crisis, where export-oriented economies were held responsible. In particular, China, due to its huge trade surplus with the United States, has been under mounting pressure to help rebalance the world economy. From China’s viewpoint, the blame on China for the global imbalance was another way of expressing the “China threat” conviction of some in the West. In response, China called upon the US to rethink and rebalance its over-borrowing habits. At the same time, the sharp decline of the world economy and the resultant slowing down of China’s economic growth is an alarming reminder to the leadership. They realised that China cannot sustain smooth growth if it continues to be overly dependent on export to the Western markets. The economic crisis may also lead to a new wave of protectionism in advanced

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economies, such as the United States and European Union, where China would be the main target. Indeed, several measures have already been proposed or implemented in the US to curb import from China for products such as tyres and steel pipes. As a result, a shift in China’s trade composition to diversify China’s export markets has become even more pressing. The importance of CAFTA has thus become more prominent. The low utilisation rate of CAFTA’s preferential arrangements has prompted the Chinese government to assign a research group to examine the reasons and make recommendations to how enterprises can benefit more from CAFTA. The objective is to further increase China-ASEAN trade. In a recent study on the effectiveness of CAFTA commissioned by China’s Ministry of Commerce, it is found that only one fourth of China’s enterprises involved in trade with ASEAN took advantage of CAFTA’s preferential arrangement using Form-E under the CAFTA rule of origin. The main reasons include a lack of the basic knowledge about CAFTA, the high cost in the Form-E application and the low utilisation rates by their trading partners. In recent years, there has also been more emphasis on trade in services and cross-border bilateral direct investment, with the recent inclusion of both under CAFTA. With the opening of the service sectors, further economic integration may be expected. For direct investment, ASEAN’s investment to China is likely to continue its dominance, while China’s direct investment in ASEAN in all likelihood will remain quite small. In the future, bilateral investment is expected to grow strongly. First, China’s overall outward FDI has grown rapidly in recent years. China’s total outward FDI in 2008 reached US$56 billion, nearly doubling its amount for 2007. China’s direct investment in ASEAN also experienced rapid growth. According to Chinese statistics, China’s direct investment in ASEAN was about US$2.2 billion in 2008, more than

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China-ASEAN FTA Changes ASEAN’s Perspective on China

twice the cumulated amount by 2000. The recently signed Agreement on Investment under CAFTA, which guarantees national treatment, is expected to propel further growth in bilateral FDI. Generally speaking, the global economic crisis has led China to view CAFTA in a more positive light, which is beneficial to China’s interests as it is important to diversify China’s trade relations and to counter its over-dependence on export to advanced economies. WHAT NEXT? China and ASEAN have just celebrated the fulfilment of CAFTA. In contrast to the festive atmosphere in Nanning, there have been concerns and complaints about import competition from China by several ASEAN members since late 2009. For example, Indonesian Industry Minister Fahami Idris said that Indonesia is “not ready” for CAFTA because Indonesian products cannot compete with Chinese products according to Jakarta Global. This suggests that despite CAFTA’s positive impact on the two regions’ economies, certain sectors will suffer in the short run. This is also true of some Chinese sectors. On the part of the Chinese leadership, there are several important considerations if CAFTA is to be successful. First, to rebalance the global economy means that China needs to diversify its trade relations so as to reduce its heavy dependency on the western market. According to China’s Customs Statistics, export to the United States and European Union accounted for 38% of China’s total export in 2009. As China’s fourth largest trade partner, ASEAN naturally receives greater attention in this effort. Chinese

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leaders have appraised the China-ASEAN cooperation during the past 20 years highly and hoped that CAFTA can serve as a model for China’s bilateral relations with other countries and regions. Second and perhaps more important, as a rising power, China wishes to maintain stable, harmonious and friendly relations with its neighbouring countries. To this end, China will continue to work with ASEAN. As a mutually beneficial arrangement, CAFTA could be a useful institutional framework for the two sides to deepen their overall relationship. Third, an emerging strategy of Shaping Neighbouring Relations also highlights the importance of CAFTA. To improve China’s soft power among neighbouring countries, this strategy, like the Peaceful Rise pledge and Building a Harmonious World concept, will most probably be experimented first in Southeast Asia. In practice, China would focus on improving the mechanisms of the already signed agreements under the CAFTA. At present, there is still much work to be done to increase the utilisation of the various agreements, in trade in goods and services, and in cross border direct investment. Institutions may need to be adjusted and rules harmonised. Businesses also need time to learn about the new opportunities and to familiarise themselves with the new arrangements. The proposed Economic Community between China and ASEAN after the CAFTA seems a little farfetched from China’s viewpoint as various CAFTA agreements are still in their infancy. New proposals will be considered but the focus is still on more urgent matters like improving the implementation of CAFTA.

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75.

JAPAN’S TRADE POLICY WITH ASIA

SHUJIRO URATA

THE IMPORTANCE OF EAST ASIA IN JAPAN’S EXPANDING TRADE Japanese trade with East Asia greatly expanded from 1990 to 2011. Exports from Japan to East Asia grew 4.9-fold from $96.3 billion to $469.2 billion, while imports from East Asia expanded 5.3-fold from $66.2 billion to $354.1 billion. East Asia’s share of Japanese exports to the world was 32.7% in 1990, but grew to 56.9% in 2011. East Asia’s share of Japanese imports from the world rose 14 percentage points from 28.4% to 42.9%, which was lower than that of exports both in terms of the rate of increase and the actual share. These figures indicate that to Japan, East Asia is more important as an export destination than as a source of imports. THE COMMODITY COMPOSITION OF JAPANESE TRADE WITH EAST ASIA: EXPANSION OF PRODUCTION NETWORKS The Japanese import commodity composition from the East Asian countries changed from 1990 to 2011. While the share represented by

products using natural resources in the form of food products, wood pulp, petroleum/ coal products decreased, the share of machine products such as general machinery and electrical machinery rose greatly. These changes reflect the fact that industrialization has made progress in East Asia. In contrast to the composition of Japanese export commodities, the Japanese import commodity composition contains large differences between imports from China, the NIEs, and ASEAN. Among import commodities from China, the share represented by food products, textile products, and petroleum/coal products fell significantly, while the share represented by electrical machinery, general machinery, and chemical products, expanded greatly. The largest share in 2011 was held by textile products, electrical machinery, and general machinery. In the import commodity composition from the NIEs, similar changes to those of the import commodity composition from China can be observed. Nevertheless, the import commodity composition in 2011 was

Reprinted in excerpted form from Shujiro Urata, “Japan’s Trade Policy with Asia”, Public Policy Review 10, no. 1 (2014): 1–31, by kind permission of the Shujiro Urata.

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very different from that from China. While electrical machinery had the highest share, intermediate goods such as ferrous and nonferrous metal products, petroleum/coal products, chemical products, and the like also accounted for high shares. Intermediate goods hold a significant position among Japanese exports to East Asia. In fact, the intermediate good share of Japanese exports to East Asia rose from 61.5% to 69.1% from 1990 to 2011. Meanwhile, the share held by final goods decreased from 37.8% to 28.7% during the same period. The intermediate good share of Japanese imports from East Asia rose from 41.8% to 48.2% from 1990 to 2011, while the share of final goods rose from 37.0% to 44.0%. JAPANESE FOREIGN DIRECT INVESTMENT IN EAST ASIA Japanese FDI to Asia stood at $9.8 billion in 1996, but it dropped after peaking at $13.1 billion when the Asian currency crisis occurred in 1997. Although dropping to $1.8 billion in 1999, it rapidly recovered, rising to $23.3 billion in 2008 when the global financial crisis arose. Although it fell in 2009, it recovered in 2010, and the rising trend continued to 2011 as well, reaching $39.5 billion that year. This was actually a 22-fold increase compared to 1999 levels. Examining Asia by country, investment to China is the largest, followed by large investment to the ASEAN countries such as Singapore and Thailand. The share of Japanese FDI to the world held by investment to Asia fluctuates wildly from year to year when looking at the numbers as a flow, so when looking at the figures on the basis of year-end balances, it stood at 26.7% at the end of 2011. Looking at Japanese FDI to Asia by industry, the top places in manufacturing were held by electrical machinery and transport machinery, and in the non-manufacturing sector, by distribution (wholesale and retail), financial/insurance, and the like.

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JAPAN’S FTA STRATEGY WITH EAST ASIA Until the end of the 1990s, Japan’s trade policy was basically implemented in accordance with the principle of nondiscrimination under GATT/the WTO, which indicates refraining from discriminating against a GATT/WTO member. However, from the 1950s to the 1990s, there are also cases that when a trade friction problem arose with the US or Europe due to rising exports from Japan of products such as textiles, steel products, electrical products, and automobiles these were resolved by concluding a bilateral trade arrangement. Amidst such circumstances, at the end of the 1990s, Japan came to have an interest in free trade agreements (FTAs), which are trade arrangements eliminating trade barriers between particular countries. Thereafter, in the 21st century, Japan began actively concluding FTAs, focusing on the ASEAN countries. RAPIDLY PROGRESSING ESTABLISHMENT OF FTAs WITH EAST ASIAN COUNTRIES Japan’s first FTA was with Singapore, and it came into effect in November 2002. FTAs basically are arrangements for liberalizing trade in goods, but the arrangement executed between Japan and Singapore included not only liberalization of trade in goods, but also comprehensive contents such as liberalization of trade in services and investment, facilitation of trade in goods and services, intellectual property rights, competition policy, government procurement, cooperation, and others, and so it was called an Economic Partnership Agreement (EPA). After that, FTA negotiations were held focusing on ASEAN countries, and as of June 2013, a regional FTA with ASEAN and 12 bilateral FTAs (in order of establishment) with Singapore, Mexico, Malaysia, Chile,

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Thailand, Indonesia, Brunei, the Philippines, Switzerland, Vietnam, India, and Peru have come into effect. The RCEP is an FTA having the ASEAN countries, Japan, China, South Korea, India, Australia, and New Zealand as members, and negotiations began in May 2013 aiming for an agreement by the end of 2015. Regarding the Trans-Pacific Partnership (TPP), Japan announced its intention to participate in negotiations in March 2013. The fraction (FTA coverage rate) of Japanese trade that is with countries having an FTA with it in effect is currently 18.6%, which is lower than that for South Korea (33.9%), the US (37.8%), the EU (26.9%), and China (23.9%). The reason for Japan’s low FTA coverage rate is that an FTA has not been concluded with Japan’s major trade partner countries of China, the US, the EU, and South Korea. Currently, if the FTAs under negotiation and the TPP, for which negotiation participation has been announced, are concluded and come into effect, Japan’s FTA coverage rate would leap to over 80%. THE SIGNIFICANCE OF FTAs TO JAPAN As discussed above, Japan did not have an interest in FTAs, which are discriminatory arrangements, due to deploying a trade policy under GATT and the WTO, which has nondiscrimination as a fundamental principle. There are a number of reasons why Japan came to respond to FTA proposals despite being initially reluctant. The first reason was that the Japanese government attempted to secure export markets for Japanese businesses and to prepare a free and open business environment overseas through FTAs. At the end of the 1990s, regional trade agreements such as FTAs and customs unions proliferated around the world, and since Japan did not participate in them, Japanese businesses began to sense damage arising due to

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receiving discriminatory treatment in export markets. Japan’s second reason for promoting FTAs has been to further domestic structural reforms. Since the collapse of the bubble in the beginning of the 1990s, the Japanese economy has fallen into a long-term period of low growth. In order to escape from low growth and achieve a recovery, it is necessary to arrange an economic environment in which labor and capital, as the factors of production, can function efficiently. To achieve this, it is necessary to reduce or eliminate restrictions obstructing the movement of labor and capital through implementing structural reforms. However, in many cases domestic pressure and impetus arising from within are insufficient to promote structural reforms, and “outside pressure” from abroad calling for market opening in Japan plays an effective role. In the past, commitments in trade liberalization negotiations under GATT and the WTO as well as calls for market opening from the US have been effective examples of outside pressure. However, the current situation is that the Doha Round, which started in 2001 under the WTO, has run aground and pressure for market opening from the US has waned, and so FTAs are the sole form of outside pressure. The third reason, which is in particular a reason to further FTAs with the countries of Asia, is to support the economic development of developing East Asian countries through FTA frameworks. If economic development moves forward in Japan’s FTA partner countries through the FTAs, the benefit can be expected that opportunities for expanding exports and investment would be granted to Japanese businesses as well. Thus far, the significance of FTAs to Japan has been discussed focusing the discussion on economics. But in actuality, the conclusion of FTAs takes into consideration not only economic reasons, but also international relations reasons such as politics and security.

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For example, a major catalyst for Japan’s FTA with ASEAN is thought to be the rivalry between Japan and China over leadership in East Asia. Japan proceeded with its policy towards the ASEAN counties by establishing bilateral FTAs with Singapore, Malaysia, and Thailand. However, when it was revealed that China would proceed with an FTA with ASEAN as a whole, Japan also moved to conclude such an FTA. JAPAN’S EAST ASIAN FTA STRATEGY Japan already has in effect a regional-level FTA with ASEAN as a whole, as well as bilateral FTAs with seven countries within ASEAN. Furthermore, there is a bilateral FTA with India. The major countries and regions in the East Asian region with which Japan does not have an FTA in effect are China, South Korea, Taiwan, and Hong Kong. Amidst such circumstances, FTA negotiations began with China and South Korea in the form of a Japan-China-South Korea FTA. Also, under the Regional Comprehensive Economic Partnership (RCEP), FTA negotiations started in May 2013 with the members being the 10 ASEAN countries, Japan, China, South Korea, India, Australia, and New Zealand. If a comprehensive FTA encompassing East Asia is formed, goods, services, and investment would come to move actively within the region, resulting in the promotion of economic growth in the East Asian countries including Japan. Taking the above into consideration, the highest priority in Japan’s East Asian FTA strategy is in promoting negotiations for the JapanChina-South Korea FTA and the RCEP, but thereafter it is considered important to pave

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the way towards the inclusion of Taiwan and Hong Kong in the RCEP. The RCEP is to be a comprehensive FTA including, as stated above, liberalization and facilitation of trade and investment, as well as economic cooperation. These contents are similar to those of the FTAs and EPAs that Japan has in effect thus far, and so Japan should actively promote the RCEP. Although there is the view that forming an FTA among the ASEAN+6 under the RCEP framework will be relatively easily carried out by bundling the existing five ASEAN+1 FTAs, but this is not correct. The degree of tariff abolishment in the five ASEAN+1 FTAs differs greatly. In other words, there are not so many products for which tariffs have been abolished in one ASEAN+1 FTA as well as another ASEAN+1 FTA. Specifically, Japan should leverage FTA negotiations with the EU, in the Japan-ChinaSouth Korea FTA, and in the Trans-Pacific Partnership (TPP), to apply pressure on the RCEP negotiations, enabling a contribution to an early agreement. It is also important to conversely leverage the RCEP negotiations to put pressure on FTA negotiations with the EU and the TPP. The RCEP should expand its membership by recognizing new members, and ultimately aim to integrate with the TPP. In fact, at the Asia-Pacific Economic Cooperation (APEC) summit meeting held in Yokohama in 2010, there was an agreement that the TPP, ASEAN+3 FTA, and ASEAN+6 FTA was the path towards building the Free Trade Area of the Asia Pacific (FTAAP), which is the regional integration of APEC. Thereafter, since the ASEAN+3 FTA and the ASEAN+6 FTA merged to form RCEP, establishing the FTAAP by integrating the RCEP and the TPP is a valid roadmap.

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76. MANAGING INTEGRATION IN EAST ASIA Behind Border Issues in Japan-ASEAN Trade Agreements YOSE RIZAL DAMURI

REGIONALISM IN EAST ASIA From Market-Driven Integration to Governance In the 1990s, virtually only ASEAN countries made an effort to create a free trade area in East Asia and to harmonize limited aspects of economic policies, such as investment and services. The lack of a formal regional arrangement was due to a combination of factors, ranging from a lack of vision to then sufficient unilateral actions, a lack of importance given to intra-regional economic relations by regional governments, and external pressure — mainly from the United States. It is interesting to note that before the new millennium, Japan did not have a single treaty for investment protection — such treaties normally take the form of a bilateral investment treaty — with an East Asian country, while it had established intensive trade and investment relations for decades. Regionalism in East Asia entered a new phase when China announced its intention

to have an FTA with ASEAN, which was implemented in 2003. Partly because of the domino effect and fear of trade diversions, other countries in the region — including Japan — started to embrace regionalism. This opened up an opportunity for Japan to address some problems related to marketdriven integration with its counterparts. Economic and trade relations between Japan and other countries in the region have grown so extensive that they require a more harmonized international regulatory framework. Japan came up with a strategy of building comprehensive economic partnerships with ASEAN countries that went beyond traditional trade liberalization. This was done by including various provisions and commitments on behindborder issues in an agreement between ASEAN member countries and Japan — the ASEAN-Japan Economic Partnership Agreement. Those BBIs’ (behind-border issues) provisions set international rules for various economic matters normally

Reprinted in excerpted form from Yose Rizal Damuri, “Managing Integration in East Asia: Behind Border Issues in Japan-ASEAN Trade Agreements”, in ASEAN-Japan Relations, edited by Takashi Shiraishi and Takaaki Kojima (Singapore: Institute of Southeast Asian Studies, 2014), pp. 160–83, by kind permission of the Institute of Southeast Asian Studies.

