Winners and losers in ASEAN 2015

6 04 2014

A number of ASEAN firms are taking steps towards grabbing opportunities that ASEAN 2015 could bring but some sectors also stand to lose out

By Ronald U. Mendoza and Charles Siriban

Economic integration in the form of free(er) movement of goods, capital and people will typically yield what economists call “efficiency gains” for a country – benefits derived through specialization, competition and better allocation of resources in production.

This is the fundamental bedrock of free trade; and this process can serve as an engine of high and sustained growth. Yet is this growth necessarily inclusive?

Critics are right to point out that these macro-level gains are not necessarily a guarantee that everyone shares in these benefits – Yes, the pie will grow, but who gets to share? Inclusiveness depends on whether most sectors are able to compete, and ultimately, whether competition brings out better products and services for most consumers.

Observations of strategic adjustments by ASEAN firms in a database being constructed by the AIM Policy Center suggest that some of the most competitive firms in the region are already taking decisive steps to take advantage of the opportunities that ASEAN 2015 could bring. Yet there are also sectors that may stand to lose out; and that is where public sector intervention is critical in order to make the integration process a fair one.

Banking

The banking industry is a key sector to watch as consolidation and network externalities (more branches and more customers spell lower costs on the margin and higher profits) take place. As expected, several regional giants are seeking to gain a foothold and expand in relatively underdeveloped markets.

In the CLMV (Cambodia, Laos, Myanmar and Vietnam which together account for approximately 167 million of 617 million people in ASEAN), Thai banks like Bangkok Bank, Krungthai Bank and Siam Commercial Bank, are pursuing expansionary strategies. Many of these same banks join DBS Holdings (a Singaporean bank trying to acquire Indonesian PT Bank Danamon) and Affin Holdings Bhd (a Malaysian banking group trying to acquire a majority share of Indonesian PT Bank Ina Perdana) in expanding in Indonesia, the largest ASEAN member country (population of about 250 million or about 40% of ASEAN).

The top 2 Malaysian banks (Maybank and CIMB) have also started penetrating the Philippine banking market, with Maybank planning to increase its branches in the Philippines to 100 in 2014 and 200 by 2018.

Manufacturing

Various manufacturing firms are now also trying to break into (or expand existing facilities in) CLMV. For instance, Universal Robina Corporation (Philippines) plans to spend US$20-30 million to set up food manufacturing facilities in Myanmar. Asiawide Refreshments Corporation (exclusive manufacturer and distributor of RC Cola in the Philippines) will similarly set up manufacturing facilities in Myanmar and Thailand. Also, Singha Corporation (Thai manufacturer of beer products) plans to set up a brewery in Myanmar (to tap potential markets in Myanmar and Southern China) and also aims to tap Cambodian and Vietnamese markets.

In addition, Thai Beverage Company together with its sister company, TCC Assets, acquired a majority ownership of Fraser and Neave Ltd., a major player in the Singaporean and Malaysian softdrinks market.

Air transport

Lion Group ordered 230 Boeing 737 jets in a deal worth $22.4 billion in 2011, and 234 Airbus medium haul aircrafts in a deal worth $23.8 billion in 2013. Air Asia Group purchased an additional 100 Airbus planes (worth $9.4 billion) in line with its expansion goals in ASEAN. Cebu Pacific acquired a 40% stake in TigerAir Philippines, while Air Asia Philippines acquired a 49% stake in Zest Air (creating Air Asia Zest).

Utilities and infrastructure

San Miguel Corporation acquired 65% of Esso Malaysia (from Exxon Mobil) for M$1.8 billion in 2011 (in this case, all Esso stations in Malaysia are now rebranded to Petron), and established a consortium with Citra group whose projects include construction of tollways and other road infrastructure projects in Philippines and Indonesia.

Further, Manila Water, which has a 49% stake in one of the main suppliers of water in the northern part of Ho Chi Minh City, has acquired 51% equity share of the water concessionaire in charge of the Western Zone of Jakarta. In addition, Meralco engaged in a joint venture with First Pacific Co acquiring 70% stake on an 800 MW Liquefied Natural Gas project on Jurong Island in Singapore from the GMR Group (a Singaporean firm).

Sugar

Nevertheless, not all firms or sectors will end up winners in the integration project. Some will undoubtedly be affected by increased competition (even as consumers end up benefiting from lower prices and better products). Turning to the Philippines, the sugar industry is an example. It is expected to contract with the onset of increased competition from ASEAN.

Through Executive Order 892, the country committed to gradually reduce its sugar tariff from 38% in 2011, to 28% in 2012, to 18% in 2013, to 10% in 2014 and finally to 5% starting 2015.

Separate simulation studies by Caesar Corporaton (International Food Policy Research Institute) and Randy Tuaño (Ateneo de Manila) predict that the reduction of protection in this sector (e.g. tariff reduction and elimination of quotas) could produce welfare gains for Philippine consumers and industries that use sugar as an input.

