ASEAN Leaders Summit to Take Place Amid South China Sea Concerns

10 05 2014

By Ankit Panda

Leaders from the ten member countries of the Association of Southeast Asian Nations (ASEAN) will meet in in Napyidaw, Myanmar this weekend. The meeting is historic due to its venue: Myanmar is hosting an ASEAN summit for the first time. However, the meeting unfortunately coincides with two major maritime disputes between two ASEAN states and China. Vietnam’s tryst with China over an oil rig near the disputed Paracel Islands and the Philippines detention of a  Chinese fishing boat in the disputed waters of the Second Thomas Shoal will ensure that managing maritime disputes with China will top the agenda as the leaders meet in Napyidaw.

The timing of the summit could encourage both the Philippines and Vietnam, and the remaining ASEAN countries, to revisit the regional organization’s bid to develop effective multilateral means to manage the various disputes in the South China Sea. It is highly unlikely that the leaders would convene in Napyidaw and issue any sort of joint condemnation of Chinese behavior (not in the least owing to the host country’s complicated relationship with China). Instead, ASEAN leaders are likely to do what they have done in the past: emphasize international law, encourage restraint, and call for diplomacy.

More specifically, the timing of the summit with these two acute flare-ups in the South China Sea should be a rude reminder that ASEAN should double-down on its efforts to set in stone a binding code of conduct for the South China Sea. Without any such concerted effort, China is unlikely to reconsider its behavior in the South China Sea. As Flashpoints blogger Carl Thayer told the South China Morning Post, ”Asean protestations will not move China one inch.”

The prospects for this summit leading to a breakthrough on a code of conduct are slim. The watershed document in this area, the 2002 Declaration on the Conduct of Parties in the South China Sea, signed between all the ASEAN states and China, is proving insufficient in managing contemporary tensions. As Malcolm Cook notes for the Lowy Interpreter, the 2014 summit will really test the mettle and conviction of ASEAN states to make good on their intention to enforce the 2002 Declaration. Chinese action in recent weeks, both against Vietnam and the Philippines, violates the declaration.

One of the worse potential outcomes of this weekend’s summit is that ASEAN leaders will leave Napyidaw having said or done nothing about Chinese behavior in the South China Sea or a code of conduct. Implicitly, such a result would expose the diplomatic fault-lines present within the 10-member association. Both Manila and Hanoi will be vocal in their pursuit of at least a joint statement on the South China Sea. Filipino Foreign Ministry spokesman Charles C. Jose told The Wall Street Journal that he expects ASEAN to reiterate its “grave concern over the recent developments in the South China Sea, as well as Asean’s strong resolve to uphold the rule of law.”

ASEAN leaders themselves remain divided over the urgency they ascribe to the China issue and the policies they would like to pursue to resolve South China Sea disputes. In particular, given that China is a major trade partner for each state in the region, the countries without disputes with China are not eager to participate in an inflammatory statement against China given the risk of damaging their political and economic relationships with Beijing. China’s approach of avoiding multilateral forums for addressing maritime disputes has worked to the extent that it has paralyzed ASEAN’s ability to respond in unison to China’s assertion of its territorial claims in the South China Sea. Indeed the July 2012 ASEAN foreign ministers’ meeting in Cambodia offers a stark reminder of what disunity can look like within the association.

For Myanmar, the historic occasion of hosting its first ASEAN Summit and joining the comity of Southeast Asian nations as a state in transition will likely be overshadowed by a fixation on China. Although Myanmar’s reforms under the leadership of Thein Sein has reduced its dependence on China, it maintains cordial relations with Beijing and is unlikely to risk this over South China Sea maritime disputes.

Source :

The Diplomat





Presidential candidates unclear on ASEAN

3 05 2014

By Ahmad Rizky Mardhatillah Umar

Recent developments in the 2014 general elections have seen an absence of ASEAN debate from both legislative and presidential candidates. From the legislative campaign to current coalition talks, we have not heard any serious discussion on Indonesia’s position toward ASEAN.

While there have been slogans that glorified Indonesia in global politics — such as “Asian Tiger” — there has been no clear vision on how Indonesia’s foreign policy will be managed, particularly in the regional environment.

