ASEAN Economic Integration

ASEAN ECONOMIC COOPERATIONASEAN ECONOMIC COOPERATION

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Economic Cooperation and Economic Cooperation and IntegrationIntegration

Cooperation = Working together to the Cooperation = Working together to the same endsame end

Integration = Combining into a wholeIntegration = Combining into a whole

Economic cooperation = the lowest form of Economic cooperation = the lowest form of economic integrationeconomic integration

Economic Integration = the highest form of Economic Integration = the highest form of economic cooperationeconomic cooperation

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Economic Cooperation and Economic Cooperation and Integration (ContIntegration (Cont’’d)d)

6 stages from Economic Cooperation to Economic 6 stages from Economic Cooperation to Economic IntegrationIntegration

Harmonization: to adjust trade policies to minimize Harmonization: to adjust trade policies to minimize discrimination*discrimination*

Free Trade Area (FTA): to remove tariffs between the Free Trade Area (FTA): to remove tariffs between the partners without adopting a common tariff policy partners without adopting a common tariff policy

Customs Union (CU): FTA adopting a common tariff policy Customs Union (CU): FTA adopting a common tariff policy against third countriesagainst third countries

Common Market (CM): CU removing restrictions on factor Common Market (CM): CU removing restrictions on factor movementmovement

Economic Union (EU): CM coordinating their policies on Economic Union (EU): CM coordinating their policies on fiscal, monetary, etc.fiscal, monetary, etc.

Economic Integration: Extreme type of Economic Economic Integration: Extreme type of Economic Cooperation when policy matters and their implementation is Cooperation when policy matters and their implementation is governed by some supra-national agency governed by some supra-national agency –– highest economic highest economic integration. integration.

*PTA: as the lowest form of economic integration, provided for *PTA: as the lowest form of economic integration, provided for tariff preferences for trade among ASEAN member countries.tariff preferences for trade among ASEAN member countries.

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ASEAN Trade (2000/2008) Country (US$mil.) Export Import Foreign Direct

Investment Brunei D. 2,169/8,754 1,068/3,105 549/239 Cambodia 1,368/4,359 4,417/1,405 149/814 Indonesia 62,124/137,020 33,515/129,197 -4,550/8,340 Lao PDR 144*/828 338*/4,417 37/228 Malaysia 98,154/194,496 79,647/144,299 3,788/7,318 Myanmar 1,194/6,621 2,219/3,795 208/258 Philippines 38,078/49,025 34,491/56,646 2,240/1,520 Singapore 138,352/241,205 134,680/230,760 16,485/22,802 Thailand 68,709/174,967 61,935/177,568 3,350/10,091 Vietnam --------/61,778 --------/79,579 1,289/8,050 Source: ASEAN Trade Statistics Database as of July 2009

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Real Economic Growth 2000-2008

ASEAN Human Development Indicators ASEAN Human Development Indicators (HDI) (HDI)

Country HDI Life expect. Adult lit. GrossCountry HDI Life expect. Adult lit. Gross enr. Expd. Expd.enr. Expd. Expd. (Rank) at birth rate (15& ratio for Pri on Heal. On Edu.(Rank) at birth rate (15& ratio for Pri on Heal. On Edu. (yrs)*(yrs)* above)* Sec. & Tert* (%GDP)! (%GDP)^ above)* Sec. & Tert* (%GDP)! (%GDP)^ Brunei 34 76.6 92.7 77 2.8 --Brunei 34 76.6 92.7 77 2.8 -- Indonesia 108 68.2 90.4 68 1.1 0.9Indonesia 108 68.2 90.4 68 1.1 0.9 Malaysia 61 73.4 88.7 73 2.2 8.0Malaysia 61 73.4 88.7 73 2.2 8.0 Phil1ppines 84 70.7 92.6 82 1.4 3.2Phil1ppines 84 70.7 92.6 82 1.4 3.2 Singapore 25 78.9 92.5 87 1.6 --Singapore 25 78.9 92.5 87 1.6 -- Thailand 74 70.3 92.6 74 2.0 4.2Thailand 74 70.3 92.6 74 2.0 4.2 Cambodia 129 56.5 73.6 60 2.1 2.0Cambodia 129 56.5 73.6 60 2.1 2.0 Lao PDR 133 55.1 68.7 61 1.2 2.3Lao PDR 133 55.1 68.7 61 1.2 2.3 Myanmar 130 60.5 89.9 49 0.5 --Myanmar 130 60.5 89.9 49 0.5 -- Vietnam 109 70.8 90.3 63 1.5 --Vietnam 109 70.8 90.3 63 1.5 --*2004, ^2003, #2002-04 Source: UNDP Human Development Report 2006 *2004, ^2003, #2002-04 Source: UNDP Human Development Report 2006

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Treaty of Amity and Treaty of Amity and Cooperation (TAC) : Cooperation (TAC) :

Fundamental PrinciplesFundamental Principles Mutual respect for independence, sovereignty, Mutual respect for independence, sovereignty,

equality, territorial integrity, and national identity equality, territorial integrity, and national identity for all nations.for all nations.

The right of every state to lead its national The right of every state to lead its national existence free from external interference, existence free from external interference, subversion or coercionsubversion or coercion

Non-interference in the internal affairs of one Non-interference in the internal affairs of one anotheranother

Settlement of differences or disputes by peaceful Settlement of differences or disputes by peaceful mannermanner

Renunciation of the threat or use of forceRenunciation of the threat or use of force Effective cooperation among themselvesEffective cooperation among themselves

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ASEAN Economic ASEAN Economic CooperationCooperation

1967 1967 –– ASEAN established ASEAN established 1976 1976 –– Regional economic cooperation launched Regional economic cooperation launched 1976-83 1976-83 –– major projects ( AIP, AIC, PTA & AIJV) major projects ( AIP, AIC, PTA & AIJV)

implemented but all failed.implemented but all failed. 1984 1984 –– Brunei joined ASEAN Brunei joined ASEAN 1989 1989 –– A breakthrough in ASEAN economic A breakthrough in ASEAN economic

cooperation as ASEANcooperation as ASEAN’’s strategy for collective s strategy for collective FDI- dependent & export-oriented industrialization FDI- dependent & export-oriented industrialization established.established.

1992 1992 –– AFTA established and later AFTA-Plus. AFTA established and later AFTA-Plus. (1995 (1995 –– 1999) 1999) –– Vietnam, Laos, Myanmar & Vietnam, Laos, Myanmar &

Cambodia as membersCambodia as members 1998 1998 –– Hanoi Plan of Action (to achieve Vision Hanoi Plan of Action (to achieve Vision

2020)2020) 1998 1998 –– 2000 2000 –– Going beyond AFTA (AFTA Plus, Going beyond AFTA (AFTA Plus,

AIA)AIA)15

Factors for Intensification of ASEAN Economic

Integration* Infrastructure (Transport, Energy, ICT)• Expansion and Diversification of ASEAN

Economies• Competitiveness (Improving Standards &

Basic Skills• Accession of New Member Countries into

WTO• Good Governance (Public & Private

Sectors)• Strictly following the targets of AFTA and

AIA

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ASEAN Economic Cooperation

1. Members of ASEAN2. To help each other in the tasks of

production goods and services & bringing there to where they are needed & used.

3. Mechanism: CEPT Scheme, IL, Temporary E.L. and Sensitive list.

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ASEAN (Association of ASEAN (Association of South East Asian Nations)South East Asian Nations)

Establishment: 8 August 1967Establishment: 8 August 1967 Members: Brunei, Cambodia, Indonesia, Members: Brunei, Cambodia, Indonesia,

Laos, Malaysia, Myanmar, Philippines, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and VietnamSingapore, Thailand and Vietnam

Total Population: 567 million (2005)Total Population: 567 million (2005) Total Area: 4.5 mil. sq. kilometers (2005)Total Area: 4.5 mil. sq. kilometers (2005) Combined GDP: US$1.07 trillion (2005)Combined GDP: US$1.07 trillion (2005) Total Trade: US$1.44 trillion (2005)Total Trade: US$1.44 trillion (2005)

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Aims and Purposes of ASEAN• To accelerate the economic group, social

progress and cultural development in the region joint endeavors in the spin of equality & partnership in order to strength the foundation for a prosperous and peaceful community of Southeast Asian nations.

• To promote regional peace and stability through abiding respect and the rule of law in the relationship among the countries of the region adherence to the principle of the United Nations Charter.

• To promote active collaboration & mutual assistance on matters of common interest in the economic, social, cultural, technical, scientific, & administrative fields.

