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Can the ASEAN Economic Community be a success?

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After almost two decades of discussion, the ASEAN Economic Community (AEC) will be proclaimed on 31st December. The AEC is a potentially significant and competitive economic region, should it be allowed to develop according to the aspiration of being a “single market and production base, with free flow of services, investments, and labour, by the year 2020”.

The ASEAN region as a composite trading block has the third highest population at 634 million, after China and India. GDP per capita is rapidly rising. The AEC would be the 4th largest exporter after China, the EU, and the United States, with still very much scope for growth from Cambodia, Myanmar, the Philippines, and Vietnam from a diverse range of activities ranging from agriculture, food, minerals and commodities, electronics, and services. The coming AEC is already the 4th largest importer of goods after the United States, EU, and China, making it one of the biggest markets in the world.

Unlike the other trade regions, the AEC still has so much potential for growth with rising population, rising incomes, growing consumer sophistication, and improving infrastructure.

Perhaps the biggest benefit of the upcoming AEC is the expected boost this will give to intra-ASEAN trade. Most ASEAN nations have previously put their efforts into developing external relationships with the major trading nations like the EU, Japan and the US through bilateral and free trade agreements. To some extent, the potential of intra-ASEAN trade was neglected, perhaps with the exception of the entrepot of Singapore.

The AEC is an opportunity to refocus trade efforts within the region, especially when Vietnam, Cambodia, Indonesia are rapidly developing, and Myanmar is opening up for business with the rest of the region.

The social, cultural, political and business interchange within the region has traditionally been low, until the rapid increase of intra-ASEAN travel, due to the low-cost airline explosion within the region.

Today intra-ASEAN trade is approximately 25% of total trade, growing around 10.5% per annum, and expected to reach 30% of total ASEAN trade by the year 2020.

However the necessary infrastructure to support intra-ASEAN trade growth is lagging behind with a delay in the completion of the Trans-Asia Highway in Cambodia, and vastly inadequate border checkpoints between Malaysia and Thailand in Sadao and Kelantan.

Some infrastructure development projects have been severely hit by finance shortfalls within member states.

There are a number of outstanding issues concerning the growth and development of the AEC.

The ASEAN Secretariat based in Jakarta has a small staff, where the best talent is lacking due to the small salaries paid. The Secretariat unlike the EU bureaucratic apparatus in Brussels relies on cooperation between the member state governments for policy direction, funding and implementation of the AEC.

Thus the frontline of AEC implementation are the individual country ministries, which presents many problems, as some issues require multi-ministry cooperation and coordination, which is not always easy to achieve as particular ministries have their own visions and agendas. Getting cooperation of these ministries isn’t easy.

There are numerous structural and procedural issues yet to be contended with. At the inter-governmental level, laws and regulations are yet to be coordinated and harmonized. So in-effect there is one community with 10 sets of regulations in effect this coming January 1st. Consumer laws, intellectual property rights, company and corporate codes (no provision for ASEAN owned companies), land codes, and investment rules are all different among the individual member states.

There are no integrated banking structures, no agreement on common and acceptable currencies (some ASEAN currencies are not interchangeable), no double taxation agreements, and no formal agreements on immigration.

There is not even any such thing as a common ASEAN business visa. These issues are going to hinder market access for regional SMEs. Any local market operations will have to fulfil local laws and regulations which may not be easy for non-citizens to meet and adhere to.

Even though there are some preferential tariffs for a number of classes of ASEAN originating goods, non-tariff barriers are still in existence, which are insurmountable in some cases like the need for import licenses (APs) in Malaysia, and the need to have a registered company which can only be formed by Thai nationals within Thailand.

Some of these problems are occurring because of the very nature of ASEAN itself. ASEAN was founded on the basis of consultation, consensus, and non-interference in the internal affairs of other members. This means that no formal problem solving mechanism exists, and the ASEAN Secretariat is a facilitator rather than implementer of policy. Illegal workers, human trafficking, money laundering, and haze issues between member states have no formal mechanisms through which these issues can be solved from an ASEAN perspective.

This weakens the force for regional integration.