Hence even as the sugar industry itself may suffer a contraction, the gains in other sectors, according to these studies, could more than make up for these expected losses. (Remember that with free trade, the cost of some imported goods like sugar is expected to go down, leading to cheaper inputs in producing other goods.) In fact, about 70,000 people on net could move out of poverty as a result of liberalizing this sector. Other sectors’ competitiveness will be unleashed; and consumers will be better off.

These studies bring us to the crux of the issue as regards international economic integration. Many countries have been able to use more economic openness as a means to boost their industrialization and job creation, thus reducing poverty much more aggressively. This is the story of China, the ASEAN tiger economies and virtually any other developing country that made significant inroads in development in the past several decades.

Government support in these countries appears to have been applied with some discipline. Industries and companies receiving support were guided by clear targets on penetrating international markets, acquiring new technologies and generating competitive products – all leading to more robust employment generation.

Economic openness more or less guarantees efficiency gains so that the entire country ends up growing more (a net gain); but more integrated markets do not guarantee that all sectors will end up winning. The most competitive sectors will likely corner the lion’s share of gains, though it might help if some of these sectors are labor-intensive so more could people participate in the gains.

This is, of course, the case for manufacturing; and this is why efforts are now underway in the Philippines to boost these sectors through the government’s “new industrial policy.”

Yet for those sectors that will contract, it is only fair to consider adjustment and compensation mechanisms so that the overall result of integration is acceptable to the entire population. And this is where the tricky part is – support must not prolong inefficiency. Here there is much to be learned from how effective social protection support for the poor is provided. The latter is disciplined and evidence-based – providing temporary support, conditioned on measurable outcomes and impact.

Accordingly, the support provided to firms and sectors should have clear objectives – either they take adequate steps to boost productivity and/or employ more people, or slowly ease out of that industry if they are unable to do so. If we can expect poor families under the Philippines’ Pamilyang Pantawid Program (4Ps) to abide by the discipline of child-outcomes-based government support, then we should also be able to extend and enforce similar outcomes-focused programs for the firms and sectors that the country supports for the sake of the general welfare.

The authors belong to the Asian Institute of Management Policy Center.

Source :

Rappler.com





The failure of ASEAN leadership?

25 03 2014

by Maria A. Ressa

It was a packed auditorium – a surprisingly gentle and curious audience at the Australian National University (ANU) looking for reasons to be excited about the Association of Southeast Asian Nations (ASEAN), a 10-member grouping of more than 630 million people that represents Australia’s 2nd largest trading partner.

Yet, Vietnamese career diplomat Le Luong Minh, who took over the leadership of ASEAN last year, couldn’t help but disappoint them because in many ways he represents much of what’s wrong with ASEAN today.

ASEAN Secretary-General Minh opened with a speech that did little to excite the audience. He focused on ASEAN’s 6 pillars when it was formed in 1967 and its most ambitious project since then – creating one regional economic grouping, the ASEAN Economic Community (AEC) slated to come together by December 2015.

Someone asked about tensions between Australia and Indonesia, ASEAN’s largest member, over asylum seekers and recent wiretapping charges from NSA classified documents.

“I hope these bilateral issues can be resolved amicably,” said ASEAN’s leader. “We have not seen any negative impact of that bilateral relationship on the ASEAN-Australian partnership.”

On ASEAN’s most contentious issue – the conflict between China and many ASEAN member countries in the South China Sea, Minh said, “ASEAN is of the view that it needs to be resolved, but it can only be resolved, and it should only be resolved, between the parties concerned.”

Minh was safe, uninspiring and bureaucratic. ASEAN insiders say it’s the luck of the draw, and that the rotating head of ASEAN moves from a politician like former Thai Foreign Minister Surin Pitsuwan, who can inspire outside interest, to a bureaucrat who can set the ASEAN house in order like Minh, who was Vietnam’s Deputy Minister for Foreign Affairs before leading ASEAN. From 2004-2011, Minh was Vietnam’s Permanent Representative to the United Nations.

Unfortunately, he’s also ASEAN’s least likely salesman.

Dynamic time

Yet, it’s an exciting and dynamic time when a single, liberalized ASEAN could boost investments significantly. There’s also an opportunity for ASEAN to provide much needed leadership at a time of shifting geo-political power.

ASEAN is at a crossroads. Created at a time of global dominance by the United States, times have changed – with economic power shifting to China. Instead of taking leadership, ASEAN is in danger of becoming a low-intensity proxy battlefield.

Nations like the Philippines, Malaysia and Indonesia are unprepared for open conflict with China or even for negotiating with China over the South China Sea. Many ASEAN nations turn to the United States for defense support. At the same time, ASEAN’s poorer nations, Cambodia, Laos and Myanmar, have become so dependent on China that analysts call them “client states of Beijing.”

This leaves an opening for Australia, ASEAN’s 1st dialogue partner.