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ASEAN Macroeconomic Indicators ASEAN Macroeconomic Indicators (2008) (2008)

Country Total land Population GDP GDPCountry Total land Population GDP GDP area (thousand) at current market prices Per Capitaarea (thousand) at current market prices Per Capita (sq. km) (US$ mn) (US$PPP$) (US$) US$ (PPP$) (sq. km) (US$ mn) (US$PPP$) (US$) US$ (PPP$) Brunei 5,765 397 14,147 11,933 35,623 48,180 Brunei 5,765 397 14,147 11,933 35,623 48,180 Indonesia 1,860,360 228,526 511,574 901,139 2,237 3,943Indonesia 1,860,360 228,526 511,574 901,139 2,237 3,943 Malaysia 330,253 27,863 222,057 383,059 7,970 13,748 Malaysia 330,253 27,863 222,057 383,059 7,970 13,748 Philippines 300,000 90,457 166,733 317,215 1,844 3,507Philippines 300,000 90,457 166,733 317,215 1,844 3,507 Singapore 710 4,834 182,103 238,765 37,629 49,338 Singapore 710 4,834 182,103 238,765 37,629 49,338 Thailand 513,120 66,482 273,729 546,320 4,117 8,218Thailand 513,120 66,482 273,729 546,320 4,117 8,218 Cambodia 181,035 14,656 11,082 27,986 756 1,909Cambodia 181,035 14,656 11,082 27,986 756 1,909 Lao PDR 236,800 5,763 5,289 13,168 918 2,406Lao PDR 236,800 5,763 5,289 13,168 918 2,406 Myanmar* 676,577 58,510 27,182 68,203 465 1,166Myanmar* 676,577 58,510 27,182 68,203 465 1,166 Vietnam 331,212 86,160 90,701 242,697 1,053 2,817Vietnam 331,212 86,160 90,701 242,697 1,053 2,817 ASEAN 4,435,830 583,651 1,504,236 2,758,385 2,577 4,726ASEAN 4,435,830 583,651 1,504,236 2,758,385 2,577 4,726 CLMV 1,425,624 165,089 124,253 352,753 813 2,137CLMV 1,425,624 165,089 124,253 352,753 813 2,137 ASEAN 6 3,010,207 418,562 1,369,983 2,405,632 3,273 5,747 ASEAN 6 3,010,207 418,562 1,369,983 2,405,632 3,273 5,747 * US$-Kyat exchange rates is based on the parallel rate as us in IMF-WEO, April, 2009 * US$-Kyat exchange rates is based on the parallel rate as us in IMF-WEO, April, 2009

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ASEANASEAN’’s Phase Of Inertia s Phase Of Inertia (1967-74)(1967-74)

During the period, ASEAN was mainly During the period, ASEAN was mainly concerned with issues political and regional concerned with issues political and regional security.security.

In 1969, the significance of ASEAN In 1969, the significance of ASEAN economic cooperation was perceived economic cooperation was perceived –– with with the assistance of the UN team.the assistance of the UN team.

In 1974, the report of the UN team (Kansu In 1974, the report of the UN team (Kansu report) came out by proposing the report) came out by proposing the Preferential Trade Agreement (PTA).Preferential Trade Agreement (PTA).

The PTA, as a lowest form of economic The PTA, as a lowest form of economic integration, provided for tariff preference s integration, provided for tariff preference s for trade among ASEAN member countries. for trade among ASEAN member countries.

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ASEANASEAN’’s surge in momentum: s surge in momentum: From 1976 to 1983From 1976 to 1983

Declaration of Asean Concord was signed in Bali Summit Declaration of Asean Concord was signed in Bali Summit (1976).(1976).

The subsequent Bali Summit further affirmed the goals The subsequent Bali Summit further affirmed the goals and role of Asean for economic progress.and role of Asean for economic progress.

Between 1976-83 Between 1976-83 –– major projects ( AIP, AIC, PTA & AIJV) major projects ( AIP, AIC, PTA & AIJV) were implemented but all failed and the bustles of were implemented but all failed and the bustles of activities were not a substitute for meaningful activities were not a substitute for meaningful accomplishments.accomplishments.

It was a record of protracted negotiations, exasperation It was a record of protracted negotiations, exasperation and frustrations.and frustrations.

Moreover, intra-Asean trade was still insignificant and the Moreover, intra-Asean trade was still insignificant and the number of implemented Asean-wide progress rather small.number of implemented Asean-wide progress rather small.

Economic nationalism and the political reality of Economic nationalism and the political reality of regionalism were the causes of so sluggish of the Asean. regionalism were the causes of so sluggish of the Asean.

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Impact of ASEAN Crisis Impact of ASEAN Crisis (1997-99)(1997-99)

Falling real incomes and rising incidence Falling real incomes and rising incidence of povertyof poverty

Increasing level of unemployment and Increasing level of unemployment and under-employmentunder-employment

Socially destabilization migration flowsSocially destabilization migration flows Food shortages and malnutritionFood shortages and malnutrition Declining public healthDeclining public health Reduces education coverageReduces education coverage Increasing incidence of crimesIncreasing incidence of crimesCurrent global financial crisis seems to be Current global financial crisis seems to be

followed the East Asian crisis. followed the East Asian crisis.

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Cross-border Issues in ASEANCross-border Issues in ASEAN

Informal trade, Illegal tradeInformal trade, Illegal trade EnvironmentEnvironment Social crimesSocial crimes Drugs and narcotics traffickingDrugs and narcotics trafficking Human traffickingHuman trafficking Immigration (illegal migration, refugees, Immigration (illegal migration, refugees,

illegal workers)illegal workers) Law and legal mattersLaw and legal matters PoliticsPoliticsAll member countries are trying to resolve All member countries are trying to resolve

the above issues and so far to some extent. the above issues and so far to some extent.

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Other Regional Grouping Before ASEAN

The economic Commision for Asia and the Far East (ECAFE – later called ESCAP) (1947)

The Colombo Plan (1950) The Southeast Asian Treaty Organization

(SEATO) (1954) The Bandung or Asian-African Conference The Association of Southeast Asia (ASA)

(1961) MAFILINDO (Malaysia, Philippines &

Indonesia) (1963)

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Regional Economic Integration

Definition: The transitional economic region established by 2 or more countries (or territories) to promote free movement of factors of production and effective distribution of out puts to gain from the economy of scale in the region.

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Forms of Regional Economic Forms of Regional Economic Cooperation/IntegrationCooperation/Integration

FormsForms Free intra-Free intra- Common Common Free factor Common Free factor Common tradetrade trade policytrade policy mobilitymobility

monetary &monetary &

fiscal fiscal policypolicy

FTAFTA YesYes NoNo NoNo No No

Customs UnionCustoms Union YesYes YesYes NoNo No No

Common MarketCommon MarketYesYes YesYes YesYes No No

Economic UnionEconomic Union YesYes YesYes YesYes Yes Yes

* The * The ““Single MarketSingle Market”” is is ““an area without internal frontiers in an area without internal frontiers in which the free movement of goods, persons, services and which the free movement of goods, persons, services and capital is ensuredcapital is ensured””..

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Regional Trade Comparison

Asean Nafta EU Mercosur

Reg. Trade ($bil) 82 494 1,316 15 Trade Exp. ($bil) 363 991 2,196 88 Intra Reg. (%) 23 50 60 17 Inter Reg. Trade in total World Trade (%) 5 22 33 1• Trade intensity Index 4.2 23 1.8

13.3Source: Comtrade

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RegionalismRegionalism

The cooperation of countries of The cooperation of countries of geographical proximity either in economic, geographical proximity either in economic, political or social fields, by means of political or social fields, by means of setting up a regional organization for the setting up a regional organization for the achievement of common purposes.achievement of common purposes.

Countries must have 1. geographical Countries must have 1. geographical proximity, 2. cooperation of the countries proximity, 2. cooperation of the countries either in eco., political or social fiends, 3. either in eco., political or social fiends, 3. setting up a regional cooperation for the setting up a regional cooperation for the achievement of common purposes.achievement of common purposes.

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Regional Economic Integration

Definition: The transitional economic region established by 2 or more countries (or territories) to promote free movement of factors of production and effective distribution of outputs to gain from the economy of scale in the region.

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Regional Eco. Coopn: /Integration

1. The transitional eco. region established by 2 or more countries or territories.

2. Objective: to promote free movement of factors of production & effective distribution of outputs

3. Mechanism: to gain from economy of scale.

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Regional Level Cooperation in 4 Regional Level Cooperation in 4 ContinentsContinents

OAS OAS –– Organization of American States Organization of American States NAFTA NAFTA –– North American Free Trade Area North American Free Trade Area MERCOSUR MERCOSUR –– (Argentina (Argentina –– Brazil Brazil ––

Paraguay Paraguay –– Uruguay Uruguay –– Venezuela) Venezuela) EU EU –– European Union European Union AU - African UnionAU - African Union GCC GCC –– Gulf Corporation Council Gulf Corporation Council PIF PIF –– Pacific Islands Forum Pacific Islands Forum ANZCERTA ANZCERTA –– Australia Australia –– New Zealand New Zealand

Closer Economic Relations Trade Closer Economic Relations Trade Agreement Agreement

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Globalization“Globalization” is shorthand for the way trade,

investment, and industry are spreading around the world in a more or less uniform pattern, going beyond political frontiers and national cultures.

Over the last generation, ASEAN & East Asia among the greatest beneficiaries of the open trading system. The East Asian “Economic miracle” was founded on export-led development strategies that tapped into rich western markets, particularly in the United States.

It also brings foreign investment & technology that generate new skills & stimulate the creativity & entrepreneurial energies among the local peoples.

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Cont’d• To provide assistance to each other in the form of

training and research facilities in the educational,, professional, technical, scientific and administrative spheres;

• To collaborate more effectively for the greater utilization of their agriculture and industries of their trade, improvement the study the problem of international commodity trade, improvement of their transportation and communication facilities and raising the living standards of the peoples;

• To promote Southeast Asian Studies;• To maintain close & beneficial cooperation with

existing international and regional organizations with similar aims and purposes, and to explore all the avenues of even closer cooperation among themselves.