One of the major issues weakening the potential development of the AEC is the apparent lack of political commitment for a common market by the leadership of the respective ASEAN members. Thailand is currently in a struggle to determine how the country should be governed. Malaysia is in the grip of corruption scandals where the prime minister is holding onto power. Myanmar is going through a massive change in the way it will be governed. Indonesia is still struggling with how its archipelago should be governed. There is a view from Vietnam that business within the country is not ready for the AEC.

Intense nationalistic sentiments among for example Thais, exasperated by the recent Preach Vihear Temple conflict along the Thai-Cambodian border need to be softened to get full advantage out of the AEC. The dispute in the International Court of Justice over Pedra Branca, and the Philippine rift with China over the South China Sea show the delicacy of relationships among ASEAN members. The recent Thai court decision on the guilt of Zaw Lin and Win Zaw Tun in the murder of two young British tourists may also show how fragile intra-ASEAN relationships can be.  

The AEC is going to fall far short of achieving its full potential of becoming a major influence in global trade.

The AEC is not intended to be the same model as the EEC. The AEC is far from being any fully integrated economic community. The lack of social, cultural, and political integration within the ASEAN region indicates the massive job ahead that Europe had been through decades ago. There is still a lot of public ignorance about what the AEC is, and lack of excitement or expectation for what should be a major event within the region. Respective national media are scant on information about the forthcoming launch of the AEC.

Economic nationalism is very strong within ASEAN. Malaysia has its Government Linked Companies (GLCs), State Economic Development Corporations (SEDCs), Thailand its Crown Property Bureau, and family business empires within each country which have vested interests in keeping market access at the current status quo. The AEC is seen as a threat to many existing business empires, which fear open market access. Many of these business empires have enormous political influence upon their respective governments.  

The AEC could be deemed to conflict with the special advantages bumiputera businesses in Malaysia enjoy in areas of government tendering and contracting.

It is yet to be seen how some of these businesses will behave within an AEC environment. However what can be said for sure is that the AEC will not create any level playing field for ASEAN businesses in the foreseeable future.

With the problems the EU is currently facing, maybe it is wisdom in hindsight that the leaders of ASEAN have been extremely cautious in their approach to the formation of the AEC. Any opening up of the labour market could also be a potential disaster. A free flow of labour across ASEAN would potentially put many under-qualified people out of work according to Gyorgy Sziraczki, the director of the ILO in Vietnam.

This could lead to economic downturns in some of the more susceptible parts of the AEC like Lao PDR and Cambodia. The AEC rather than promoting intra-ASEAN trade, lead to a more domestic orientation, where unemployed may see the informal economy looking much more attractive means of making a living.

However, if the leadership of ASEAN see the opportunities of dramatically increasing intra-ASEAN trade, then the AEC has great potential to assist the region withstand any steep economic downturn around the rest of the world.

Projects that are able to boost regional synergies like coordination of education, river system water management, energy, transport, banking and finance, may very quickly improve regional integration. Regional clustering can be developed in education, auto-parts, food production, electronic parts, and the value adding of basic commodities to benefit the economies of the region.

Infrastructure development will be vital to the success of the AEC. For this purpose the ASEAN Infrastructure Fund, financed by member countries and the Asian Development Bank will be extremely important. The recent ASEAN summit in Kuala Lumpur also reactivated the ASEAN Joint Consultative Committee to resolve trade and investment issues.

The slowness of the AEC should not be seen as a failure of ASEAN. We can see the slow pace that ASEAN makes decisions, with the long period it is taking to admit Timur Leste as ASEAN’s 11th member.

The vital questions here are whether the AEC will be able attract direct foreign investment to the region? Take advantage of rising opportunities like international education? Stop the talent drain from the region with China becoming more aggressive in attracting the best from the region? and Create an ASEAN awareness within the region?

Sadly, one may expect the fate of the AEC to be similar to that of the Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT), and the Brunei Darussalam-Indonesia-Malaysia-The Philippines East ASEAN Growth Area (BIMP-EAGA). They are in existence by name, but with little real substance on the ground.

Innovator and entrepreneur. Notable author, thinker and prof. Hat Yai University, Thailand Contact: murrayhunter58(at)gmail.com

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Southeast Asia

China – Myanmar relations

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While addressing a meeting of the foreign ministers of the Association of Southeast Asian Nations (ASEAN) Chinese State Councilor and Foreign Minister, Wang Yi expressed China’s grave concerns over the Myanmar issue. Wang reaffirmed China’s commitment to continue playing a constructive role, saying that China is all ready to work with ASEAN on Myanmar-related problems. Wang Yi was addressing the special ASEAN-China Foreign Ministers’ meeting to commemorate the 30th anniversary of dialogue relations held on June 7, 2021, at Chongqing Municipality, South West of China.