This is ironic; as the ASEAN Community will be established next year, our president’s vision on ASEAN will determine Indonesia’s position in the upcoming era. It makes this year’s general elections important, not only for the Indonesian people, but also for ASEAN.

The most interesting part of this year’s election is the rise of the Indonesian Democratic Party of Struggle (PDI-P) and the Gerindra Party, two parties with populist-nationalist rhetoric that have been in opposition to the government of President Susilo Bambang Yudhoyono over the last five years. Quick-count results from the legislative election have so far placed these parties among the top three positions, along with the Golkar Party.

The PDI-P is renowned for its populist and pro-poor approach to gaining voters, including the use of Indonesia’s first president Sukarno’s slogans, as well as criticism of Yudhoyono’s “neoliberal” government, while Gerindra uses populist economics and readapts nationalist symbolism to gain middle-class voters.

Both of these parties have utilized nationalist rhetoric as a main part of their political programs. Their approaches — such as nationalization or pro-poor programs — are different to the more pragmatic approach of the ruling Democratic Party.

This nationalist rhetoric is also accompanied by the tendency to strengthen the state’s role in managing the economy. Several campaigns from the PDI-P and Gerindra have raised “sovereignty” and “nationalization” as items on the political agenda, in contrast to the policies of the government.

Although the commitment to nationalization by presidential candidates Joko “Jokowi” Widodo and Prabowo Subianto is still in question, their statements and programs reflect intentions to raise nationalism as a main topic of discourse.

The rhetoric campaigned by the PDI-P and Gerindra has two prominent characteristics.

First, the rhetoric glorifies Indonesia’s greatness and its decadence under a neoliberal regime. The parties reject neoliberal capitalism and excessive foreign investment and exploitation, and they call for the nationalization of strategic industrial assets, particularly those related to mining.

However, the PDI-P and Gerindra do not fully reject capitalism and the parties have been supported by several domestic businesspeople.

Second, the rhetoric strongly calls for “national sovereignty” and a strong state role in the economy. Both the PDI-P and Gerindra have described nationalism as a “state-led economy” in which the government stands strong in the face of the global economy. It shares some similarities with the early New Order government, which put an emphasis on state-led planning and industry, but with the full support of foreign aid, as described by scholars Vedi Hadiz and Richard Robison.

State-led capitalism differs from neoliberal capitalism in terms of who regulates the market and the role of the state, but is similar in terms of capital accumulation. State-led capitalism only transfers the locus of capitalist accumulation within the state; it has nothing to do with the bigger capitalist accumulation process.

Thus, within state capitalism, the capitalist accumulation will be preserved. With its strong position in the economy, the state will be able to control any industry or investment in the country (for example, through a licensing policy) and thus create a new form of oligarchy with businesspeople. It makes the state relatively autonomous in the process of capitalist accumulation in Indonesia.

The nationalist rhetoric is merely a redundant form of the “state-led capitalism” practiced in the early New Order era. As long as capitalists’ interests can be preserved by the new government, there will be no radical change in the next regime.

So, what would this mean for ASEAN regionalism?

This year’s election will have at least two implications for regional integration in South East Asia. First, the election will determine Indonesia’s position toward ASEAN. Nationalist candidates will favor a strong position based on “national interest”, while candidates from centrist parties (the Democratic Party or Golkar Party) will favor a more regionalist approach in their foreign policy.

Parties with nationalist tendencies are likely to be skeptical toward ASEAN integration. Gerindra seems to consider ASEAN and cooperation in other regional and international frameworks as an obstacle for national sovereignty. Gerindra’s position is clearer than that of other parties — Indonesia’s foreign policy should be based on state-defined national interest. Parties with religious tendencies, such as the Prosperous Justice Party (PKS), aim to bring Indonesia’s foreign policy closer to the so-called interests of the Muslim community.

However since ASEAN has been completely institutionalized since 2003, such nationalist and religious tendencies will have to adapt its norms.

Second, the election result will determine debates and negotiations related to the ASEAN Economic Community (AEC). Nationalists will favor higher state control of the economy, but “centrists” seem to accommodate ideas of “free trade” or a “competitive economy” embedded in the AEC Blueprint. However, their position toward capital will not be different to that of the current government.

The absence of clear foreign policy including regional and international cooperation from presidential candidates will lead to a lack of preparedness for facing the regional and global challenges ahead.