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ContinuedContinued: Some positive : Some positive factorsfactors

The success of Asean was found the goodwill and the The success of Asean was found the goodwill and the spirit of accommodation that is practical among the spirit of accommodation that is practical among the peoples. peoples.

During the last decades, Asean achieved its recognized During the last decades, Asean achieved its recognized stature in the world of geopolitics and ecopolitics.stature in the world of geopolitics and ecopolitics.

Asean people are proud of the fact that we are Asean people are proud of the fact that we are respected for our peaceful manner in resolving respected for our peaceful manner in resolving conflicts and for our consistent friendly relationships conflicts and for our consistent friendly relationships with all nations.with all nations.

It was the private sector in Asean that was and still It was the private sector in Asean that was and still now should be congratulated that private now should be congratulated that private entrepreneurs have become an important driving force entrepreneurs have become an important driving force behind the governments. behind the governments.

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Dialogue of Asean Dialogue of Asean intellectual people intellectual people

contributed to the solution contributed to the solution of the crisisof the crisis Promote good public-policy decision making on Promote good public-policy decision making on

complex societal problems through objective complex societal problems through objective researchresearch

Stimulate new ideas drawing on multinational &Stimulate new ideas drawing on multinational &

multidisciplinary backgroundsmultidisciplinary backgrounds

-- Propagate knowledge for dealing with common Propagate knowledge for dealing with common problemsproblems

- Promote mutual understanding & with it mutual - Promote mutual understanding & with it mutual confidenceconfidence

- Build community with shared aspiration and - Build community with shared aspiration and values values

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Tackling of Environment IssuesTackling of Environment Issues#Haze issue:#Haze issue: - ASEAN agreement on transboundary haze pollution- ASEAN agreement on transboundary haze pollution - Regional Haze Action Plan (RHAP)- Regional Haze Action Plan (RHAP) - ASEAN Centre for Biodiversity- ASEAN Centre for Biodiversity - Coastal and Marine Environment- Coastal and Marine Environment# Global Environmental Issues# Global Environmental Issues - Promote common points of understanding in the - Promote common points of understanding in the

negotiations and meetingsnegotiations and meetings - Promote capacity building- Promote capacity building - Implementation of multilateral environmental agreements- Implementation of multilateral environmental agreements - Note the importance of trade and environment issues- Note the importance of trade and environment issues# Integrated Water Resource Management# Integrated Water Resource Management - Adoption of Long-term Strategic Plan for Water Resource - Adoption of Long-term Strategic Plan for Water Resource

management to meet the needs in terms of health, food, management to meet the needs in terms of health, food, security, economic and environmentsecurity, economic and environment

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Tackling Environment Issues: Tackling Environment Issues: Contd.Contd.

# Adoption of the Framework for # Adoption of the Framework for Environmentally Sustainable CitiesEnvironmentally Sustainable Cities

- Awareness of the challenges in the areas of - Awareness of the challenges in the areas of clean air, clean water and clean landclean air, clean water and clean land

- Implementation of best practices of lessons and - Implementation of best practices of lessons and experiences of ASEAN member countriesexperiences of ASEAN member countries

## Other Environmental ActivitiesOther Environmental Activities

- Launching of ASEAN Environmental Education - Launching of ASEAN Environmental Education Action Plan (AEEAP) which includes formal Action Plan (AEEAP) which includes formal education, non-formal education, manpower education, non-formal education, manpower capability building, and networking, colarborating capability building, and networking, colarborating and communication and communication

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Transnational CrimesTransnational Crimes

Forms of cross-border crimesForms of cross-border crimes: drug production : drug production and trafficking, arms smuggling, money laundering, and trafficking, arms smuggling, money laundering, human trafficking, piracy, as well as new forms of human trafficking, piracy, as well as new forms of transnational crimes such as, credit card fraud, transnational crimes such as, credit card fraud, fraudulent foreign travel documents, cyber crime, fraudulent foreign travel documents, cyber crime, and terrorismand terrorism

Tackling cross-border crimesTackling cross-border crimes: :

- Adopting the Work Programme of the ASEAN Plan - Adopting the Work Programme of the ASEAN Plan of Action to Combat Transnational Crime (2003)of Action to Combat Transnational Crime (2003)

- Main activities: Information exchange, cooperation - Main activities: Information exchange, cooperation in law enforcement, law and legal matters, training in law enforcement, law and legal matters, training capacity building and extra regional cooperation capacity building and extra regional cooperation

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Drugs and NarcoticsDrugs and Narcotics Strengthening cooperation and coordinating of Strengthening cooperation and coordinating of

ASEAN Senior Officials on Drugs (ASOD) with the ASEAN Senior Officials on Drugs (ASOD) with the ASEAN Official Meeting on Transnational Crime ASEAN Official Meeting on Transnational Crime (SOMTC), ASEAN Directors-General of Immigration (SOMTC), ASEAN Directors-General of Immigration Department and Heads of Consular Affairs Divisions Department and Heads of Consular Affairs Divisions of the Ministries of Foreign Affairs (DGIOM), and of the Ministries of Foreign Affairs (DGIOM), and Asean Inter-Parliamentary Organization (AIPO) in Asean Inter-Parliamentary Organization (AIPO) in combating illicit drug traffickingcombating illicit drug trafficking

AIPO is looking into possibility of harmonizing and AIPO is looking into possibility of harmonizing and bridging the gaps in the anti-drug laws in the bridging the gaps in the anti-drug laws in the region, especially on the issues of punishment and region, especially on the issues of punishment and ASOD is also looking into the ASEAN Work ASOD is also looking into the ASEAN Work Programme to Combat Transnational Crime, Programme to Combat Transnational Crime, particularly the component on illicit drug trafficking. particularly the component on illicit drug trafficking.

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Migration IssuesMigration Issues Combating Illegal Migration: Combating Illegal Migration:

- Implementation of Asean Plan of Action on - Implementation of Asean Plan of Action on Immigration by DGIOM adopting a Work Programme Immigration by DGIOM adopting a Work Programme which includes development of an Asean immigration which includes development of an Asean immigration network, visa exemption travel within Asean in line with network, visa exemption travel within Asean in line with the jurisdiction of the immigration authorities, and the jurisdiction of the immigration authorities, and collaboration with international orgainations like the collaboration with international orgainations like the International Organization for Migration (IOM) and International Organization for Migration (IOM) and United Nations High Commissioner for Refugees United Nations High Commissioner for Refugees (UNHCR) on legal migration on the existing bilateral (UNHCR) on legal migration on the existing bilateral basis.basis.

- Other measures to combat illegal migration include - Other measures to combat illegal migration include harmonization of migration policies & legislation, harmonization of migration policies & legislation, training in management, and protecting the integrity of training in management, and protecting the integrity of travel documents travel documents

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Political Issues

Some political issues came out on 2008 between Cambodia and Thailand due to the border land and pagoda building.

It happened the cross-border few fighting with small guns and battles.

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Law and Legal MattersLaw and Legal Matters Harmonizing of Law and Legal matters:Harmonizing of Law and Legal matters: - Cooperation of ASEAN countries takes the forms of collation of - Cooperation of ASEAN countries takes the forms of collation of

legal materials, establishment of local points, sharing of research, legal materials, establishment of local points, sharing of research, study tours and government officers programmestudy tours and government officers programme

- Cooperation in mutual legal assistance in criminal matters - Cooperation in mutual legal assistance in criminal matters including extraditionincluding extradition

- Introduced the Mutual Assistance in Criminal Matters Treaty - Introduced the Mutual Assistance in Criminal Matters Treaty which is intended to operate in conjunction with existing mutual which is intended to operate in conjunction with existing mutual assistance in criminal-matters mechanism s, both formal anf assistance in criminal-matters mechanism s, both formal anf informal, and also seeks to support the implementation of the informal, and also seeks to support the implementation of the regional cooperation component of ASEAN Work Programme to regional cooperation component of ASEAN Work Programme to Implement the Combat Transnational Crime.Implement the Combat Transnational Crime.