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determined domestically. The agreement provides cross-border governance for trade, investment, and production relations between Japan and ASEAN countries. This move was followed by other countries in East Asia, including South Korea and Australia. BEHIND-BORDER ISSUES: AN OVERVIEW Disciplining Integration: Importance of Behind-Border Issues in East Asia A firm’s objective in opening production bases and sourcing intermediate inputs overseas is to take advantage of geographical differences in price of production. While this strategy offers many advantages, it also brings up problems that do not exist with more conventional production activities. One of the most significant problems is related to the protection of business activities. Multinational investors from capital-exporting countries feel the need to protect their assets against financial damage due to political risks in the host countries. Another crucial protection is related to intellectual property rights (IPR). Firms subcontracting work to suppliers in other countries may be required to share their proprietary knowledge, such as trademarks, industrial designs, and patents. The risk of losing valuable IPR assets increases as international production becomes a more substantial component of the production process. With production networks in East Asia becoming larger and more complex, the above problems are becoming more prevalent. Multinationals operating such networks, usually from Japan and South Korea, find the risks increasing as they expand their production bases in countries such as the ASEAN nations and China. While the problem can be handled at the national level to some extent, international cooperation increases the effectiveness of actions. Many trade liberalization and facilitation measures,

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such as agreements on customs procedures and standards, also need to be taken at the international level. An effective arrangement for production and trade, in short, requires new and deeper internationally accepted disciplines and governance. This is where behind-border provisions in FTAs play an active role. These provisions offer the deeper disciplines required in international trade and production-sharing practices. While the best option is to go for multilateral agreements, the delay in the WTO’s Doha Development Agenda has made countries pursue cross-border economic governance using regional agreements instead. The blueprint for the ASEAN Economic Community (AEC) signed in 2007, for example, provides for a deeper commitment that envisages a more coherent regulatory environment among the member countries. What Constitute Behind-Border Issues? BBIs’ provisions in FTAs can cover a broad range of issues, from economic and commercial to political and social. Henrik Horn et al. (2010) have tried to define a complete list of provisions observed in FTAs involving the European Union and the United States. The list includes 52 provisions ranging from the conventional provision of tariff elimination to less common provisions such as corruption and social cooperation. Damuri (2012) finds that among the 52 provisions, there are only 18 that are commonly found in trade agreements and have substantial commercial meaning. Of these, six can be categorized as behindborder commitments. Provisions on investment protection and policy seek to apply national treatment principles to the investment interests of foreign firms. These provisions may include various types of prohibition, a subrogation clause, and a state-investor dispute-settlement mechanism. Investment provision is among

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the most extensive areas of commercial regulation found in FTAs. Provisions on IPR seek to ensure returns on intellectual property by promoting international standards and preventing/dissuading from counterfeiting and piracy. Provisions on competition policy force trade partners to conform to the general principles of open and competitive domestic markets. BEHIND-BORDER ISSUES IN JAPAN AND ASEAN TRADE AGREEMENTS How Deep are the Commitments? Although the ASEAN-wide agreement seems to pay little attention to those provisions, agreements between Japan and individual members cover the issues to some extent. Unlike many other trade agreements involving major developed economies such as the European Union and United States, Japan’s FTAs have a visible lack of attention to various aspects that contain less commercial value. Issues such as the environment and labor standards are rarely mentioned in those agreements. However, Japan also emphasizes the economic cooperation aspect of trade agreements. This provision, both general and sector-specific commitments, can be seen as a leverage for the inclusion of behind-border commitments in Japan’s agreements with its trading partners. While BBIs are common in Japan’s agreements, the extent of such provisions varies significantly between one trading partner and another. One way to see the depth of the commitments is by comparing the contents of behind-border issues with the related subjects discussed at the multinational level. Investment provisions in the agreements between Japan and selected members of ASEAN seem to be quite deep, encompassing agreements set in the WTO’s trade-related investment issues. Deep commitments are negotiated in individual agreements

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between ASEAN countries and Japan, while ASEAN-wide agreement does not cover such provisions. A similar pattern is found in other agreements between ASEAN and other East Asian countries. Commitments on property rights can be compared to trade-related intellectual property rights, which define national laws on various aspects of property rights that affect trade policy. The agreements between Japan and ASEAN members do not specify many areas beyond multilateral agreement. In terms of provisions on competition policy, there is not much effort from Japan and ASEAN countries to define a more harmonized and coherent competition policy in the region. ASEAN countries so far do not have specific agreement on such policy, although the AEC blueprint envisages deeper cooperation between member countries in that policy area. Are the Commitments Sufficient? An interesting question regarding the commitments in Japan’s FTAs is whether they can sufficiently deliver the discipline and rules required to manage the complex arrangement of international trade and production in East Asia. There are three main issues normally covered in provisions on investments: (1) liberalization, (2) protection, and (3) promotion. The liberalization aspect of investment, including Japan’s FTAs with ASEAN countries, can be found in two chapters of the ASEAN-Japan agreement dealing with two separate but related issues. Market access issues for investment in the services sector are normally discussed in the agreement on trade in services, particularly for mode 3 (commercial presences of service providers). Another aspect, namely the principle of national treatment, which maintains nondiscriminatory treatment toward foreign investors, is specified in the investment chapter.

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Managing Integration in East Asia: Behind Border Issues in Japan-ASEAN Trade Agreements

While the principle of national treatment is specified clearly in Japan’s FTAs, it is also followed by long lists of exceptions and reservations regarding foreign investment. Such measures include horizontal ones — such as the acquisition of lands and properties, and limitations on asset transfers — and sectorspecific measures such as equity limitations in the banking sector. Those exceptions reduce the significance of investment provisions in FTAs between Japan and ASEAN. Moreover, commitments specified in other related chapters are normally below the actual rules and regulations. In terms of investment liberalization, FTAs in East Asia, including among ASEAN members, do not really provide substantial improvement. A better arrangement can be observed when it comes to protection of investment rights. Protection provisions in FTAs between Japan and ASEAN members stipulate the limits of government actions to restrict activities of investors and to expropriate their investment. This is a significant improvement in the attempt to regulate integration in the region, considering that Japan has virtually no bilateral investment treaty with any ASEAN member, which normally provides such protection. In agreements on competition policy, FTAs in the region do not seek to set up an aligning mechanism on competition policy or to harmonize domestic policy between trading partners. Rather, the agreements aim to construct more effective enforcement mechanisms through the promotion of transparency and cooperation in implementation. It is still a long way to suggest that FTAs in East Asia, especially between Japan and ASEAN members, would provide better attempts at harmonizing such policy at the regional level. One aspect related to competition policy that is missing from Japan’s FTAs is the provision of state aid and the conduct of SOEs. In many economies SOEs receive special privileges from the government,

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including monopoly rights that may harm a pro-competition environment. The implementation of a national competition policy, as well as provisions in trade agreements, often exclude special rights for SOEs. The lack of commitment on the part of SOEs in FTAs between Japan and ASEAN members indicates that state-owned companies remain a sensitive issue in the region. The reason for this is that in virtually all economies in the region, SOEs maintain a significant role and receive massive state aid and special rights in conducting business. For the protection of IPR, FTAs between Japan and ASEAN countries provide substantial provisions. The chapter on IPR in those agreements even includes several enforcement measures that require both parties to act in order to support IPR protection. This provision seems to be a comprehensive arrangement for managing integration in the region. Unfortunately, besides Japan-ASEAN FTAs there is no similar arrangement among countries in the region. ASEAN itself, while it has been discussing IPR for more than a decade, still focuses on how to improve IP creation rather that enforcing laws and protection. One point worth mentioning on BBIs in trade agreements between Japan and ASEAN countries is the absence of behind­ -border provisions in such FTAs. Commitments in such region-wide agreements seem to be weaker than the agreements between Japan and individual countries. This is apparent not only on new issues such as BBIs, but also on traditional subjects, including rules of origin and tariff elimination. This may arise from Japan’s strategy in pursuing regional economic cooperation: seeking a general framework of economic cooperation in region-wide agreements while discussing the details in individual agreements. However, this approach might undermine the initiatives toward a more coherent and harmonized regulatory framework in the region. The “noodle bowl” effects of

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different BBI arrangements in East Asia may not be as severe as the problems created by border-barriers commitments — e.g., different preferential tariffs or rules of

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origin — but they indicate that initiatives toward harmonized and deeper formal arrangements in the region are still far from being realized.

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77.

FORTIFYING THE JAPAN-ASEAN STRATEGIC PARTNERSHIP Abe’s Quest for Viable Hedging Policies SUEO SUDO

INTRODUCTION ASEAN has maintained close dialogue with Japan ever since 1973. At a special summit held in Tokyo in 2003 to celebrate the 30th anniversary, it was decided that the relationship between the two be elevated into a strategic partnership (Sudo 2015). It was the fast-changing environment in Asia, especially the rise of China, which necessitated the reappraisal of the regional structure and mode of interaction. Specifically, ASEANJapan relations have come to be seen in a common strategic perspective ever since the East Asia Summit (EAS) was established in 2005. FORTIFYING THE STRATEGIC PARTNERSHIP The year 2011 was regarded as a critical juncture by both Japan and ASEAN (Shiraishi 2014). To begin with, the JapanASEAN Foreign Ministers’ Meeting was held on 26 July 2011 in Bali, Indonesia.

Both parties agreed with the planned new joint declaration and plan of action that was to be adopted at the next Japan-ASEAN summit meeting, which was to be held in November 2011. The ASEAN-Japan strategic partnership covers vast areas of cooperation. It is encapsulated in the ASEAN-Japan joint declaration for “enhancing strategic partnership for prospering together” and detailed further in the “Plan of Action 2011– 2015”. Both were newly issued at the 14th ASEAN-Japan Summit in Bali. It is also built upon the progress of cooperative activities undertaken to date and in consideration of circumstances prevailing in the region since the preceding declaration was issued in 2003. At this summit, Prime Minister Noda Yoshihiko stressed that Japan would provide 2 trillion yen worth of aid for development projects to strengthen regional integration, officials said. Noda also expressed his commitment to boosting cooperation with the region over maritime security and safety amid China’s increasing assertiveness at sea.

This chapter was specially commissioned by the Institute of Southeast Asian Studies for The Third ASEAN Reader, and is based on Sueo Sudo, Japan’s ASEAN Policy: In Search of Proactive Multilateralism (Singapore: Institute of Southeast Asian Studies, 2015).

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In a joint declaration issued afterward, Japan and ASEAN mapped out five strategies for promoting peace, stability and prosperity in the region which include deepening political and security ties, cooperation in ASEAN community-building and improving links between ASEAN and Japan. They are: (1) strengthening political-security cooperation in the region; (2) intensifying cooperation towards ASEAN community building; (3) enhancing ASEAN-Japan connectivity; (4) creating together a more disaster-resilient society; and (5) addressing together common regional and global challenges. With the adoption of the 2011 Joint Declaration for Enhancing ASEAN-Japan Strategic Partnership and the ASEAN-Japan Plan of Action, ASEAN and Japan are in the position to build a strategic partnership that can benefit not only ASEAN and Japan but also the wider international community in the longer term. CONSOLIDATING BILATERAL PARTNERSHIPS Since becoming prime minister in December 2012, Shinzo Abe has vigorously initiated two major policy innovations (Yachi 2014). First is the revision of the National Defence Program Guidelines (NDPG); while the second is the revision of the Official Development Assistance (ODA) guidelines. The interim report on the latter came out in June 2014, and stressed the strategic use of Japan’s ODA. This revision is apparently influenced by the Japan-US alliance. In fact, the Japan-US 2+2 joint statement in October 2013 cogently stated that both countries welcomed the strategic use of ODA by Japan, such as providing coastal patrol vessels and training for maritime safety to regional partners, and recognized the importance of such endeavours in promoting regional peace and stability. Based on these domestic reforms, Abe has vigorously pursued his strategic diplomacy

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toward ASEAN. Three initiatives are worth mentioning here. First, in January 2013, during his stay in Jakarta, Abe revealed five goals that Japan would strive to achieve in partnership with ASEAN countries: to protect and promote universal values such as freedom, democracy and basic human rights; to ensure that the seas are governed by laws and rules; to deepen economic integration by promoting trade, investment and flows of people and services; to strengthen cultural ties; and to expand youth exchanges. These so-called Abe Principles underscore a turning point for ASEAN-Japan ties, which had until then been defined by the Fukuda Doctrine laid out in 1977. Second is the 40th anniversary summit held in Tokyo in 2013. ASEAN’s welcoming of Japan as a political player in the region was manifested throughout that year. Due to Abe visiting all ten ASEAN countries that year, the second commemorative summit yielded two substantial agreements (Peng and Yang 2013). One noticeable outcome was that leaders of Japan and ASEAN agreed to a vision statement on ASEAN-Japan friendship and cooperation and a plan of action to implement the vision statement for the future development of the ASEAN-Japan strategic partnership. Third is Abe’s attendance at the Shangrila Dialogue in Singapore in May 2014. The speech, the first by a Japanese prime minister at the forum, came amid a recent spike in regional tensions after China deployed an oil-rig on Vietnam’s continental shelf. Abe expressed hope that a code of conduct would be put in place in the South China Sea soon, adding that Japan was studying the possibility of providing patrol ships to Vietnam. Abe is trying to bolster Japan’s defense capabilities as part of his plan to restructure the country’s security architecture to better address China’s growing assertiveness and North Korea’s missile and nuclear development programmes. At the same time, he was strengthening bilateral ties not just with Japan’s traditional ally the United States,

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Fortifying the Japan-ASEAN Strategic Partnership: Abe’s Quest for Viable Hedging Policies

but also with Southeast Asian countries and Australia in an effort to counterbalance the rise of China. Given the steady progress toward a new diplomacy, together with the initiation of rebalancing by the US, the time was ripe for Prime Minister Abe in his second term to embark on a campaign of strategic diplomacy. Focusing on the South China Sea problem, Abe attempts to hedge against China by carefully orchestrating both bilateral relations with the ASEAN countries and strategic ODA (Pajon 2013). The new, enhanced security cooperation promoted by Japan encompasses intensified defense diplomacy, larger security-oriented ODA and the launching of a brand-new military assistance programme. Let us examine two examples here. NEW DYNAMICS IN JAPAN-PHILIPPINE RELATIONS Induced by Abe’s initiatives, the Philippines has reinvigorated its security cooperation with Japan, aided by the fact that both share the common perception of a security threat from China. In January 2013, the foreign ministers of Japan and the Philippines expressed “mutual concern” over China’s increasing assertiveness in staking its territorial claims. President Benigno Aquino stated that a stronger Japan can challenge the “threatening” presence of China in the region. The transfer of new patrol boats, expected to be delivered within eighteen months, can be perceived as a shot in the arm for the Philippines. Although it would not significantly shift the power balance in the South China Sea it could nonetheless improve the Philippines’ maritime capabilities and advance Japan’s strategic position. A month later, Japanese and Philippine maritime officials met in Manila to discuss substantial cooperation in the South China Sea, including anti-piracy measures, fisheries and marine scientific research. The offer of patrol vessels, each costing one billion yen

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($11 million) vividly illustrates the closeness of both countries. It should be noted here that these joint initiatives to revitalize their security cooperation are in response to Beijing’s assertiveness in the East and South China Seas. China is challenging Japanese sovereignty over Senkaku/Diaoyu and has now de facto control over the Philippineclaimed Scarborough Shoal. The forging of the Japan-Philippines strategic partnership has a bearing on Manila’s effort to internationalize the South China Sea disputes. In fact, the Philippines has consistently sought wider support from its allies in dealing with China’s assertiveness. Manila has also brought territorial disputes with Beijing to an Arbitration Tribunal under the United Nations Convention on the Law of the Sea. Furthermore, unlike his predecessor Gloria Macapagal-Arroyo, President Aquino has appeared to be less receptive to Beijing’s commercial incentives and instead turned to Japan for economic and security assistance. As such, it was symbolic that Prime Minister Abe announced Japan’s intention to provide ten maritime vessels to the Philippines at the Japan-Philippines summit in July 2013 (Yomiuri Shimbun, 28 July 2013). EXTENSIVE STRATEGIC JAPAN-VIETNAM PARTNERSHIP Vietnam has followed suit. Visiting Hanoi in January 2013, Abe stressed that Japan would continue to play an active role in maintaining regional peace and prosperity in this region and that Vietnam was an important partner for Japan, with shared regional challenges and a mutually complementary economic relationship. The two leaders shared the recognition that both sides would further advance their “strategic partnership”, strengthen their cooperation, and work together to ensure peace and stability and achieve prosperity in the Asia-Pacific. The two leaders shared the perception that both sides would oppose changing the status quo by force in the South China Sea and that the

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rule of law, including related international laws, was essential. At the invitation of Vietnamese Foreign Minister Pham Binh Minh, Japanese Foreign Minister Fumio Kishida paid an official visit to Vietnam in July 2014 with the aim of deepening and widening the Vietnam– Japan strategic partnership. On 1 August, both ministers held the 6th meeting of the Vietnam–Japan Cooperation Committee in Hanoi with the participation of representatives from ministries and sectors of the two countries. At the meeting, Minh affirmed that Vietnam considers Japan one of its top strategic partners while Kishida emphasized Japan’s determination to boost the strategic partnership with Vietnam. In particular, Japan agreed to provide six used vessels and related equipment through a total of 500 million yen non-project grant aid for the enhancement of maritime law enforcement capabilities of Vietnam. The two ministers reached a consensus on effectively implementing agreements signed by high-level officials. Kishida also affirmed that Japan continues to consider Vietnam a leading partner in ODA, focusing on supporting growth, enhancing competitiveness, improving the market economy mechanism, training human resources and preventing natural disasters, including the signing of a diplomatic note of exchange on a non-refundable aid package worth $4.86 million to ensure maritime safety and a $3.43 million grant for a human resources development scholarship programme in 2014.