The writer is a staff member at the ASEAN Studies Center, Gadjah Mada University.

Source :

The Jakarta Post





Will US-Philippines pact sideline ASEAN’s normative order?

2 05 2014

By Rizal Sukma

The recent visit by US President Barack Obama to the Philippines ended in an agreement aimed at reinvigorating bilateral defense ties and cooperation between the two allies. With the signing of the Enhanced Defense Cooperation Agreement (EDCA), the US military has greater access to Philippine bases for the next 10 years. The agreement will allow US troops and other military assets to be stationed in the Philippines on a temporary and rotational basis.

Even though Obama and US officials maintain that the EDCA is primarily meant to promote regional security and has nothing to do with China, one cannot miss the fact that the agreement clearly reinforces America’s “rebalancing” strategy in East Asia. Similar steps have been carried out by the US. During 2012-2013, it announced that it would deploy 2,500 marines to Australia; station four littoral combat ships (LCS) in Singapore; and deepen defense and security ties with Vietnam. The newest agreement with Manila will clearly boost America’s defense posture and military presence in Southeast Asia.

Of course, through the EDCA, the US expects to alleviate doubts in the region, especially among its allies, about America’s resolve and capacity to sustain its “pivot to Asia” strategy. However, it is not difficult to see that the “rebalancing” strategy is also meant to preserve American primacy in the face of China’s rise and growing influence in the region.

For American allies and partners in the region, it is also the rise of China — or the fear of it — that has prompted them to convince Washington to stay engaged in the region to preserve the balance of power. Regional countries are nervous about China’s growing assertiveness invoking its claims in the South China Sea.

Indeed, the strengthening of defense ties between the US and its allies and partners is taking place with the growing rivalry between the two great powers in the background. In this context, one wonders whether power politics has returned to Southeast Asia. In fact, many fear that the region is increasingly defined by the primacy of a realist order based on power politics and balance of power in classical sense.

These developments raise a critical question for the future of regional order in East Asia: Is ASEAN’s approach, which prefers norms and institution-building as a mechanism to ensure regional peace and stability, being sidelined?

Of course, it is too early to say that ASEAN’s approach has lost its relevance. From the outset, ASEAN realized that the region had always been characterized by the existence of three types of order that co-exist with each other. The first is the realist order based on the central role of power in inter-state relations. It would be naïve to believe that in an “anarchical” world of international politics, the pursuit of power should be abandoned.

Second, states also believe that international relations are guided by certain norms. In fact, norms — often demonstrated by states’ adherence to international laws — function to define the behavior of states. Even great powers like the US and China do see the need to abide by international norms. Hence, the existence of normative order in East Asia is a reality.

Third, interaction among states in East Asia has always been carried out within various institutions. This institution-based order in the region has been exemplified by the presence of various ASEAN-centered institutions such as the ASEAN Regional Forum (ARF), the ASEAN Plus Three (APT) and the East Asia Summit (EAS).

The challenge for ASEAN, therefore, is how to ensure that the realist order will not become a dominant feature of regional politics. ASEAN should ensure that the three types of order would reinforce, not undermine, each other. This is critical for peace and stability in the region. In order to do this, two prerequisites need to be fulfilled.

First, ASEAN and great powers need to recognize that the three types of order are interconnected. Normative and institution-based orders would not function properly without a stable balance of power among the great powers. However, a realist order based on balance of power will be fraught with risks of conflict if it is not moderated by a functioning normative and institution-based order. In the Southeast Asian context, therefore, it is in the interests of the great powers to support and strengthen ASEAN’s normative and institution-based order.

Second, it is imperative for the region to find a way to alleviate the fear of China’s rise. It is this fear that would push regional countries to adopt either “bandwagoning” or “balancing” strategies. Unfortunately, more and more countries in the region are choosing the strategy of balancing or hedging against China. China’s growing assertiveness, especially in the South China Sea, is often cited as the key factor in this regard.

Therefore, the fear of China could be mitigated if the South China Sea problem can be managed peacefully through an early conclusion of the Code of Conduct (CoC) between China and ASEAN.

The writer is executive director of the Centre for Strategic and International Studies (CSIS), Jakarta.

Source :

The Jakarta Post





ASEAN and UN Peacekeeping

26 04 2014

By Carl Thayer

ASEAN will slowly develop and evolve regional peacekeeping coordination capacity.