“ASEAN does have an identity in Australian diplomacy, and it’s a positive one,” said Senator Brett Mason, the Parliament Secretary to the Minister for Foreign Affairs, who acknowledged the changing global power structures and Australia’s shifting focus to Asia. “It’s a forum that could be used more creatively and more fully, but I don’t think it’s ineffective.”

I’ve been reporting on ASEAN since 1987. I was there in the late 1990s when Cambodia, Laos, Vietnam and Myanmar were admitted in the grouping, creating a three-tiered system because these economies lagged far behind original members Indonesia, Thailand, Malaysia, the Philippines and even more affluent Brunei and Singapore.

Like many Asians, I hoped constructive engagement would be a different way to push reforms, more effective than the confrontational push from the West, but decades later, constructive engagement remains an excuse – a failure of leadership. Reforms in Myanmar, which was the main focus of constructive engagement, were fueled by an internal process – with little help from ASEAN.

During the financial crisis of 1997, which started in Thailand and spread to Indonesia, the nations turned, not to ASEAN, but to the International Monetary Fund (IMF). When smog and haze from forest fires in Indonesia that same year engulfed cities in Malaysia and Singapore, ASEAN proved incapable of working together to prevent this near-annual event that continues to plague the region today.

In 1999, ASEAN was criticized for failing to hold Indonesia accountable for what was effectively a scorched earth policy in East Timor. Leadership then came from Australia, which led INTERFET, an international non-UN peacekeeping force.

In the late 2000s under pressure from some members, ASEAN formed a human rights body that’s stayed largely silent on ongoing human rights violations within ASEAN, like in Vietnam or the Rohingyas in Myanmar.

Fissures over China

Dealing with China clearly shows the fissures inside ASEAN. At the July, 2012 meeting in Cambodia, conflict erupted openly. For the first time ever, the foreign ministers failed to agree on a joint statement – with Filipino officials storming out of the meeting. Other ASEAN states accused host Cambodia of working against ASEAN interests by protecting China, Cambodia’s largest trading partner. Two months later, Cambodia announced $500 million in new assistance from China.

While largest nation and founding member Indonesia tried to use shuttle diplomacy for a satisfactory agreement, ASEAN again fell short of leadership.

Still, Australian officials seem optimistic.

On March 19, Australian Foreign Minister Julie Bishop hosted ASEAN’s Secretary-General Minh for the 40th anniversary of a partnership she says now prioritizes trade, investment, regional security and education.

40 YEARS. ASEAN Sec Gen Le Luong Minh with Australian Foreign Minister Julie Bishop 40 YEARS. ASEAN Sec Gen Le Luong Minh with Australian Foreign Minister Julie Bishop

“The extent of government contact – economic, financial – really is at a much higher level now than a decade before that,” a senior foreign affairs official told me. “Building ties just below the political level, senior level official contact, over the last decade has given our relationship a lot more ballast than ever before.”

The problem lies in two areas: ASEAN makes decisions based on consensus, unwieldy in today’s fast-moving world and in an organization that spans a wealth gap from Singapore to Laos; and that wealth gap leads to differences in leadership experience and style.

Cambodia, Laos, Vietnam and Myanmar tend to have fewer officials capable of participating fully in meetings held in English. The most progressive of these nations, Vietnam, used government money to train a new generation of foreign service diplomats like Minh.

Consensus not enough

Still, the skills needed for consensus building are not enough to inspire faith in the ASEAN way, and senior officials who have led ASEAN, with few exceptions, have not had the charisma or status to demand necessary meetings with heads of states.

In order to effectively push forward an ambitious ASEAN agenda of one market, ASEAN must move faster, and its leader must lead – not just within ASEAN but among its dialogue partners and potential investors.

“While there’s so much criticism about ASEAN in terms of leadership, ASEAN is all we have to work with,” said Deakin University’s Dr. Sally Wood. “I don’t know if they ever really expected that they would reach this level of centrality. There are so many contending national interests in the region. So that makes it very challenging for ASEAN to be able to speak with one voice.”

ASEAN Sec-Gen Minh is trying to fill a tall order, and insiders say his experience is helping build the organization behind the scenes. At ANU, he said he’s optimistic that the economic integration of ASEAN, which promises a single market and a highly competitive region, will happen as scheduled on December, 2015.

“ASEAN has implemented about 80% of all the measures,” he told the audience at ANU.

Not all agree.

“We’ve got to be realistic. I cannot see that this is going to happen,” said Professor Andrew Walker, Acting Dean of ANU College of Asia and the Pacific.

“It looks unlikely that AEC 2015 will be met,” added Wood. “Perhaps it doesn’t matter that it won’t be realized in 2015, but that ASEAN is working on it.”

Source :

Rappler.com





An ASEAN Intra-Energy Market?

11 03 2014

By George Lerner

There are huge potential advantages for ASEAN if it can integrate its energy market.