- ASEAN agreed to establish an ad hoc group to study - ASEAN agreed to establish an ad hoc group to study criminalizing acts of terrorism and harmonization od anti-terrorism criminalizing acts of terrorism and harmonization od anti-terrorism laws in the region, formulating the ASEAN convention on laws in the region, formulating the ASEAN convention on combating terrorism combating terrorism

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Disaster ManagementDisaster Management Tackling of Disaster managementTackling of Disaster management

- The ASEAN Experts Group of Disaster - The ASEAN Experts Group of Disaster Management (ACDM) has adopted the ASEAN Management (ACDM) has adopted the ASEAN Regional Programme on Disaster Management Regional Programme on Disaster Management (ARPDM) to enhance cooperation in disaster (ARPDM) to enhance cooperation in disaster management, including natural disasters and management, including natural disasters and man-made disasters, in order to minimize the man-made disasters, in order to minimize the adverse consequences of disasters on the social adverse consequences of disasters on the social and economic development of the member and economic development of the member countriescountries

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ASEAN-China Cooperation in ASEAN-China Cooperation in Tackling the Narcotics ProblemTackling the Narcotics Problem

Adoption of the ASEAN-China Cooperative Operations in Adoption of the ASEAN-China Cooperative Operations in Response to Dangerous Drugs (ACCORD): Plan of Action 2005-Response to Dangerous Drugs (ACCORD): Plan of Action 2005-20102010* Four central pillars: civic awareness, demand reduction, law * Four central pillars: civic awareness, demand reduction, law enforcement, and alternative developmentenforcement, and alternative development

* Examples of cooperation:* Examples of cooperation: - Establishment of over 40 Border Liaison Officers- Establishment of over 40 Border Liaison Officers - Two-boat operation by Thailand and Laos in Mekong river- Two-boat operation by Thailand and Laos in Mekong river - Establishment of China- Establishment of China’’s bilateral ties with Myanmar & s bilateral ties with Myanmar &

LaosLaos - Cooperation between China, Myanmar, Thailand & Laos - Cooperation between China, Myanmar, Thailand & Laos

seized heroin and arrested suspectsseized heroin and arrested suspects - Cooperation between China and Malaysia dismantled - Cooperation between China and Malaysia dismantled

several amphetamine- types (ATS)several amphetamine- types (ATS) - Sharing national drug abuse information through the Drug - Sharing national drug abuse information through the Drug

Abuse Information Network for Asia and the Pacific (DAINAP) Abuse Information Network for Asia and the Pacific (DAINAP)

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ASEAN FREE TRADE AREA ASEAN FREE TRADE AREA (AFTA)(AFTA)

What are objectives of AFTA?What are objectives of AFTA?1.1. AFTA was to liberalize of trade in Asean by AFTA was to liberalize of trade in Asean by

progressively removing intra-regional tariffs progressively removing intra-regional tariffs and, ultimately, non-tariff barriers.and, ultimately, non-tariff barriers.

2.2. AFTA would attractAFTA would attract FDI to the region by FDI to the region by presenting a larger coordinated presenting a larger coordinated market.market.

3.3. AFTA will adapt ASEAN to changing AFTA will adapt ASEAN to changing international economic conditions, in international economic conditions, in particular the rise of regional trading particular the rise of regional trading arrangements (RTA) in the developed arrangements (RTA) in the developed world.world.

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AFTA Plus AFTA is for tariff reduction only & tariff reduction is

nor enough Need to expand liberalization from goods & capital to

services Various measures beyond trade liberalization is

needed such as increase in cooperation in – banking, finance, transport & telecoms, harmonization of standards, harmonization of customs procedures, removal of obstacles to FDI, rules for fair competition, etc.

Since 2000/01, it spread to the following areas: Services (liberalization, facilitation & cooperation), Industry (AICO, SMEs, IPR), Infrastructure (transport, energy & telecoms), Finance (CMI, ASEAN Surveillance Process, ect.), and ICT, tourism, GMS, food & agriculture).

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ASEAN Investment Area (AIA)

• Created in 1995 & inaugurated in 1999• Why AIA? Trade alone is not enough; decline in FDI

after the regional crisis & competition for FDI.• Objectives: -To realize goals to increase FDI flows in

2010 to make the region competitive, open & liberal investment area.

- Seek private sector participation, free flow of capital, skilled labour & technology among members, transparency of investment policies, rules, procedures & procedures administrative processes, coordinated ASEAN investment cooperation, facilitation & promotion

- To give national treatment to all investers- To establish FDI statistics & monitor & Investment

Portal- To organize FDI road shows

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What is the framework of AFTA ?What is the framework of AFTA ?

The Common Effective Preferential Tariff The Common Effective Preferential Tariff (CEPT) Scheme is the centerpiece of the (CEPT) Scheme is the centerpiece of the AFTA.AFTA.

A cooperative arrangement among ASEAN A cooperative arrangement among ASEAN members that would reduce intra-regional members that would reduce intra-regional tariff and remove NTBs (Non-Tariff Barriers) tariff and remove NTBs (Non-Tariff Barriers) over a 15 year period starting from January over a 15 year period starting from January 1, 1993.1, 1993.

It covers all manufacturing products, It covers all manufacturing products, including capital goods and processed including capital goods and processed agricultural products and those outside the agricultural products and those outside the definitions of agricultural products as definitions of agricultural products as defined in Article1 (7) of the agreement.defined in Article1 (7) of the agreement.

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Goals of AFTAGoals of AFTA

AFTAAFTA Tariff ReductionTariff Reduction

0- 5%0- 5% 0%0%

ASEAN 6ASEAN 6 20032003 2010 2010 20072007

CLMVCLMV

VV

20062006 2015 2015 20122012

LL

20082008

CC

20102010

MM

20102010

51


Why AFTA is necessary for ASEAN?Why AFTA is necessary for ASEAN? Political reason: To sustain and enhance Political reason: To sustain and enhance

regional cooperationregional cooperation Economic reason: More of Economic reason: More of ““reactivereactive”” or or

““defensivedefensive”” to the establishment of to the establishment of NAFTA and to enhance regional NAFTA and to enhance regional economic cooperationeconomic cooperation

AFTA will liberalize trade in ASEAN by AFTA will liberalize trade in ASEAN by progressively removing intra-regional progressively removing intra-regional tariff ( to achieve tariff rates to 0 to 5 tariff ( to achieve tariff rates to 0 to 5 per cent), ultimately, non-tariff barriers per cent), ultimately, non-tariff barriers (NTBs).(NTBs).

52

Intra-Asean Trade: Exports (1995-Intra-Asean Trade: Exports (1995-2004)2004)

(US$ mil.)(US$ mil.) 1995 1997 1998 2000 2003 20041995 1997 1998 2000 2003 2004Brunei 1,119.6 1,333.9 685.2 533.3 735.1 870.0 Brunei 1,119.6 1,333.9 685.2 533.3 735.1 870.0 Cambodia -- -- -- 855.4 1.211.5 4,089.0Cambodia -- -- -- 855.4 1.211.5 4,089.0Indonesi 36,435.2 36,266.7 22.777.6 26,733.6 24,520.4 34,838.0 Indonesi 36,435.2 36,266.7 22.777.6 26,733.6 24,520.4 34,838.0 Laos -- -- -- -- 373.0 455.0Laos -- -- -- -- 373.0 455.0Malaysia 58,917.3 62,148.3 48,036.4 63,712.6 65,761.6 79,104.2Malaysia 58,917.3 62,148.3 48,036.4 63,712.6 65,761.6 79,104.2Myanmar -- -- -- 1,106.1 875.4 981.9 Myanmar -- -- -- 1,106.1 875.4 981.9

Philipp 19,150.8 31,059.7 27,231.0 26,432.0 31,098.4 35,683.4Philipp 19,150.8 31,059.7 27,231.0 26,432.0 31,098.4 35,683.4Singapore85,577.7 105,575.8 77.848.3 101,388.8 96,664.2 125,868.8Singapore85,577.7 105,575.8 77.848.3 101,388.8 96,664.2 125,868.8Vietnam -- -- -- 14,483.0 20,176.0 26,660.0 Vietnam -- -- -- 14,483.0 20,176.0 26,660.0 Thailand -- -- -- 67,889.0 78,105.0 94,041.0Thailand -- -- -- 67,889.0 78,105.0 94,041.0

53

Intra-Asean Trade: Imports (1995-Intra-Asean Trade: Imports (1995-2004)2004)

(US$ mil) 1995 1997 1998 2000 2003 2004(US$ mil) 1995 1997 1998 2000 2003 2004Brunei 1,013.0 2,848.6 591.1 534.4 616.9 644.5Brunei 1,013.0 2,848.6 591.1 534.4 616.9 644.5Cambodia -- -- -- 549.1 1,694.1 673.5 Cambodia -- -- -- 549.1 1,694.1 673.5 Indonesia 4,218.9 5,413.0 4,559.2 6,781.2 8,030.3 11,686.0Indonesia 4,218.9 5,413.0 4,559.2 6,781.2 8,030.3 11,686.0Laos -- -- -- 535.0 500.0 600.0 Laos -- -- -- 535.0 500.0 600.0 Malaysia 12,522.6 14,840.1 12,940.0 15,934.8 14,329.5 26,195.1 Malaysia 12,522.6 14,840.1 12,940.0 15,934.8 14,329.5 26,195.1

Myanmar -- -- -- 1,113.3 967.8 951.1 Myanmar -- -- -- 1,113.3 967.8 951.1 Philippine 2,489.1 4,872.8 4,461.0 4,955.4 6,398.1 8,355.9 Philippine 2,489.1 4,872.8 4,461.0 4,955.4 6,398.1 8,355.9

Singapore 24,537.6 30,396.1 23,674.6 33,291.3 31,226.5 37,456.0 Singapore 24,537.6 30,396.1 23,674.6 33,291.3 31,226.5 37,456.0

Thailand 8,820.8 8,121.6 5,438.1 10,306.4 12,616.3 15,834.6Thailand 8,820.8 8,121.6 5,438.1 10,306.4 12,616.3 15,834.6Vietnam -- -- -- 15,637.0 24,776.0 31,600.0 Vietnam -- -- -- 15,637.0 24,776.0 31,600.0

54

Regional Trade Comparison Regional Trade Comparison (ASEAN, NAFTA, EU, Mercosur)(ASEAN, NAFTA, EU, Mercosur)

