Bloomberg.com
By Daniel Ten Kate and Shamim Adam
March 2 (Bloomberg) -- Southeast Asian governments want to speed the formation of a European Union-modeled economic grouping, as the global recession slows their export-driven economies. They may not be willing to make the hard choices required to achieve it.
Leaders from the 10-member Association of Southeast Asian Nations, who met in Thailand Feb. 27 to March 1 for their annual summit, signed trade deals and agreements to form an integrated economic community, without a common currency, by 2015. Absent from the agenda were the deep concessions analysts say are necessary to boost growth in the region.
“Asean’s biggest problem is that individual members haven’t been willing to sacrifice for the common good,” said Michael Montesano, a visiting research fellow at the Institute of Southeast Asian Studies in Singapore. “Every European Union member has given up sovereignty to be part of a stronger union, and we haven’t seen that in Asean.”
Wide economic disparity among Asean members has hindered the region’s ability to leverage its market of 570 million people and compete for investments with China and India, the world’s fastest growing economies. Thai Prime Minister Abhisit Vejjajiva, who chaired the summit, called on the bloc to “accelerate” the formation of an “attractive single market.”
Common Standards ‘Difficult’
Southeast Asian leaders agree that closer regional integration would boost growth, Thai Finance Minister Korn Chatikavanij said in an interview. Still, the large differences in wealth among Asean members “makes it difficult to create common standards because our national standards remain so far apart,” he said.
“We’ve got to be realistic in the kind of goals that we set for 2015,” Korn said. “We’re not talking about the level of integration that has taken place in the EU.”
The push for more integration comes at a time when the EU is straining under the pressures created by a similar disparity in the strength of its constituent economies.
Multinational companies have scaled back spending plans because of the global recession, leading to fiercer competition among governments looking to attract investment and create jobs. Singapore has cut corporate taxes for the second time in three years, Malaysia has pledged to liberalize its services sector and Cambodia extended tax breaks for garment makers.
Trade deals such as the one Asean signed with Australia and New Zealand Feb. 28 “won’t make a difference in the short term as long as the drop in global demand doesn’t stabilize,” said David Cohen, director of Asian economic forecasting at Action Economics. “There is no magic bullet.”
Foreign Direct Investment
Two years ago Asean saw foreign direct investment jump 18 percent to more than $60 billion, Singapore Prime Minister Lee Hsien Loong said Aug. 26. China attracted about $83 billion of foreign direct investment that year. The bloc includes Indonesia, Thailand, Malaysia, Singapore, Brunei, the Philippines, Cambodia, Laos, Myanmar and Vietnam.
Singapore, Asean’s richest country, said fixed-asset investments may fall as much as 44 percent this year to S$10 billion ($6.5 billion) as the island slides into recession. By contrast, China announced a 4 trillion yuan ($585 billion) stimulus plan to boost the economy, which the government expects to grow 8 percent in 2009.
The region’s four largest economies -- Singapore, Thailand, Malaysia and Indonesia -- account for almost 90 percent of all foreign investment into Asean. The purchasing power of the group’s four poorest countries was five times less than the other members in 2007, according to statistics on the bloc’s Web site.
No Enforcement Mechanism
Asean’s new charter, which came into force three months ago, has no mechanism to stop member countries from implementing protectionist policies. Earlier this month Indonesia ordered civil servants to use local products, and Malaysian Prime Minister Abdullah Ahmad Badawi said it was “normal” for countries to resort to protectionist measures in a slowdown, according to local media reports.
For four decades, Asean made decisions mainly by consensus, refusing to interfere in the affairs of individual countries. Two years ago the bloc’s leaders signed a charter, the first legally binding document since the group’s founding in 1967.
Governments found to be in violation of its rules will be referred to Asean leaders to come up with a consensus on action. The group rejected proposals to add voting, expulsion or sanctions on its members.
Later this year, Asean plans to finalize a human rights body that cannot tackle country-specific issues. At the summit, Asean leaders sidestepped concerns about the treatment of Myanmar migrants who reportedly died after Thai authorities towed them out to sea, though said “the welfare and well being” of Palestinians in Gaza “was of paramount importance.”
‘Bite the Bullet’
Asean will never become similar to the EU because the political and institutional differences between the countries are too large, said Razeen Sally, a director of the European Centre for International Political Economy in Brussels. Individual countries must “bite the bullet” and make structural reforms on their own to benefit when the global economy recovers, he said.
“The problem with Asean is that they can only arrive at a very low common denominator,” Sally said. “It’s not going to be a strong collective body and we can’t expect it to come up with a strong collective response to global challenges.”