Can ASEAN build an integrated energy market, one that is “less volatile, more flexible and resilient” courtesy of “regional cooperation such as infrastructure connectivity, trade and investment arrangement, and the harmonization of regulatory and technological framework[s],” as envisioned by the Economic Research Institute for ASEAN and East Asia?

The ASEAN Council on Petroleum (ASCOPE) has proposed in its revised Masterplan 2008 to connect ten member states together via a linked energy superhighway of pipelines currently under construction, with five slated to be finished by 2020, equaling more than 9820 km of pipeline, and costing upwards of $17 billion. Sounds promising, but with one problem: there has been little discussion of the regional cooperation needed to make this happen. And the necessary steps – a dialogue to coordinate trans-regional harmonization of legal structures, and the fanning of executive powers for the ASEAN Secretariat – remain elusive.

Over-promising timetables for such an important project is as much a threat to ASEAN energy security as is the energy imbalance that now exists between producers and importers. For example, Thailand’s Chulalongkorn University, and its ASEAN Energy Market Integration group, argue that ASEAN-member states might lose interest and look elsewhere for investment and cooperation if the stalled intra-ASEAN energy process leaves a community of 600 million, the world’s fifth largest economy by GDP, without a clear plan of action yet with so much already in place.

ASEAN will require, the International Energy Agency’s World Energy Report of 2013 forecasts, a staggering $1.7 trillion of cumulative investment in energy supply infrastructure, to become both a leading supplier and a hub of energy, by 2035. Such developments could rekindle the region’s drooping growth rates and expected slowdown, and advert supply scarcity in the long-term.

Already, ASEAN already has 3,020 km worth of pipeline built across the region, according to Francoise Nicholas, of the think tank the French Institute of International Relations, based in Brussels. Further investment, in the form of actually connecting the pipelines together and forming a regional body to not only administer and arbitrate, but also to coordinate R&D and maintain low price levels through efficient supply channels, could be a huge boon to regional cooperation.

But Basil Constantinescu, the Special Advisor to ASEAN from the EU, argues that while 80 percent is great, many stakeholders realize the other 20 percent will be much harder to achieve. Specifically, to accomplish the remaining 20 percent will require ASEAN to learn from the experiences of the European Union, North American Free Trade Area, Mercado Comun del Sur, and the Central Asia region. Adoracion Navarrob and Maxensius Tri Sambodoc have detailed this in their paper on “The Pathway to ASEAN Energy Market Integration” for the Chulalongkorn project.

They argue that liberalization, not harmonization, could be an effective tool to circumnavigate any timidity or trepidation in the region. Indeed, the thought of changing one’s energy regulatory structure on a national level, with the hope that your regional neighbor will play by the same rules, is murky. Liberalization means that rather than make laws similar to another, difficult given the diversity of common and civil law institutions in the region, the price-mechanism would be better: fewer subsidies for public energy firms and rules that strengthen the separation of the transmission and distribution of energy by allowing consumers to choose their energy supplier. Perhaps this approach would allow for a freer supply of energy.

George Lerner is a Special Lecturer at Chulalongkorn University, Bangkok and has worked with the ASEAN Secretariat.

Sources :

The Diplomat

 





ASEAN, Korea for common security, prosperity

6 03 2014

By Ngurah Swajaya

Two years from the establishment of the ASEAN Economic Community (AEC), ASEAN and the Republic of Korea (South Korea) are celebrating the 25th anniversary of their partnership. The convening of the International Conference on the prospect of ASEAN-South Korea relations organized in Seoul, Feb. 26, marked the start of commemorative activities organized throughout this year in ASEAN and South Korea, ending with the Special Summit in South Korea at the end of 2014.

The ASEAN-Korea Dialogue Partnership has been expanded and deepened over the past 25 years since the conferment of sectoral partnership status in 1989 and the full Dialogue Partnership status in 1991. The partnership was further strengthened with the annual interaction at the leaders’ level since 1997, the status of comprehensive partnership in November 2004 and strategic partnership in October 2010.

Interactions have also been enriched through all ASEAN initiated mechanisms, namely, the ASEAN Regional Forum, ASEAN Plus Three, East Asia Summit and the ASEAN Defense Ministerial Meeting Plus.

Political-security cooperation covers many areas, such as combating transnational crime, terrorism, realization of Nuclear Weapon Free Zone, including non-proliferation and disarmament and the promotion of peace and stability on the Korean Peninsula. Strengthening human rights protection, good governance, democracy and rules of law are also included.

Economic cooperation covers the full implementation of the ASEAN-Korea Free Trade Agreement covering the trade of goods, services and investment. ASEAN is South Korea’s second-largest trading partner while South Korea is ASEAN’s fifth-largest. The target of realizing the US$150 billion bilateral trade by 2015 is attainable considering that 2012 bilateral trade has already reached $131 billion.