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In October 2014, furthermore, a JapanVietnam summit was held and both countries agreed to promote cooperation in a wide range of fields under the extensive strategic partnership. Prime Minister Dung welcomed Japan’s efforts to maintain peace and stability in the region, and Japan’s proactive contribution to peace. Abe also promised that in addition to the provision of six used vessels, Japan would discuss the provision of new patrol vessels. CONCLUSION With the announcement of the ASEANJapan strategic partnership in 2005, we saw the beginning of Japan’s dynamic diplomacy in close collaboration with ASEAN. Abe’s attempts symbolize a new phase in ASEANJapan relations, long centred on the Fukuda Doctrine. To make it viable, Japan needs to undertake two measures. First, the partnership critically requires Japan to improve the quality of trust by resolving historical issues. Second, Japan should pay due attention to ASEAN’s centrality and neutrality. In fact, ASEAN is still trying to preserve its strategic autonomy by engaging the important regional players without tying its hands to one ally. Nevertheless, Abe’s attempts, combining economic assistance and security cooperation, have been received positively by ASEAN as a whole. Depending upon China’s reaction, Japan and ASEAN could strengthen their strategic partnership to effectively cope with the changing security environment in East Asia.

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78.

PROSPECTS FOR KOREANSOUTHEAST ASIA RELATIONS

LEE JAEHYON

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he Republic of Korea is passing through three “years of Southeast Asia”, starting in 2008. A variety of anniversaries, summits and initiatives are scattered across these years. Korea and Thailand celebrated fifty years of diplomatic ties in 2008. The following year brought the sixtieth anniversary of Philippine-Korean relations and the twenty-fifth anniversary of ties between Brunei and Korea. Malaysia and Korea will in 2010 commemorate the establishment of diplomatic relations fifty years ago. In late 2008, the ASEAN countries and Korea signed a memorandum of understanding to establish in Seoul an ASEAN-Korea Centre to facilitate sociocultural and economic interaction between those countries and Korea. The centre began operation in early 2009. ASEAN and the Republic of Korea celebrated two decades as dialogue partners in 2009. To mark this milestone, an ASEANKorea Commemorative Summit was held on Jeju Island in June. The national leaders of

Southeast Asia and the Republic of Korea met again only four months later at the ASEAN+3 Summit in Thailand in October 2009. Korean president Lee Myung-Bak announced a “New Asia Initiative” (NAI) in March 2009, during a trip to Indonesia. Southeast Asia is one of the central foci of the NAI. It epitomized the way in which the events, anniversaries and initiatives of the 2008–10 period augur well for future relations between Southeast Asia and Korea. Although not widely appreciated among members of the general public in Korea and Southeast Asia, practical contacts and exchanges between the two surpass what is easily imaginable. Southeast Asian countries and the Republic of Korea have cooperated closely in the political-security field. Southeast Asian countries, individually and collectively through ASEAN, have supported the Republic of Korea’s position in efforts to address problems on the Korean peninsula. In return, Korea has not spared its support for ASEAN integration.

Reprinted in excerpted form from Lee Jaehyon, “Prospects for Korean-Southeast Asia Relations”, in Regional Outlook: Southeast Asia 2010–2011, edited by Michael Montesano and Lee Poh Onn (Singapore: Institute of Southeast Asian Studies, 2010), pp. 17–19, by kind permission of the Institute of Southeast Asian Studies.

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Since the beginning of ASEAN+3 regional cooperation, space for cooperation between Southeast Asia and Korea to shape the newly emerging regional order has grown. Both Southeast Asia and Korea share similar strategic interests in a region where two great powers, China and Japan, compete for hegemony. Solid cooperation among middle powers such as the Southeast Asian countries and Korea can mediate, veto and lead the great powers, shaping a regional order rooted in principles of equality. Furthermore, there is still ample room for mutual cooperation in the increasingly important area of nontraditional security or human security. In the economic field, cooperation between Southeast Asia and the Republic of Korea has been particularly substantial. Southeast Asian countries are, taken as a group, Korea’s third most important trading partner, following only China and the European Union. While that latter grouping includes twenty-seven countries, ASEAN is an association of but ten. When measured by the average trade volume of individual countries, Southeast Asia thus outpaces Europe as a trade partner for Korea. Also, the ASEAN region is the second-leading destination of Korean foreign direct investment (FDI), trailing only China. More than US$5 billion flow into Southeast Asia from Korea annually. In addition, five Southeast Asian countries are included in the ten leading recipients of Korean overseas development assistance (ODA), with Cambodia at the top of the list. Economic cooperation will expand still further as ASEAN and Korea signed a free trade agreement at the 2009 Commemorative Summit. Socio-cultural exchange between Southeast Asia and Korea is no less significant. More than four million visitors move between the two annually, although the flow from Korea to ASEAN is much greater than that in the opposite direction. About 30 per cent of migrant workers in Korea are from Southeast Asia, while the same percentage

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of migrants by marriage in Korea is from the region as well. More than 20,000 longterm and short-term student exchanges take place annually. While Korean Wave or Hallyu is widely recognized in the Southeast Asian region, the Southeast Asian phenomenon — a penetration of Southeast Asian culture into Korea — is slowly but steadily growing in Korea; it is reflected not least in the fields of food, migration and tourism. The recent approach and initiatives of the Korean government relating to Southeast Asia, such as the Commemorative Summit and the NAI, reflect the depth and breadth of ongoing exchanges and cooperation. They also mirror Seoul’s recognition of the multi-dimensional importance of Southeast Asia to Korea. At the same time, the Korean government, by fulfilling a role in the region befitting its objective capacity, wants to position itself as a reliable friend to and middle power in the region, one that exercises an appropriate leadership role. During 2009, the Korean government made clear its many ambitious ASEANrelated plans. At the Commemorative Summit, three pillars of future Korea-ASEAN cooperation — development cooperation, green growth, and cultural and peopleto-people exchange — were announced together with concrete programmes to support each area. The summit was followed by a more advanced plan of action, announced at the ASEAN+3 summit in October 2009. The Korean government is particularly keen on low-carbon and greengrowth initiatives. It is preparing cooperative endeavours with ASEAN in this field. While 2009 was a year that saw preparation for cooperation between Southeast Asia and Korea, the fruit of the announcement of the NAI, of the Commemorative Summit and of the establishment of the ASEAN-Korea Centre will be harvested in 2010 and beyond. In the economic field, Korea, jointly with ASEAN, will endeavour to expedite the building of an East Asian Free Trade Area

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Prospects for Korean-Southeast Asia Relations

(EAFTA). Already in 2009, the ASEAN+3 finance ministers agreed to set up working groups to study it. Korea and ASEAN have a crucial role to play in the EAFTA, mediating among and managing the big regional economies. The Korean government will also extend more ODA to Southeast Asia, as promised at the Commemorative Summit. It will increase scholarships to Southeast Asian students for study in Korea. The ASEAN-Korea Centre is expected to produce concrete results and yield the benefits of cooperation in socio-cultural domains. Moreover, important progress in building a strategic partnership between ASEAN and Korea, as suggested by the ASEAN-Korea Eminent Persons Group, is to be expected in 2010. While most of Korea’s 2009 initiatives to enhance ties to Southeast Asia were with ASEAN as an association, an increased focus on bilateral relations will mark coming years. President Lee’s visits to Vietnam and Cambodia in October 2009 heralded this focus.

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In the longer term, it is clear that the breadth of exchange and cooperation between Southeast Asia and Korea has grown considerably in recent decades. What is required now is a qualitative leap-frogging in the relationship. To this end, the Seoul government must adopt a new diplomatic approach to Southeast Asia. Its diplomacy has previously been preoccupied with shortterm strategic and economic interests. It has concentrated on relations with bigger and stronger nations. In the future, Korea must eye mutual benefits and non-economic gains, as in its relationship with Southeast Asia. Judging from what the Korean government accomplished under the auspices of the NAI in 2009, it seems that its resolute approach to Southeast Asia has a solid basis for continued progress. The Republic of Korea and Southeast Asia are facing a new phase in their relations. The question is how to nurture the budding ties of recent years into a strong and mutually beneficial relationship in the years ahead.

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79.

CHINA’S TWO SILK ROADS Implications for Southeast Asia

DAVID ARASE

INTRODUCTION In December 2014, Chinese Premier Li Keqiang attended a Shanghai Cooperation Organization meeting of prime ministers in Kazakhstan. He traveled on and met 16 other government heads at the third ChinaCentral and Eastern European Leaders’ Meeting in Serbia where he advertised a US$10 billion Chinese credit line for infrastructure development, a US$3 billion Chinese equity investment fund, and a deal to build a new railway link from Budapest through Belgrade and Skopje to the Greek port of Piraeus on the Mediterranean Sea. Li Keqiang then departed for Thailand where he signed a US$ 10.6 billion financing deal to build the Thai segment of a railway that will connect Bangkok to China, and he pledged US$3 billion at the Greater Mekong Subregion Economic Cooperation summit to finance infrastructure connectivity, Chinese machinery exports, and poverty reduction efforts.

The connection between these farflung destinations is China’s two Silk Road initiatives. Xi Jinping announced the Silk Road Economic Belt initiative during his tour of Central Asia in September 2013. This envisions efficient, high volume land connectivity between China and Europe — with links to all major sub-regions along the way. He announced the 21st Century Maritime Silk Road initiative during his visit to Indonesia in October 2013. This envisions Chinese participation in the development of major ports on the Eurasian rim between China and the Mediterranean Sea in order to promote maritime connectivity. China refers to this pair of initiatives as “One Belt, One Road” (yidai-yilu). Together, the two Silk Roads constitute a grand vision of Eurasian integration under China’s leadership. THE TWO SILK ROADS This vision is inspired by China’s rise to great power status and the transition back

Reprinted in excerpted form from David Arase, “China’s Two Silk Roads: Implications for Southeast Asia”, ISEAS Perspective 2015/2 (Singapore: Institute of Southeast Asian Studies, 2015), by kind permission of the Institute of Southeast Asian Studies.

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to structural bipolarity in the international system. China’s neighbours are becoming ever more dependent on it for money, finance, and trade, while the rest of the world looks to Beijing to drive global economic growth. Judging from his speeches at Chinese Communist Party central leadership meetings and at international summits, Chinese President Xi Jinping is implementing an ambitious geo-strategic vision of a China-centric order in Asia and the long-term integration of Eurasia to serve China’s growth and development needs. The two Silk Roads should be seen as a serious bid to realize a 21st Century “great rejuvenation of the Chinese nation” that will match the ancient glory of the Han and Tang Dynasties. It should be noted that this strategic agenda is a work in progress rather than a pre-conceived master plan. That is, as previous Chinese leaders have done, Xi Jinping is providing a grand vision or agenda for China. The Chinese Communist Party and government must work to realize this agenda to the best of their ability. So, for the rest of Xi Jinping’s years in power — expected to last until 2022 — we will hear about the two Silk Roads at every meeting that Xi Jinping or Li Keqiang attends in Europe, Africa, the Middle East, and Asia. Chinese-style Economic Integration The West’s approach to regional integration (e.g., NAFTA and the EU) is economic liberalization. It uses multilateral treaties to remove legal and institutional barriers to trade and investment, and to create legally binding rules, standards, and dispute resolution mechanisms to create a flat open space for private sector actors. In contrast, China’s approach to regional integration centres on economic facilitation. This means boosting trade and investment by improving connectivity between markets by, for example, building more efficient transportation linkages, providing more trade and invest-

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ment finance, and multiplying human exchange opportunities. China’s aim is to create transcontinental economic corridors that radiate across the Eurasian landmass (the Silk Road Economic Belt) and along the maritime rim of Eurasia (the 21st Century Maritime Silk Road). The result will be to channel economic flows to or from China. The infrastructure that constitutes the two Silk Roads is both hard and soft. Hard infrastructure is the steel, concrete, and machinery that goes into building railways, highways, ports, energy pipelines, industrial parks, border customs facilities, and special trade zones. Soft infrastructure refers to development finance institutions, international trade and investment agreements, multilateral cooperation forums, academic research, cultural exchange, tourism, etc., that constitute the social foundation for trade and investment flows. Benefits to China China has a number of reasons to invest in the two Silk Roads. It has become a net importer of energy, industrial commodities, and food so it needs to secure access to new sources. China can now export higher value-added goods and services, including electronic parts, consumer durables, heavy equipment, and construction and engineering services, but it still lacks access to export markets. Growing doubts about the US dollar motivate China to diversify the investment of its US$3.9 trillion in foreign exchange reserves, and to plan for the internationalization of the RMB. So investment of foreign exchange reserves in overseas economic projects and productive assets is worth considering, and economic cooperation allows the promotion of RMB trade invoicing, trade settlement, and project financing across Eurasia. The fact that the marginal productivity of domestic investment has fallen so low (in the macro-economy it now takes RMB5.0 of investment to produce RMB1.0 of GDP

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growth), may also make investment overseas more attractive. THE SILK ROADS AGENDA IN SOUTHEAST ASIA At the 2013 China-ASEAN summit, Premier Li Keqiang introduced China’s 2 + 7 Initiative. China’s two fundamental principles of engagement with ASEAN are mutual security and economic cooperation. Based on these principles, China proposes seven ideas: a new China- ASEAN treaty of good neighbourliness and cooperation; an annual China-ASEAN defense minister meeting; a goal of $1 trillion in trade by 2020; the Asian Infrastructure Investment Bank; more reliance on the RMB in central bank reserves, trade invoicing, and bank finance; maritime cooperation in the South China Sea; and cultural exchange. This framework strengthens Chinese influence over Southeast Asia. On his trip to Malaysia and Indonesia in October 2013, Xi Jinping announced the 21st Century Maritime Silk Road initiative. Though the nearest target is maritime Southeast Asia, the agenda of expanding port access to support maritime trade extends across the Indian Ocean to the Persian Gulf, East Africa, and through the Red Sea into the Mediterranean. Guangxi as a Maritime Silk Road Hub In geo-economic terms Guangxi has a 637 km land border with Vietnam and has three deep seaports on the South China Sea that can be a main terminus for the Maritime Silk Road. Together with Hainan and Guangdong provinces, Guangxi supports the Pan-Beibu Gulf Economic Cooperation Forum and it hosts the annual China-ASEAN Expo in Nanning. Guangxi’s main cooperation partners are Vietnam, Malaysia, Singapore, the Philippines, Indonesia and Brunei. Talk of a high-speed railway from Guangxi along the Vietnam coastline leading all the way to

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Singapore is eye-catching, but the Maritime Silk Road focus is overseas port development and operation by Chinese firms to manage maritime trade with Southeast Asia. Yunnan as a Silk Road Hub Landlocked Yunnan has always been a remote and backward border province, but the Silk Road Economic Belt agenda now turns it into China’s “strategic bridgehead” into Indochina. It borders on Vietnam, Laos, and Myanmar, and the province is a member of the Greater Mekong Subregion (GMS) Economic Cooperation Program. The GMS programme brings Yunnan into cooperation with Myanmar, Thailand, Vietnam, Laos, and Cambodia to manage a variety of Mekong River watershed issues. Kunming, the capital of Yunnan, is the hub of land transport corridors. An all-weather highway leads to Bangkok, and another leads to Hanoi. Planned electrified railways will link Kunming to Vientiane, Bangkok, Hanoi, Ho Chi Minh City, Kuala Lumpur, and Singapore. FINANCING THE GEOSTRATEGIC AGENDA China’s banking system and international financial flows remain under state control, and the national savings rate is around 40 percent of GDP. China runs a chronic current account surplus at around two percent of GDP. China’s foreign exchange reserves have grown to US$3.9 trillion, and there is a desire to invest it in more than just US Treasury bills. China’s Reform and Development Council is considering investing as much as $800 billion over the next ten years in the two Silk Roads. This seems doable. In 2014, Premier Li Keqiang committed at least US$94 billion in new government financing to specific projects and programmes at leadership meetings in Silk Road countries.1 In addition, in October 2014, 21 Asian countries signed

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China’s Two Silk Roads: Implications for Southeast Asia

an MOU establishing the US$100 billion Asian Infrastructure Investment Bank. And at the November 2014 APEC summit, President Xi announced a $40 billion Silk Road Fund. THE COMMUNITY OF COMMON DESTINY The difference in economic scale between China and its neighbors creates asymmetric interdependence that favours China. And military superiority gives China additional leverage over neighbours. Now that China feels its status as a great power, Beijing is laying out a vision of regional order that fits its unique set of values and interests. The Asian sub-regions surrounding China feel its gravitational pull most of all. China wants to dominate this near abroad not only to feel more secure, but also to fulfill the China Dream of a restored Sino-centric Asian order. Xi Jinping chose the term “Community of Common Destiny” (命运共同体 — mingyun gongtongti) during his October 2013 tour of ASEAN members to express a vision of Chinacentred regional community.2 At the Chinese Communist Party Central Leadership Work Forum on Diplomacy Toward the Periphery held on October 23–24, 2013, Xi explained that neighbours must link their economic future to China’s rise. This approach to regional integration is different from ASEAN-style regionalism in important respects. China promises prosperity in association with its own continuing growth and development. But the core-periphery structure of connectivity, regional decision-making, and membership status differs from the kind of multilateralism that ASEAN has entertained. Based on key principles enunciated by China, we might infer the following points. First, there is the practice of reciprocity in China’s bilateral diplomacy. In China’s view, if others respect China, this respect will be paid back. But if others do not respect China, China will find ways to punish them.