The Association of Southeast Asian Nations (ASEAN) has set the objective of creating an ASEAN Community by the end of 2015. The ASEAN Community will be based on three pillars or communities: the ASEAN Political-Security Community, the ASEAN Economic Community and the ASEAN Socio-Cultural Community.

After the ASEAN Political-Security Community is created, what role could ASEAN and the United Nations undertake in peace operations in Southeast Asia and globally? How would ASEAN’s existing capacity and structure have to change in order to deploy on peace operations?

These questions and other questions were posed at an international conference on “The New Landscape of Peace Operations: A Dialogue with South East Asia and Vietnam.” The conference was convened in Hanoi from April 15-16 under the co-sponsorship of the Swedish International Peace Research Institute (SIPRI), the Frederick Ebert Stiftung (FES) based in Germany, and the University of Social Sciences and Humanities, Vietnam National University.

The conference was the last in a series of similar conferences held regionally by SIPRI in Europe, Middle East, Africa, South Asia, South America, Central Asia and Northeast Asia. The Hanoi conference was attended by delegates from the United Nations, Europe, Southeast Asia and Australia. It was conducted under Chatham House rules.

The conference was held in Hanoi because Vietnam will become the newest member of ASEAN to contribute to peace support operations under the UN. Seven other members of ASEAN have participated in UN peace operations. As of January 31, total Southeast Asian contributions (including police, military experts and troops) stood at: Brunei (26), Cambodia (342), Indonesia (1,697), Malaysia (909), Philippines (703), and Thailand (33). Singapore contributed 22 personnel in 2013.

The Dialogue with Southeast Asia and Vietnam was preceded by an invitation-only national seminar titled “Contributing to Peace Operations: Experiences, Challenges and Priorities.” There it was announced that Vietnam has approved the setting up of a Peacekeeping Center and Vietnam will make a modest contribution by deploying two military observers to the Sudan this year. At the same time, Vietnam will commence detailed planning for further commitments, including humanitarian missions involving mine clearance and medical assistance.

The national seminar delved deeply into the obstacles and challenges that Vietnam faced in reaching a decision to commit to UN peace operations. Vietnam, in fact, refrained from making its annual UN levy on peacekeeping from 1975 until 1994. Vietnam currently contributes $1 million annually.

At the national seminar it was revealed that, due to lack of consensus among policymakers, Vietnam’s Master Plan on contributions to UN peace operations, originally scheduled for release in 2013, has been postponed to 2015. A key factor in this decision was uncertainty about public support for sending Vietnamese military personnel abroad, especially if there were casualties.

Vietnamese participants highlighted other obstacles and challenges. One major impediment was legal in nature. In 2013, Vietnam amended Article 64 in its state constitution and inserted the clause “[the people’s armed forces] shall contribute to the protection of peace in the region and in the world” to provide sanction for its participation in UN peace operations.

This year, Vietnam’s National Assembly will give legal effect to the constitutional amendment by passing a resolution providing for the deployment of armed forces personnel abroad in the service of the UN. The National Assembly will follow up later by drafting a Law on Peacekeeping authorizing Vietnam to meet its international obligations.

ASEAN Peacekeeping Centers Network

In 2003, Indonesia proposed a Plan of Action to assist in the creation of the ASEAN Political-Security Community by 2020 (since brought forward to 2015). The ASEAN Political-Security Community was proposed as a mechanism for ASEAN states to settle disputes and security issues among themselves. It included a proposal to create an ASEAN peacekeeping network.

In 2004, Indonesia proposed at a meeting of ASEAN senior officials the creation of an ASEAN peacekeeping force that could be deployed to assist in the settlement of internal disputes such as the conflicts in Aceh and the southern Philippines.

According to Marty Natalegawa, then Acting Director General for ASEAN Cooperation (and now Indonesia’s Foreign Minister):

What we are saying is ASEAN countries should know one another better than anyone else and therefore we should have the option for ASEAN countries to take advantage of an ASEAN peacekeeping force to be deployed if they so wish.

Natalegawa’s proposal was quickly scotched by Thailand and Singapore.