South Korea was ASEAN’s fifth-largest source of foreign direct investment (FDI) in 2012 and the trend is increasing ahead of the AEC. The number of tourists from both South Korean and ASEAN countries is growing fast and ASEAN has become the second most popular destination for South Korean tourists. South Korea is also part of the negotiation of the Regional Comprehensive Economic Partnership.

Cooperation in the social and cultural field has also covered environmental protection, addressing climate change, disaster management, sustainable forest management, energy and food security as well as cooperation on education, health, culture and people-to-people interactions. The Low-Carbon Green Growth initiative launched by the South Korean government and the East Asia Climate Partnership were the initiatives under this pillar.

The establishment of the ASEAN-Korea Center in Seoul in 2009 was instrumental in promoting closer people-to-people interactions. The appointment of the first resident Korean ambassador to ASEAN and the established of its diplomatic mission in Jakarta in 2012 have provided greater opportunity for more frequent interactions, bringing the strategic partnership to a higher level.

The momentum achieved in the past 25 years will not only enable ASEAN-South Korea to seize significant potentials but also strengthen collaboration to address new and emerging challenges from the dynamic regional geopolitical situation.

The Treaty of Amity and Cooperation and the Bali Principles of Mutually Beneficial Cooperation of the East Asia Summit provide important instruments to create a conducive environment for peaceful resolution of any potential conflicts and disputes. On the issues regarding the Korean Peninsula, ASEAN has been consistent in creating an opportunity for dialogue and negotiation, in emphasizing the need to abide by international laws, in rejecting acts of provocation and in opposing the proliferation of weapons of mass destruction.

In the future, ASEAN and Korea should double their efforts to achieve the agreed trade target of $200 billion by 2020. They should also double the target for FDI and tourism.

ASEAN and South Korea should develop common understanding on the geopolitical issues and pursue common goals to promote regional peace and stability. Therefore, the Korean proposal to organize a security dialogue is also essential in deliberating on how ASEAN and South Korea can effectively support each other in the pursuance of peace and stability and common prosperity, including on the Korean Peninsula issue. ASEAN and South Korea should also start intensifying their collaboration on any global issues of common concern as identified in the Bali Concord III Plan of Action.

As Korea becomes an alternative destination for ASEAN citizens to pursue their academic interests, student exchange and scholarships should be further strengthened. The idea of organizing an ASEAN-Korean Student Summit involving ASEAN and Korean Students in Korea should be implemented to promote closer interactions among the younger generation. As K-Pop and K-Movies have become popular in all ASEAN countries, in exchange, ASEAN’s culture should also be promoted further to the Korean people.

The commemorative activities and the Special Summit this year provide a significant impetus to strengthen the longstanding strategic partnership and to chart further the road map to collaborate beyond 2015. As ASEAN is now preparing the development of its 2030 vision, the momentum should be utilized to align the roadmap of the strategic partnership with the 2030 ASEAN Vision.

Finally, as ASEAN is in its final preparations to establish the people-centered AEC by Dec. 31, 2015 and to further chart its effective contribution to maintaining everlasting regional peace and stability, the ASEAN-Korea Strategic Partnership should strengthen and reinforce the ASEAN-South Korea cooperation to attain shared goals and objectives, in maintaining durable peace and stability and in enhancing prosperity.

Ngurah Swajaya is former ambassador/ permanent representative of Indonesia to ASEAN and Indonesia’s representative to the High Level Task Force for Strengthening the ASEAN Secretariat and Reviewing ASEAN Divisions at the Foreign Ministry.

Source :

The Jakarta Post





Will Myanmar’s ASEAN chairmanship lead to national reconciliation?

15 02 2014

By Eliane Coates

Myanmar’s chairmanship of ASEAN this year will become an open display of its progress in undertaking national economic and political reforms. Naypyidaw’s hosting of ASEAN has the potential to improve Myanmar’s international reputation, national economy and, potentially, domestic reconciliation efforts.

Long seen as a pariah state, Myanmar sees the ASEAN chairmanship as an opportunity to demonstrate its reformist credentials and a platform to re-engage the international community.

Will Myanmar’s ASEAN chairmanship lead to national reconciliation?
15 February 2014
Author: Eliane Coates, RSIS

Myanmar’s chairmanship of ASEAN this year will become an open display of its progress in undertaking national economic and political reforms. Naypyidaw’s hosting of ASEAN has the potential to improve Myanmar’s international reputation, national economy and, potentially, domestic reconciliation efforts.

Long seen as a pariah state, Myanmar sees the ASEAN chairmanship as an opportunity to demonstrate its reformist credentials and a platform to re-engage the international community.

Under the leadership of a quasi-civilian government, Myanmar has undertaken the path towards substantial reforms, including a loosening of the political system, freedom of the press and economic liberalisation. This has not only convinced Napyidaw’s ASEAN neighbours, but has also managed to woo the major powers, including the United States, into according Myanmar political legitimacy, leading to the easing of sanctions.