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Second, “the principled bottom line” (原则底线 yuanze dixian) corollary in China’s peaceful development means that China will fight before it sacrifices its “core interests.”3 These include Chinese Communist Party and government rule in China; the sovereignty and territorial integrity of the Chinese state; and the continuing stability and development of China’s economy.4 In other words, China reserves the right to use force if anyone denies Chinese territorial claims or other core interests. Finally, in the name of sovereignty, China will not turn to international tribunals to resolve sovereignty disputes. It will instead make up its own mind over the justice of competing claims, and how to resolve them. In explaining China’s concept of the international rule of law, Foreign Minister Wang Yi stated: “Such principles as respect for sovereignty and territorial integrity, peaceful settlement of international disputes and non-interference in the internal affairs of others, as enshrined in the UN Charter, are the foundation stones upon which modern international law and conduct of international relations are built.”5 This definition avoids key norms such as state accountability to law, respect for human rights, and the resort to independent adjudication of disputes.6 With respect to international judicial institutions, Wang Yi warned: “[they] should avoid overstepping their authority… Still less should they encroach on the rights and interests of other countries under the pretext of ‘the rule of law’ in total disregard of objectivity and fairness.” This begs the question, who will apply international law with objectivity and fairness when China’s interests conflict with those of its neighbours? The implication of reciprocity in Chinese bilateral diplomacy, the principled bottom line, and China’s insistence on the sovereign interpretation of rights beyond the reach of international jurisdiction is that smaller countries will face China’s power and

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authority without the protection of the full range of international legal norms and institutions when disputing China. They will need to accommodate themselves to the values and interests of China in order to avoid the loss of rights and privileges in the community of common destiny.

CONCLUSION Beijing’s Eurasian geo-strategic vision makes a great deal of sense for China if one assumes that its fast-paced economic growth and development will be maintained. China will gain increasing economic, military, and political leverage over neighbours, which it can use to preside over an Asian sphere of influence and command the resources of

David Arase

Eurasia and neighbouring Africa. China’s concept of regional community is simple and easy to manage — for China. It relies on Beijing’s ability to finance the construction of trans-Eurasian economic corridors to facilitate its trade and investment, and to incentivize economic cooperation with China. It plays on China’s geographical centrality, ability to export prodigious quantities of capital, prowess in engineering large-scale physical infrastructure projects, and capable diplomacy. A quick look at what China has done so far shows that this approach is extending China’s economic and strategic access both across and around the Eurasian land mass. The impact of this could be lasting, and will affect other ongoing efforts to build a new international order.

NOTES 1. “The Chinese Premier’s US$140 billion trips abroad,” China Development Gateway, December 26, 2014. http://en.chinagate.cn/2014-12/26/content_34416924.htm. 2. “China vows to build community of common destiny with ASEAN,” Xinhua, October 3, 2013, , accessed March 21, 2014. 3. “Xi Jinping Explains the Principled Bottom Line in China’s Peaceful Development,” Xinhua Online, January 30, 2013 (习近平阐明中国和平发展原则底线，新华网，2013年01月30日。http:// www.chinanews.com/gn/2013/01-31/4535125.shtml; Timothy Heath, “Diplomacy Work Forum: Xi Steps Up Efforts to Shape a China-Centered Regional Order,” China Brief, vol. 13, issue 22 (November 7, 2013). http://www.jamestown.org/single/?tx_ttnews[tt_news]=41594&no_cache=1#. VJGRfqbdVRA. 4. In 2009, speaking at the US-China Strategic and Economic Dialogue, State Councilor Dai Bingguo defined China’s core interests in the following way: 中国的核心利益第一是维护基本制度和国家安 全，其次是国家主权和领土完整，第三是经济社会的持续稳定发展. [首轮中美经济对话: 除上月球 外主要问题均已谈及, 中国新闻网, 2009年07月29日 09:29 (“First Round of the US-China Economic Dialogue: Other Important Issues Discussed Besides the Moon,” China News Online, July 29, 2009, 9:29am]. http://www.chinanews.com.cn/gn/news/2009/07-29/1794984.shtml). 5. “Full text of Chinese FM’s signed article on int’l rule of law,” Xinhua, October 24, 2014. http:// en.people.cn/n/2014/1024/c90883-8799769-2.html. 6. The UN’s definition of the international rule of law starts off this way: “a principle of governance in which all persons, institutions and entities, public and private, including the State itself, are accountable to laws that are publicly promulgated, equally enforced and independently adjudicated, and which are consistent with international human rights norms and standards….” (italics added). “What is the rule of law?” United Nations Rule of Law website. http://www.unrol.org/article.aspx?article_id=3.

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Section

VIII

SOUTHEAST ASIA: PERIPHERAL NO MORE

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INTRODUCTION

Ooi Kee Beng

W

hat we know as Southeast Asia today has largely been peripheral to world history, and it was only after the arrival of maritime colonialists from Europe that the region was gradually drawn into global politics. The region’s role remained subordinate, however, and its peoples functioned as subalterns to external powers. During the Second World War, the region was invaded by the Japanese and throughout the war, it remained a minor theatre for the Europeans and Americans, engaged as they were in bigger battles elsewhere. Independence came to most peoples in the region against the backdrop of the Cold War, a circumstance that strongly influenced the state-building dynamics and the developmental policies of the new governments. Founding ASEAN was essentially a strategic move by the early members to limit external interference in the region and to enhance dialogue and security cooperation among themselves. It was only in the 1990s, after the Cold War had ended, that the regional organization was able to expand to embrace all countries within the region. Cambodia was the last, joining officially only in April 1999. East Timor remains an exception: having gained independence only on 20 May 2002. The Asian financial crisis heightened the importance of the ASEAN Plus Three forum that had begun

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meeting just a year earlier, and ASEAN’s ties to Northeast Asia have become a top priority. Going forward, ASEAN countries have in hand tools such as: the ASEAN Charter that it adopted in November 2007; the ASEAN Vision 2020 programme for achieving an integrated community by 2015; and almost 50 years of successful collaboration. Maintaining ASEAN centrality amidst the influence from global powers remains the organization’s main concern. In this section, noted analysts deliberate key challenges ASEAN faces. Rizal Sukma argues that greater acceptance of regional institutions is necessary for ASEAN to grow. Allan Gyngell debates the need for a less complex and more efficient regional architecture in the Asia-Pacific region as a whole. Emil Salim, in turn, maintains that the building of trust among member countries is vital — ASEAN centrality depends on it. With regard to the economic performance of the region, the skills and knowledge gap will have to be narrowed. Suthiphand Chirathivat and Piti Srisangnam discuss what will be needed for further economic integration beyond 2015. Finally, Bilahari Kausikan provides an assessment of big power adjustments in relation to Southeast Asia at a time when economic nationalism among ASEAN members is growing, making regional consensus harder to achieve.

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80.

ASEAN BEYOND 2015 The Imperatives for Further Institutional Changes RIZAL SUKMA

1. INTRODUCTION The Association of Southeast Asian Nations (ASEAN), despite its origin as a loose and modest inter-governmental regional organisation aimed at preventing interstate conflicts through economic and sociocultural cooperation among its members, has now evolved into an association of sovereign states with a more ambitious agenda of regional integration. Indeed, when ASEAN took a formal decision to transform itself into an ASEAN Community in October 2003, member states declared, “an ASEAN Community shall be established comprising of three pillars, namely political and security cooperation, economic cooperation, and socio-cultural cooperation.”1 In 2005, ASEAN leaders agreed on the need for ASEAN to have a charter that would “facilitate community building towards an ASEAN Community and beyond.”2 Indeed, as it promises to transform ASEAN into a

more rules-based organisation rather than a loosely organised association, the ASEAN Charter serves as an important step towards, and a confirmation of ASEAN’s commitment to, the realisation of the ASEAN Community. Since its establishment in August 1967, criticisms of ASEAN have been primarily directed at deficiencies in the organisational structures and the slow pace of institutionalisation of the Association. This paper argues that while ASEAN had in the past undertaken measures to strengthen and expand its institutions, and ASEAN’s recent commitment to undertake greater institutionalisation efforts have been manifested in the adoption of the ASEAN Charter, the willingness of member states to rely on regional institutions is still circumscribed by member states’ attachment to the principle of sovereignty and overriding preference for maintaining unity amid regional diversity (as reflected in persistent inter-state problems and diverging interests).

Reprinted in excerpted form from Rizal Sukma, “ASEAN Beyond 2015: The Imperatives for Further Institutional Changes”, ERIA Discussion Paper 2014-01 (Jakarta: Economic Research Institute for ASEAN and East Asia, 2014), by kind permission of the Economic Research Institute for ASEAN and East Asia (ERIA).

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2. THE EVOLUTION OF ASEAN’S INSTITUTIONALISATION: THE PRIMACY OF “ASEAN WAY” AND THE IMPETUS FOR CHANGE 2.1 The First Three Decades (1967–1997) When it was established in August 1967, ASEAN did not set for itself an ambitious task of becoming a regional organisation equipped with complex institutional structures and machinery in order to function effectively and immediately. Indeed, the necessity to foster regional reconciliation constituted one key reason behind the formation of ASEAN. Regional reconciliation through regional cooperation required a set of agreed principles, norms and rules that would guide the conduct of foreign relations among participating countries. Through this approach, “each member refrains from criticizing the policies of others in public” and this, in turn, “allows the ASEAN members to subdue any bilateral tensions.” (Katsumata, 2003). Second, regional stability could only be assured if regional countries were able to concentrate on “putting its own house in order” by addressing issues of domestic importance such as economic development, internal stability, and regime security. Third, it was understood also that cooperation should take a non-legal form based on a mechanism of decisionmaking defined in terms of consultation and consensus. Fourth, differences were to be resolved through informal and collegial manner, not through the application of legal means of conflict resolution. Through the application of these principles, norms and rules — which later became known as the ASEAN Way — the Association represented an experiment at constructing a regional order that allowed member states to focus on, and devote their resources for, the more pressing task of nation-building.

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Institutions put in place were very modest indeed. It was a gathering of foreign ministers of member countries that played a central role in setting the direction for the grouping. That body, later known as ASEAN Ministerial Meeting (AMM), served as the central institution of the Association. To support the work of the AMM, the ASEAN Declaration of 1967 also established a Standing Committee charged with the task of carrying out the dayto-day work of the Association, a number of ad-hoc committees and Permanent Committees of specialists and officials on specific subjects, and a National Secretariat in each member state. In November 1971, the AMM created another institution called the Senior Official Meeting (SOM) consisting of senior Foreign Ministry officials, but still outside the formal structure of ASEAN. The first summit was not convened until 1976 in Bali, Indonesia, when ASEAN leaders recognised the need to strengthen and expand the Association’s machinery in order to meet new challenges. It issued two important documents concerning the strengthening of the ASEAN machinery, namely, the Declaration of ASEAN Concord (DAC) and the Agreement on the Establishment of the ASEAN Secretariat. The DAC stipulated that there would be meeting of heads of government as the supreme organ of ASEAN. The only significant change in the postBali Summit was the gradual transformation of the AEMM to become the highest decisionmaking body for economic matters. This provision restricted the AMM’s competence to the political, diplomatic, and socio-cultural arena (Alagappa, 1987). It also reflected an underlying shift towards greater emphasis on economic and functional cooperation (Chin, 1984). Moreover, the AEM, which was previously overshadowed by the AMM, has also begun to play a more active role in formulating new proposals for greater economic cooperation, culminating in the agreement, reached at

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ASEAN Beyond 2015: The Imperatives for Further Institutional Changes

the Singapore Summit in 1992, to establish an ASEAN Free Trade Area (AFTA). Initially, as mentioned earlier, ASEAN affairs were very much the business of foreign ministers. However, at the third ASEAN Summit in Manila in 1987, ASEAN leaders stressed the importance of functional cooperation and promoted new ideas of economic cooperation through ASEAN’s private sector. In 1992, at the fourth ASEAN Summit in Singapore, the leaders agreed that the meeting of heads of governments should be held every three years with yearly informal meetings in between (since 2001, the Summit became an annual event, and twice annually since 2009). ASEAN also moved to strengthen the role of the ASEAN Secretariat (ASEC). However, it is important to note that the institutionalisation of the Summit and the upgrading of the status of the Secretary General did not signify a fundamental change in the nature of ASEAN as a loose regional association. Despite the new status given to the Secretary-General, “the scope for independent action on the part of the ASEAN Secretary-General is highly circumscribed.” (Chin, 1994, p. 18). Greater efforts at institution-building, driven by greater recognition of new challenges and the expansion of agenda of economic cooperation, was undertaken in a way that reflected ASEAN’s predicament: how to strengthen regional institutions without necessarily transforming itself into a supranational organisation. 2.2 The Impetus for Change: ASEAN Institutionalisation since the 1997/1998 Financial Crisis Regionally, the financial crisis that swept the region by the end of 1997, and the attendant turmoil and dramatic political change in Indonesia, raised doubts about ASEAN’s credibility and its ability to cope with the crisis. For ASEAN, the crisis also reminded it that

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the region could not rely on extra-regional forces — especially the IMF-— to provide a solution to its own problem (Hernandez, 2002). At the same time, ASEAN was also losing its competitiveness to China that was rapidly becoming more powerful as an economic power. The focus of ASEAN’s activities since 1997, therefore, had been on the search for a new direction and new modus vivendi in order to stay relevance. For example, to give regional cooperation a more focused platform, ASEAN drew the ASEAN Vision 2020 (December 1997), the Hanoi Plan of Action (1998), and ASEAN’s leaders’ agreement to create an ASEAN Economic Community (November 2002). Indonesia’s chairmanship of ASEAN marked the beginning of significant change. Beginning with the proposal to transform ASEAN into a security community (ASC), which required ASEAN to introduce the previously taboo issues such as democracy and human rights as part of cooperative agenda, ASEAN at the 9th Summit in Bali agreed to embark upon an ASEAN Communitybuilding project. At the end, Indonesia did not succeed in getting the support for all its proposals. The most important follow-up in this regard has been the adoption of the ASEAN Charter in December 2007. 3. THE ASEAN CHARTER AND CHALLENGES TO INSTITUTIONALISATION: SOVEREIGNTY, REGIONAL UNITY AND NATIONAL AUTONOMY It is true that the ASEAN Charter, which came into force in December 2008, has provided ASEAN with new institutional frameworks. Indeed, it is important to recognise that the ASEAN Charter does introduce a number of institutional changes in order to “streamline ASEAN’s cumbersome and uncoordinated organisational structure...” (Koh, et al.,

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2007). The Charter gives more tasks and responsibilities to the ASEAN Secretariat and the ASEAN Secretary-General, especially with the mandate to facilitate and monitor the implementation of ASEAN’s commitments and agreements, and doubles the number of deputy secretary-general from two to four. For one, despite all the rhetoric and promises made by the ASEAN charter and official pronouncements, ASEAN essentially remains an inter-governmental form of regional cooperation. It is still a regional organisation where progress (or lack of it) in implementing cooperative agenda is still determined by the political will of member states rather than by an implementing agency of a supra-national body. The ASEAN Charter is a document that attracted a lot of the debate during its formulation and ratification process. Indeed, the process of drafting, negotiation, adoption, and ratification of the Charter took place within the constraining effects of three major factors that define and shape ASEAN’s approach to intra-mural relations: the inviolability of state sovereignty (and its attendant aversion to non-interference), the overriding concern over unity due to tremendous regional diversity, and the sanctity of national autonomy. 4. THE NEED FOR FURTHER CHANGE: PROPOSALS FOR POST-2015 ASEAN Institutional changes and promises introduced by the ASEAN Charter are still inadequate and, in some cases, might even complicate the process of ASEAN communitybuilding. First, as the EPG (Eminent Persons Group) has noted, the main problem with ASEAN is not lack of vision, but the lack of responsibility to implement.3 Second, ASEAN’s agreements are still non-binding in nature, due to the absence of a mechanism to enforce compliance and ASEAN’s aversion to sanction regimes.

