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The impact of EU crisis on EU-ASEAN Relations

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The Association of Southeast Asian Nations (ASEAN) countries have watched the crisis in Euro zone closely. Southeast Asia countries experience similar crisis towards the end of 1990s which shattered ‘the Asian micracle’ and, arguably, shifted EU interests away from the region.

Nowadays, peoples and governments in ASEAN countries perceived the EU crisis differently. These mixed responses reflect how Asian countries have assessed suspected sources and impacts of the crisis on the European integration. From those mixed responses, one may analyse some possible directions of EU-ASEAN relations.

This article addresses the impacts of EU financial crisis to inter-regional cooperation between EU and ASEAN such as EU-ASEAN dialogue, ASEAN Regional Forum, and Asia-Europe Meeting (ASEM). It is built around the argument that ASEAN countries would keep EU as an important partner but the character of the inter-regional relations is likely to change Despite EU financial difficulties and integration problems, people in ASEAN countries still believe that historically-proven European endurance would bring EU survive the crisis. The financial crisis, however, make the Southeast Asians not only perceive  EU less powerful than before but also  find out that  the global power has shifted to Asia. The study is based on primary and secondary data gathered from document study, Focus Group Discussion (FGD), interview with key actors, and observation of EU activities in ASEAN countries

The organization of the article is as follow: a short explanation on the importance and significance of the study is succeeded by an elaboration on the existing inter-regional relations between ASEAN and EU. It is continued with a description on economic and diplomatic relations  based on quantitative and qualitative data. Finally, the article analyses the impacts of the crisis on ASEAN-EU relations.

 

A. EU crisis and the need to study ASEAN-EU inter-regionalism
Crisis in Euro zone unfolded since 2009 has halted EU’s efforts to maintain a high standard welfare to peoples in its member countries. Indeed, the austerity packages in the crisis-thorned countries –the PIGS- to save their economies and the Euro have driven some people to question the objective of EU integration. The crisis in Euro zone started in Greece in 2009. A year later, Ireland, Italy, Portugal and Spain  experienced similar troubles.  This crisis has brough EU to continuing financial problems.

In Southeast Asia in which severe financial crisis rampaged toward the end of 1990s, bringing down some of the strongest regimes and collapsed what so-called ‘Asian economic tigers’, the EU crisis has been perceived with a mixed response.  Some are surprised given the fact that Euro was stronger than the US dollars for many years. Others see the crisis as the consequence of EU strange economic arrangement – having a single currency but maintaining independent fiscal policies. Some other are more positive toward the European strength, thinking crisis is natural in Europe and the people would overcome the crisis with their resilience that they would re-emerge stronger after the crisis. Nevertheless, a few people believe that the crisis is a ‘karma’ to the Europeans because of what they did to Asian people during the Asian financial crisis. These mixed responses reflect how Asian countries have assessed suspected sources and impacts of the crisis on the European integration. From those mixed response, one may analyse some possible directions of EU-ASEAN relations.

Within the context of Euro zone crisis and the mixed responses from people in Southeast Asia, the question on the future of EU-ASEAN inter-regionalism deserves a careful study. The question is important as the two regional institutions represent almost one third of world’s population and can form an alternative axis of global trade. ASEAN and EU key figures can be seen below:

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The significance of the study lies in three aspects. Firstly, ASEAN-EU inter-regionalis excludes the US, creating an alternative international relations from politico-strategic as well as economic and cultural perspectives. Secondly, the region-to-region, rather than country-to-country relations are a distinctive and new practice in international relations that requires an understanding of its merit and limitations.  This inter-regional pattern of interactions in international relations has arisen in the last two decades, so it is reasonable to investigate what can work or not work and what can be expected from such relations. Thirdly, the relations between Europe and  Southeast Asia date back to more than five centuries ago when the first European fleet when through the Straits of Malacca and started establishing colonialism. The centuries European occupation and trade monopoly have left various colonial legacies –positive and negative- in Southeast Asian countries. Any contemporary interactions between the two regions can not be made immune from the colonial experience and the feeling of anti-colonialism sometime emerge from the Asian side. The feeling sometimes stronger as the Southeast Asian countries shared common historica legacy vis-a-vis their European counterparts in the inter-regional relations.