ASEANASEAN NAFTNAFTAA

EUEU MercoMercosursur

Regional Trade ($ Regional Trade ($ billion)billion)

8282 494494 1,3161,316 1515

Trade Exports ($ Trade Exports ($ billion)billion)

363363 991991 2,1962,196 8888

% Intra Regional Trade% Intra Regional Trade 2323 5050 6060 1717

% Intra Regional Trade % Intra Regional Trade in total World Tradein total World Trade

55 2222 3333 11

Trade intensity IndexTrade intensity Index 4.24.2 2.32.3 1.81.8 13.313.3

Source: ComtradeSource: Comtrade 56

AFTAAFTA’’s Weaknesss Weakness

ASEAN way and ASEAN minus XASEAN way and ASEAN minus X AFTA only covers 15 major AFTA only covers 15 major

commodity groupscommodity groups Non-tariff barriers need to be lifted Non-tariff barriers need to be lifted Do not trust one another despite Do not trust one another despite

their consensus on CEPTtheir consensus on CEPT Do not negotiate collective deals Do not negotiate collective deals

with outsiderswith outsiders

57

AFTAAFTA’’s Weakness s Weakness (cont(cont’’d)d)

Tariff cuts and self-interestTariff cuts and self-interest Malaysia - imported carsMalaysia - imported cars Philippines Philippines –– petrochemicals petrochemicals Indonesia Indonesia –– textiles textiles

ThailandThailand Vietnam Vietnam

No independent dispute settlement No independent dispute settlement mechanismmechanism

Effort to draw up shared procedures and Effort to draw up shared procedures and standards for imports lag far behind tariff cutsstandards for imports lag far behind tariff cuts

Rice

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AFTA: ProspectsAFTA: Prospects

1. AFTA may be completed in time1. AFTA may be completed in time 2. AFTA will have a beneficial impact on ASEAN2. AFTA will have a beneficial impact on ASEAN

REASONS:REASONS:

1. Unless ASEAN moves rapidly to create a single 1. Unless ASEAN moves rapidly to create a single market, it will become less attractive than market, it will become less attractive than NAFTA, EU, MERCOSUR & ChinaNAFTA, EU, MERCOSUR & China

2. Complementarity has increased in the past and 2. Complementarity has increased in the past and has been enhanced with enlargementhas been enhanced with enlargement

3. While reduction of trade barriers could lead to 3. While reduction of trade barriers could lead to short-term dislocations, long-term efficiency short-term dislocations, long-term efficiency gains are in their favour. gains are in their favour.

59

ASEANASEAN’’s cooperation has s cooperation has widenedwidened

Since 1999, ASEAN represented the whole Since 1999, ASEAN represented the whole Southeast Asia. Brunei joined it in 1984, Vietnam Southeast Asia. Brunei joined it in 1984, Vietnam in 1995, Laos and Myanmar in 1997 and Cambodia in 1995, Laos and Myanmar in 1997 and Cambodia in 1999.in 1999.

External multi-lateral linkages with APEC, External multi-lateral linkages with APEC, ANZCERTA, EU, MERCOSUR, NAFTA, UNDP and ANZCERTA, EU, MERCOSUR, NAFTA, UNDP and Dialogue Partners.Dialogue Partners.

Bilateral relations with Australia, Canada, China, Bilateral relations with Australia, Canada, China, India, Japan, New Zealand, Republic of Korea, India, Japan, New Zealand, Republic of Korea, Russia, US, and Pakistan.Russia, US, and Pakistan.

60

Motivating Factors/ Motivating Factors/ Building BlocksBuilding Blocks

PoliticalPolitical- collapse of the Soviet Union & CMEA- collapse of the Soviet Union & CMEA- US embargo- US embargo

- Thawing of political tension- Thawing of political tension- ASEAN- ASEAN’’s adoption on constructive s adoption on constructive engagementengagement

Social & PhysicalSocial & Physical- historical links- historical links

- cultural and ethnic ties- cultural and ethnic ties - geographical proximities- geographical proximities

61

Motivating Factors/ Motivating Factors/ Building BlocksBuilding Blocks

EconomicEconomic- Competition for FDI- Competition for FDI

- Economic Complementarity- Economic Complementarity

- Economic Reforms in CLMV- Economic Reforms in CLMV

- Emergence of regional and sub-- Emergence of regional and sub-regional regional

groupingsgroupings

- Formation of Trade Blocks and Trade - Formation of Trade Blocks and Trade

Protectionism Protectionism 62

Conditions for joining Conditions for joining ASEAN/AFTA (contASEAN/AFTA (cont’’d)d)

An embassy in every ASEAN CapitalAn embassy in every ASEAN Capital Establishment of an AFTA unit and a Establishment of an AFTA unit and a

national ASEAN Secretariatnational ASEAN Secretariat Acceding to basic agreements of Acceding to basic agreements of

ASEANASEAN To participate in all levels of ASEAN To participate in all levels of ASEAN

activities (Head of States, Ministerial, activities (Head of States, Ministerial, SOM, technical staff working groups SOM, technical staff working groups and projects)and projects)

63

Implications of Joining ASEANImplications of Joining ASEANA. Political ImplicationsA. Political Implications

1.1. One and the only Southeast AsiaOne and the only Southeast Asia

2.2. Peace and stability in the region/regional harmonyPeace and stability in the region/regional harmony

3.3. Better confidence buildingBetter confidence building

4.4. Improved dispute resolutionImproved dispute resolution

5.5. More collective bargaining powerMore collective bargaining power

6.6. RegionRegion’’s external security concerns will be strengtheneds external security concerns will be strengthened

7.7. ChinaChina’’s influence ?s influence ?

B. Social-cultural ImpactB. Social-cultural Impact

1.1. More tolerance of outside cultures in the region by socio-More tolerance of outside cultures in the region by socio-cultural and information exchangescultural and information exchanges

2.2. Development of Development of ““Asian ValuesAsian Values”” as a response to the perceived as a response to the perceived ““WesterenizationWesterenization”” of the region. of the region.

THE ASEAN WAY:Agreeing to disagree without being disagreeable

--Noordin Sopiee

64

Implications of Joining ASEAN Implications of Joining ASEAN (Cont(Cont’’d)d)

C. Economic ImplicationsC. Economic ImplicationsI. Overall impactI. Overall impact1.1. More trade and investment links within the regionMore trade and investment links within the region

2.2. More attractiveness of FDI from outside the regionMore attractiveness of FDI from outside the region

3.3. Higher development level expectedHigher development level expected

II. For old membersII. For old members1.1. Greater competition will lead to increase in efficiencyGreater competition will lead to increase in efficiency

2.2. Increase in imports of labour-intensive products from new Increase in imports of labour-intensive products from new membersmembers

3.3. Increase in exports of more capital-intensive products to new Increase in exports of more capital-intensive products to new membersmembers

4.4. Lower costs of labour-intensive products will lead to lower prices Lower costs of labour-intensive products will lead to lower prices (hence lower inflation)(hence lower inflation)

5.5. More foreign direct investment (FDI) to new membersMore foreign direct investment (FDI) to new members

6.6. Greater market accessGreater market access

65

Implications of Joining ASEAN Implications of Joining ASEAN (Cont(Cont’’d)d)

III. For new membersIII. For new members

1.1. Easier to sell agricultural products to old members due Easier to sell agricultural products to old members due to reductions of tariffs and trade barriersto reductions of tariffs and trade barriers

2.2. Imports of manufactured goods and services will Imports of manufactured goods and services will increase.increase.

3.3. More FDI from the region as well as from the outsideMore FDI from the region as well as from the outside4.4. More gain in entrepreneurship from ASEAN experienceMore gain in entrepreneurship from ASEAN experience5.5. Can plug into old ASEAN members in order to expand Can plug into old ASEAN members in order to expand

trade with partnerstrade with partners6.6. Should accelerate and strengthen the economic reformShould accelerate and strengthen the economic reform7.7. Greater market accessGreater market access8.8. More economic reforms expectedMore economic reforms expected9.9. Less state revenue due to tariff reductionLess state revenue due to tariff reduction10.10. Increase in tourismIncrease in tourism11.11. More competitivenessMore competitiveness

66

ASEANASEAN’’s External Linkagess External Linkages

A. ASEAN + 3 (China, Japan and S. Korea)A. ASEAN + 3 (China, Japan and S. Korea) B. Dialogue partners: Australia, Canada, China, B. Dialogue partners: Australia, Canada, China,

EU, India, Japan, Republic of Korea, New EU, India, Japan, Republic of Korea, New Zealand, Russian Federation, United States, and Zealand, Russian Federation, United States, and UNDPUNDP

C. Sectoral Dialogue partners: PakistanC. Sectoral Dialogue partners: Pakistan D. ASEAN + 3 + 3 (India, Australia and New D. ASEAN + 3 + 3 (India, Australia and New

Zealand)Zealand) Cooperation with other international Cooperation with other international

organizations: Group of 8 (Industrialized organizations: Group of 8 (Industrialized countries), World Bank, WHO, ASEM, East Asia-countries), World Bank, WHO, ASEM, East Asia-Latin America Forum, APEC, etc.Latin America Forum, APEC, etc.