To contact the reporters on this story: Daniel Ten Kate in Cha-am, Thailand at dtenkate@bloomberg.net; Shamim Adam in Cha-am, Thailand at sadam2@bloomberg.net
By Daniel Ten Kate and Shamim Adam
March 2 (Bloomberg) -- Southeast Asian governments want to speed the formation of a European Union-modeled economic grouping, as the global recession slows their export-driven economies. They may not be willing to make the hard choices required to achieve it.
Leaders from the 10-member Association of Southeast Asian Nations, who met in Thailand Feb. 27 to March 1 for their annual summit, signed trade deals and agreements to form an integrated economic community, without a common currency, by 2015. Absent from the agenda were the deep concessions analysts say are necessary to boost growth in the region.
“Asean’s biggest problem is that individual members haven’t been willing to sacrifice for the common good,” said Michael Montesano, a visiting research fellow at the Institute of Southeast Asian Studies in Singapore. “Every European Union member has given up sovereignty to be part of a stronger union, and we haven’t seen that in Asean.”
Wide economic disparity among Asean members has hindered the region’s ability to leverage its market of 570 million people and compete for investments with China and India, the world’s fastest growing economies. Thai Prime Minister Abhisit Vejjajiva, who chaired the summit, called on the bloc to “accelerate” the formation of an “attractive single market.”
Common Standards ‘Difficult’
Southeast Asian leaders agree that closer regional integration would boost growth, Thai Finance Minister Korn Chatikavanij said in an interview. Still, the large differences in wealth among Asean members “makes it difficult to create common standards because our national standards remain so far apart,” he said.
“We’ve got to be realistic in the kind of goals that we set for 2015,” Korn said. “We’re not talking about the level of integration that has taken place in the EU.”
The push for more integration comes at a time when the EU is straining under the pressures created by a similar disparity in the strength of its constituent economies.
Multinational companies have scaled back spending plans because of the global recession, leading to fiercer competition among governments looking to attract investment and create jobs. Singapore has cut corporate taxes for the second time in three years, Malaysia has pledged to liberalize its services sector and Cambodia extended tax breaks for garment makers.
Trade deals such as the one Asean signed with Australia and New Zealand Feb. 28 “won’t make a difference in the short term as long as the drop in global demand doesn’t stabilize,” said David Cohen, director of Asian economic forecasting at Action Economics. “There is no magic bullet.”
Foreign Direct Investment
Two years ago Asean saw foreign direct investment jump 18 percent to more than $60 billion, Singapore Prime Minister Lee Hsien Loong said Aug. 26. China attracted about $83 billion of foreign direct investment that year. The bloc includes Indonesia, Thailand, Malaysia, Singapore, Brunei, the Philippines, Cambodia, Laos, Myanmar and Vietnam.
Singapore, Asean’s richest country, said fixed-asset investments may fall as much as 44 percent this year to S$10 billion ($6.5 billion) as the island slides into recession. By contrast, China announced a 4 trillion yuan ($585 billion) stimulus plan to boost the economy, which the government expects to grow 8 percent in 2009.
The region’s four largest economies -- Singapore, Thailand, Malaysia and Indonesia -- account for almost 90 percent of all foreign investment into Asean. The purchasing power of the group’s four poorest countries was five times less than the other members in 2007, according to statistics on the bloc’s Web site.
No Enforcement Mechanism
Asean’s new charter, which came into force three months ago, has no mechanism to stop member countries from implementing protectionist policies. Earlier this month Indonesia ordered civil servants to use local products, and Malaysian Prime Minister Abdullah Ahmad Badawi said it was “normal” for countries to resort to protectionist measures in a slowdown, according to local media reports.
For four decades, Asean made decisions mainly by consensus, refusing to interfere in the affairs of individual countries. Two years ago the bloc’s leaders signed a charter, the first legally binding document since the group’s founding in 1967.
Governments found to be in violation of its rules will be referred to Asean leaders to come up with a consensus on action. The group rejected proposals to add voting, expulsion or sanctions on its members.
Later this year, Asean plans to finalize a human rights body that cannot tackle country-specific issues. At the summit, Asean leaders sidestepped concerns about the treatment of Myanmar migrants who reportedly died after Thai authorities towed them out to sea, though said “the welfare and well being” of Palestinians in Gaza “was of paramount importance.”
‘Bite the Bullet’
Asean will never become similar to the EU because the political and institutional differences between the countries are too large, said Razeen Sally, a director of the European Centre for International Political Economy in Brussels. Individual countries must “bite the bullet” and make structural reforms on their own to benefit when the global economy recovers, he said.
“The problem with Asean is that they can only arrive at a very low common denominator,” Sally said. “It’s not going to be a strong collective body and we can’t expect it to come up with a strong collective response to global challenges.”
To contact the reporters on this story: Daniel Ten Kate in Cha-am, Thailand at dtenkate@bloomberg.net; Shamim Adam in Cha-am, Thailand at sadam2@bloomberg.net
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