The term ‘inter-regionalism’ refers to region-to-region relations, defining as a group of countries that become the member of regional institutuions, which in this study focus on ASEAN and EU. ASEAN countries consist of ten countries in Southeast, ie. Indonesia, Malaysia, Singapore, Thailand, the Philippines, Brunei, Vietnam, Cambodia, Laos and  Myanmar.  The EU consists of 27 member states namely  Austria, Belgium, Bulgaria, Czech Pepublic, Crovatia, Cyprus, Denmark, Estonia, Findland, French, Hungary, Ireland, Italy, Germany, Greece, Malta, Netherlands, Latvia, Lithuvania, Luxemburg, Poland, Portugal, Romania, Sweden, Slovakia Republic, Slovenia, Spain, United Kingdom. ‘Regionalism’ refers to the design and implementation of a set of preferential policies among countries within the same geographical area in order to build harmonious relations in any or all aspects such as politic-security, economy or socio-culture. Regionalization is defined as ‘the grow of societal integration within a region and to the often undirected process of social and economic interaction’ (Hurrell 1995). Thus, what differentiates regionalism from regionalization is the design; while the former is directed by governmental agreements the latter is officially undirected and grows more naturally among non-state actors. This study is focused on the inter-regionalism.

Previous scholars have written on the inter-regionalism between ASEAN and EU. The inter-regionalism of ASEAN and EU were observed within the Asia-Europe Meeting (ASEM), as an exercise ground for a new pattern of global relationship ASEM has been observed as an exercise ground for a new pattern of global relationship (Dent 1997/1998; Cammak and Richards 1999; Gilson 2002, 2005). Nevertheless, there are two contrasting views of the application of the interregional framework. The earlier studies of ASEM treat the inter-regional relations between Asia and Europe in ASEM as the consequence of the failure of ASEAN-EU relations in 1980s  and as an alternative axis in the regional-based world order (Dent 1997/1998; Hanggi 1999; Cammak and Richards 1999; Dent 2001; Yeo 2007). Later studies on the inter-regional level of analysis and suggest that the inter-regionalism should be examined with a focus on the relations of the two regions, that is the social interactions between them, rather than as the consequence of some outside phenomenon (Gilson 2002, 2005).  

The focus on the importance of the inter-regional framework between Asia and European countries is particularly relevant when accepting the notion that the post-Cold War era is the time for the emergence of regional order, substituting the strategic competition of a bipolar world with cooperation and discord in the regional framework).  ASEAN-EU has also posed challenges in its mission to connect the Asian and European countries as they have different approaches to cooperation and international relations. Despite the rhetoric in ASEM’s summit statements that call for a deeper understanding towards each other, the Asian and European countries brought their own cooperation culture and approaches to international relations, thereby creating divertgent of interest. At the end, inter-regional relationships such as ASEM  and ASEAN-EU may work in both functional and cognitive ways (Gilson 2005, p. 310).

The inter-regionalism can also be approached with constructivist framework. In their analysis on inter-regionalism, Hettne and Soderbaum (2002), and Fawcett (2004) emphasize that regionalism is socially constructed through cognitive processes as actors respond to each other and to their environmental pressures. The framework helps identify the emergence of a defensive identity vis-à-vis external actors (Lee and Park 2001; Yeo 2003). It was also applied by Gilson (2002) in investigating the cognitive process of ASEM inter-regionalism  which reveals the social construction of regional identity for both ASEAN countries and their partners in Northeast Asia vis-a-vis EU countries through communication and interpretation of ‘us’ and ‘other’.

Study the inter-regionalism between EU and ASEAN as the consequences of the financial crisis in Euro zone area, thus, could provide insights into not only the competences of ASEAN and EU as regional actors but also recent perceptions of ASEAN and EU towards ecah other.