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If ASEAN really wants to be able to deliver, then it needs to initiate further institutional changes. First, ASEAN needs to change its decisionmaking mode and procedures. As a general rule, ASEAN should not discard consensus as the fundamental principle of decisionmaking, but consensus should not be equated with unanimity. At the moment, while consultation (musyawarah) is retained as the primary process for decision-making, the Charter stipulates that “where consensus cannot be achieved, the ASEAN Summit may decide how a specific decision can be made.” Second, ASEAN needs to establish a mechanism to enforce compliance. This will require ASEAN to introduce two processes: (a) Establish an independent Assessment Task Force. ERIA has already done this regarding the implementation of the AEC through its studies on AEC Scorecard. (b) Adopt regime sanctions. While this is still a sensitive issue, ASEAN nevertheless needs to admit that rules, commitment and agreements without any punitive actions in case of breaches are meaningless.

One specific area that requires greater clarity and mandate is the monitoring role of the ASEAN Secretariat. Fourth, ASEAN needs to clarify the functions and role of existing ASEAN’s organs and institutions and the relationship among them. Fifth, ASEAN should change the formula for members’ financial contribution to the ASEAN Secretariat. An equal contribution determined by a member state capable of contributing the lowest sum is no longer adequate. Sixth, ASEAN should empower the ASEC to become a real central mechanism and possess a truly regional perspective that helps the realisation of ASEAN’s collective objectives.

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ASEAN Beyond 2015: The Imperatives for Further Institutional Changes

Seventh, ASEAN needs to introduce, clarify and institutionalise the mechanism for engagement with CSOs. Eight, ASEAN has to improve and strengthen the dispute-settlement mechanism. 5. CONCLUSION ASEAN had been at the crossroads since 1998 and, in 2003, it decided to choose the path towards greater regional integration

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by becoming an ASEAN Community based on three pillars. ASEAN cannot stand at the crossroads for too long if it does not want to be rolled over by the passing giant forces — China, US, Japan, and India — locked in a complex set of competitive and cooperative relationship. The changing economic and political-security environment in East Asia, and the resulting challenges for ASEAN, heighten the need for ASEAN to integrate deeper and function effectively.

NOTES 1. The Declaration of ASEAN Concord II, Bali, 7 October 2003. 2. Kuala Lumpur Declaration on the Establishment of the ASEAN Charter, Kuala Lumpur, 12 December 2005. 3. ASEAN, Report of the EPG on the ASEAN Charter, December 2006, p. 21. Available at http://www. aseansec.org/19247.pdf.

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81.

DESIGN FAULTS The Asia Pacific’s Regional Architecture

ALLAN GYNGELL

WHAT IS THE PROBLEM? The Asia Pacific region has too many regional organisations, yet they still cannot do all the things we require of them. This matters because the large adjustments which the world will have to make to the rising power of China and India will be managed more easily and effectively if their neighbours can help shape the emerging landscape. Instead of focusing on what we’ve got, we should look at what we need. WHAT SHOULD BE DONE? Four elements are necessary in any effective regional architecture. We must be able to facilitate trade and investment; help build an East Asian community; promote regional security; and permit heads of government to discuss common problems. The complication is that a different group of countries and a different definition of the region is best suited to each case.

The best solution would be to leave APEC with its economic role but decouple the leaders’ meeting from it; preserve the ASEAN Plus 3 forum; develop a new security body, perhaps around the institutionalisation of the informal Shangri-la Dialogue in Singapore or widening the membership and role of the Six Party Talks on North Korea; and establish a new Heads of Government meeting independent of both APEC and ASEAN. This is a difficult but by no means impossible task. The APEC leaders’ meeting in Sydney is a good place for the conversation to begin. A CROWDED FIELD When the leaders from 21 Asia Pacific economies meet in Sydney for the APEC leaders’ meeting in September, they will be elbowing for attention and relevance in an overcrowded field of regional organisations. Our problem is that there are too many

Reprinted in excerpted form from Allan Gyngell, “Design Faults: The Asia Pacific’s Regional Architecture”, Lowy Institute Policy Brief, July 2007, (Sydney: Lowy Institute for International Policy, 2007), by kind permission of the Lowy Institute for International Policy.

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Design Faults: The Asia Pacific’s Regional Architecture

regional forums, yet they still cannot do all the things we need. This proliferation of regional institutions in Asia and the Pacific is a new development. Until the early 1990s Asian regionalism was vestigial. Even the oldest of the sub-regional organisations, the Association of Southeast Asian Nations (ASEAN), covered only half its potential membership. All that began to change once the rigid divisions of the Cold War were removed. APEC was established in 1989, its first leaders’ meeting was held in 1993 and ASEAN expanded between 1995 and 1999 to include Vietnam, Cambodia, Laos and Myanmar. But over the past decade or so the institutional landscape of the Asia Pacific has become crowded with new nameplates — ASEAN Plus 3, the East Asia Summit, the Shanghai Cooperation Organisation, the ASEAN Regional Forum. The range and form of regional institutions that now exist in Asia and the Pacific (its ‘architecture’ as the experts term it) are certainly not the best that can be envisaged and it seems unlikely that they will all survive. Why have so many new institutions emerged? One reason is that the geopolitical stakes in Asia are higher than they have been for several centuries. With the growth of China and India, global economic and strategic power is swinging back towards Asia for the first time since the industrial revolution in Europe. As a result, the way in which the region organises itself, and the number and identity of the countries which are involved in its institutions, matter more intensely, and matter to a wider number of governments. WHAT WE SHOULD DO The question facing the region is whether the present institutions can serve the needs or whether new approaches are needed. In considering this question it is important to bear in mind the resource implications of

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regional institution-building. Any architecture, however elegant the design, needs craftsmen and labourers to build and maintain it. We are reaching a point where none but the very largest regional governments has the capacity to service effectively all the institutions now out there. And the time and competing demands on leaders and the interests of efficiency means that it is highly unlikely that a gathering of Heads of Government can be convened more than once a year. So the aim should be an architecture which is as simple as possible. A practical and effective outcome which maintains the best of the organisations that now exist would be, first, to maintain APEC with its current membership but with the Ministerial meeting, rather than the leaders’ meeting, at its apex, (and a role for the increasingly important Finance Ministers meeting). This would not be difficult and would not damage APEC itself given that the leaders’ meeting was deliberately structured from the beginning as an informal addition to the formal structure of the organisation. It operated successfully before the leaders’ meetings were established and can do so afterwards. Second, ASEAN Plus 3 should be preserved with its present membership to serve the task of building an East Asian community. This would involve no changes. Third, the difficult but by no means impossible task should be begun of developing a new regional security body with a membership that incorporates the key governments that will shape the security environment of East and Southeast Asia (China, Japan, Korea, the United States, Russia, the ASEAN states, Australia, New Zealand and India). The outline of such a forum can be imagined in something like the institutionalisation of the current informal Shangri-la Dialogue of the International Institute of Strategic Studies, based in Singapore, which brings together many of the region’s defence ministers and military

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leaders. An alternative would be to expand outward from the current six party talks on North Korea to build a broader Asian security grouping. Finally, regional leaders need to establish a new Heads of Government meeting. The most useful membership would be the current ASEAN members of APEC (Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand, Vietnam) plus the other members of the East Asia Summit (China, Japan, Korea, India, Australia and New Zealand) together with the region’s vital security and economic partners, the United States and Canada. Because this would be a stand-alone institution (like the G8), with a mandate to review developments in the Asian region broadly, it should not be tied formally to either APEC or ASEAN. Like the APEC leaders’ meeting it would operate informally. Its role would be to discuss the central Issues affecting the security and prosperity of the region, including those that might arise in the other forums. It would

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not need its own secretariat but members could receive reports from their ministerial representatives in the other institutions. Chairing duties would rotate amongst the members. Political scientists write of a phenomenon called ‘institutional stickiness’ — in layman’s terms, the tendency of organisations to resist doing themselves out of a job. When that is mixed with national interests, political pride and diplomatic caution, it makes change in international organisations hard to secure. The proposals outlined in this Policy Brief are neither radical nor particularly difficult to implement but they cannot get far without political leadership. The APEC leaders’, ministers and senior officials meetings in Sydney will have many other things to do. But if we are to build an institutional architecture for the region that will shelter us during the unpredictable weather ahead, it would be helpful if, in the margins of their discussions, some of them were pondering new blueprints.

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82.

ASEAN’S ECONOMIC COOPERATION Original Vision, Current Practice and Future Challenges EMIL SALIM

INDONESIA IN ASEAN: PAST After Indonesia’s independence in 1945, Sukarno, the country’s first President, faced the challenge of building a nation that had been occupied for 350 years by the Dutch and for 3.5 years by the Japanese. From the early to mid-1960s, Indonesia had experienced great domestic and foreign political dynamics. Sukarno secured his domestic authority with the support of the military, the communist party and the parliament, to which he had appointed half the members. At that time, he did not want to be associated with the West since he saw many of them as former colonials. His basic obsession was to build the world anew, in which the West needed to be balanced by new emerging nations. However, with the downfall of Sukarno due to the alleged coup d’état by the Communist Party in Indonesia, things changed dramatically under Suharto who succeeded as president in 1967. Suharto had to face not only domestic political and economic turmoil inherited from the previous government, but also growing

concerns about communist influence in the Southeast Asian region. Domestically, Indonesia inherited a massive foreign debt from the last government and needed money to pay it off. In handling the domestic economic burden, Suharto followed a more pragmatic approach and was willing to accept help from countries in the West to settle Indonesia’s debt. Externally, Indonesia faced the growing threat of communism after Vietnam won the war against the United States. Communism had become a common threat to the countries in Southeast Asia. As with Sukarno in his earlier years, along with the spirit of the Constitution of Indonesia, Suharto developed a “nonalignment” or “free and active” foreign policy which emphasized neutrality (“free”) and the need to proactively engage in a continuous effort to keep peace in the region (“active”). Based on the need to establish a zone of peace and cooperation, Indonesia signed the ASEAN declaration with Malaysia, the Philippines, Singapore and Thailand in 1967, showing the group’s commitment

Printed in abridged format from a presentation given at the High Level Conference on the Evolving Nature of ASEAN’s Economic Cooperation, organised by the Institute of Southeast Asian Studies, Singapore, 9 October 2014. An abridged version of this speech will appear in a book to be jointly published by the Institute of Southeast Asian Studies and the Asian Development Bank. Used with the kind permission of the Institute of Southeast Asian Studies.

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to regional cooperation against a common enemy: the communists. In 1967, ASEAN was merely a “declaration”, which was non-binding. ASEAN’s objectives were to accelerate economic growth, social progress and cultural development; to promote peace and stability; to collaborate in agriculture and industry and expand trade. However, the key concerns, namely political stability and security in the region, were not explicitly mentioned in the declaration. As a result, ASEAN was often seen as a “loose” organization and there was little tangible progress in early years. ASEAN members were fully aware that they formed this institution more for political objectives, stability and security. It took some time for ASEAN to actually consolidate their cooperation and cohesiveness. In its earlier years, ASEAN’s ministers and officials had developed good working relationships to build trust officially through regular and frequent meetings. Unofficially, ASEAN leaders played golf or had karaoke sessions together. It is usually in these relaxed atmospheres that they exchanged ideas and informed each other of their domestic policies that fall into the ASEAN framework. Overtime, this personal and relaxed ambience of meetings was helpful in building trust among ASEAN leaders. In every major situation, ASEAN sought consensus, avoided meddling in other members’ sovereignty, and in the long run this cycle of trust built stronger bonds among the leaders of member countries. INDONESIA IN ASEAN: PRESENT After almost 50 years since ASEAN was born, ASEAN has experienced a major transformation from a “loose” to a stronger organization, in terms of cooperation on economic, political-security and sociocultural matters. Indonesia looks upon Southeast Asia and Asia in the mode of a “dynamic equilibrium”

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in which ASEAN members would like political relations in the region to be integrative, cooperative and peaceful. In the past, Indonesia had played an important and active role in ASEAN as a manager of crises, a mediator of disputes and a creator of ideas, contributing to the transformation of the organization. Moreover, Indonesia has created and proposed innovative ideas that have shaped ASEAN’s norms and institutions since its establishment. In a meeting in Bali in 2003, Singapore along with Indonesia proposed the formation of the ASEAN Economic Community to strengthen economic cooperation. At that time, the Asian Financial Crisis had considerable negative impacts on ASEAN economies and there was an urgent need for regional integration to accelerate recovery. Meanwhile, Indonesia experienced a significant political change from an authoritarian to democratic regime. The movement is widely known as “Reformasi” or reformation. Indonesia tried to mirror this domestic spirit of reformation and shared its experiences with ASEAN by proposing that the group should not have emphasized only economics. Instead, it should have also considered values such as good governance, human rights, democracy and sustainable development. Before the meeting in Bali, the Indonesian government created a draft policy document entitled “Towards an ASEAN Security Community”. However, in 2003, there was some resistance towards the notion that political and security issues, such as human rights and democracy, should be included in the Charter because of differences between the varied political systems in ASEAN (such as the tension between democratic and authoritarian regimes). As a result, political and security inclusiveness were delayed later in a meeting in 2007, which was promulgated in the ASEAN Charter. The Charter marked a great transformation of ASEAN from

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ASEAN’s Economic Cooperation: Original Vision, Current Practice and Future Challenges

merely a “loose organization” to a legal entity with a more formalized structure of regional governance. It also reaffirmed ASEAN’s main principles of non-interference and consensus-based decision-making. In recent years, there have been major developments between ASEAN and nonASEAN countries, as well as within ASEAN: First, there is stronger competition for resources to meet the domestic demand of ASEAN members and their neighboring countries. Initially, ASEAN was founded to curb ideological influences in the region. However, now, ASEAN and countries around the East Asian region have to compete for resources. This has changed power politics and threatened security and peace in the region. China’s claims over some areas are largely due to its efforts to secure resources for energy and food. Second, the rise of a stronger and assertive China has raised the concerns of not only its neighboring countries, but also major advanced countries, leading to the formation of some “new blocs”; China became friends with Cambodia. The U.S., which has increased its military presence in the region through the so-called “Pivot to Asia” from the Middle East, has approached the Philippines, Vietnam and Myanmar. Meanwhile, Japan has made some effort to strengthen its relations with Vietnam and the Philippines because these three countries have territorial dispute with China over the South China Sea. Third, ASEAN is currently seen by some countries as overemphasizing economic cooperation, while neglecting its politicalsecurity and socio-cultural aspects. This is due to the fact that economic development is easier to measure whereas political-security and socio-cultural issues can only be assessed when negative situations emerge. In 2012, during the ASEAN Summit in Cambodia, ASEAN could not reach a consensus, showing that socio-political aspects fall short at the expense of economic development in ASEAN. Regional order is a necessary

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condition for the success of economic integration. Fourth, ASEAN members are currently experiencing a “trust deficit” in which member countries have a lack of trust in other member countries. Less emphasis on the development of the socio-cultural aspect might have contributed to this lack of trust. This trust deficit has hindered the unity of ASEAN and weakened ASEAN’s bargaining power in dealing with major countries such as China, the U.S. and Japan. Fifth, as global demand has weakened recently due to growth slowdowns in advanced countries such as the U.S. and E.U., ASEAN has become more relevant as a new source of global growth. Intra-trade has increased significantly among member countries and between ASEAN and other countries in East Asia. On the other hand, inter-trade between ASEAN and developed countries has either stagnated or declined. However, as the political relations between advanced countries deteriorate and exert major impacts on their trade relations, advanced countries now seek stronger trade and financial cooperation with ASEAN. As in the past, in the current context, some ASEAN countries have hinted for more of Indonesia’s leadership in closed meetings. However, as in many occasions everywhere, this “leadership” has also led to resistance from members. As a consequence, this resistance within the organization has hindered Indonesia’s ideas and proposals, most notably those that are considered to undermine sovereignty and regime security, such as the establishment of a human rights body, a peacekeeping force, a changed decision-making system and formalized conflict resolution mechanisms (Roberts, 2012). INDONESIA IN ASEAN: FUTURE In 1976, the leaders of the founding ASEAN members signed the “Treaty of Amity and

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Cooperation”, indicating that maintaining peace and strengthening cooperation were key objectives of ASEAN. Since then, many non-ASEAN countries have signed the treaty. Furthermore, in 1995, the ASEAN Heads of State and Government reaffirmed that “cooperative peace and shared prosperity shall be the fundamental goals of ASEAN”. Note that the two key words were peace and prosperity. Maintaining peace within the region over a long period of time is one of ASEAN’s major achievements. The rapid rise of some Asian countries in terms of military and economic size may undermine Southeast Asia’s geopolitics and ASEAN’s integration. As stated before, the meeting in Cambodia in 2012 was the first time in its 45-year history that ASEAN could not reach consensus, underscoring deep divisions within ASEAN amid conflicting territorial claims in the resource-rich South China Sea. However, since Japan, China and South Korea cannot easily reach a consensus, they still need ASEAN. These three countries remain ASEAN’s largest export market with more than 26% of the world’s total export. This indicates the significance of the ASEAN Plus Three’s trade relationship. ASEAN countries need to work harder to build trust for stronger cohesiveness. The common enemy is now the trust issue among member countries. ASEAN countries need to work on their differences, particularly on political-security and socio-cultural issues. In the future, ASEAN member countries are facing rising demographic pressures and the increasing probability of being caught in the middle-income trap. To prevent being caught in a middle-income trap, it is of utmost importance that ASEAN countries continue to raise the productivity and capability of their people. All this is to be accomplished by keeping each ASEAN member country on the triple track of sustainable development meeting

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economic, social and environmental challenges. New technologies and innovative means of development need to take place, changing the customary “resource exploitation path of conventional development” into “resource enrichment value added path of sustainable development”. This requires the growing role of science, technology, engineering, and mathematics into efforts that raise value added by the enrichment of resources, through the increase of the total factor productivity of each ASEAN nation. On this path of productivity-led sustainable development, ASEAN will face new challenges, namely the skills and knowledge gap. ASEAN needs a new economic arrangement that can open ways to strengthen economic cooperation to face those challenges in such a manner whereby no member country feels trapped as an object of development for other member countries. The road of social cooperation to raise productivity, as well as to deal with social inequity and poverty eradication, emphasizes the need for enhancing productivityled development along the path of social development. In the 1960s, ASEAN showed its resiliency in weathering the common threat of communism. We shall see again that it still has its resiliency in facing current political dynamics in the region. This is because at the end each ASEAN member will realize that amid current political dynamics in the region, without ASEAN cooperation, this region can easily suffer chaos and instability like in the Balkans or Middle East. With the economic, political-security and socio-cultural pillars supporting its existence, ASEAN’s existence has provided a peace dividend for economic development in the region. Up to now, the fact is that ASEAN countries have enjoyed growth, security and prosperity due to ASEAN’s principles of cooperation and non-interference.