Wang further emphasized that all parties in Myanmar should prioritize the interests of the people, exercise moderation, and eradicate all forms of violence. China can assist in economic recovery, enhance its people’s livelihoods, and protect their rights and interests. He stated that China welcomes all parties to conduct political discourse under the constitution and legal framework to resume the path of democratic change, adding that China remains ready to cooperate with ASEAN to give help to Myanmar in the face of COVID-19.

China has always remained a proponent of peace and stability in Myanmar. The relations between two, have been characterized as “kinsfolk” (pauk-phaw in Burmese), a phrase coined in the 1950s. The relations between China and Myanmar have gone through various ups and downs. Formal relations between the two dates back to late 1940 when both countries mutually recognized each other. Until the 1960’s two nations have enjoyed warm bilateral relations. Things got complicated in 1967 when anti-Chinese riots erupted in Yangon. Bilateral relations between them again touched a high point in 1988 when they signed a ‘cross-border trade agreement’ that finally put an end to Myanmar’s lengthy isolation from the rest of the world. China was thus vigorously seeking a strategic channel to the Indian Ocean, mainly for its landlocked provinces of Yunnan and Sichuan. Later, the Chinese presence in Myanmar enlarged significantly in terms of financial and domestic affairs. In 2018, China was the biggest foreign investor in Myanmar with a direct investment of more than $15 billion on 126 business projects. In the 1990s and early 2000s, China was Myanmar’s principal source of arms and ammunition. In more recent times, the Tatmadaw attempted to shift its arms supply dependence on China, though China is still the leading supplier, accounting for almost 50% of Myanmar armaments. Moreover, Myanmar is amongst the largest receivers of Belt and Road Initiative (BRI) funds. It has continuously having China’s massive financial support for a set of infrastructural projects along the China Myanmar Economic Corridor (CMEC) including projects related to transportation, industry, finance and communication. The construction of a deep-sea port and the development of a Special Economic Zone at Kyaukphyu, in Rakhine State that connects Yunnan province via railway, are among the utmost significant developmental projects.

The recent coup of February 2021 raised serious apprehensions for China due to the factors which are multifold. Firstly, given the past events, it poses severe security threats to the neighboring Yunnan province as a spillover effect, for instance, 2017 had seen the death of five persons on the China side and the migration of thousands of refugees into the Yunnan Province in combat between the Tatmadaw and Kachin Independence Army, one of the four (Ethnic Armed Organizations)EAOs of the Northern Alliance. Additionally, it can halt the economic development of Yunnan, an impoverished province, draws investment because of its strategic location as a doorway to Southeast Asia. Secondly, Instability in Myanmar can be ruinous for China’s flagship project, Belt and Road Initiative. For the success of BRI, stability in neighborhood is indispensable. Thirdly, China can’t afford to have turmoil in the neighborhood. The instability in Myanmar is causing disturbances in the neighboring states too, as hundreds of thousands of Rohingya Muslims fled to Bangladesh when Myanmar’s army launched a brutal campaign on them in August 2017.

While China was enjoying stable and friendly relations with the ruling National League for Democracy (NLD) led by Aung San Suu Kyi, the recent coup is by no means in favor of China Yun Sun, a co-director of the East Asia Program and director of the China Program at the Stimson Center in Washington, D.C stated that  “A coup in no way is in Beijing’s interests. Beijing was working very well with the NLD”, he further added, “If Beijing has a choice, I think they would prefer the NLD over the military. But they don’t have a choice… so they have to deal with whatever comes along.”

China has always remained a proponent of peace and stability in Myanmar. In the current scenario, China can play a constructive role in somehow settling the Myanmar issue and support the ill-fated country to embrace stability.