As the ASEAN Chair Myanmar has the opportunity to discard its previously isolationist foreign policy to become a responsible stakeholder in the international community. This year is Naypyidaw’s turn to steer ASEAN in dealing with contentious regional issues, including the South China Sea disputes. Naypyidaw’s challenge now is to translate this ‘chairmanship’ into a commendable ‘leadership’ role.

Apart from raising its international profile, chairing ASEAN could potentially unlock greater economic opportunities for Myanmar. This includes growing investor confidence and further integration with ASEAN and the wider regional economic communities.

ASEAN’s goal is to create a single Southeast Asian market and regional trading bloc by 2015. However, Myanmar remains ASEAN’s poorest member with a GDP of only US$53 billion, contributing only 0.2 per cent of continent-wide production in mainland Southeast Asia. Myanmar would undoubtedly struggle to meet the strict policy reform requirements for the ASEAN Economic Community in the specified time frame.

Nevertheless increased investor confidence after the ASEAN chairmanship could help narrow the crucial gaps in critical infrastructure and employment, as well as provide the momentum to achieve market regulation and greater human capacity in Myanmar.

Domestic economic reforms have already helped to increase the flow of foreign capital into Myanmar. In a recent report by the private sector, Myanmar was listed as one of five countries that had made the greatest improvements over the last five years to their business environment. The floating of its national currency, the Kyat, as well as the enactment of a new Foreign Investment Law to regulate foreign ownership limits and land leasing rules, have not only made Naypyidaw more attractive to foreign investors but have also enabled its rich natural resources to be exploited further. One report suggests Myanmar’s energy and mining sector is projected to expand to US$22 billion by 2030 from US$8 billion in 2010.

However, Myanmar’s capacity to fully exploit such opportunities is questionable at best. Endemic corruption, lack of transparency, limited legal recourse, strict approval procedures to rebuild infrastructure, which are slow and costly, and remaining Western economic sanctions continue to stifle the country’s economic growth. There has also been a brain drain of skilled workers to neighbouring countries that offer higher wages. The International Finance Corporation, a branch of the World Bank, recently ranked Myanmar 182 out of 189 countries for the ease of doing business within its borders.

While the economic payoffs in hosting ASEAN may be great, more reforms must be made to create an inviting business environment to set the stage for Myanmar’s full integration within the ASEAN Economic Community.

While most regional countries want Myanmar to succeed in its path to democratisation, ASEAN’s support of Myanmar will not be unconditional. The prestige and legitimacy associated with being at the helm of Southeast Asia’s regional bloc must not obscure the fact that Myanmar still has a long way to go, particularly in protecting human rights and pursuing national reconciliation.

National reconciliation presents the biggest hurdle to Myanmar’s reform process. Some outsiders remain sceptical of Myanmar’s development amid ongoing internal inter-ethnic conflict. Myanmar expects ASEAN to recognise its national reconciliation efforts to solve deep-rooted ethnic conflicts through individual ceasefire deals and comprehensive peace settlements for a nationwide reconciliation.

Myanmar’s inter-ethnic violence continues to strain other ASEAN countries due to the refugee outflow of Rohingya Muslims to Thailand, Malaysia and Indonesia. The Rohingya issue might also spillover to Myanmar’s neighbouring states and pose a potential security threat to some regional countries. In 2013 two Rohingya leaders linked to the Rohingya Solidarity Organisation (RSO) were reported to have enlisted assistance in the form of weapons and tactical knowledge from Indonesian hardline Muslim groups.

At present, peace agreements have not been consolidated. Instead of granting greater autonomy, Naypyidaw is offering economic incentives through development projects to rebel leaders in exchange for signing ceasefire agreements. While this process has facilitated re-engagement between the two sides, it is no more than a short-term fix; it is unable to replace sincere political dialogue to address the underlying political, economic and social causes of the ongoing armed conflict.

Slow progress in national reconciliation efforts is also compounded by increasing human rights concerns inside Myanmar, despite Naypyidaw having set up a national human rights commission in 2011. The recent visit by the UN special rapporteur on Human Rights only confirmed Myanmar’s inability to conduct objective investigations on widespread human rights violations and to bring the perpetrators to justice, including those belonging to local security forces.

While a spokesperson for the Myanmar government has announced the Rohingya issue will not be on the ASEAN agenda, he agreed the government will accept advice from individual ASEAN governments on the conflict. ASEAN could thus play an instrumental role in pushing Myanmar from behind to achieve national reconciliation and encourage it to implement the 2012 ASEAN Human Rights Declaration.

As the largest democracy in ASEAN, Indonesia could also cooperate with Naypyidaw to strengthen Myanmar’s civil society and engage in more transparent inter-ethnic dialogues. With the potential regional spillover of Myanmar’s internal strife, Naypyidaw should not interpret ASEAN’s move as intervening in its internal affairs. Rather, it would be in Naypyidaw’s best interests to embrace ASEAN’s assistance with open arms.

