ASEAN inches closer to achieving single economic market

Producer: Yvonne Gomez
First broadcast: 6 September 04, Radio Singapore International

ASEAN will begin formal negotiations for a tripartite ASEAN, Australia and New Zealand free trade agreement next year. This was a key issue discussed at a meeting of trade and economic ministers from the 10-member Association of Southeast Asian Nations, or ASEAN, which ended yesterday in Jakarta.

At an ASEAN summit in Bali last year, ASEAN leaders endorsed a plan to form an ASEAN Economic Community, or AEC, by 2020. At this meeting, details on how to remove tariff and non-tariff barriers to achieve this goal, were discussed.

The European Union, or EU, which already operates as a single market, believes an AEC would attract foreign investors to the region.

From some reasons why Southeast Asian economic integration is important, Yvonne Gomez spoke to Dr Teofilo Daquila from the National University of Singapore.

TD: For ASEAN member countries it will be a free flow of goods and services within the ASEAN region. The consumers will benefit because they will have wider choices, and prices of goods will be lower. The producers will also benefit because there’ll be economies of scale, meaning they can produce a lot more at lower costs of production, and therefore the prices will be lower. For the non-member countries, they will also benefit because they will be attracted to the region – the ASEAN region – because the region will now be a larger with a large production base. And this is in fact evidenced by an increase in the foreign direct investments in the region last year. It was reported that about 13 billion in the first quarter of 2004, moved into the ASEAN region. So this is an indication of the attractiveness of the ASEAN region.

Pascal Lamy, the EU’s Trade Commissioner, said the different stages of development of the 10 ASEAN member countries should not be a major obstacle for economic integration. How far do you agree with this?

TD: Well, ideally, the similarity in the levels of economic development is one of the conditions for successful economic integration. Realistically, we have two groups of countries – the richer group and the poorer group. The challenge for the richer group is to help increase the level of development or to address the development divide between the richer and poorer group. So as long as the richer group helps the poorer group, this divide will be lessened. And I think integration can proceed at a much faster pace.

Assuming economic integration does take place eventually, what would be the highlights of a single, common ASEAN market?

TD: It is envisioned in the Declaration of ASEAN Concord, in Bali, that by the year 2020 we will have an ASEAN Economic Community, which as you said, is a single, common market. Basically, there will be a free flow of goods within the region, free flow of investments within the region, freer flow of capital in the region. Basically, tariffs or taxes on imported good will be eliminated among the countries in the region.

An FTA between the EU and ASEAN could be on the cards. How do you see something like this working out? Is it too ambitious a plan at this stage?

TD: I think it has to start somewhere, and I think it’s the right time. In fact, it should have started earlier but there’s no other way except to pursue regionalism and there are many regional trading groups taking place in the world. This has been a trend and will continue to increase. In fact, ASEAN and China are expected to complete their FTA in 2010, ASEAN and India in 2011, ASEAN and Japan in 2012…so I think it’ll be good to have an FTA between ASEAN and the EU, because all these regional trading and groups will increase global trade.

When negotiating an EU-ASEAN FTA, how can some sticking issues be resolved? For example, there are some EU members who have problems with the Myanmar political leadership. Would this pose a problem in trade negotiations?

TD: If some EU members take a very hard stance, and resist Myanmar’s inclusion into ASEAN, the ASEM summit, or any initiatives by the Asia-Europe meeting, either the economic ministers’ meeting or finance ministers’ meeting itself, will not move forward. So compromises should be reached and I think at the meeting last week, in the Netherlands, a compromise was reached so that Myanmar would be able to attend the ASEM summit in Vietnam next month.

An FTA between ASEAN, Australia and New Zealand is reportedly starting to take shape. What consequences will regional trade pacts like this, and the one between the EU and ASEAN, have for regional and global trade?

TD: Well, there has been the view that the formation of regional trading groups will slow down multilateralism or globalism, but since the trend is now towards regionalism, I think, as in the case of Singapore forming FTAs with other countries, this regionalism, multilateralism and globalism will go hand-in-hand And both regional trade and global trade will increase.