ASEAN Regional Forum with 22 member ASEAN Regional Forum with 22 member countriescountries

67

Benefits from Joining ASEANBenefits from Joining ASEAN

Greater trade and investment linksGreater trade and investment links Increased attractiveness to foreign investors Increased attractiveness to foreign investors

outside the regionoutside the region More secured access to a larger ASEAN marketMore secured access to a larger ASEAN market Benefit from improved resource allocation from Benefit from improved resource allocation from

specialization according to competitive advantagespecialization according to competitive advantage Greater economy of scale in an enlarged regional Greater economy of scale in an enlarged regional

marketmarket Enhancement in industrialization prospects of Enhancement in industrialization prospects of

SMEsSMEs Greater spill-over effect, demonstration effect, and Greater spill-over effect, demonstration effect, and

industrial learning effectindustrial learning effect Improve quality control, design and marketingImprove quality control, design and marketing May improve its competitiveness in the world May improve its competitiveness in the world

market.market.68

Costs of Joining ASEANCosts of Joining ASEAN

- Reduction in their capacity to determine their own - Reduction in their capacity to determine their own macroeconomic, trade and investment policiesmacroeconomic, trade and investment policies

- - Inability to protect their infant industries and SOEsInability to protect their infant industries and SOEs

- Balance of payment & balance of trade are affected- Balance of payment & balance of trade are affected

- Customs revenue is affected- Customs revenue is affected

- There may be potential adjustment problems such as - There may be potential adjustment problems such as budgetbudget

deficits, current account deficits, and increasing deficits, current account deficits, and increasing foreign foreign

- Increased inflation- Increased inflation

- Increased in social costs and social crimes- Increased in social costs and social crimes69

ProspectsProspects

Optimistic for the following reasons:Optimistic for the following reasons: All members believe that unless ASEAN All members believe that unless ASEAN

moves rapidly to create a single moves rapidly to create a single market, it will become less attractive market, it will become less attractive than NAFTA, EU, China etc.than NAFTA, EU, China etc.

Complementary has been increased in Complementary has been increased in the past and has been enhanced with the past and has been enhanced with the enlargement of ASEAN since 1995.the enlargement of ASEAN since 1995.

70

Prospects (contProspects (cont’’d)d)

Optimistic for the following reasons:Optimistic for the following reasons: All members believe that while reduction All members believe that while reduction

in trade barriers and non-trade barriers in trade barriers and non-trade barriers could lead to short term dislocations, could lead to short term dislocations, long term efficiency gains are in their long term efficiency gains are in their favor.favor.

ASEAN has 17 years to realize ASEAN ASEAN has 17 years to realize ASEAN 2020. Given the rapid globalization and 2020. Given the rapid globalization and expected accession to throne of CLMV expected accession to throne of CLMV into WTO during period, targets of into WTO during period, targets of Vision 2020 could be realized.Vision 2020 could be realized.

71

Stumbling BlocksStumbling Blocks

Ideological DifferencesIdeological Differences Refugees ProblemsRefugees Problems Territorial DisputesTerritorial Disputes Differences in Economic SystemDifferences in Economic System Differences in Development LevelsDifferences in Development Levels Historical Rivalry and MistrustHistorical Rivalry and Mistrust

72

ASEANASEAN’’s cooperation has also s cooperation has also deepened its economic, political, deepened its economic, political,

social and securitysocial and security It moved forward from PTA to FTA. AIA has It moved forward from PTA to FTA. AIA has

been introduced.been introduced. Number of ASEAN summits increased from 3 Number of ASEAN summits increased from 3

in 10 years (between 1967 and 1987) to once in 10 years (between 1967 and 1987) to once in every three years with informal meetings in every three years with informal meetings between them.between them.

Established ARF and it expanded from 18 Established ARF and it expanded from 18 members to 22.members to 22.

Established COCI and COSD to deepen social Established COCI and COSD to deepen social and cultural relations among members.and cultural relations among members.

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ASEAN Plus Three (ASEAN+3)ASEAN Plus Three (ASEAN+3)

Informal organizationInformal organization Regular meeting since 1994Regular meeting since 1994 Involves economic, social, political, monetary, Involves economic, social, political, monetary,

financial, cultural and transnational issuesfinancial, cultural and transnational issues Miyazawa Plan after the Regional Crisis in 1998 with Miyazawa Plan after the Regional Crisis in 1998 with

$30 mil. as a rescue package$30 mil. as a rescue package The pace of cooperation accelerated since 1999 after The pace of cooperation accelerated since 1999 after

the joint statement on East Asian Cooperationthe joint statement on East Asian Cooperation Currency swap arrangement to be used in Currency swap arrangement to be used in

emergencies surveillance program and Asian emergencies surveillance program and Asian Monetary Fund in 2002Monetary Fund in 2002

Chiang Mai Initiative (CMI), in 2001, outlined a set of Chiang Mai Initiative (CMI), in 2001, outlined a set of financial self-help and support mechanism among 13 financial self-help and support mechanism among 13 countriescountries

74

AFTA PlusAFTA Plus

AFTA is for tariff reduction only and tariff reduction is not AFTA is for tariff reduction only and tariff reduction is not enoughenough

Need to expand liberalization from goods & and capital to Need to expand liberalization from goods & and capital to servicesservices

Various measures beyond trade liberalization is needed such Various measures beyond trade liberalization is needed such as increase in cooperation inas increase in cooperation in- banking, finance, transport & telecoms, harmonization of - banking, finance, transport & telecoms, harmonization of standards, harmonization of customs procedures, removal of standards, harmonization of customs procedures, removal of obstacles to FDI, rules for fair competition, etc.obstacles to FDI, rules for fair competition, etc.

Since 2000/01, it spread to the following areas:Since 2000/01, it spread to the following areas:- services (liberalization, facilitation,& cooperation)- services (liberalization, facilitation,& cooperation)- industry (AICO, SMEs. IPR)- industry (AICO, SMEs. IPR)- Infrastructure (transport, energy and telecoms)- Infrastructure (transport, energy and telecoms)- Finance (CMI, ASEAN Surveillance Process, etc.)- Finance (CMI, ASEAN Surveillance Process, etc.)- ICT, tourism, GMS, food, and agriculture- ICT, tourism, GMS, food, and agriculture

This AFTA Plus pushes on feasibility of AseanThis AFTA Plus pushes on feasibility of Asean’’s economic s economic cooperation and pointing to how it is made possible.cooperation and pointing to how it is made possible.

75

FACTIORS FOR INTENSIFICATION OF FACTIORS FOR INTENSIFICATION OF

ASEAN ECONOMIC INTEGRATIONASEAN ECONOMIC INTEGRATION Infrastructure (Transport, Energy, ICT)Infrastructure (Transport, Energy, ICT) Expansion and Diversification of ASEAN Expansion and Diversification of ASEAN

EconomiesEconomies Competitiveness (Improving Standards & Competitiveness (Improving Standards &

Basic Skills) Basic Skills) Accession of New Member Countries into Accession of New Member Countries into

WTOWTO Good Governance (Public and Private Good Governance (Public and Private

Sectors)Sectors) Strictly following the Targets of AFTA Strictly following the Targets of AFTA

and AIAand AIA76

Critical Success Factors for ASEAN Critical Success Factors for ASEAN Economic IntegrationEconomic Integration

External climate for trade and External climate for trade and peaceful relationspeaceful relations

Appropriate macroeconomic Appropriate macroeconomic management of the economymanagement of the economy

Continuation of economic reform Continuation of economic reform processprocess

Human resource developmentHuman resource development Political will of the governments Political will of the governments

77

ASEAN Institutions to ASEAN Institutions to Strengthen Integration Strengthen Integration

ASEAN Investment Area (AIA)ASEAN Investment Area (AIA) ASEAN Vision 2020ASEAN Vision 2020 Hanoi Plan of Action (HPA)Hanoi Plan of Action (HPA) Vientiane Action Programme (VAP)Vientiane Action Programme (VAP) ASEAN Economic Community ASEAN Economic Community

(AEC)(AEC)

Note: Note: The first 4 institutions will The first 4 institutions will reinforce and strengthen the AEC.reinforce and strengthen the AEC.