Firstly, since the outbreak of Covid19, things got worse domestically in Myanmar due to the lack of a proper health care system. It can be a blessing in disguise for China and provides a golden opportunity to score some diplomatic points by providing vaccinations and playing a significant role in solving the combined public health and economic crises that would be a win-win situation for both nations. Secondly, China can use its influence being the sole and long term partner, to bring conflicting parties to the table to find amicable resolution of the conflict. Thirdly, China should keep investing in Myanmar and help it building its economy through more investments especially in development sector. Finally, China can utilize ASEAN option as mentioned by Wang Yi in latest statement. ASEAN and China can collaborate to devise amicable and practical resolution of the Myanmar problem.

Stable and peaceful Myanmar is in the interest of the whole region and China in particular. Considering, chaos in a neighboring country can have grim implications for China and its developmental projects,  China along with other regional actors need to find realistic solutions for durable peace and stability in Myanmar.

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Southeast Asia

The National Unity Government and the Rohingya Issue in Myanmar: A New Twist?

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In a Twitter message on 3 June 2021, the National Unity Government (NUG) in Myanmar announced a new policy position about the Rohingya issue. Entitled as ‘Policy Position on the Rohingya in Rakhine State’ the NUG unequivocally spells out, “In honour of human rights and human dignity and also to eradicate the conflicts and root causes in the Union, the NUG aims to build up a prosperous and federal democratic union where all ethnic groups belonging to the Union can live together peacefully. This objective is clearly stated in the Federal Democracy Charter.’ The statement further says, ‘We invite Rohingyas to join hands with us and others to participate in the Spring Revolution against the military dictatorship in all possible ways.’

This marks a monumental policy change on the Rohingya issue by the NUG that did not include any Rohingya when it was formed on April 16, 2021. It may be mentioned that the NUG includes a president, state counsellor, vice president, prime minister and 11 ministers for 12 ministries. There are also 12 deputy ministers appointed by the CRPH.  Of the 26 total cabinet members, 13 belong to ethnic nationalities, and eight are women. International community particularly global civil society actors criticized the NUG for excluding the Rohingyas in the newly formed civilian government. It is, indeed, a question about the credibility of the government when it talks about federal democracy, but excludes a community who have been living in Myanmar for centuries.

The new statement from the NUG is a welcome development and an adjustment of their position with a genuine spirit of bringing all ethnic groups together and create a strong platform against the brutal and genocidal military regime in Myanmar. The February 2021 military coup in Myanmar is a watershed political development in the country that has dramatically changed the attitudes and perception oof the Myanmar people and the civilian political forces because of illegality, extreme form of brutality and betrayal to democratic change. The spontaneous social movements by the Myanmar people with a high risk of lives and livelihoods was perhaps unimaginable to the Junta government as well as global community. The civilian political forces possibly did not think such kind of sustained resistance in the form of Civil Disobedience Movement (CDM) in Myanmar where people suffered direct military rule for more than five decades. Military rule was the order of the day in the country.

Against this backdrop, the statement of the NUG deserves a huge attention. Why has the NUG issue the statement? What is the significance of this statement for the status of the Rohingyas and the future of democracy in Myanmar? These questions are vital for establishing the rights of the Rohingyas who have been suffering as stateless people and living in different countries as the forcibly displaced people. Particularly, the presence of the 1.1 million Rohingyas in Bangladesh in the camps of Cox’s Bazar and Bhashan Char is a stark reality and a great casualty of humanity in the present world where a country called Myanmar can force more than a million of its residents overnight and continue to show the defiance not to accept them. The world is virtually silent!

In understanding the significance of the statement of the NUG we can identify several issues that deserve to be taken into consideration. First, the reason behind the change of position of the NUG on the question of Rohingyas is clearly spelled out at the bottom of the statement where they have urged the Rohingyas to join the movement to oust the military regime in Myanmar. It is not only addressed to the Rohingya people, but also to the forces and parties in the world who are supporting the cause of the Rohingyas. From this perspective it has a huge diplomatic purpose to bolster the movement of the NUG and CDM in their fight against the military regime. Particularly, the Western world, the United Nations and the Muslim countries who have expressed their solidarity and compassion for the Rohingyas and have devoted their resources for them. Second, the statement is not just a declaration of support of the NUG to the Rohingyas. It contains a roadmap about solving the Rohingya crisis for which some of the members of the NUG were liable. The leadership of the National League for Democracy (NLD) betrayed with the Rohingyas when their leader Aung San Suu Kyi joined hands with the Tatmadaw in 2011 and ruled the country jointly and ditched the cause of the Rohingyas.