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83.

THE 2030 ARCHITECTURE OF ASSOCIATION OF SOUTHEAST ASIAN NATIONS FREE TRADE AGREEMENTS

SUTHIPHAND CHIRATHIVAT and PITI SRISANGNAM

T

he economic world in 2030 will be unrecognizable from what it is today as emerging countries, including the Association of Southeast Asian Nations (ASEAN) region as a whole, grow faster than advanced economies as a result of the global financial crisis. After recovering from the Asian financial crisis of 1997–1998, ASEAN started to feel the need to move beyond the scope of AFTA to attract more capital inflows, especially from East Asia. From that point onwards, the ASEAN Economic Community blueprint was proposed and finally signed, with the aim of creating a single market and production base by promoting the free flow of goods, services, capital, and skilled labor. To promote a free flow of goods in order to position itself as a production base for both ASEAN and ASEAN dialogue partners and investors, ASEAN switched from a collection of agreements related to trade in goods to a comprehensive agreement — the ASEAN Trade in Goods Agreement (ATIGA).

With ATIGA, ASEAN set the time frame to eliminate both tariff barriers (especially for products on the sensitive and highly sensitive list) and NTBs by 2015. For the movement of capital, ASEAN adopted the elimination of investment restrictions and impediments under the ASEAN Comprehensive Investment Agreement (ACIA). The AEC also agreed to ease the free flow of professional employees, but only seven mutual recognition agreements (MRAs) were finally signed (for engineering services, architectural services, nursing services, medical practitioners, dental practitioners, surveying qualifications, and accountancy services). The ability of ASEAN to position itself as a core of all ASEAN+ economic integration depends mainly on the success of members in narrowing their differences, both on economic and noneconomic issues. One proposal starts with an East Asian FTA (known as EAFTA) among ASEAN+38

Reprinted in excerpted form from Suthiphand Chirathivat and Piti Srisangnam, “The 2030 Architecture of Association of Southeast Asian Nations Free Trade Agreements”, ADBI Working Paper No. 419 (Tokyo: Asian Development Bank Institute, 2013), by kind permission of the Asian Development Bank Institute.

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countries and then extending it gradually to ASEAN+6 countries and others; another idea proposes including all ASEAN+6 countries in a region-wide FTA or comprehensive economic partnership in East Asia (known as CEPEA) from the start. Overall, the two processes (EAFTA and CEPEA) have created real questions in East Asia, if not great confusion, about the way people look at the region, and have complicated the regional institutional landscape. However, formation of a region-wide trading arrangement will better serve the region only if it institutes greater discipline than the web of bilateral trading arrangements does. The main question that remains is how ASEAN will benefit from such an expanding FTA hub. The issue of ASEAN centrality is becoming crucial for ASEAN in terms of its hub status. An increasing number of both ASEAN member country bilateral trading agreements and ASEAN+1 FTAs have led to the so-called “Asian noodle bowl” effect. In the longer term, the Asian noodle bowl effect and the need for an ASEAN common external tariff scheme may subside when the most-favoured-nation (MFN) tariff rate between ASEAN members reduces under the WTO tariff reduction scheme. By 2015, we expect that the ASEAN single-window systems will be enabled and accessible. It is expected that the more complex issues — such as customs, trade procedures, standards and conformance, and sanitary and phytosanitary issues — will be solved prior to 2015. However, in the longer term, the three major mechanisms ASEAN needs to conclude to help realize the single market are the rules of origin, MRAs, and harmonization of standards and technical regulations. Thus far, ASEAN has concluded only two sector MRAs — the electrical and electronics sector, and the cosmetics sector (ASEAN

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Secretariat 2011). Therefore, more MRAs — especially ones that set the standard for intraASEAN top-traded products — need to be set by 2015. ASEAN connectivity is another development area that helps towards the realization of AEC 2015. Since WTO agreements bind all members to decreasing the barriers in trade in goods, ASEAN FTAs need to focus more on the liberalization of trade in services and investment. To realize a real free flow of services by 2015, ASEAN may need to adopt a new approach to liberalizing trade of services (Soesastro 2007; Dee 2011). To realize this goal by 2015, the rules of origin, self-certificate system, and trade facilitations need to be more user-friendly and accessible, with lower transaction costs. Moreover, ASEAN+1 FTAs need to be negotiated consistent with the ASEAN Comprehensive Investment Agreement (ACIA). According to the study by Bank Indonesia, ASEAN may not yet be ready to form an economic and monetary union with a common currency (Simorangkir 2011). ASEAN would be ill-advised to completely follow the EU down the path of monetary integration without significantly harmonized fiscal policies. ASEAN also needs an EU-type growth and stability pact with an institution to monitor, facilitate, govern, or even penalize members who cannot maintain the pact. The Bali Concord III is just the beginning of good governance in macroeconomic policy coordination. As the plan is yet to be negotiated, ASEAN has to wait to realize this objective. For the other areas of economic integration among ASEAN members, there are some critical issues to be dealt with in realizing AEC 2015. Nontariff measures, standards and conformance, and service sectors are the elements of the AEC Blueprint that need to be liberalized as a priority (Narjoko, Intal, and Hin 2011).

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The 2030 Architecture of Association of Southeast Asian Nations Free Trade Agreements

The rationale behind the current global financial crisis gives countries in the region the impetus to broaden economic integration. Meanwhile, recognizing the proliferation of FTAs in East Asia, consolidation and streamlining of these FTAs should be a good thing, and will have to be undertaken at some point in order to get maximum benefits — in principle, the bigger the FTA grouping is, the greater the economic gains would be. For instance, the RCEP is a new ASEANled FTA linking Southeast Asia with all of the “+6” countries — Australia, the PRC, India, Japan, the Republic of Korea, and New Zealand. In its design, ASEAN leaders have planned to adopt an open accession scheme that will allow other countries to join as new members provided they can comply with the grouping’s rules and framework. Meanwhile, the RCEP is supposed to have a wider framework that includes trade in goods, trade in services, investment, trade and business facilitation, intellectual property rights, economic and technical cooperation, competition policy, and dispute settlement. Given the wide diversity among ASEAN countries — particularly the developing members such as Cambodia, the Lao PDR, Myanmar, and Viet Nam — the RCEP process would fall into a lowest-commondenominator trap of trying to accommodate all countries with a fare minimum level of liberalization, and ASEAN must ensure this does not happen. In the end, ASEAN needs to ensure that the RCEP becomes a key pillar in Asia’s broader regional economic architecture. Nevertheless, the main exercise for the RCEP, at least initially, remains the consolidation of all ASEAN+1 FTAs and bilateral trade agreements. ASEAN countries are expected to streamline their existing FTAs and gain greater access to other non-ASEAN countries, whether this is the ASEAN+3 countries — the PRC, Japan, and the Republic of Korea — or the ASEAN+6

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countries — Australia, India, and New Zealand. The development of the Trans-Pacific Partnership (TPP) in 2006, an effort to tie economies along the Pacific into a free trade area, also poses a major concern for ASEAN, particularly regarding ASEAN’s centrality and its driving force in the RCEP. The TPP was advanced as an alternative to the Asia–Pacific trade and investment liberalization in view of the failure of the “soft” approach of region building by APEC. The TPP had included Brunei Darussalam, Chile, New Zealand, and Singapore. In the latest development, just before the APEC Leaders Meeting in Hawaii in November 2011, the number expanded to 12, as first Japan, then Canada, and Mexico all pledged to join the TPP. Suddenly, the TPP could develop into one of the largest free trade zones covering Asia and the Pacific. Initially, the TPP was seen as a low-key effort with little economic impact on the US. The TPP aims for a high level of trade liberalization — members are required to remove all tariff barriers on all products without exception within 10 years. Given the development of ASEAN FTAs into different paths at different speeds and frameworks, it is interesting to look at a likely landscape that might potentially be the result of future development. Path 1: Achievement of the AEC is crucial to ASEAN’s FTAs as a whole, as this will lessen the complexity of ASEAN-related trading arrangements and could help strengthen ASEAN’s ability to play the Asian integration centrality role. In the long run, up to 2030, completion of the AEC is feasible with regard to free flows of goods, services, and investment, although the AEC might still fall short of its targets beyond 2015 in the areas of rules of origin, non-tariff measures, implementation of goods and services beyond mutual recognition (MRA), and others.

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Path 2: Although ASEAN+1 FTAs have become an important feature of the way people look at ASEAN as an important hub in Asia, this picture might change in the future, particularly in the longer run. However, trade in services might generate stronger interest from ASEAN+1 partners as the issue is of major interest for both sides and they will try to solve impediments related to trade and investment so that a clear picture of service liberalization in the long run might result from negotiations. Path 3: Country participation in bilateral FTAs might slow down somewhat over time, although it is still widespread and transcends regional boundaries. The proliferation of country bilateral FTAs is not being matched by an expansion in trade flows that receive preferential treatment. However, country bilateral FTAs might still be enjoyed in the areas of trade in services and investment, and such targets could be developed in parallel with ASEAN+1 FTAs. Path 4: Creation of the RCEP is an important feature of ASEAN FTAs in the long-term, consistent with completion of the AEC, with the AEC facilitating deeper regional integration and the RCEP aiding broader regional integration. By 2030, the issue of the RCEP should be strengthened, given the fact that ASEAN’s centrality will play an increasingly important role in managing this open regionalism. The focus of policymakers should be slowly moving away from various ASEAN+1 FTAs and EAFTA, to CEPEA or even broader regional trading arrangements. It is important to note that the RCEP will serve to consolidate ASEAN’s FTAs, particularly reducing the complications related to multiple rules of origin, generated by different paths of ASEAN FTAs.

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It is important for ASEAN to put into perspective the 2030 architecture of ASEAN FTAs, thus including the importance of Path 1 in relation to other paths, and in particular the potential of Path 4 in helping to consolidate ASEAN FTAs. To find its own version of deeper regional integration, ASEAN realizes the need to move toward the AEC by 2015. It would provide a single market and production base, and keep ASEAN competitive and globally oriented. The RCEP has to be implemented sooner rather than later as it directly corresponds with development of regional production networks in which ASEAN and major economies have become increasingly linked. Accordingly, for ASEAN, the more members the grouping has, the more benefits the members will gain. Ultimately, the RCEP could favor economic growth and industrial development, making country members both competitive and cooperative. A fundamental transformation is finally underway for the future of ASEAN’s deepening and widening economic integration. With the advent of the RCEP, the broadening process is also becoming more crucial to ensure ASEAN centrality. While all members will be busy implementing such an agreement, the scope and extent of the agreement will be in direct competition with bilateral and regional trading arrangements of each ASEAN member and ASEAN+1 agreement. However, with a proper policy framework, the RCEP will emerge more strongly Asia-wide in the longer run as the agreement is supposed to be more practical and workable, with an aim to reduce the noodle bowl effect to increase the chance of success by 2030.

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84.

ASEAN AND MAJOR POWER TRANSITIONS IN EAST ASIA

BILAHARI KAUSIKAN

T

he US and China are groping towards a new equilibrium in their relationship with each other and with other countries in East Asia. Since the Second World War, East Asia has been very largely an American creation because it was the US that created conditions that facilitated the growth that is the most salient common characteristic of an otherwise very diverse region. China’s rapid growth and reemergence as a major regional and potentially global actor would not have been possible without the Sino-American rapprochement of the early 1970s and 1980s. But the US and China are now both freed of the constraints of the de facto anti-Soviet alliance of that period and China’s transformation is transforming East Asia. There is now a consensus across the region that while the US is still and will remain a necessary condition for the stability that is vital for continued growth, it is no longer a sufficient condition and needs to be supplemented — supplemented not supplanted — by some new architecture.

This is a consensus shared by US friends and allies and implicitly by China as well, at least for the present. No one really knows what this new architecture will look like, but US-China relations will certainly be its central pillar. Neither does anyone know how long Washington and Beijing will take to reach a new accommodation with each other, although this will probably be a work of decades and not just a few years. In the meantime, we will all have to endure the trials and tribulations that inevitably arise when strategic adjustments of this scale are underway between major powers. China is certainly rising. But America is not obviously in decline. I concede that if one were to assess the US solely by what is going on in its capital, one could be forgiven for coming to such a bleak conclusion. But it would be a mistake to forget that the most important developments in the US do not always occur in Washington DC. Equally if not more important are what happen in the fifty states of the United States, in the

Printed in abridged format from a speech given on 8 January 2015 at ISEAS’ Regional Outlook Forum, held at Shangri-La Hotel, Singapore, by kind permission of the author.