 

B. History of EU-ASEAN inter-regionalism
ASEAN and EU have been linked since 1970s when the European Economic Community (EEC) became the first institution that built a linkage for dialogue and cooperation with countries in the Southeast Asia. This linkage was formalized in 1977 in the 10th ASEAN Ministerial Meeting which followed by the first forum in Brussels.  Despite the creation of  EU-ASEAN Cooperation Agreement in 1980, however, the inter-regional framework could not develop further to enhance the relations of the two regions. Geographical distance between the two regions is a problem to strengthen economic and socio-cultural relations, nevertheless the difference of political values and agenda of cooperation seem to be the main reason for the deadlock. The most disagreement is on political issues, especially on human rights and democratization (Palmujoki 1997; Wisela 2007). Autoritarian governments in ASEAN countries were irritated with criticism from EU countries while the Europeans thought they should participate actively in global politics as the champion of human rights and democratization. Therefore, the contacts in 1970s and 1980s were more rhetorical than substantial in nature (Leifer and Djiwandono1998, p. 203; Stockhof and van der Velde 1999).  
It was the rapid and high economic development in East and Southeast Asia during the 1980s that drew the Europeans’ attention to what was perceived as ‘the world’s most dynamic region in the 21st century’ (Edwards and Regelsberger, 1990, p. 5; see also Richards and Kirkpatrick, 1999; Forster 1999). Consequently, EU launched ‘the New Asia Strategy’ in 1994 that underpinned the need of European countries to resume close ties with the Asian countries whose economic growth had been seen as a world phenomenon (European Commission, 1994).  

The inauguration of the Asia-Europe Meeting (ASEM) in Bangkok in 1996 was celebrated with enthusiasm and hopes in the two regions because this region-to-region forum represented a breakthrough in Asia-Europe relations and a unique arrangement: it did not include the United States (US) and was the first forum to which Asian countries have been summoned as a group to sit vis-à-vis their Europeans counterparts.  For Southeast Asian countries, the region-to-region relations between Asian and European countries in ASEM have some characteristics that are unusual in terms of their engagements in regional and global affairs. ASEM does not include the United States (US) and it was initially expected to balance the US-EU-Asia triangle. In addition, ASEM is the first forum in which Southeast Asian countries have been able to meet and coordinate collectively with countries in Northeast Asia, namely Japan, China and South Korea vis-à-visanother partner.  However, the enthusiasm soon shifted toward pessimism and criticism after the Asian financial crisis in 1997/1998 and following the war against terrorism after 9/11. Nevertheless, ASEM –now has 51 members- has survived despite the many criticisms about its ineffectiveness (Fitriani 2010).

The climate for inter-regional discourse has also been changing. Despite some downturns at the end of the 1990s and early 2000s, the inter-regional relations between Asia and Europe in ASEM have been constructed during a critical period of world history when East Asia has been developing as an economic powerhouse, while Europe has been seeking an identity as a global actor under EU. In January 2003 EU and ASEAN sigh joint declaration on Cooperation to Combat Terrorism. In July of the same year, EU commission launced its policy paper ‘A new partnership with Southeast Asia’.  This inter-regional cooperation was expanded in 2007 with the Nurenberg Declaration on the enhancement of EU-ASEAN Partnership followed by the Plan of Action which is adopted in the first ASEAN-EU Commemorative Summit in Singapore.   A year later, the inter-regional cooperation was planned for a free trade as the two regional entities agreed to negotiate a free trade agreement (FTA). This plan has been suspended in 2010 and EU started negotiating bilateral FTA with several ASEAN member states such as Singapore (concluded), Malaysia, and Thailand.

The development of the inter-regional relations between EU and ASEAN has been revivalized  since 2012. In April the two adopted Bandar Seri Begawan Plan of Action 2013-2017 to define to rout map of cooperation in the next five year. In July, EU also signed the ASEAN Treaty of Amity and Cooperation (TAC).     EU delegation in ASEAN countries has also been busy with various approaches and events to speed up the cooperation, not only between Government-to-Government but also between Business-to-Business.

 

C.  Impact of the Euro crisis on ASEAN-EU economic relation

The crisis in Euro zone and the continuing problems of settlement process have put a stress on Euro value.  The exchange rate on this currently has decreased significantly since 2008 the when first hit of global financial crises took place. Chart1 shows the drecreasing trend of the Euro value against the US Dollars.

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The Euro crisis and the financial crisis in the US have caused a shard declined of global trade experienced (see Chart 2 below). The collapsed of the rate of global trade in the period of 2008 to 2010 was believed as badly as the financial crisis during the great recession in 1930s.