78

ASEAN Investment Area (AIA)ASEAN Investment Area (AIA)

- Created in 1995 and inaugurated in 1998- Created in 1995 and inaugurated in 1998 - Why AIA? Trade alone is not enough; decline in FDI after - Why AIA? Trade alone is not enough; decline in FDI after

the regional crisis, and competition for FDI from Chinathe regional crisis, and competition for FDI from China

Objectives:Objectives: - To realize goals to increase FDI flows in 2010 to make the - To realize goals to increase FDI flows in 2010 to make the

region competitive, open and liberal investment arearegion competitive, open and liberal investment area - Seeks private sector participation, free flow of capital, - Seeks private sector participation, free flow of capital,

skilled labour & technology among members, transparency skilled labour & technology among members, transparency of investment policies, rules, procedures & administrative of investment policies, rules, procedures & administrative processes, coordinated ASEAN investment cooperation, processes, coordinated ASEAN investment cooperation, facilitation & promotionfacilitation & promotion

- To give national treatment to all investors- To give national treatment to all investors - To establish FDI statistics and monitor & Investment - To establish FDI statistics and monitor & Investment

PortalPortal - To organize FDI road shows - To organize FDI road shows

79

ASEAN Vision 2020ASEAN Vision 2020

Launched in December 1997Launched in December 1997 Deals with peace, freedom, justice, rule of law, Deals with peace, freedom, justice, rule of law,

neutrality, national and regional resililience, neutrality, national and regional resililience, development & shared prosperity, confidence development & shared prosperity, confidence building and conflict resolution in broad termsbuilding and conflict resolution in broad terms

ASEAN charts a future direction: outward-ASEAN charts a future direction: outward-looking, living in peace, stability & prosperity, looking, living in peace, stability & prosperity, bonded together in partnership in a just, bonded together in partnership in a just, democratic, & harmonious environment, dynamic democratic, & harmonious environment, dynamic development & ever-closer economic integration development & ever-closer economic integration & in a community of caring societies, conscious of & in a community of caring societies, conscious of its of history, aware or its shared cultural its of history, aware or its shared cultural heritage & bound by a common regional identity heritage & bound by a common regional identity

80

ASEAN Vision 2020 (continued)ASEAN Vision 2020 (continued)

Objectives:Objectives: to enhance integration by attempting to strengthen to enhance integration by attempting to strengthen

macroeconomic & financial cooperation, science & macroeconomic & financial cooperation, science & technology, greater eco. Integration, HRD, technology, greater eco. Integration, HRD, environment, etc.environment, etc.

seeks to chart a new direction thro partnership in seeks to chart a new direction thro partnership in development to forge closer eco. integration within development to forge closer eco. integration within ASEAN with emphasis on sustainable and equitable ASEAN with emphasis on sustainable and equitable growth & national & regional resiliencegrowth & national & regional resilience

seeks to create seeks to create ““a stable, prosperous & highly a stable, prosperous & highly competitive ASEAN in which there is free flow of competitive ASEAN in which there is free flow of goods, services & investment, a freer flow of capital, goods, services & investment, a freer flow of capital, equitable development & reduced poverty & soc. eco. equitable development & reduced poverty & soc. eco. disparitiesdisparities

Underlies the importance of regional macroeco. & Underlies the importance of regional macroeco. & financial stability, modern & competitive SMEs, financial stability, modern & competitive SMEs, development of science and technology, food security, development of science and technology, food security, improved infrastructure & communications, HRD, etc.improved infrastructure & communications, HRD, etc.

81

Declaration of ASEAN Declaration of ASEAN Concord II (Bali Concord II) Concord II (Bali Concord II)

(2003)(2003) Seeks to bring the ASEAN Vision Seeks to bring the ASEAN Vision

2020 into reality by setting the goal 2020 into reality by setting the goal of ASEAN Community by 2020of ASEAN Community by 2020

ASEAN Community comprising 3 ASEAN Community comprising 3 pillars; political-security community, pillars; political-security community, economic community & socio-economic community & socio-cultural communitycultural community

3 pillars to accelerate the establish 3 pillars to accelerate the establish the ASEAN Community by 2015 the ASEAN Community by 2015 agreed in Cebu, Philippines in 2007 agreed in Cebu, Philippines in 2007

82

Hanoi Plan of Action (HPA)Hanoi Plan of Action (HPA) Launched in 1998 ASEAN Summit in HanoiLaunched in 1998 ASEAN Summit in Hanoi Time frame: 6 years (1999-2005)Time frame: 6 years (1999-2005) Attempts toAttempts to

- strengthen macro-economic financial cooperation- strengthen macro-economic financial cooperation- enhance greater economic integration- enhance greater economic integration- promote S&T and telecoms infrastructure- promote S&T and telecoms infrastructure- promote social development & address impact of - promote social development & address impact of 1997 crisis1997 crisis- promote HRD- promote HRD- protect environment and sustainable development- protect environment and sustainable development- strengthen its role in regional peace and security- strengthen its role in regional peace and security- Promote awareness standing in the world - Promote awareness standing in the world community & improve its structure and mechanism community & improve its structure and mechanism

83

ASEAN Integration in ITASEAN Integration in IT

SS’’pore Technical Assistance to pore Technical Assistance to CLMVCLMV

Asian IT Belt ( KL Asian IT Belt ( KL –– S S’’pore pore –– BKK BKK –– Shanghai Shanghai –– Tokyo Tokyo –– Seoul) Seoul)

JapanJapan’’s IT Cooperation Fund ( US $ s IT Cooperation Fund ( US $ 15 million) 15 million)

84

ASEAN Economic Community ASEAN Economic Community (AEC)(AEC)

Extension of AFTAExtension of AFTA To form a single market and To form a single market and

production base production base To form a law-based institutionTo form a law-based institution Similar to EEC in 1960s and 1970sSimilar to EEC in 1960s and 1970s Integration stage: between Customs Integration stage: between Customs

Union and Common MarketUnion and Common Market Goal of AEC: 2015Goal of AEC: 2015

85

AEC: Historical BackgroundAEC: Historical Background ASEAN Summit in Kuala Lumpur in Dec.,1997, decided to ASEAN Summit in Kuala Lumpur in Dec.,1997, decided to

transform Asean into a stable, prosperous & highly transform Asean into a stable, prosperous & highly competitive region with equitable eco. Development & competitive region with equitable eco. Development & reduced poverty & socio-eco. disparities (ASEAN Vision reduced poverty & socio-eco. disparities (ASEAN Vision 2020).2020).

Bali Concord II (October 2003) declared the AEC shall be Bali Concord II (October 2003) declared the AEC shall be the goal of regional economic integration by 2020. In the goal of regional economic integration by 2020. In addition, the Politico-Security Community and Socio-addition, the Politico-Security Community and Socio-Cultural Community are the other two integral pillars.Cultural Community are the other two integral pillars.

AEM, held in August, 2006, Kuala Lumpur, agreed to AEM, held in August, 2006, Kuala Lumpur, agreed to develop develop ““a single and coherent blue for advancing the AEC a single and coherent blue for advancing the AEC by 2015by 2015””. .

ASEAN Summit in Jan., 2007, in Philippines, affirmed their ASEAN Summit in Jan., 2007, in Philippines, affirmed their strong commitment to accelerate the establishment of an strong commitment to accelerate the establishment of an ASEAN community by 2015. In particular, the Leaders ASEAN community by 2015. In particular, the Leaders agreed to hasten the establishment of AEC & to transform agreed to hasten the establishment of AEC & to transform Asean into a region with free movement of goods, services, Asean into a region with free movement of goods, services, investment, skilled labour, & free flow of capital.investment, skilled labour, & free flow of capital.

86

Three Pillars of ASEAN Three Pillars of ASEAN CommunityCommunity

The ASEAN Security Community The ASEAN Security Community (focusing on regional political & (focusing on regional political & security cooperation)security cooperation)

The ASEAN Economic Community The ASEAN Economic Community (focusing on regional economic (focusing on regional economic integration)integration)

The ASEAN Socio-Cultural The ASEAN Socio-Cultural Community (focusing on regional Community (focusing on regional socio-cultural co-operation)socio-cultural co-operation)

87

Recommendation of Recommendation of Economic Integration for Economic Integration for

AECAEC Fast-tract integration of priority sectorsFast-tract integration of priority sectors Faster customs clearance & simplified Faster customs clearance & simplified

customs procedurescustoms procedures Eliminations of barriers to tradeEliminations of barriers to trade Accelerated implementation of the Mutual Accelerated implementation of the Mutual

Recognition Arrangements for key sectors Recognition Arrangements for key sectors (eg, electrical and electronic equipments (eg, electrical and electronic equipments and telecommunications equipments)and telecommunications equipments)

Harmonization of standard & technical Harmonization of standard & technical regulationsregulations

88

Objectives of AEC: Vientiane Objectives of AEC: Vientiane Action Plan 2004-2015Action Plan 2004-2015

Intensify current Eco. Cooperation initiatives Intensify current Eco. Cooperation initiatives which are targeted for completion on or which are targeted for completion on or before 2010 as well as accelerate the before 2010 as well as accelerate the integration of the 11 priority sectors.integration of the 11 priority sectors.

Remove barriers to free flow of goods, Remove barriers to free flow of goods, services, and skilled labour and free floor of services, and skilled labour and free floor of capital by 2015.capital by 2015.

Development and implement economic Development and implement economic measures that would put in place the essential measures that would put in place the essential elements for ASEAN in function as a single elements for ASEAN in function as a single market and production base.market and production base.

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Agreement on 3 PillarsAgreement on 3 Pillars

All Heads of ASEAN members also All Heads of ASEAN members also agree that the ASEAN Political-Security agree that the ASEAN Political-Security Blueprint, the AEC Blueprint, and the Blueprint, the AEC Blueprint, and the ASEAN Socio-Cultural Blueprint. ASEAN Socio-Cultural Blueprint.

In addition, IAI Work Plan 2 (2009-In addition, IAI Work Plan 2 (2009-2015), as annexed, shall continue the 2015), as annexed, shall continue the Roadmap for an ASEAN Community Roadmap for an ASEAN Community (2009-2015) and each ASEAN Member (2009-2015) and each ASEAN Member State shall ensure its timely State shall ensure its timely implementation.implementation.

