Let A Hundred Flowers Bloom!

Introducing ASEAN; Changes in 2015; & Free Trade

‘what it means’

ASEAN

nearly 30% of China’s

10 countries $2.4 trillion GDP600 Million people

199919971995199719841967

How ASEAN came about

Bangkok Declaration5 ASEAN founding members - Indonesia, Singapore, Philippines, Malaysia and Thailand – in a display of solidarity against Communist expansion in Vietnam and communist insurgency across the region

Brunei joined Myanmar

joinedVietnam joined

Laos joined

Cambodia joined

Southeast Asia is a post World War II political concept as much as a geographic oneAn example of Jaw-jaw to prevent war-war – e.g. Indonesia/Malaysia conflict 1963-1966

ASEAN Secretariat is in Jakarta, Indonesia

What ASEAN is not

ASEAN is not a Southeast Asian EU and never wants to be:EU is about limiting national sovereignty and obliging compliance with directives determined by Qualified Majority Voting (with some opt-outs)

The ASEAN way:

Legally-binding decisions on members, yes. But based on unanimity.

Means decision-making runs at the pace of reaching consensus

Fierce preservation of national sovereignty

An Association of Unequal Equals

• Indonesia & Thailand are Premiership• Malaysia; Vietnam and Philippines 1st division

ASEAN is a GDP success but it’s relative

Singapore’s financial sector far outweighs its real economy and population size

While a tad larger than India’s economy, across 10 countries it is expensive and complex to access the ASEAN market

DEMOGRAPHIC BONUS

• Compared to other Economic regions ASEAN benefits from a young population:

• good for macro-economics (bigger workforces to support seniors)

• good for companies selling to consumers in terms of medium-long term demand growth

• posing unique challenges for higher and technical education / training, in terms of both infrastructure and teaching resources

ASEAN PopulationThere are other significant differences between ASEAN members:

• Life expectancy ranges from a high of 80.7 years in Singapore, to a low of 62.3 and 62.7 years in Cambodia and Myanmar respectively

• UN Human Development Index scores rank from a high (Singapore) of 0.85 out of 1.0, 27th in the world, to lows of 0.45 (132nd); 0.49 (124th) and 0.50 (122nd) for Myanmar, Cambodia and Laos respectively

• Healthcare spending/GDP is low:

• USA 17.5%• OECD average 9.5%• China >5.5% • Asian average 4.5%• ASEAN <4%

• Indonesia <3% before ‘leakage’• Malaysia <4%

Indonesia; 244.47

Thailand; 64.38Malaysia; 29.46Singapore; 5.41

Philippines; 95.8

Vietnam; 90.39

Myanmar;

63.67Brunei; 0.4

Cambodia; 15.25

Laos; 6.38

In millions of people, by country

IMF 2012 estimates

ASEAN Connectivity

ASEAN Economic Community 2015

ASEAN Connectivity is a three part initiative - physical - Institutional - People

‘CONNECTIVITY’ MEANS

– Regional power transmission grid

– Single maritime and aviation market (& ATC coordination)

- Development of end-to-end road/rail/port transportation networks:

“I put my exports from my new low-cost factory in Cambodia on a train; and it goes to Singapore via Thailand and Malaysia – no customs; no tariffs – and gets shipped to the US from Singapore’s container port”

- Mobility for high-skill labour (but not free-movement of labour)

- Corporate ‘passporting’ between members states (registration; licensing; contracting and investment capital)

ASEAN Economic Community 2015

10 ASEAN countries have the potential to be a manufacturing and

trade market as big as India

- Singapore’s financial market - Indonesia’s raw materials - Thai manufacturing

• 600 million consumers

Raw material sourcing; manufacturing base to

export worldwide

BUT- Some areas of national protectionism and Non-Tariff Barriers (NTBs)- A democratic deficit? Most ASEAN citizens don’t know about 2015 - ASEAN is a purely ‘top-down’ national leadership issue: who will control

ASEAN in the future?

• Single supply-chain

• Single Market

Current pan-regional FTA negotiations

• RCEP is the ASEAN-led plan (a ‘twentieth century solution to a twenty-first century challenge’), due 2015

• TPP – a ‘space age solution’ within, but separate to, APEC

• TPP - extensive regulatory alignment over labour law, environmental and intellectual property protection.

• RCEP ‘sets the bar low’

Reach of Free Trade Agreements

RCEPTPP ACFTA

APECWorld’s Biggest Trade Bloc

44% global trade

21 countries

40% world’s population

54% world GDP

China & ASEAN

ACFTA (aka

CAFTA)ASEAN China free trade

agreement

• $400bn in 2012• $850bn by 2020China wants $1 trillion by 2020

MARKET of 2 BILLION people

90% of ASEAN exports to China are tariff-free

$500m fishing, environment & maritime fund

150,000 scholarships to China by 2018

Trans-Asian Railway project to link China, India &

ASEAN

The Paradox at the heart of ASEAN’s future

• “Southeast Asia is not a country and ASEAN is not an Asian EU”

• The ‘ASEAN way’: consensus & unanimity for legally-binding outcomes, but ASEAN’s WTO-like dispute mechanism has never been triggered

• ASEAN “must prepare for the establishment of the ASEAN Community with robust mechanisms to support a rules-based community”

• “[ASEAN] must wake up from its archaic top-down approach & begin building strong institutions…”

What impact will the centrifugal force of the ASEAN Economic Community, from 2015, have on an Association that has member state

sovereignty at its core?

2015

Engaging with ASEAN

• Because of the sovereignty enshrined in the ASEAN Charter, for detailed policy dialogue it is recommended to engage with member states.

• So too engaging with countries with a track record of detailed policy engagement with ASEAN especially the ‘+3’ (China, Korea & Japan)

• Although quite siloed – which can make internal mapping complex – so much can be learned from the ASEAN Secretariat as it manages the work-flow of member states’ committees e.g. ASOMM – the ASEAN senior Officials Meetings on Minerals - amongst very many

• ASEAN is not the EU: the Secretariat (unlike the EU Commission) doesn’t drive policy development or have its own policy agenda

Engaging with ASEAN

• The ASEAN business advisory council is not so much directly influential on policy thrust as it is a superb way of getting collective member state ‘temperature’ on policy issues. Its events have excellent networking potential, including with high-level policy-makers

• The ASEAN Foundation works on ASEAN awareness amongst member state populations; poverty reduction; capacity building and education. More MNCs are working with the Foundation as part of their CSR programs. Needs more ambitious reach?