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The declined global trade seems to bring no impact on EU-ASEAN trade relations as the trade between the two regions has kept growing after a sudden drop in 2009. The following chart show the development of EU-ASEAN trade from 1995 to  2011.

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Despite the increasing trend of EU-ASEAN trade in term of value, the place of EU among ASEAN trading partners decresed. The main trading partners of ASEAN countries are their Southeast Asian neighbours.   Chart 4 below implies that ASEA’s intra-regional trade remains the highest.

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In term of investment, EU countries has maintained their collective position as the second biggest source of FDI to ASEAN countries. The value of EU investment increased in 2011, however its proportion to the total investment in ASEAN fell.  The table below shows the figures from 2009 to 2011 gatherred by the ASEAN Secretariat.

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Notes: Details may not add up to totals due to rounding off errors.
1/ Ranked according to FDI inflows in 2011; covers countries on which data is available.
2/ Includes inflow from all other countries, as well as total reinvested earnings and inter-company loans in the Philippines.
3/Singapore’s data for 2011 excludes inter-company loans as geographical and industry breakdown are presently not available. Inter-company loans with intra-/extra-ASEAN breakdown for 2011 shown are estimated by the ASEAN Secretariat.
Source: ASEAN Secretariat FDI Statistic

 

The gap left by EU investors was quickly filled by intra-regional ones. The data in the following table reveals that capital inflows inform of FDI to ASEAN countries has increased drastically –threefold- since 2009.

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The above data also bring about the fact that for the first time, intra-ASEAN investment has grown significantly, jumping from 6,000 million US$ to almost 26,000 million US$ in three years. Economic integration among ASEAN economies, besides the worsening investment conditions in other parts of the world, may have encouraged ASEAN countries to send FDI to each other.

The financial crisis in the Eurozone also hit official development assistant from EU to ASEAN countries. The figures are fluctuated with a decreasing trend. While reached the highest in 2008, the annual growth of EU ODA to the Southeast Asian countries decreased in 2009 before hiked again in 2010 and followed with a drastic drop in 2011.

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The data shows that the financial crisi in Euro zone has brought some negative impacts on EU economic engagements in ASEAN countries. The conclusion of FTA negotiation between EU with Singapore and negotiation with Thailand and Malaysia seems to contribute to the rise of the trade value between EU and ASEAN countries. The EU position among ASEAN trading partners, however, decreased in 2011. Trading with China and intra-ASEAN continue to dominate ASEAN trade.  Similar trend –increasing in value but decreasing in proportion againts other ASEAN partners- also took place in regard to EU investment in ASEAN countries. It is unavoidably the result of EU financial difficulties. In addition, the shortage of EU financial resource also hit the flow of development assistant from EU to ASEAN countries  that have been fluctuated since 2006.  The total amount of FDI flow from EU to ASEAN countries has decreased since 2010 despite the fact that EU maintains a position as the second biggest source of FDI for Southeast Asia. Similarly, the annual growth of ODA from EU to ASEAN countries has slowed down to 20% in 2011 compared with 80% in 2008. In short, in economic relations, EU is an important partner of the ASEAN countries; the European countries, however, are not the most important one.

 

D. Impact of the Euro crisis on ASEAN-EU

Previous section has shown briefly the economic impacts of the Euro crisis on EU-ASEAN relations. This section analysis further impacts of prolonged crisis on the European and Southeast Asian countries political and diplomatic interactions.

Toward the end of the first decade of the 21st century, whereas the Euro zone experienced financial crisis, the ASEAN countries enjoyed an economic growth accelerated by the rise of China economy. Indeed, the East Asia became the engine of the global growth when the EU and the US suffered from the financial problems. The Southeast Asian region that was overlooked by the EU due to the financial crisis a decade before was transformed to a lucratic market of 600 million population with growing middle classes and increasing purchasing power. Consequently, there is an increasing trend in which EU pays more attention to ASEAN countries. As a global trading actor, EU naturally turns to see ASEAN countries as it main interests. Since 2009, there has been more enthusiasm from the EU side to approach to ASEAN.  In the same year, EU started appointing Ambassadors as representative to ASEAN after the Southeast Asian countries launched the ASEAN Charter that transform the regional institution as a legal entity.

