Regional Economic Integration: The Challenges Ahead

Article excerpt

I should like, together with you, to trace the evolution of regional economic integration in ASEAN, examine its nature, define its current status, and put forward some views on what else needs to be done to advance its essential purposes; that is, as the title of this workshop suggests, what are today's challenges for closer economic integration in Southeast Asia.

In 1967, in this very city, ASEAN was founded for three interlocking and ambitious objectives regional peace, stability and prosperity. From the beginning, economic co-operation was to be a key to achieving these goals. At the time, the Indochina war was raging. The Cold War was threatening to wipe out the hopes of Southeast Asia's people for a better life. Disputes among the nations of the region continued to unsettle it.

In these unpromising circumstances, the countries of Southeast Asia set their minds, their labours and their resources on the development of their economies. At the same time, it became increasingly clear that their national programmes for development and prosperity would be strengthened and made more effective by openness to and co-operation with the rest of the world, particularly and above all within the region. Economic co-operation would give each member of the new association a stake in the economic well-being of the others and thus serve as a potent force for regional peace. This was the logic of the European Communities and the European Common Market. Firmly locking their economies together would bind together the core nations of Europe so closely that the wars that had so ravaged the continent for centuries would be unthinkable in the future. At the same time, peace among nations and economic progress for their peoples would bring about a measure of stability that would make further development possible.

Thus, ASEAN laid down programmes of co-operation in industry, minerals and energy, in finance and banking, in transport and communications, in food, agriculture and forestry. The ASEAN countries devised schemes like the ASEAN Industrial Projects and the ASEAN Industrial Joint Ventures. They set up the Preferential Trading Arrangements.

They used such programmes, schemes and arrangements not only to help their own national development efforts but also to build confidence among themselves, develop personal relationships among their leaders, and cultivate a sense of regional identity among their peoples.

AFTA is Born

After many years, they realized and decided that these tentative and modest measures for regional economic co-operation - nobody dared talk of economic integration in those days - were not enough. Looking to the future, the ASEAN leaders knew that these measures would not be enough to bring about the economic efficiencies and attract the investments essential for their countries' continued development.

At their fourth summit, in Singapore in 1992, ASEAN's leaders decided to move ASEAN to an entirely new stage in their countries' economic relations, to make the leap from co-operation to integration, by resolving to transform the region into a free trade area. In fifteen years, tariffs on goods traded within ASEAN, with some exceptions, would be eliminated or reduced to a maximum of 5 per cent. This commitment would be subject to legally binding schedules of tariff reductions. Most exceptions would be phased out according to fixed timetables.

The objective was to create an integrated ASEAN market for trade in goods. Such an enlarged market would attract investments much more effectively than the much smaller national domestic markets. It would thus be a further stimulus for growth. It would also raise, for ASEAN members, the stakes in one another's purchasing power and economic progress.

In four years, from 1993 to 1997, the value of intra-ASEAN trade almost doubled, from less than US$44 billion to more than US$85 billion, from less than 21 per cent to almost 25 per cent of total trade. …