The Urgent Case for ASEAN Integration – Part Three

This is the last of three posts that seeks to make the case for urgent action into ASEAN integration. This third post will provide some suggestions as list two key issues regarding implementation.

In the previous two posts, the case for integration was laid out and the possible benefits were elaborated on. Having listed the potential benefits of regional integration it is now timely to suggest some possible methods for this integration to be proceeded with.

The current ASEAN region shares Free Trade Agreements amongst the 10 nations and with a host of other groups. ASEAN also has plans for an Economic Community by 2015, which builds upon the Free Trade Agreement to include a Comprehensive Investment Area and a Single Aviation Market (Update: Following on from the Hua Hin Summit, an ASEAN Community Roadmap has already been posted on the AEAN website).

Economic integration should not stop at a common market but should go to complete economic integration. Complete economic integration means that there should be a common currency in use in the region as well as a single market. This measure will increase the common market for every nation tremendously. However, this will prove a challenge at least until the three Horse economies – middle income-high growth – of the original ASEAN 6 (Malaysia, Indonesia and Thailand) transit into an Elephant economy.

At the same time, modified from the theory proposed by Bela Balassa, there should be some sort of limited regional fiscal policy. Unlike national fiscal policy, this regional fiscal policy should be a common agreement to devote a portion of their financial resources from the national pie into a particular national industry over a period of some years, so that the industry in the whole region can be developed. Regional fiscal policy ultimately does not replace a national fiscal policy. The Filipino region is rich in natural resources but suffers what is called a low-level equilibrium trap (a result of being a low income- low growth turtle economy). A regional fiscal policy could encourage Foreign Direct Investment from resource poor elephant economies (High income-low growth) such as Singapore and Brunei. This introduction could help grow the number of resource exploitation options in the Philippines, thereby lowering unemployment in the Philippines and growing the national economy; the companies themselves would obviously also benefit.

The free movement of peoples should also be encouraged. This free movement could include competitive job opportunities (with proper protection for blue collar workers) as well as lower financial barriers to entry for regional scholars as compared to those from outside the region (for example ASEAN Scholarship to study in another ASEAN country etc). Other means could be visa and passport free access across these nations such as that used in the EU.

Policing information can also be shared between nations so that the risk of terrorist attacks and cross border crime can be cut down. At the same time the joint policing of the Malacca Straits can limit pirating activity within the regional waters. The sharing of information between Singapore, Indonesia and Malaysia when Mas Selamat Kastari escaped is an example. Additional information and sharing can be held between Thailand (Southern Thailand Insurgents), the Philippines (Abu Sayaff, Moro Islamic Liberation Front) and Indonesia (Jemmah Islamiah) who have been coping with cross-border terrorist insurgencies.

Implementing this needy medicine will not be easy though. It may be penicillin, but it certainly is not a panacea. Improperly managed and it might even turn out to be a Pandora’s Box.

Two challenges stand out, one in politics, the other economics. The growth of nationalism and nationalistic sentiments within the region has been strong ever since the departure of the colonial masters. All the national governments (except Thailand) have once been under colonial rule, Singapore, Malaysia, Myanmar and Brunei under the British; the Philippines under the Spanish and Americans; Vietnam, Laos and Cambodia under the French and Indonesia under the Dutch. The almost invisible national identity after the overthrow of nations has led to many national directed at building a national identity. Just recently, a diplomatic headache was caused by some controversial advertisements and comments made by the Malaysian Tourism Board and Tourism Minister, challenging the food and culture of Singapore and Indonesia. Other diplomatic disputes that fan the violence of nationalism include the Spratly Islands territorial dispute and Cambodia’s show of support for the ousted Thai Premier Thaksin Shinawatra. Singapore bashing is another trait common to the Malaysian government when the situation is local situation is not that good. The over suspicion of neighbours, as well as the xenophobic language of politicians can lead to the fear that a strong regional grouping will compromise the national identity. Fear of foreign investment will also lead to another “Shin-Corp” or “Indosat” saga, which will compromise the overall national situation. It will take a lot less intolerant rhetoric and a lot more logic for all parties to realize that any compromise of a national sovereignty is detrimental to the regional strength and national independence of any other nation.

Economic integration is also more complicated than it seems. In his book, Southeast Asia: The Long Road Ahead (2008), Dr Lim Chong Yah wrote about the spread Turtle-Horse-Elephant economies within the region. When compared to the single Market of the European Union whose main countries are all part of the elephant economy, ASEAN lags far behind. The disparity in monetary exchange rate and economic development means that full economic integration will be even tougher.

Nevertheless, these obstacles are not insurmountable. With the proper political will, these challenges must and can be overcome so that South East Asia will not more be the “Sick Man of the East”.