In the subsequent years, EU launched an active economic diplomacy toward ASEAN. In 2011 the ASEAN-EU Business Summit (AEBS) was conducted in Jakarta to be followed by the second Summit in Phnom Penh a year after. EU Delegation in Southeast Asia and member states also exercised an active diplomacy to attract ASEAN investors. The regional FTA, which had been negotiated since 2007, was aborted in 2010. Subsequently, EU changed its strategy to approach ASEAN countries through bilateral FTA with the most advanced countries in Southeast Asia. The shift of efforts to establish regional FTA (EU-ASEAN) to bilateral FTA with several ASEAN countries shows EU short term strategy to accelerate trade relations with the most convenient partners while accepting the fact that ASEAN countries so vary in term of economic development and the readiness to wage effective trade relations. Despite the change of FTA strategy, EU trade deficit against the ASEAN countries prevailed.

Nevertheless, EU is keen to support the ASEAN integration. Provide funds for ASEAN integration projects. Since 2007, EU has actively assisted ASEAN integration.  The amount of official development assistants that EU provided for projects towards ASEAN integration to 70 million Euro for the period of 2007-2012.  It was used for various initiative in supporting ASEAN three communities.

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Table 3 shows that EU supports for the regional integration of ASEAN vary from establishing trust to trade liberalization and climate change. On one hand, those various supports reflect EU competence to play its role as a partner in regional development. On other hand, however, the supports were likely to be ineffective since they were operated through the project-based cycles in which sustainability is problematic. EU officials frequently stated that a more integrated ASEAN is better for the EU. This opinion perhaps derived from their frustration in negotiating with ASEAN member states. With the decreased of EU development assistant to ASEAN as showed in Chart 6, the European support for the regional integration in ASEAN is also under questions.

Under the active economic diplomacy, leaders of EU institutions as well as EU member states have frequently visited ASEAN countries. All top leaders from EU biggest member states took the difficulties of long haul flights from Europe to meet their counterparts in the capital cities of ASEAN member states. This trend – so many high profile figures from EU and EU member states to visit ASEAN countries- is never seen before. This phenomenon is in contrast with the frequent absence of EU leaders in the ASEM summits, especially those after the Asian financial crisis.

EU active economic diplomacy and the frequent visit of U top leaders have created a better atmosphere in EU-ASEAN relations. EU criticism on social or political practices in ASEAN countries continues but with a less frequency and intensity. This change on EU diplomatic style may derive from several factors. The first is EU leaders and official realized that they had a higher priority to pursue economic interests vis-à-vis the ASEAN countries. Secondly, the changes that took place in Southeast Asian countries have addressed different perspectives between EU and ASEAN countries, especially in political issues and human rights. The political openness and transformation in Myanmar, that used to be the problems in EU-ASEAN relations, seem to contribute indispensably in this improvement of political atmosphere. Thirdly, perhaps by paying more attention to ASEAN countries and by realizing their interest in the region, the Europeans are able to build a more culturally, socially, and politically sensitive approach in their diplomacy with ASEAN.  With this kind of approach, the EU officials as well as officials of EU member states  seem to be more open mind and more ‘appreciate’ to  what have been considered as Asian values and ‘ASEAN way’. The approach is reflected in more prudent comments on political issues in ASEAN countries and more restrain in putting forward criticism towards the ‘ASEAN way’. One of strategic steps taken by the EU is to accede to the ASEAN Treaty of Amity and Cooperation (TAC) in July 2012.

The crisis in the Euro zone and its impacts on EU active diplomacy in Southeast Asia has created mixed perceptions in ASEAN. An optimist view sees EU as a crisis fighter and believe that, as those in the past, the European countries would reemerge from the crisis stronger. However, the financial crisis has also spread skeptical views on regional integration and strengthened the refusal of ASEAN Economic Community. Those who adopt the latter perspective believe that the European integration and the common currency are very risky experiments that could create social, political and economic disaster if not chaos. The crisis in the Euro zone is a valuable lesson learn for regional integration in other parts of the world including in Southeast Asia. In addition, what has happened in Europe encourage perceptions that EU’s power is decreasing.