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boardrooms of major American corporations, on Wall Street, and in American universities and research laboratories. The American military is unsurpassed and will likely remain so for a long time to come. And there is yet no substitute for the US dollar. The changes in the distribution of power that are occurring are relative, not absolute. This is not to say that the US does not face serious challenges. But China too faces serious challenges. No country’s trajectory is ever smooth, and all who have underestimated America’s resolve and resilience have come to regret it, just as all who underestimated China’s resilience and resolve have regretted it. China has no reason to be deeply committed to a regional order that is heir to the order responsible for what every Chinese schoolchild knows as ‘a hundred years of humiliation’. But it is that very same order that has also over the last thirty years or so facilitated China’s rise. Beijing has no strong reason to kick over the table even as it seeks adjustments to better reflect its interests. America now clearly needs help to maintain the regional order, but is uncertain about how much help to ask for and what price to pay for help. China benefits from the current order but is driven by a sense of destiny to reclaim its historical role in the region, and is unsure how much help to offer and what price to ask for its help. From these ambiguities stem the uncertainties, confusions and contradictions of our times. The ‘new model of major power relations’ that China has proposed, and which the US has sought to redefine but not rejected, at least implicitly acknowledges a legitimate American role in East Asia even if it leaves the precise parameters of that role open. But China has also floated the idea of a new security concept based on the pernicious and impractical notion that Asian problems should be resolved only by Asians. The last time this was tried, it did not end well for its proponents. More recently China seems to

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have recognised that it needs to do more to assuage regional anxieties. How this plays out in practice remains to be seen. The entangled production chains that today cross and criss-cross national boundaries and which are redefining the classical concept of comparative advantage, did not exist in the early 20th century on the scale that characterises the 21st century world economy. The Soviet Union was containable because it largely contained itself by pursuing autarky. China today is such a vital node in the world economy that the US might as well try to contain itself as try to contain China; and the US occupies so central a place in East Asia — indeed the US is an East Asian, or at least an AsiaPacific country, a concept that is increasingly difficult to disentangle from the idea of East Asia — that China might as well try to displace itself from East Asia as displace the US. Although their rhetoric sometimes suggests otherwise, I think the US, China and Japan all do understand these realities and that they need to work together. China’s rise has been psychologically disquieting to many in America and to the West generally, because in China, capitalism flourishes without liberal democracy. This is regarded as somehow unnatural and illegitimate because it punctures the western myth of the universality of certain political values and of the inevitability of the development of certain political forms. And unlike, say, Japan or India, China only wants to be China and not an honorary member of the West. The myth of universality is ahistorical, pretentious and parochial. It is ahistorical because it ignores the inconvenient fact that every western country was capitalist long before it was either liberal or democratic as those terms are today understood; it is ahistorical also because the fundamental basis of democracy resides in the 18th century western political philosophy that holds that sovereignty derives from the will of the

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people, rather than divine right, bloodline or some other principle. In the 20th century three major political forms based on mass politics evolved from that 18th century political philosophy: fascism, communism and liberal democracy. One may have a preference for one form or another, but it cannot be denied that all share the same intellectual roots and all are thus legitimate heirs of that political philosophy. The myth of universality is pretentious and parochial because it generalizes as universal the highly contingent historical processes that led, quite late in the 20th century, to the current form of western liberal democracy; processes that there is no reason to believe will be replicated anywhere else. Of course all societies and cultures hold some values in common and there may be a certain superficial similarity of political forms. But the commonalities are at such a high level of generality that they have little practical relevance as a guide to how different societies actually govern or organize themselves, and focusing on the similarity of political forms is not a very useful way to understand how different societies actually operate. Still, universality is a mode of thought that has its origins in teleological and monotheistic Christian traditions and is today deeply embedded in the sub-consciousness of even the most secular of western societies. It lies at the very heart of the western sense of self. It will not go away and cannot be refuted by something as mundane as empirical evidence. These are not just abstract intellectual considerations because since the end of the Cold War the claim of the universality of certain political forms and values has been used to justify military interventions to change regimes in North Africa and the Middle East. That all these interventions have only resulted in greater instability has not forced any change of minds or rhetoric, even if foolish talk about ‘the end of history’ has now been smothered in an embarrassed

silence, and prudence has dictated that interventions in the name of universality have only been deployed against the weak. Last autumn, State Counsellor Yang Jiechi visited Washington. I was told that the new model of major power relations was discussed. There was agreement that under this new model, the US and China should try to minimize their disagreements and foster habits of cooperation. But the Americans could not unambiguously endorse a third element that is perhaps the most important element for China: mutual respect for each other’s core interests. Why not agree to something so obvious? I think one reason is because the US knows that the preservation of communist party rule must be the most vital of Chinese core interests and is reluctant to endorse this explicitly. American leaders and officials often posture for domestic audiences, are often constrained by the attitudes of Congress, and there is often a large element of ritual in their evocations of democracy and human rights. But the idea of universality is so essential a part of the American psyche that I don’t think that their words are always just posturing for domestic effect. More to the point, I think Chinese leaders suspect that this is so too. This is a particularly delicate phase of China’s development. Never before has a major country experienced so far-reaching an economic and social transformation affecting so many people in such a short time. But rapid change is destabilizing and China’s history has taught China’s leaders to fear most those historical moments where external uncertainty coincides with internal restlessness. This is such a moment of history. Beijing is now embarking on a second and more difficult stage of reforms that must loosen the centre’s grip on crucial sectors of the economy while preserving the rule of the Communist Party of China (CPC). Can it be done? One should certainly hope so because all the realistic alternatives are worse.

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Last year I had the opportunity to hear a former senior American official speak in a closed group about what he expected would be discussed when President Obama met President Xi Jinping. He was obviously still connected and well briefed. He rattled off a long litany of issues covering almost every matter under the sun on which the US and China could work together. His predications were largely correct. The US and China working together on such matters as climate change, counter-proliferation and terrorism is certainly all to the good. But unless Chinese concerns on the core issue can be concretely assuaged, I do not think strategic trust will be established. Chinese leaders and officials too do not sufficiently understand that their own words and actions can evoke distrust. If a new equilibrium requires the US to acknowledge that different political systems can have their own legitimacy, it requires China to resist the temptations of triumphalist and xenophobic nationalism. China can be rightly proud of its achievements. But Chinese leaders and officials may not understand how China’s sense of destiny in reclaiming its historical place in East Asia can evoke anxiety in its neighbours and how one country’s dream could be another’s nightmare. The simple fact is that China is big and growing bigger and all the rest of us are small. Even the biggest of us is small as compared to China. In fact all of us combined will still be smaller than China. The CPC is increasingly relying on nationalism to legitimize its rule. There is nothing particularly unusual about this. But there are certain characteristics of contemporary Chinese nationalism that enhances the natural anxieties of small countries. Every country’s nationalism has two basic sources. It can well up from within the country’s history, or it can be outwardly directed against some other country or people. Both elements are always present.

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But the balance between the two elements is crucial. More than other kinds of nationalism, Chinese nationalism is outwardly directed. As a party that still calls itself communist, the CPC cannot base its nationalism entirely on China’s imperial past. If the past was so glorious why was there a need for a communist revolution? At the same time, the CPC’s attitude towards its own revolutionary history and such episodes as the disastrous famine caused by the Great Leap Forward and the many lives lost or wrecked during the Cultural Revolution and indeed towards Mao Zedong himself, is ambivalent. Chinese nationalism must be outwardly directed lest awkward questions be asked internally about the CPC itself. Chinese nationalism is today primarily focused on Japan, although the US and the West in general have not been spared attention. The Chinese public is subjected to a steady drumbeat of reminders of Japanese atrocities in China to fan and keep alive bitter memories of the Second World War. There is no doubt that since the end of the Cold War, Japanese politics has steadily moved rightwards and that Mr Shinzo Abe’s political stance on many, though certainly not all, aspects of Japan’s wartime record reflects that shift. Mr Abe has not always been prudent in his choice of political allies. China has attempted to use history as a means of turning ASEAN countries and even the US against Japan. In particular, China has demonized Prime Minister Abe, accusing him of revising history. But I doubt it really works and in fact, I think it is counterproductive. The history that resonates with Chinese nationalism is not confined to the Second World War. In February last year, President Xi Jinping met Lien Chan, the former Taiwanese Vice-President in China in what was described as the highest level meeting between the two sides since Mao Zedong met

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Chiang Kai-shek in 1945. In a speech that the People’s Daily published on its front page under the title “The Chinese Dream to Fulfil the Great Rejuvenation of the Chinese People Together”, President Xi cast the meeting in the historical context of how Taiwan had been occupied by foreign powers when the Chinese nation was weak. The speech was about Taiwan and reconciliation between the two sides is to be welcomed. But by casting reconciliation with Taiwan as an instance of the rectification of historical injustices inflicted upon a weak China, it suggested and left open several questions. Many injustices were done to China during the 19th and early 20th centuries. Does a rising China intend to rectify all of them? How will it choose which to rectify? By what means does it intend to rectify historical injustices? Changes in the strategic environment confront ASEAN with arguably the most complex regional security challenge it has faced since its formation. ‘ASEAN Centrality’ is a term far more often used, and abused, than understood, even by some members of ASEAN. Southeast Asia has of course long been at the intersection of the interests of major powers. ASEAN has decided to call this ‘centrality’. The major powers have been gracious enough not to overtly demur. But let us not forget that before ‘centrality’ became the term of preference, ASEAN used to refer to itself as being ‘in the driver’s seat’, a choice of metaphor that overlooked the possibility that the driver’s seat may well be occupied by a chauffeur and not necessarily by the person who sets the direction. The formation of the East Asia Summit (EAS), among other forums, was intended to try and channel major power relations into more predictable and constructive

directions and promote the kind of ‘balance’ that would enable ASEAN to maintain good relations with all major powers. The US, China and Japan on their part have found the EAS among other ASEAN-created platforms useful as supplementary means of ordering their relationships with each other and ASEAN. But we can continue to play even such a minimal role only if ASEAN remains neutral and the major powers do not try to make us choose one way or another. American and Chinese leaders have said that the region is big enough for both. But the actions of some officials sometimes suggest otherwise. Singapore, for example, has on occasion been accused by American friends of being too close to China and by Chinese friends of being too close to America. Japanese friends have been discreet in keeping their thoughts to themselves. I could recount other anecdotes of how the actions and attitudes of officials and intellectuals have refuted theories of peaceful development. It often seems that if major powers really believe in the formal sovereign equality of states, they do so only very lightly and only when convenient. The key decisions are always going to be made in Washington DC and Beijing and not in any ASEAN capital. Still, one critical factor is within ASEAN’s grasp. This is to continue ASEAN’s own economic integration project. In ASEAN as in all of East Asia, economics is never just economics but is strategy. Without economic integration, the centrifugal forces generated by China’s growth will at least loosen and may well destroy the nascent development of a Southeast Asian identity erected on ASEAN. Such an eventuality will in turn shape the evolution of a new regional architecture.

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Wiyono, Gani. “Pentecostals in Indonesia”. In Asian and Pentecostal: The Charismatic Face of Christianity in Asia, edited by Allan Anderson and Edmund Tang. Oxford: Regnum Books International, 2005. Woo, Y. Pau and J. Wilson. New Directions for APEC´s Trade Facilitation Agenda. Vancouver: Asia Pacific Foundation of Canada, 2000. World Bank. East Asia Decentralizes: Making Local Government Work. Washington, D.C.: World Bank, 2005. World Bank. A Survey of Non-Tariff Measures in the East Asia and Pacific Region. Washington, D.C.: World Bank, 2008. World Bank. World Development Report 2009: Reshaping Economic Geography. Washington, D.C.: World Bank, 2009. World Bank. Investing Across Borders: Indicators of Foreign Direct Regulations in 87 Economies. Washington, D.C.: World Bank, 2010. World Bank. Doing Business 2013. Washington, D.C.: World Bank, 2012. World Bank and OECD (Organisation for Economic Co-operation and Development). A Framework for the Design and Implementation of Competition Law and Policy. Washington DC and Paris: World Bank and the Organisation for Economic Co-operation and Development, 1999. World Christian Database. “World Christian Database”. 2005. Brill and Center for the Study of Global Christianity at Gordon-Conwell Theological Seminary . WTO (World Trade Organisation). “Trade Policy Review: China (2010)”. 2010 . X Xia, Liping. “Prospects for Cooperative Security in East Asia: Chinese Perspectives”. Conference paper, the Second Collaborative Workshop on East Asia Regional Security Futures, Nautilus Institute-Center for American Studies, Fudan University, Shanghai, 3–4 March 2001. Xinhua News Agency (China). “ASEAN Driving Force in Community Building: Susilo”, 11 December 2005 (accessed May 2011). Xinhua News Service (China). “China Vows to Enhance Political Trust, Policy Coordination with ASEAN: Premier”, 20 November 2007. Xinhua Online (China). “习近平阐明中国和平发展原则底线 [Xi Jinping Explains the Principled Bottom Line in China’s Peaceful Development]”, 30 January 2013 . Xinhua (China). “China Warns Against Rush to Set Code of Conduct in South China Sea”, 5 August 2013. Xinhua (China). “Premier Li’s Keynote Speech at 10th China-ASEAN Expo”, 4 September 2013. Xinhua (China). “China Vows to Build Community of Common Destiny with ASEAN”, 3 October 2013 (accessed 21 March 2014). Xinhua (China). “Full Text of Chinese FM’s Signed Article on Int’l Rule of Law,” 24 October 2014 .

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THE CONTRIBUTORS

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The Contributors

AHMAD FUZI BIN ABDUL RAZAK is the former Secretary-General of the Ministry of Foreign Affairs, Malaysia. He currently serves on the boards of several private and public organizations. NARONGCHAI AKRASANEE is the Minister of Energy for the Kingdom of Thailand. A renowned economist, he held various senior government positions in Thailand, including: Minister of Commerce and Director of the National Economic and Social Development Board. JOSE T. ALMONTE is the former National Security Advisor and Director-General of the National Security Council in the Philippines. He retired from the Armed Forces of the Philippines with the rank of Major General. JULIO AMADOR is Deputy Director-General of the Philippines’ Foreign Service Institute. His research interests include: ASEAN; East Asian integration; the Philippines’ foreign and economic policy; security analysis; Southeast Asia’s security and politics. DAVID ARASE is Professor of International Politics at the John Hopkins University-Nanjing University Center for Chinese and American Studies in Nanjing, China. He is also a Research Associate at the Pacific Basin Institute at Pomona College in Claremont, CA where he previously taught in the Politics Department for twenty-two years. ASEAN SECRETARIAT is the official administrative body of ASEAN, and is based in Jakarta. Established on 24 February 1976, its basic mandate is to provide for greater efficiency in the coordination of ASEAN organs and for more effective implementation of ASEAN projects and activities. ASIAN DEVELOPMENT BANK INSTITUTE is the think-tank of the Asian Development Bank that focuses on identifying development strategies for the Asia-Pacific. Established in 1997 in Tokyo, its work covers applied research; capacity building and training; and outreach and knowledge management. MARUJA M.B. ASIS is Director of Research at the Scalabrini Migration Center. She is also Co-Editor of the Asian and Pacific Migration Journal.

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PREMA-CHANDRA ATHUKORALA is Professor of Economics at the Australian National University, and fellow of the Academy of Social Sciences in Australia. He has served as a consultant to the World Bank, Asian Development Bank, and several United Nations agencies at various times. His research interests include: development macroeconomics; and trade and development. MYRNA AUSTRIA is Professor at the School of Economics, De La Salle University. Her research interests include: ASEAN economic integration; development economics; macroeconomics; and trade and investment. SANCHITA BASU DAS is a Fellow and Lead Researcher for Economic Affairs (ASEAN Studies Centre) at the Institute of Southeast Asian Studies. She is also the Coordinator of the Singapore APEC Study Centre and Co-Editor of the Journal of Southeast Asian Economies. Her research interests include: international trade; regional economic integration; and Southeast Asian economies. GRAZIANO BATTISTELLA is Director of the Scalabrini Migration Center, and the founder and Co-Editor of the Asian and Pacific Migration Journal. He is also a Scalabrinian missionary. MARK BEESON is Professor of International Politics at the University of Western Australia. The author of more than 150 journal articles and book chapters, his work is centred on the politics, economics and security of the broadly conceived Asia-Pacific region. NICK BISLEY is Professor of International Relations and Head of the Department of Politics, Philosophy and Legal Studies at La Trobe University. His research and teaching expertise is in the international relations of the Asia-Pacific, globalization, and the diplomacy of great powers. ERNEST Z. BOWER is Senior Adviser and Sumitro Chair for Southeast Asian Studies at the Center for Strategic and International Studies in Washington, D.C. A leading expert on Southeast Asia, he is also President and Chief Executive Officer of BowerGroupAsia, a business advisory firm he created and built. MARCO BÜNTE is Associate Professor of Politics and International Relations at the School of Arts & Sciences, Monash University, Malaysia, and Co-Editor of the Journal of Current Southeast Asian Affairs. His research interests include: democracy promotion; human rights; transnational movements; and non-traditional security issues. MELY CABALLERO-ANTHONY is Associate Professor and Head of the Centre for NonTraditional Security Studies at the S. Rajaratnam School of International Studies, Nanyang Technological University, Singapore. She does research in conflict prevention and management; ASEAN politics; and regionalism and regional security in the Asia-Pacific. WILLIAM CASE is Professor at the Department of Asian and International Studies and former Director of the Southeast Asia Research Centre at City University of Hong Kong. His research interests include comparative politics and the politics of Southeast Asia.

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AKKHARAPHOL CHABCHITRCHAIDOL is Senior Economist at ASEAN+3 Macroeconomic Research Office, Singapore. TERMSAK CHALERMPALANUPAP is Visiting Research Fellow and Lead Researcher for Political and Security Affairs (ASEAN Studies Centre) at the Institute of Southeast Asian Studies. His research interests include: ASEAN’s political and security affairs; and ASEAN’s external relations. CHIA SIOW YUE is Senior Research Fellow at the Singapore Institute of International Affairs, and former Director of the Institute of Southeast Asian Studies. Her research interests include: foreign direct investment; trade policy; and regional economic integration. SUTHIPHAND CHIRATHIVAT is Professor at the Faculty of Economics, Chulalongkorn University. He also holds several positions in the boards of academic organizations. JA IAN CHONG is Assistant Professor at the Department of Political Science, National University of Singapore. His research interests include: international and domestic political institutions; international relations and politics of the Asia-Pacific; major power rivalry; and U.S.-China relations. TERENCE CHONG is Senior Fellow and Coordinator of the Regional Socio-Cultural Studies programme at the Institute of Southeast Asian Studies. His research interests include: Christianity in Southeast Asia; Chinese immigration in CLMV countries; and cultural globalization in in the region. AEKAPOL CHONGVILAIVAN is Economist (Young Professional) at the Asian Development Bank and Associate Editor of The Singapore Economic Review. His research interests include: development economics; economies in the Asia-Pacific; and international economics. CHIEN-PENG CHUNG is Professor of Politics at the Department of Political Science, Lingnan University. His research interests include: Asian foreign and security relations; the politics and history of China; and the dynamics of political change in Asia. GERARD CLARKE is Associate Professor in Politics and International Development at the Department of Political and Cultural Studies, Swansea University. His research interests include: global civil society organizations; human rights in Southeast Asia; and international development. MALCOLM COOK is Senior Fellow at the Institute of Southeast Asian Studies. He is also Nonresident Fellow at the Lowy Institute and Adjunct Professor at Flinders University. His research interests include: the Philippines; major power interests in Southeast Asia; and Asia-Pacific regional organizations. IAN COXHEAD is Professor and Chair of the Department of Agricultural and Applied Economics, University of Wisconsin-Madison. His research interests include: the problems of globalization; and growth and development in Asian economies, especially Southeast Asia.