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Replace the Vientiane Replace the Vientiane Action ProgrammeAction Programme

According to the Cha-am Hua Hin According to the Cha-am Hua Hin Declaration on the Roadmap for the Declaration on the Roadmap for the ASEAN Community (2009-2015), all ASEAN Community (2009-2015), all Heads of ASEAN states agree that Heads of ASEAN states agree that the Roadmap for an ASEAN the Roadmap for an ASEAN Community (2009-2015) shall Community (2009-2015) shall replace the Vientiane Action replace the Vientiane Action Programme.Programme.

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AECAEC’’s 11 Priority Sectorss 11 Priority Sectors

AECAEC’’s 11 priority Sectors:s 11 priority Sectors:SectorSector CoordinatorCoordinatorElectronic industryElectronic industryPhilippinesPhilippinesWood-based & AutomotiveWood-based & Automotive IndonesiaIndonesiaRubber-based and TextilesRubber-based and TextilesMalaysiaMalaysiaAgri-based & FisheriesAgri-based & Fisheries MyanmarMyanmare-ASEAN & Health Caree-ASEAN & Health Care SingaporeSingaporeAirlines and TourismAirlines and Tourism ThailandThailand

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ASEAN Economic ASEAN Economic Community BlueprintCommunity Blueprint

I. IntroductionI. Introduction II. Characteristics and Elements of AECII. Characteristics and Elements of AEC A. Single Market and Production BaseA. Single Market and Production Base A. 1. Free flow of goodsA. 1. Free flow of goods A. 2. Free flow of servicesA. 2. Free flow of services A. 3. Free Flow of InvestmentA. 3. Free Flow of Investment A. 4. Free flow of capitalA. 4. Free flow of capital A. 5. Free flow of skilled labourA. 5. Free flow of skilled labour A. 6. Priority integration sectorsA. 6. Priority integration sectors A. 7. Food, Agriculture and ForestryA. 7. Food, Agriculture and Forestry

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Characteristics & Elements of Characteristics & Elements of AECAEC

The ASEAN Summit in 2009 launched for IAI to narrow the The ASEAN Summit in 2009 launched for IAI to narrow the development divide & enhance ASEANdevelopment divide & enhance ASEAN’’s competitiveness as s competitiveness as a region to provide a framework for regional cooperation.a region to provide a framework for regional cooperation.

In 2001, Foreign Ministers adopted the Hanoi Declaration on In 2001, Foreign Ministers adopted the Hanoi Declaration on Narrowing the Development Gap (NDG).Narrowing the Development Gap (NDG).

Vientiane Acton Programme 2004-2010, a medium term Vientiane Acton Programme 2004-2010, a medium term development to realize ASEAN Vision 2020, highlighted the development to realize ASEAN Vision 2020, highlighted the strategic importance of narrowing the development gap to strategic importance of narrowing the development gap to realize the ASEAN Community, and at the IAI be realize the ASEAN Community, and at the IAI be strengthened to address the needs of CLMV and sub-strengthened to address the needs of CLMV and sub-regional areas.regional areas.

The 13The 13thth ASEAN Summit in 2007 agreed the narrowing the ASEAN Summit in 2007 agreed the narrowing the gap which will ensure the benefits of ASEANgap which will ensure the benefits of ASEAN’’s integration s integration efforts are fully realized. The leaders realize that efforts to efforts are fully realized. The leaders realize that efforts to narrow the development gap should be aligned with the narrow the development gap should be aligned with the broader aspects of ASEAN integration initiatives. With the broader aspects of ASEAN integration initiatives. With the acceleration of realization of the ASEAN Community to 2015, acceleration of realization of the ASEAN Community to 2015, these efforts have become even more urgent.these efforts have become even more urgent.

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Characteristics of AECCharacteristics of AEC 1. Asean shall act to an open, outward looking, 1. Asean shall act to an open, outward looking,

inclusive, & market-driven economy consistent inclusive, & market-driven economy consistent with multilateral rules, rule-based system for with multilateral rules, rule-based system for effective compliance & implementation of effective compliance & implementation of economic commitments.economic commitments.

2. AEC will be a single market and production base 2. AEC will be a single market and production base making Asean more dynamic and competitive new making Asean more dynamic and competitive new mechanism& measures. And as a first step mechanism& measures. And as a first step towards realizing the AEC, Asean has been towards realizing the AEC, Asean has been implementing the recommendation of the High implementing the recommendation of the High Level Task Force (HLTF) on ASEAN Integration Level Task Force (HLTF) on ASEAN Integration contained in the Bali Concord II.contained in the Bali Concord II.

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Cont’d:Cont’d:

3. At the same time, AEC will address the development divide & 3. At the same time, AEC will address the development divide & accelerate the integration of the CLMV through the initiative for accelerate the integration of the CLMV through the initiative for Asean integration & other regional initiatives. Other areas of Asean integration & other regional initiatives. Other areas of cooperation are also to be incorporated such as human resource cooperation are also to be incorporated such as human resource development & capacity building , recognition of professional development & capacity building , recognition of professional qualifications, closer consultation on macroeconomic & financial qualifications, closer consultation on macroeconomic & financial policies, trade financing measures, enhance infrastructure & policies, trade financing measures, enhance infrastructure & communications connectivity, development electronic transactions communications connectivity, development electronic transactions through e-Asean; integrating industries across the region to promote through e-Asean; integrating industries across the region to promote regional sourcing; and enhancing private sector involvement of the regional sourcing; and enhancing private sector involvement of the building of the AEC.building of the AEC.

4. Based on the above & taking into consideration the importance of 4. Based on the above & taking into consideration the importance of external trade on Asean & the need for the ASEAN Community as a external trade on Asean & the need for the ASEAN Community as a whole to remain outward looking, the AEC envisages the following key whole to remain outward looking, the AEC envisages the following key characteristics: (a) a single market & production base, (b) highly characteristics: (a) a single market & production base, (b) highly competitive economic region, competitive economic region, ©© a region of equitable eco. a region of equitable eco. development, and (d) a region fully integrated into the global development, and (d) a region fully integrated into the global economy. These characteristics are inter-related and mutually economy. These characteristics are inter-related and mutually reinforcing, incorporating the required elements of each reinforcing, incorporating the required elements of each characteristics in one Blueprint shall insure the consistency & characteristics in one Blueprint shall insure the consistency & coherence of these elements as well as their implementation & proper coherence of these elements as well as their implementation & proper coordination among relevant stakeholderscoordination among relevant stakeholders. .

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Single Market & Single Market & Production BaseProduction Base

An Asean market & production base An Asean market & production base shall comprise 5 core elements: (i) free shall comprise 5 core elements: (i) free flow of goods; (ii) free flow of services; flow of goods; (ii) free flow of services; (iii) free flow of investment; (iv) free (iii) free flow of investment; (iv) free flow of capital; & (v) free flow of skilled flow of capital; & (v) free flow of skilled labour.labour.

In addition, the single market & In addition, the single market & production base also include 2 production base also include 2 important components, namely, the important components, namely, the priority integration sectors, & food, priority integration sectors, & food, agriculture and forestry. agriculture and forestry.

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Elements of AEC (A): Single Elements of AEC (A): Single Market & Production BaseMarket & Production Base

A.1. Free flow of goodsA.1. Free flow of goodsA.2. Free Flow of ServicesA.2. Free Flow of ServicesA.3. Free Flow of InvestmentA.3. Free Flow of InvestmentA.4. Free Flow of CapitalA.4. Free Flow of CapitalA.5. Free Flow of Skilled LabourA.5. Free Flow of Skilled LabourA.6. Priority Integration SectorsA.6. Priority Integration SectorsA.7. Food, Agriculture and ForestryA.7. Food, Agriculture and Forestry

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Elements of AEC (B): Elements of AEC (B): Competitive Economic Competitive Economic

RegionRegionB.1. Competition PolicyB.1. Competition Policy

B.2. Consumer ProtectionB.2. Consumer Protection

B.3. Intellectual Property Rights (IPR)B.3. Intellectual Property Rights (IPR)

B.4. Infrastructure DevelopmentB.4. Infrastructure Development

B.5. TaxationB.5. Taxation

B.6. E-CommerceB.6. E-Commerce

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Elements of AEC Elements of AEC ©©: : Equitable Economic Equitable Economic

DevelopmentDevelopmentC.1. SME DevelopmentC.1. SME Development

C.2. Initiative For ASEAN Integration C.2. Initiative For ASEAN Integration (IAI)(IAI)

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Elements of AEC (D): Elements of AEC (D): Integration Into the Global Integration Into the Global

EconomyEconomyD.1. Coherent Approach Towards D.1. Coherent Approach Towards

External Economic RelationsExternal Economic Relations

D.2. Enhanced Participation in Global D.2. Enhanced Participation in Global Supply Networks Supply Networks

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III. ImplementationIII. Implementation

A. Implementation MechanismA. Implementation Mechanism B. ResourcesB. Resources C. CommunicationsC. Communications D. Review D. Review

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Strategic Schedule for Strategic Schedule for AECAEC

Please see Please see Roadmap for an ASEAN Roadmap for an ASEAN Community 2009-2015Community 2009-2015: One Vision, : One Vision, One Identity, One Community, One Identity, One Community, ASEAN Secretariat, 2009, p. 41-65ASEAN Secretariat, 2009, p. 41-65

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HopeHope

AEC may be fully AEC may be fully implemented in 2015 to implemented in 2015 to widen and deepen the widen and deepen the ASEAN economic integration.ASEAN economic integration.

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ASEAN Economic Integration

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