Despite the financial crisis and challenges to EU’s role as a global player, EU has shown an intention to deepen its relations with ASEAN. In April 2012, the two regional entities adopted the Bandar Seri Begawan Plan of Action which states to strengthen EU-ASEAN enhanced partnership for 2013-2017. The plan to enhance the inter-regional relations includes cooperation in policy and security. In 2012 and 2013, EU Representatives and high level officials from member states frequently stated that they expect EU could play a bigger role in the regional security.  However, it is not clear the reason behind this intention and what kind of role that EU could play in the Asian security. For ASEAN countries, China’s rise, its increasing assertiveness and the US’ pivot have increased tension in the regional politics and security. It would be a question whether EU needs a pivot to Southeast Asia too.  

 

E. Conclude
Inter-regional relations between ASEAN and EU have been established since 1970s.  This region-to-region engagement has gone through three crises that shape not only the nature of the relations but also the perceptions of each side towards each other.  The first is the strained relations during 1980s due to different political values that can be categorized as the crisis of common values between ASEAN and EU. This crisis hampered the development of the inter-regional relations; EU however preceded by enhancing bilateral relations with individual ASEAN countries namely Singapore and Thailand. The second is the Asian financial crisis that cracked some ASEAN countries towards the end of 1990s; the crisis that switched European previous interests and hopes on what so called ‘Asian economic miracle’. In the context of EU-ASEAN relations, this crisis loomed the relations and created a substantial negative feeling among affected ASEAN countries as the EU economies failed to respond as sincere partners that could be relied on for real supports and needed assistance. This crisis halted the development of not only ASEAN-EU relations but also their relations in the ASEM process. EU countries seem lost their interests in ASEAN and switched their attention to newly integrated countries in Central and Eastern Europe. The third and most recent event is the financial crisis in the Euro zone that has been responded variously by people and key persons from ASEAN, creating a momentum to re-address the inter-regional relations. This period is concomitantly with continuously high economic growth in East Asia, including main countries in ASEAN, encouraging the EU countries to realize on the importance of ASEAN economies for their own. The relations mirror those in early 2000s when enthusiasm in at side was met by cautiousness and restrained at the other side.

The data collected for this study show that economic relations between the two regions have been influenced by the crisis in the Euro zone since 2009. In term of trade, export and import of goods between the two regions has increased steadily after a drop in 2009. The data implies that the Euro crisis has boasted trade between the two regions, indicated by more active governments and business from EU countries to approach their partners in Asia. The trade, nevertheless, booked a surplus for the ASEAN countries. The increased trend of an active engagement in the inter-regional trade did not take place in investment and official development assistant.

The Euro crisis has created a more balanced enthusiasm in EU-ASEAN relations. Whereas EU seems to lost interests in Southeast Asia after the Asian financial crisis, the European countries return their attention to the lucratic market of ASEAN countries when they experience the crisis.  It may not ideal relations but economic interests continue to be the primary motive of the relations between the two regions.

The financial crisis in Euro zone makes the Southeast Asians not only perceive EU less powerful than before but also find out that the global power has shifted to Asia. It seems that ASEAN countries would keep EU as an important partner either in ASEAN-EU Dialogue Forum, ARF or ASEM; however, the character of the inter-regional relations is likely to change.

 

REFERENCES

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Afreximbank Meets Ahead of Russia-Africa Summit

Kester Kenn Klomegah

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The African Export-Import Bank (Afreximbank) plans to hold its 26th annual meeting in Moscow on 18-22 June. A series of closed sessions will be held as part of the event including the meeting of Board of Directors of Afreximbank and a meeting of Shareholders of Afreximbank, as well as the open Russia-Africa Economic Conference.

The African Export-Import Bank, the Roscongress Foundation, the Ministry of Finance of the Russian Federation, and the Russian Export Centre are the key organizers of this event. The Afreximbank Annual Meetings is a high-level event, bringing together political and business leaders from across Africa to discuss the issues of trade, industrialization, export, and financial stability and efficacy.

Key themes planned for the economic conference are: State of Russia-Africa Relations: An Overview; Mining Industry: An Integrated Approach to the Fields Development; Prospects for Multilateralism in an Era of Protectionism; Railways Infrastructure as the Key Element for Development in Africa; South-South Trade: Path for Africa Integration into the Global Economy.

