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By ERIC BELLMAN
NUSA DUA, Indonesia—Southeast Asian nations will continue to work toward integrating their diverse economies despite the recent problems the European Union has had with its struggling members, one of the Asian region’s top leaders said Thursday.
The 10-member Association of Southeast Asian Nations has been working for years to try to become one of the world’s biggest economic blocs by lowering barriers to the flow of people, products and capital across its many borders.
But its economic integration plans, many of which are supposed to be implemented by 2015, have been held back by lingering suspicions about the project among some of the region’s national leaders. Some of them point to Europe, where more extensive integration helped spur growth in many areas but also made it harder to deal with problems such as the 2008 financial crisis and the recent debt woes in Greece and elsewhere.
Southeast Asia won’t repeat the same mistakes as the EU, said Asean Secretary General Surin Pitsuwan in an interview. For example, no one in the association is thinking of allowing fully free labor flow or a unified currency, he said.
“The European model is not our model, it is only our inspiration,” he told The Wall Street Journal on Thursday. “We are looking at the European Union knowing we are not going to travel that road.”
Mr. Surin is attending a summit of foreign ministers and other top diplomats from Asean countries who are meeting on Indonesia’s resort island of Bali this week to discuss everything from recent tensions in the South China Sea to ways to encourage democracy in the region. They are joined by some of their counterparts from China, the U.S. and Japan as well, underlining the growing importance of the region economically and geopolitically.
The 43-year-old Asean organization has long suffered from a reputation of being little more than talk shop, and some analysts have argued that a looser version of the EU can never work, because it would lack enough central authority to enforce common rules across the region.
Even so, Asean is eyeing some form of closer integration of its economies as a way of becoming a more serious global player while showcasing the region as the world’s next big economic opportunity, with a population of nearly 600 million people wedged between emerging-market giants China and India. With a combined gross domestic product of $1.7 trillion, Asean is bigger than India.
“We find the Asean economy to be sizable, the sixth-largest economy in the world if the euro area is taken as a single block,” wrote Edward Teather, an economist at UBS, in research report about Asean integration last month. “By more efficiently using Asean’s existing pools of labor and capital, increased integration could support growth.”
For now, Asean remains a patchwork of nations with radically different economic and social profiles. Singapore’s GDP per capita in 2009 was close to $37,000 per year, where in Indonesia it was around $2,400 and in Myanmar it was only $419. Varying restrictions on capital mean that average lending rates in Cambodia were 23% in 2009 while in Malaysia they were 5.5%. The other members of Asean are Laos, the Philippines, Thailand, Vietnam and Brunei.
Economic integration is difficult “because of the diversity in the economic and the financial areas as well as governance, historical, linguistic, culture and religion,” said Mr. Surin. “We want something that would accommodate the differences among us while creating synergies.”
In the past, analysts note, trade with nearby neighbors wasn’t a priority for most members of Asean, whose economies to a large degree are driven by exporting products to markets such as the U.S. and Europe. On average only around 25% of Asean’s exports and imports are within the bloc. Mr. Surin said members would like to see that ratio jump to 35% in the next four years as the association lowers barriers to trade and backs better infrastructure for the region.
Despite some of the skepticism over integration, he said the association has already gotten rid of most tariffs among members and is now tackling nontariff barriers such as import quotas and quality regulations. It is also supporting the building of railways, ports and road corridors to make it easier to move goods around the region.
He said members have agreed to eventually allow certain types of skilled workers such as accountants and architects to roam the region freely without the need for working visas in each country. The same freedom won’t be allowed for unskilled workers because the richer countries are worried they would be inundated by laborers from the less-developed members.
“We want to make sure our institutions, our standards and our procedures in customs, immigration and quality restrictions will work together to allow more trade, more investment and more exchange,” he said. “We can’t allow the free movement of people like in Europe because there would lead to a lot of problems with economic migrants.”
He also noted that some international companies are already planning to tap the new market that will be created as more barriers come down.
“Many multinational corporations are now setting up Asean departments and offices for Asean, getting ready to take advantage of the landscape that we have created,” Mr. Surin said.
Write to Eric Bellman at [email protected]
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Source: The Wall Street Journal, July 22, 2011
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