The NLD leader also defended the crimes against humanity of the military leaders in the International Court of Justice (ICJ). It was a true infidelity to the Rohingyas and also to her own long credentials as a fighter for democracy. Therefore, to establish a credibility of their declaration, the NUG shows a way-out to resolve the Rohingya crisis. They have promised to repeal and amend laws such as the 1982 Citizenship laws by the new constitution. This new Citizenship Act must base citizenship on birth in Myanmar or birth anywhere as a child of Myanmar citizens. It is also mentioned that the NUG is in process of abolishing National Verification Cards to recognize Rohingyas as citizens. These two laws have discriminated for Rohingyas as the core ground. The NUG reaffirms to implement the aggrements signed with Rohingya repatriation and also agreed to Kofi Anan’s 88 points recommendations over Rohingya legal rights.

Third, the statement acknowledges the rights of Rohingya people and atrocity crimes they faced in Myanmar. The statement represents a shift from the persecution of the Rohingya by the military junta as well as previous governments, which routinely denied the existence of the Rohingya as well as evidence of mass atrocity crimes they suffered. The statement commits the NUG to ensuring justice and accountability for crimes against Rohingya in Myanmar. The NUG also affirmed its commitment to “voluntary, safe, and dignified repatriation” of Rohingya refugees to Rakhine State. The NUG makes a bold promise, “We will actively seek justice and accountability for all crimes committed by the military against the Rohingyas and all other people of Myanmar throughout our history.” They have gone to the extent of profound redressing of the past crimes and injustice as they say, “We intend if necessary to initiate processes to grant [the] International Criminal Court jurisdiction over crimes committed within Myanmar against the Rohingyas and other communities.”

Fourth, a critical issue is how would the supporters and sympathizers of the Tatmadaw at home and abroad respond to this major policy reversal of the NUG and its leadership who once viewed the Rohingyas in the same eyes as with the Tatmadaw? Understandably, China, Russia, ASEAN, India and several pro-military regime actors would not find it encouraging. They may rule it out at a tactic of the NUG to garner the global support particularly from the UN and West. Fifth, whatever the reactions of the global community, the Tatmadaw would find it a new avenue of diplomatic pressure on them. However, they will rule out this position as the military regime has already declared the NUG as a ‘terrorist’ outfit. Rather, the Tatmadaw would appeal to the Buddhist nationalists and Bamar people that the NUG has a sinister objective to legitimize the Rohingyas as citizens of the country.

Finally, the crux of the matter is that it is a great victory of the Rohingyas to show the world that the successive Myanmar regimes – military and pseudo military – have used false narratives, including branding them as terrorists, to undermine their rights and justice in the country where they have been living for centuries with their own identity. The NUG has made it loud and clear to the world that the military junta in the country is pursuing an apartheid policy and committed the crimes against humanity widely referred as ‘ethnic cleansing’ and ‘genocide’.

In conclusion, to mean the business and establish a credibility of their intention expressed in the new policy position, the NUG of Myanmar should appoint an ethnic-Rohingya member to the cabinet who would help it implement and expand upon its new policy on the rights of Rohingya people. The NUG must continue to highlight meaningful consultation with Rohingya people globally, including Rohingya women. This new twist in the position of the civilian leadership in Myanmar who once reigned power and supported the military regime is critical for the future of the Rohingya issue and if it sustains, then the prospect of democracy in the post-Tatmadaw Myanmar will energize pro-democracy forces and boost global support for the NUG.

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Bargaining and Strengthening position of EEZ: Indonesia’s Diplomacy in South China Sea

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The South China Sea issue is getting more complex and has become an international issue that never ends until now. Because in addition the water areas are rich in natural resources both from energy sources, offshore and fisheries, on the other hand,  the waters of the South China Sea also become a strategic territory because the South China Sea is a trade route that delivers international goods and services with the amount of US$5 trillion. Therefore, automatically, these territories become a bone of contention for many countries especially China and four ASEAN member countries such as Vietnam, Malaysia, the Philippines, and Brunei Darussalam in utilizing natural resources, where the involvement of many countries in claiming ownership of the South China Sea can trigger the occurrence of tension in an area such as the occurrence of conflicts such as there are showing of force between the armed forces, military intervention, and monitoring each other in the territorial waters of the South China Sea. These activities will disrupt the security stability of the South China Sea which triggers the threat of waters and disrupt the stability of neighbor countries that it close to the territorial. Coupled with the existence of China’s ownership claiming of the entire South China Sea through the Nine Dash Line rule, which is an ancient rule that emerged from Chinese history. This rule violates International law and is an illegal act, especially in violation of UNCLOS (United Nations Convention on the Law of the Sea) is an international treaty that was adopted and signed in 1982. In which the treaty emphasizes the existence of national sovereignty over the territorial sea as far as 12 miles from the coast and the Exclusive Economic Zone (EEZ) as far as 200 miles.