The other topics are Emerging Trends in Sovereign Reserves Management; Reflections on the Transformative Power of South-South Trade; Launch Afreximbank ETC Strategy; Cyber Solutions and Cyber Security for Solving Governmental and Municipals Tasks; Financing South-South Trade in Difficult Global Financing Conditions; The Future of South-South Trade and Infrastructure Financing.

Over 1,500 delegates are expected to attend the economic conference, including shareholders and bank partners, government representatives, members of the business community and media representatives. The conference will be a crucial stage in preparation for the full-scale Russia-Africa political summit and the accompanying economic forum, scheduled for October 2019 in Sochi.

“Russian and African countries are basically on the track of bilateral strategic partnership and alliance based on openness and trust. The fact that the Afreximbank Annual Meeting is to be held in our country gives a positive momentum for the mutually beneficial cooperation of the parties ahead of the full-scale Russia-Africa Political Summit that will take place in Sochi in October, and will add to the inclusive nature of the events,” emphasized Anton Kobyakov, Advisor to the President of Russian Federation.

Following the setup of the Organizing Committee for the Russia – Africa summit and other Russia–Africa events in Russia in 2019, Russian officials have described that this year truly as a year of Africa for Russia.

“We witness the clear growing interests from the both sides to establish the new level of relationships, which means a perfect timing to boost the economic agenda. All economic events planned for this year will become a platform to vocalize these ideas and draw a strong roadmap for the future,” Russian Export Center’s CEO, Andrei Slepnev, argued in an emailed interview with Buziness Africa.

In December 2017, Russian Export Center became a shareholder of Afreximbank. Russian Export Center is a specialized state development institution, created to provide any assistance, both financial and non-financial, for Russian exporters looking for widening their business abroad.

On March 19, the Organizing Committee on Russia-Africa held its first meeting in Moscow. President Vladimir Putin put forward the Russia-Africa initiative at the BRICS summit (Russia, Brazil, India, China, and South Africa) in Johannesburg in July 2018.

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The silent revolution

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Jamaica is well known for its beautiful beaches, Bob Marley, and reggae music. But what is less known is that the Caribbean island started a silent revolution after being one of the most indebted developing countries in the world. Jamaica has shown a macroeconomic turnaround that is quite extraordinary.

As Bob Marley said, “It takes a revolution to make a solution”. After decades of high debt and low growth Jamaica has changed its growth trajectory, with positive economic growth for 16 consecutive quarters and growth getting closer to two per cent.

During that period, the Jamaica Stock Exchange went up more than 380 per cent.The credit agency Fitch upgraded the island’s debt to B+ rating with a stable fiscal outlook, and unemployment hit eight per cent in January, the lowest in decades.

The Government had a wake-up call when its debt overhang peaked at almost 150 per cent of GDP in 2013. With the support of the International Monetary Fund, the World Bank and the Inter-American Development Bank, the country embarked on an ambitious reform programme. These efforts have paid off. Jamaica is now one of the few countries that has successfully cut public debt by the equivalent of half its gross domestic product in a short time frame.

The fiscal turnaround and economic transformation were possible because of the strong commitment across political parties over two competing administrations and electoral cycles. The country also critically benefited from a sustained social consensus for change and the strong backing of the private sector.

The country has generated primary fiscal surpluses of at least seven per cent of GDP for the last six years, and remains steadfast in its commitment to fiscal discipline. These fiscal results make Jamaica a top performer internationally.

For this silent revolution to continue and bring greater prosperity to all its people, Jamaica will need to further boost the investment climate, strengthen economic and climate resilience and invest more in its people to build human capital. These are necessary complements to the maintenance of a strong macroeconomic framework and would help boost economic growth and job creation. There are encouraging signs that Jamaica is taking action in these areas.

With regard to the business climate, the National Competitiveness Council has adopted a road map to fast-track reforms to improve the business environment. Jamaica features in the top 20 countries in the world for its comprehensive credit reporting systems and ranks among the best globally in the area of starting a business, according to the World Bank’s 2019 Doing Business report. It only takes two procedures and three days for an entrepreneur to start and formally operate a business.

There have been advancements on public-private partnership investments. For instance, the Norman Manley International Airport public-private partnership was recently completed with advisory support from the International Finance Corporation — the private sector arm of the World Bank Group.