Eliane Coates is a Senior Analyst at the Centre of Excellence for National Security (CENS) at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University.

Source :

East Asia Forum 





Myanmar Assumes ASEAN Chairmanship at Critical Time for Domestic Reforms

14 02 2014

By Megan M. Roberts

Myanmar took on the chairmanship of the 10-member Association of Southeast Asian Nations (ASEAN) on Jan. 1, assuming this high-profile role at an important time for the regional bloc. Its ambitious integration program is gathering steam, though political turmoil—particularly in Thailand—and internal divisions over how to deal with China’s economic influence present formidable challenges to the group’s cohesion. Not surprisingly, then, the theme of Myanmar’s chairmanship is “moving forward in unity toward a peaceful and prosperous community.”

But Myanmar’s chairmanship also comes at a critical time for the country itself, having only recently emerged from international isolation. Domestically, much attention this year will be devoted to preparations for the highly anticipated 2015 national elections, expected—or hoped—to be the culmination of the political reform agenda that began in 2011. The three issues at the top of the list in Myanmar are the constitutional review, the peace process and the rise of sectarian violence.

The first and most visible issue is reform of the oft-criticized 2008 constitution, which was introduced under the former military regime before the 2010 elections. In July 2013, parliament formed a committee to assess possible amendments to the constitution. The 109-member committee is dominated by the ruling Union Solidarity and Development Party (52 members) and military (25 members), in addition to having seven members from Aung San Suu Kyi’s National League for Democracy (NLD) and 25 from small political parties. This composition leaves the committee open to criticism of being overly favorable to the ruling party.

Most international analysis to date has focused on whether provisions will be made to allow Suu Kyi to run for president. Clause 59(f) of the constitution currently bars anyone from the presidency whose spouse or children hold foreign citizenship. Suu Kyi’s deceased husband was a British citizen, and neither of her adult children has Myanmar citizenship. After a brief period of uncertainty, the NLD confirmed in late December that it will participate in the elections whether Suu Kyi is able to run for president or not. In a national address in early January, President Thein Sein expressed support for amending the constitution to allow “any citizen” to take the presidency.

The constitutional review committee released its recommendations on Jan. 31, notably omitting any recommendation related to article 59(f). However, the committee’s report did include recommendations to allow for increased power-sharing between the government and ethnic groups. The report has now been submitted to a parliamentary panel responsible for drafting recommendations. Any changes to the constitution will require a 75 percent majority in parliament, providing the military with an effective veto. Some changes would also require a national referendum. Whether parliament is able to come to agreement on recommended constitutional amendments is one question; whether it would then be possible to implement them prior to the 2015 elections is another.

The second notable reform issue is the peace process. Several minority ethnic groups have been in conflict with the government for decades. In recent years, government efforts to achieve a nationwide cease-fire have proceeded according to the same rapid pace as political reforms. The government recently requested approximately $7 million to be allocated to the peace process, the first time such a request has been made in the state budget.

This issue is closely tied to constitutional reform, as for many of the ethnic minority groups, the problem dates back to the 1947 signing of the Panglong Agreement under Gen. Aung San, the current opposition leader’s father. Under this agreement, a number of larger ethnic minority groups in Myanmar agreed to join a federal union in return for autonomy. However, the groups quickly grew frustrated with the limited implementation of the provisions of the agreement, particularly those related to self-determination. Negotiations fell apart and ethnic groups rebelled.

Since 2011, the government has restarted efforts to bring peace to Myanmar and has signed more than a dozen cease-fires, yet clashes have continued in some areas. The government had hoped to sign a national cease-fire prior to the end of 2013, but these efforts have been stalled by ethnic minority group demands for federalism, both politically and in the armed forces, with calls for a new Panglong conference. Civilians in conflict-affected areas, while acknowledging that the signing of agreements has led to greater freedom, also express skepticism about the sustainability of the current cease-fires.

Finally, although some progress has been registered on the peace process front, Myanmar has witnessed a surge in sectarian violence over the past two years between majority Burman and minority Muslim populations. While this violence was initially focused on the Rohingya in Rakhine state in western Myanmar, violence in 2013 spread beyond Rakhine, attributed to the extremist 969 movement led by Buddhist monk Wirathu. Bouts of violence in 2012 and 2013 resulted in hundreds of deaths and the displacement of more than 140,000 people. This violence also points to deep-seated tensions that, if left unchecked, could present a real threat to political reform underway in Myanmar.

The International Crisis Group notes, “At a time when Myanmar is emerging from decades of authoritarianism and isolation, the rise of intercommunal violence threatens to complicate its transition and damage its standing in the region and beyond.” This issue could also raise tensions with ASEAN countries with Muslim majorities. In May 2012, Indonesian authorities arrested several men plotting to bomb the Myanmar Embassy in Jakarta in response to violence against Muslims within Myanmar.