Nevertheless, individual ASEAN members have welcomed the role of outside military observers in conflict settlement. For example, in 2003 Indonesia permitted unarmed military monitors from Brunei, Malaysia, the Philippines, Singapore and Thailand (as well as the European Union) to observe the ceasefire in Aceh. The following year, the Philippines invited Malaysian military personnel to Mindanao to observe Malaysian-mediated peace talks between the Philippine government and the Moro Islamic Liberation Front.

Four ASEAN members – Malaysia, the Philippines, Singapore and Thailand – contributed troops and civilian police to the United Nations Transitional Administration in East Timor. In 2006, the Democratic Republic of Timor-Leste sought assistance from Malaysia (as well as Portugal, Australia, and New Zealand) to provide assistance in restoring stability after a domestic crisis erupted into large-scale violence.

In 2011, in a set back for ASEAN efforts to play a mediating role in the border clashes between Thailand and Cambodia, Thailand declined Indonesia’s offer to send military personnel to observe a ceasefire. At that time, Indonesia was chair of the ASEAN Standing Committee.

In a more positive development, Indonesia’s 2003 proposal for a network of ASEAN national peacekeeping centers gradually took shape. The Three-Year Work Program (2008-2010) adopted by the 2nd ASEAN Defense Ministers’ Meeting  (ADMM) in 2007 included a provision for establishing a network among ASEAN peacekeeping centers in order to conduct joint training and exchange of experiences.

In 2009, the proposal for creating a network of ASEAN peacekeeping centers was included in the ASEAN Political-Security Community Blueprint. The 5th ASEAN Defense Ministers Meeting (ADMM) in 2011 adopted the Concept Paper on the Establishment of ASEAN Peacekeeping Centers Network (APCN) and included a provision on networking in its second Three-Year Work Program (2011-2013).

The first meeting of the APCN was held in Kuala Lumpur in September 2012. It was co-hosted by Thailand and Indonesia and attended by Cambodia, the Philippines, and Malaysia. The second meeting was held in Bogor in September 2013 with the participation of all national peacekeeping centers as well as military representatives from Laos and Myanmar.

ASEAN and UN PKO

The international conference on “The New Landscape of Peace Operations: A Dialogue with South East Asia and Vietnam” did not adopt any formal recommendations. SIPRI, however, will prepare and publish a conference report offering a summary of the discussions.

In looking at the future, conference participants reached consensus that ASEAN, as a regional association, was unlikely to become involved in UN peace support operations outside Southeast Asia under the ASEAN flag.

The eight troop contributing countries were likely to continue to support traditional UN peace operations on an individual basis. They were less likely to support multi-dimensional or robust peacekeeping efforts.

Indonesia, which is currently ranked as the world’s seventeenth largest contributor to UN peacekeeping missions, has set itself the objective of becoming one of the top ten troop contributing countries. President Susilo Bambang Yudhoyono made this commitment when he opened the Indonesia Peace and Security Center in Sentul, West Java on April 7.

Participants found it difficult to identify realistic scenarios in which the United Nations would become involved in peacekeeping missions in Southeast Asia over the next five to ten years. Rather, ASEAN members preferred to operate through regional mechanisms, especially for peace-building missions. Participants also felt it unlikely that ASEAN would agree to assemble a standby force for regional contingencies in the near term.

Participants were generally in agreement that Southeast Asia’s norms upholding sovereignty and non-intervention, and the requirement of consent by the host state, would mitigate against any ASEAN-initiated intervention among its members. Participants from Southeast Asia also noted that these norms held stronger sway than the newer norms of the Responsibility to Protect and Protection of Civilians.

The most likely future development is expansion of the ASEAN Peacekeeping Centers Network to include all ten members. This was touted as an example of ASEAN connectivity. The APCN was also expected to promote specialist niches of expertise among its members.

The prospect of ASEAN interoperability and standby arrangements were viewed as long-term objectives. ASEAN, however, could be expected to take the lead in dealing with armed conflict between its members or the serious outbreak of domestic violence in a state.  But ASEAN would use primarily diplomatic and political tools such as those enumerated in Article 23 of the ASEAN Charter – good offices, consultation, mediation etc. – to meet its obligations. ASEAN and its members would resist the use of force.

Depending on the circumstances, individual ASEAN members might contribute to conflict resolution at the invitation of the host state or by the consent of the parties concerned.

Source :

The Diplomat





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