Jamaica is also a front-runner among Caribbean countries in promoting climate and financial resilience in the face of natural disasters. The economic cost of these disasters for the Caribbean is substantial, exceeding US$22 billion between 1950 and 2016, compared with US$58 billion for similar disasters globally. One serious storm or natural disaster could set back the country’s growth prospects and development achievements of recent years. To tackle this, the Government has adopted a Public Financial Management Policy Framework for Natural Disaster Risk Financing to facilitate the availability of dedicated resources for recovery in the face of disaster risks.

In order to further support Jamaica in its efforts to strengthen the economy, build resilience, and support human capital development, the World Bank will expand its financing by US$140 million. This financing package will be for a series of two operations to help Jamaica be better prepared to mitigate the financial impact of natural disasters and build stronger infrastructure, and an additional project to strengthen social protection.

Despite unemployment at a new low, still too many young people are struggling to find a job. For Jamaica to continue to grow and prosper, it also needs to develop the skills for the workforce of tomorrow, especially in the areas of technology and digitalisation. This requires a sharp focus on creating the conditions for youths to strive and succeed in the modern business world and close cooperation with the private sector in this respect.

Today, more than ever before, young Jamaicans can dream of a brighter future where “every little thing is gonna be alright”. This is the generation that must aim higher and can write a new chapter for its country.

As we celebrate the 55th anniversary of the World Bank-Jamaica partnership, we look forward to working together to build on the success of the past few years and promote growth, jobs and resilience for Jamaica.

World Bank

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Economy

With or without sanctions, Iran needs to say goodbye to oil money

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Except Norway, almost all oil producing countries have made themselves more or less reliant on oil money.

Only oil producing countries with a small population, such as Kuwait and Qatar which is also a great gas exporter, have so been safe from fluctuations in the oil market. But, countries with large population, such as Iran, are prone to volatility in the oil market, let alone the mad sanctions introduced against the country.

There is no doubt that oil money has affected politics, economy, management system, culture, spending and consumption habits and many other issues in oil rich countries.

For example, Iran now has one of the cheapest energy prices in the world. This has led to an extravagant use of energy, especially an excessive use of private car, in the country.

Let’s make an example to clarify that oil money is not the road to progress and a vibrant economy. In the 1970s, Iran was more developed than South Korea, but now South Korea is much more successful than Iran in terms of economy and technology. South Korea does not have oil, but it has provided an opportunity for a competitive economy and capitalized on its talents.

It is true that the war imposed on Iran in the 1980s hindered Iran’s progress and inflicted about 1 trillion dollar in damages on the country, yet officials failed to take serious steps toward creating a competitive economic atmosphere with a focus on research and technology. The oil money has been the main blame for such an economic approach.

According to the successive five-year development plans which end on 2021, Iran had to reduce dependence on oil to a great extent, however, successive administrations, with varying degrees, did not fully act based on the development plan.

Iran is now subject to the toughest ever illegal sanctions by the Trump administration. Just on April 22, the United States ended sanctions waivers on Iran’s exports and announced it wants to zero out Iran’s oil exports by May 1.

Whether the Trump administration succeeds or not to implement its oil threats is an issue that we should wait and see, but it is necessary that Iran take a departure from oil export how much painful it will be.

Sorena Sattari, a graduate of Sharif University of Technology who serves as vice president for scientific affairs, told a meeting in Hamedan on Tuesday that sanctions have provided an opportunity that knowledge-based companies to intensify their efforts. Sattari also said plans have been drawn up to manufacture equipment and machinery that are subject to sanctions. 

Also, whether we like it or not, fossil fuels, especially crude oil, are losing their importance as renewable energy resources are gradually taking the center stage.

Saying goodbye to easily-gained oil revenues is a bitter pill that Iran should swallow. To do so, though very difficult under tough sanctions, officials need to find other sources of income.

They can invest on tourism as Iran is among the top countries in hosting touristic sites, establish an environment for a transparent competitive economy, close loopholes of corruption, involve competent persons in managerial posts, introduce a sound and workable tax system, end unnecessary subsidies, and more importantly prioritize research and development (R&D).

First published in our partner Tehran Times

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