The Importance of Bargaining and Strengthening position of EEZ Indonesia Diplomacy In South China Sea

Indonesia has no claim position and disputes in the waters of the South China Sea. Because Indonesia respects the International law of the sea agreement. However, there is Indonesia’s EEZ (Exclusive Economic Zone) which intersects with China’s Nine Dash Line. It is clear that this action violates UNCLOS and has become an illegal action. Because China still maintains the claims and rules of the Nine Dash Line which is a rule that come from Chinese history that is contrary to International Law. It can be proven by the presence of a Chinese Coast Guard ship entering the Indonesian Exclusive Economic Zone in the North Natuna Sea, it can automatically disrupt the stability of Indonesia’s territory and can become a problem and it is obvious that China violates the International norms. Therefore, Indonesia is important to strengthen Indonesia’s diplomatic position in its EEZ (Exclusive Economic Zone) through negotiations with China through South China Sea diplomacy by maintaining its EEZ position to avoid inequality between the Nine Dash Line and Indonesia’s EEZ , especially in the Natuna Sea. Where this diplomatic activity can be used as a more effective strategy because it prioritizes peace or soft power strategy rather than through hard power diplomacies like military which can cause tension between the two countries, especially Indonesia and China. Indonesia and China have established diplomatic relations for 70 years in various aspects, both in terms of economy, education, military, religion, as well as public diplomacy activities that involving people to people strategy in each country as a strategy to maintain the relationship between two countries. As good partner country, Indonesia and China also need to carry out diplomacy activity, especially Indonesia in maintaining and showing a standing position and considering the overlapping Nine Dash Line in the Exclusive Economic Zone which if Indonesia does diplomacy through soft power, both countries will become good negotiating partners. Indonesia and China are coexistence with each other, therefore more comprehensive cooperation is important in discussing problems from various aspects, in particular, Indonesia must strengthen the position of Indonesia’s Exclusive Economic Zone to maintain the sovereign rights owned, especially the Natuna waters.

Therefore, Indonesia is important to negotiate and make a clear standing position in the EEZ by conducting diplomacy that is sustainable and encouraging China not to occupy Indonesia’s Exclusive Economic Zone. As Indonesia has sovereign rights in the waters of the South China Sea which consists of territorial integrity, regional stability, and economic interests. However, with the existence of Indonesia’s Exclusive Economic Zone (EEZ) which has been intersectingwith China’s Nine Dash Line, this has led to a reduction in Indonesia’s sovereign rights which can be feared to disrupt the stability of the international security of Indonesia waters, especially the Natuna Islands which can disrupt many activities such as navigation activities, activities in exploring natural resources, and can threaten the national stability of the country. It because the Natuna Island is an asset that owned by Indonesia which greatly influences the life of civil society in the Natuna Archipelago region and depends on it for their lives by looking for natural resources in the Natuna island. Therefore in addition to economic cooperation, education and others. There is also a need for clear cooperation and certainty from each country, especially Indonesia and China, regarding their clarity in claiming waters without offending the boundaries of the neighboring waters, especially the Indonesian territory in the Natuna Islands through diplomatic activities, which with the existence of diplomatic activities, bilateral negotiations from the two countries. It can be a strategy to achieve peace and prevent conflicts. Because until now Indonesia is dependent on China from any aspect in completing the country’s needs especially through Belt and Road Initiative (BRI), therefore the strategy in maintaining Indonesia’s Exclusive Economic Zone (EEZ) position through bilateral diplomacy can be a great strategy to create peace, without undermined cooperation and diplomatic relations between two countries especially must implement the aim and the purposes of ASEAN  to promote regional peace and stability through abiding respect for justice and the rule of law.

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