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JOSE RIZAL DAMURI is Head of the Economics Department at the Centre for Strategic and International Studies in Jakarta. DONALD K. EMMERSON is Director of the Southeast Asia Program at the Walter H. Shorenstein Asia-Pacific Research Centre, Stanford University. A renowned expert on Southeast Asia, he also serves on the editorial boards of Contemporary Southeast Asia (Singapore), the Journal of Democracy (Washington, D.C.), and the Journal of Current Southeast Asian Affairs (Hamburg). SIMON FEENY is Associate Professor at the School of Economics, Finance and Marketing, RMIT University. His research interests include: economic shocks; development economics; poverty and well-being; and Pacific and Melanesian countries. YOSHIFUMI FUKUNAGA is Senior Policy Coordinator at the Economic Research Institute for ASEAN and East Asia. His research interests include: ASEAN economic integration; competition policy in ASEAN; and free trade agreements in East Asia. DANIEL GOH is Associate Professor at the Department of Sociology, National University of Singapore. His research interests include: race and ethnic relations; multiculturalism; sociology and anthropology of the state; and urban studies. EVELYN GOH is Shedden Professor of Strategic Policy Studies at the Australian National University. Her research interests include: East Asian security and international relations; strategic policy studies; and U.S.-China relations and diplomatic history. EUAN GRAHAM is Director of the International Security Program at the Lowy Institute. His research interests include: maritime disputes in the East and South China Seas; nuclear proliferation; the US rebalance to Asia; and defence diplomacy. CAROLINA GUINA is Research Advisor at the Graduate School of Business, Ateneo de Manila University. ALLAN GYNGELL is Visiting Fellow at the National Security College, and Adjunct Professor at the Crawford School of Public Policy, Australian National University. He has a wide background in international policymaking and analysis, and has held various government positions in Australia. MOHAMED JAWHAR HASSAN is Chairman and Chief Executive Officer of the Institute of Strategic and International Studies Malaysia. He held various senior government positions in Malaysia, and currently holds positions in the boards of several public organizations. DENIS HEW is Director of the Policy Support Unit at the Asia-Pacific Economic Cooperation Secretariat. He has written extensively on regional economic cooperation and integration, especially in ASEAN and the Asia-Pacific region. MURRAY HIEBERT is Senior Fellow and Deputy Director of the Sumitro Chair for Southeast Asia Studies at the Centre for Strategic and International Affairs, Washington, D.C. He was previously Senior Director for Southeast Asia at the U.S. Chamber of Commerce.

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HAL HILL is H.W. Arndt Professor of Southeast Asian Economies in the Arndt-Corden Department of Economics, Crawford School, College of Asia and the Pacific, the Australian National University. The author/editor of 18 books and about 150 journal articles and book chapters, his research interests are on various aspects of the economies of Southeast Asia. CAROLINE HUGHES is Professor of Conflict Resolution and Peace, and Academic Director of the Bradford Rotary Centre for International Studies at the University of Bradford. Her research interests include: peacebuilding; Southeast Asia; and the politics of aid and development. HUI YEW-FOONG is Senior Fellow and Coordinator of the Indonesia Studies Programme at the Institute of Southeast Asian Studies. He is also Research Associate Professor at Hong Kong Shue Yan University. His research interests include: Chinese translocalism; regionalism in Indonesia; and religion and social differentiation. SASI IAMSIRAROJ is Postdoctoral Research Fellow in International Development at Deakin University. His research interests include: foreign direct investments; international development; international trade; and meta-analysis. IKUMO ISONO is Research Fellow in the Economic Geography Studies Group and Interdisciplinary Studies Center at the Institute of Developing Economies–Japan External Trade Organization, Tokyo. SUPUNNAVADEE JITDUMRONG is Global Markets Analyst at Nomura Securities. She recently graduated from Colby College with a Bachelor of Arts in Economics and Mathematics, and East Asian Studies. GAVIN JONES is the former Director of the J.Y. Pillay Comparative Asia Research Centre, National University of Singapore. Before his retirement, he followed an academic career closely linked with consultancy assignments in the areas of population and development, educational planning and urban planning. DOUGLAS ANTON KAMMEN is Associate Professor in the Department of Southeast Asian Studies at the National University of Singapore. His research focuses on historical and political change in Timor-Leste and political violence in Indonesia. BILAHARI KAUSIKAN is Ambassador-at-Large at the Ministry of Foreign Affairs (MFA), Singapore, and Senior Fellow at the School of Social Science, Singapore Management University. He has held various positions in the Ministry and abroad, including Permanent Secretary of MFA and Singapore’s Permanent Representative to the United Nations in New York. TSUYOSHI KAWASAKI is Associate Professor with the Departments of Political Science and Humanities at Simon Fraser University. His research interests include: Japanese diplomatic history and international relations theory; grand strategy; and the international relations of the Asia-Pacific region.

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JONATHAN KOH is Director of the Solutions & Consulting team at CrimsonLogic Pte. Ltd., where he provides domain expertise on trade-related solutions. ARCHANUN KOHPAIBOON is Assistant Professor in the Faculty of Economics at Thammasat University. He specializes in microeconomics, mathematical economics, and international economics. HERMAN JOSEPH S. KRAFT is Executive Director of the Institute for Strategic and Development Studies, and Associate Professor in the Department of Political Science at the University of the Philippines. His research interests include: comparative government; international relations; and politics. LE HONG HIEP is Visiting Fellow at the Institute of Southeast Asian Studies. His research interests include: international political economy; international relations; and Vietnam’s foreign policy. LEE HOCK GUAN is Senior Fellow at the Institute of Southeast Asian Studies. His research interests include: civil society and democratization in Southeast Asia; education and nationstate formation in Malaysia; construction of race and citizenship in Malaysia. LEE JAEHYON is Research Fellow and Director of the Center for ASEAN and Oceania Studies at the Asan Institute for Policy Studies. His research interests include: Southeast Asian politics and international relations; regional cooperation in East Asia; and non-traditional and human security issues. MAY-ANN LIM is Managing Director at TRP Corporate, a boutique consulting and research firm in the Asia-Pacific’s telecommunications and ICT industries. Her career has spanned a number of research institutions, including the World Bank and the Singapore Institute of International Affairs. PETER J. LLOYD is Professor Emeritus in the Department of Economics at the University of Melbourne. He specializes in international economics and microeconomics. MARK MCGILLIVRAY is Research Professor in International Development at the Alfred Deakin Research Institute for Citizenship and Globalisation, Deakin University. The author of over 120 refereed journal articles and book chapters, his research interests include: aid effectiveness and allocation; vulnerability in developing countries; and inter-country inequality in well-being. JAYANT MENON is Lead Economist in the Office for Regional Economic Integration at the Asian Development Bank, where he works on trade, international investment, and development issues. He holds adjunct appointments with the Australian National University, University of Nottingham (UK), and Cambodian Institute for Cooperation and Peace. MICHAEL MONTESANO is Visiting Senior Fellow and Co-Coordinator of the Thailand Studies Programme at the Institute of Southeast Asian Studies. He is also the Managing Editor of SOJOURN. His research focuses on society and commerce in twentieth-century Thailand.

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ANDREA FELDMAN MOWERMAN is Private Sector Development Specialist at the World Bank. She graduated from Lee Kwan Yew School of Public Policy, National University of Singapore, with a Master of Public Administration in Economic Policy. JUDITH NAGATA is Professor Emeritus at the Department of Anthropology, York University. Her research interests cover Southeast Asia, where she has conducted extensive field and other research on Islam in Malaysia and Indonesia in its civil and political forms. SHAUN NARINE is Associate Professor at the Department of Political Science, St. Thomas University. He has written extensively on ASEAN and other institutional arrangements in the Asia-Pacific. HELEN S. NESADURAI is Associate Professor of International Political Economy at Monash University, Malaysia. Her research interests include: environmental governance in Southeast Asia; private regulation and multi-stakeholder regimes in Southeast Asia; and regional governance and institutions in the Asia-Pacific. THIAM HEE NG is Senior Economist at the Asian Development Bank, where he works on financial integration, macroeconomic surveillance, and early warning systems. He also manages the Asian Bonds Online web portal and the Asia Bond Monitor, a quarterly report on local currency bond market developments in Asia. DEUNDEN NIKOMBORIRAK is Research Director, Economic Governance at the Thailand Development Research Institute. Her areas of expertise include: competition law and policy; telecom regulation; trade in services; and foreign investment. OOI KEE BENG is Deputy Director of the Institute of Southeast Asian Studies. He is foundereditor of ISEAS Perspective, ISEAS Monitor and Penang Monthly. His key interests are: modern nation building in Asia; Malaysian socio-politics; modern language philosophy; and world history. DIEP PHAN is Assistant Professor at Beloit College. Her primary research interest is in the economic growth and development of developing nations, especially East and Southeast Asian economies. LINDA RICHTER is Professor Emeritus at the Department of Political Science, Kansas State University. She has undertaken research in the Philippines, Pakistan and India, and is widely known for her published work on public policy in the Philippines and on the politics of tourism in Asia. GARRY RODAN is Australian Professorial Fellow of the Australian Research Council, and Professor of Politics and International Studies at the Asia Research Centre, Murdoch University. His thematic research interest is in the relationship between capitalist development and political regime directions in Southeast Asia. EMIL SALIM is Emeritus Professor at the Faculty of Economics, University of Indonesia. A highly acclaimed and influential economist, he held several key ministerial positions in the

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Indonesian government from 1971 to 1993, including: Minister of Transportation; Minister of State for Development Supervision and the Environment; and Minister of State for Population and the Environment. RAZEEN SALLY is Associate Professor at the Lee Kuan Yew School of Public Policy, National University of Singapore. He is also Director and Co-Founder of the European Centre for International Political Economy. His research and teaching focuses on global trade policy and Asia in the world economy. RODOLFO C. SEVERINO is Head of the ASEAN Studies Centre at the Institute of Southeast Asian Studies. He is a former ASEAN Secretary-General and former Philippine diplomat. TAKASHI SHIRAISHI is President of the Institute of Developing Economies-Japan External Trade Organization, and President of the National Graduate Institute for Policy Studies in Tokyo. His current research interests are in regional formation in East Asia, and international relations and politics in East Asia REZA SIREGAR is Executive Director and Senior ASEAN Economist at the Global Investment Research division of Goldman Sachs & Co. He has previously worked in several academic, private, and public institutions, such as the University of Adelaide, Asian Development Bank, and ASEAN+3 Macroeconomic Research Office, Singapore. SOKBUNTHOEUN SO is a former Visiting Fellow with the East West Centre in Washington, D.C., and former Visiting Fellow with the Institute of Southeast Asian Studies. His research interests include: state-society relations; land access issues; and decentralization and deconcentration reforms in Cambodia. The late HADI SOESASTRO was Executive Director and Co-Founder of the Centre for Strategic and International Studies in Jakarta. One of Indonesia’s leading economists, he was well regarded nationally and internationally. PITI SRISANGNAM is Assistant Professor at the Faculty of Economics, Chulalongkorn University. He specializes in international economics and finance. IAN STOREY is Senior Fellow at the Institute of Southeast Asian Studies, and Editor of Contemporary Southeast Asia. His research interests include: China’s foreign and defence policies; maritime security in the Asia-Pacific; and Southeast Asia’s relations with China and the United States. SUEO SUDO is Professor at the Department of Policy Studies, Nanzan University. He was Research Fellow at Chulalongkorn University, Fellow at the Institute of Southeast Asian Studies, and Professor at Saga University. His research interests are ASEAN and Japan-ASEAN relations. RIZAL SUKMA is Executive Director of the Centre for Strategic and International Studies in Jakarta. In 2009, he was named one of the 100 Global Thinkers by Foreign Policy. He works on

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issues related to Southeast Asian security; ASEAN; Indonesia’s defence and foreign policy; Islam and politics; and domestic political changes in Indonesia. TAN SEE SENG is Associate Professor and Deputy Director of the Institute of Defence and Strategic Studies at the S. Rajaratnam School of International Studies. His areas of expertise include: critical social thought; international relations theory; and the politics and security of Southeast Asia and the Asia-Pacific. ALAN KHEE-JIN TAN is Professor at the Faulty of Law, National University of Singapore. His research and teaching expertise is in aviation law, criminal law, maritime law and environmental law. NICHOLAS TARLING is Emeritus Professor of History at the University of Auckland. He is one of the foremost historians of Southeast Asia, specializing in the role of the British in eighteenth- and nineteenth-century Malaysia, Indonesia, Thailand, and Myanmar. He is the author and editor of nearly 40 books and more than 90 journal articles. MOE THUZAR is Fellow and Lead Researcher of Socio-Cultural Affairs (ASEAN Studies Centre) at the Institute of Southeast Asian Studies. Her research interests include: the ASEAN Socio-Cultural Community; the socio-cultural issues of ASEAN integration; and Myanmar’s foreign policy. TIN MAUNG MAUNG THAN is Senior Research Fellow at the Institute of Southeast Asian Affairs. His research interests include: ASEAN political cooperation; political economics; politics and development in Myanmar; and political culture and democratization. SARAH Y. TONG is Senior Research Fellow at the East Asian Institute, National University of Singapore. Her research interests include: Chinese economy; economic growth and development; economic transition; and international trade. SHUJIRO URATA is Professor at the Graduate School of Asia-Pacific Studies, Waseda University, where he specializes in international and development economics. He carries out research on regional economic integration in the Asia-Pacific and Japan’s foreign trade policy. WANG GUNGWU is Chairman of the Institute of Southeast Asian Affairs, the East Asian Institute, and the Lee Kuan Yew School of Public Policy. He is also Emeritus Professor at the Australian National University, and University Professor at the National University of Singapore. His many articles and books on Chinese history, Chinese overseas, and world history have influenced a whole generation of scholars and students. WANG YUZHU is Associate Professor at the Institute of Asia-Pacific Studies, Chinese Academy of Social Sciences, where he works on China–ASEAN relations and regional cooperation in the Asia-Pacific. BRIDGET WELSH is Senior Research Associate at the Center for East Asia Democratic Studies of the National Taiwan University, where she conducts research on democracy and politics in Southeast Asia.

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MARIA MONICA WIHARDJA is Researcher, Strategic and International Studies at the Centre for Strategic and International Studies in Jakarta, and teaches at the University of Indonesia. Her research interests are in institutions; decentralization and development; and regional and global economic architectures. FAIZAL YAHYA is Research Fellow at the Institute of Policy Studies, Lee Kuan Yew School of Public Policy. His research interests include: human capital; social capital; and multicultural and societal issues.

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THE COMPILERS

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OOI KEE BENG is Deputy Director of the Institute of Southeast Asian Studies. He is foundereditor of ISEAS Perspective, ISEAS Monitor and Penang Monthly. His key interests are modern nation building in Asia; Malaysian socio-politics; modern language philosophy; and world history. SANCHITA BASU DAS is Fellow and Lead Researcher for Economic Affairs (ASEAN Studies Centre) at the Institute of Southeast Asian Studies. She is also the Coordinator of the Singapore APEC Study Centre and Co-Editor of the Journal of Southeast Asian Economies. Her research interests include: international trade; regional economic integration; and Southeast Asian economies. TERENCE CHONG is Senior Fellow and Coordinator of the Regional Socio-Cultural Studies programme at the Institute of Southeast Asian Studies. His research interests include: Christianity in Southeast Asia, Chinese immigration in CLMV countries, and cultural globalization in in the region. MALCOLM COOK is Senior Fellow at the Institute of Southeast Asian Studies. He is also Nonresident Fellow at the Lowy Institute and Adjunct Professor at Flinders University. His research interests include: the Philippines, major power interests in Southeast Asia and Asia-Pacific regional organizations. CASSEY LEE is Senior Fellow at the Institute of Southeast Asian Studies, and Managing Editor of the Journal of Southeast Asian Economies. His research interests include: competition policy in ASEAN; the political economy of single party dominance in Southeast Asia; and the political economy of ASEAN economic integration. MICHAEL YEO is Research Associate at the Institute of Southeast Asian Studies, and Book Review Editor of the Journal of Southeast Asian Economies. His research interests include: commerce and society in British Malaya; global economic history; and the history of agricultural commodities.

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