All of this will take place as Myanmar juggles a heavy agenda of ASEAN meetings; the country is expected to host more than 150 events in 2014, including the ASEAN and East Asia summits. It will also occur under a bright international spotlight as observers seek to assess the depth of both ASEAN’s commitment to integration and Myanmar’s to internal reform. Myanmar has the opportunity to demonstrate its regional leadership and showcase the progress achieved under its fast-moving reform agenda. The coming year will determine whether it will do so.

Megan M. Roberts is a program officer with the Southeast Asia Program at the International Foundation for Electoral Systems (IFES), covering Myanmar and Cambodia.

Source :

World Politics Review





ASEAN’s Long-Term Security Obstacle and Impossible Solution.

14 02 2014

By Peera Chaoroenvattananukul

Two years from now, the Association of Southeast Asian Nations (ASEAN) will be integrated as the ASEAN Economic Community (AEC). Even though the prospects of the regional economic integration are bright, but the regional security issues remain bleak. This tendency stems from the fragmentations among the ASEAN members with regard to security perceptions.

In order to survive in a dog-eat-dog world, small and medium nations of Southeast Asia need to unite altogether as a counterweight to the U.S. and China. The strengthened relationship among the ASEAN countries will be leverage against the two great powers. It will undoubtedly enhance bargaining power as well. Nonetheless, this long-term future is in tatters as long as the ASEAN states are deprived of a unifying vision.

Modeled on the European Coal and Steel Community (ECSC), ASEAN was originally formed to ward off threats from communism and extra-regional powers. This loosely organized regional institution could glue its members together through the regional norm of non-interference in one another’s domestic affairs. This norm is currently guiding relations among the ten members. This central precept has also been formally institutionalized in the ASEAN Charter, a constitution of ASEAN.

During the Cold War, Western Europe struggled over the German question and the menace of communism. The ECSC was seen as an attempt of the Western European nations to bind West Germany to this regional economic platform. The immediate threat for the Western European states by that time was the surge of the Soviet Union. Hence, the Western Europeans had a unifying vision with regard to the threat to the European common welfare. This unifying threat perception, spearheaded by the Franco-German cooperation, reinforced the relationship within the ECSC bloc.

Unlike Europe during the Cold War, the threat perception among the ASEAN nations varies differently. Due to the regional norm of non-interference, each nation is shortfall of a unifying security vision. Some ASEAN states are plagued by internal divide whereas some are reluctant to pursue assertive foreign policy. Some archipelagic states are deeply concerned with maritime security to the extent that they neglect the regional integration project.

Thailand and Cambodia, for instance, are currently undergoing political turmoil within their boundaries. For this reason, they both tend to accentuate the primacy of domestic politics as opposed to the primacy of regional foreign policy. In this light, the possibility of envisioning a unifying regional perception is dim.

Some ASEAN members such as the Philippines, Vietnam, Malaysia and Brunei, which are in conflict over maritime disputes with China, are likely to perceive Beijing as a threat. As a result, they are more than willing to bandwagon with the return of the U.S. to the region as a counterpoise to an increasing influence of China in Southeast Asia.

This is a stark difference from the mainland Southeast Asian countries such as Thailand, Burma, Laos, and Cambodia which are inclined toward the Chinese in order to reap tremendous benefits from China’s so-called “good neighbor policy”. Thailand, however, is an exception since its tradition of foreign policy has been deeply rooted in striking a balance in dealing with two great powers simultaneously. In this regard, the Thais can either side with Washington or Beijing. The geographical proximity of Burma, Laos, and Cambodia, however, is an essential factor which drives these governments toward China as well.

Some scholars in international relations who are faithful to the “hegemonic stability theory” such as Robert Gilpin may offer an explanation that these ASEAN members are bereft of a regional hegemon who would monitor and guide a conduct of relations in Southeast Asia. A natural leader of this region such as Indonesia has failed to advance the unifying security vision. It has been a “reluctant regional hegemon.”

Although Indonesia does not play its decent role as a regional leader, it can hardly be castigated for this matter. A vital flaw of this regional integration project lays in the regional norm of non-interference. With this norm as a core regional guideline, which has been embedded in the ASEAN constitution and the four-decade tradition, Indonesia’s regional inertia, thus, is legitimate in accordance with the appropriate regional conduct. Following this, it can be inferred that this aged-old norm is a root of regional inefficiency.

The long-term security of ASEAN depends on a unifying vision among the ASEAN countries. However, the diverging interests and perceptions among the ASEAN countries bar them from realizing this ultimate security objective. The solution to this division is to transform the regional norm of non-interference. By and large, the possible solution is inherent within the ASEAN system, which cannot be amended easily. This prevents a regional hegemon from performing a role of an enforcer who could be able to unify the ASEAN threat perception and ease tensions within the region.

Source :

World Politics Journal