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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

Southeast Asia

Transforming Social Protection Delivery in the Philippines through PhilSys

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Social protection helps the poor and vulnerable in a country, especially in times of crises and shocks that may threaten the well-being of families. When COVID-19 hit and quarantines began, the Philippines needed a massive expansion of social protection coverage to mitigate the impacts of the pandemic. Countries that already had good and inclusive digital infrastructure (including internet connectivity, digital identification, digital payments and integrated data ecosystems) were better equipped to quickly adapt their social protection programs to meet urgent needs. They also fared better in maintaining continuity of services when in-person interactions could be moved online.

For the Philippines, it presented a challenge, and strain was felt in the delivery of social assistance under the Bayanihan acts.

Fortunately, the country is moving to address digital infrastructure gaps, including through the development of the Philippine Identification System (PhilSys). PhilSys is one of the most complex – but also game-changing – projects undertaken in the country.

The Philippines is one of only 23 countries without a national ID system. As a result, Filipinos need to present multiple IDs (and often specific IDs that many do not have) when transacting, including with government, creating barriers to services for the most vulnerable among the population. Information across government databases is often inconsistent. These undermine the Philippines’ transition to a digital economy, society and government. The PhilSys will help address this by providing all Filipinos with a unique and verifiable digital ID (and not just a card), while also adopting innovative and practical data protection and privacy-by-design measures.

The new partnership agreement between the Philippine Statistics Authority (PSA) and the Department of Social Welfare and Development (DSWD) for DSWD’s adoption of the PhilSys is a milestone for the Philippines’ social protection and digital transformation journeys. DSWD will be the first agency to utilize the secure biometric and SMS-based identity authentication offered by the PhilSys to uniquely identify and verify its beneficiaries. Pilots with the Pantawid Pamilyang Pilipino Program (4Ps) and Assistance to Individuals in Crisis Situations (AICS) program will begin within the next few months, before PhilSys is used by all DSWD programs.

Adopting PhilSys will enable DSWD to further accelerate its digital transformation. By automating verification and business processes for its programs and services, DSWD will be able to improve the impact while reducing the costs of social protection programs. PhilSys will assist with identifying and removing ghost, duplicate and deceased beneficiaries to address leakages, fraud and corruption, and thus boost transparency and public trust. The unified beneficiary database that DSWD is developing with the help of PhilSys will contain up-to-date and consistent beneficiary information across all programs.

The World Bank is supporting these DSWD initiatives through the Beneficiary FIRST (standing for Fast, Innovative and Responsive Service Transformation) social protection project.

Importantly, these changes will translate to benefits for Filipinos.

Those who interact with the DSWD will face less paperwork, queues, hassle, costs and time. With their PhilSys ID, they will also have better access to a bank or e-money account where they can potentially receive payments directly in the future, promoting financial inclusion. Indeed, more than 5 million low-income Filipinos have already opened bank accounts during PhilSys registration. And the resources that DSWD saves can be redirected to addressing the needs of beneficiaries who live in remote areas without easy access to internet and social protection programs.

Beyond the advantages for social protection, the digital transformation PhilSys will catalyze in the public and private sectors can be fundamental to the Philippines’ pivot to reviving the economy and getting poverty eradication back on track. Success in utilizing PhilSys for social protection will have a significant demonstration effect in accelerating digital transformation by other government agencies as well as the private sector.

But digital transformation is not easy. It is not about simply digitizing things. It is about re-imagining how things can be done for the better, with technology as an enabler. Digitizing bad systems or processes just leads to bad systems or processes digitalized. Digital transformation therefore depends on and can only be as fast as process re-engineering and institutional and bureaucratic changes to overcome inertia.

Digital transformation must also be inclusive to avoid exacerbating digital divides or creating new ones.

The effort will be worth it. And the World Bank is firmly committed to scale up our support to the Philippines’ digital transformation agenda. A digital Philippines will not only be more resilient to future shocks – whether they are natural disasters or pandemics – but also be poised to take advantage of the opportunities brought by COVID-19 (shift of activities online) and those that lie ahead in the post COVID-19 world.
 first published in The Philippine Star, via World Bank

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Southeast Asia

Bringing “the people” back in: Forest Resources Conservation with Dr. Apichart Pattaratuma

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With a lifetime dedicated to forest conservation, Dr. Apichart Pattaratuma reflected back on his career and what forest management means to Thailand. In the year 1978, he received the prestigious United Nations and Ananda Mahidol Foundation Scholarship to attain higher education at the College of Forest Resources, University of Washington, Seattle, USA. After graduating in the year 1985, he returned to Thailand with a commitment to teach and research at the Department of Forest Management, Faculty of Forestry, Kasetsart University until his retirement with full professor position. The excerpts below encapsulated a conversation between Dr. Pattaratuma and Dr. Rattana Lao on forest conservation.

Beyond the classroom: An anthropological perspective

I dedicated my life to study the anthropological aspect of forest management to His Majesty King Bhumibol Aduyadej of Thailand. I studied cultural dimensions of forest management in many areas of Thailand. I began with Huay Hin Dam with Karen hill tribe (Pra-ka-ker -yor) Suphanburi Province. I tried to review the international literature on land use and combine it with in-depth interviews with the hill tribes to understand the cultural dimensions of their livelihoods. I observed how they built their houses and how their managed their forest. There are three characteristics of the Karen tribe. Firstly, they lived on small plots of lands and their houses are very small. Secondly, they conserve their forest land with water resources. Thirdly, they refrain from using pesticides. Culturally, there is a clear division of labor amongst men and women. While men will clear the lands, women will cultivate agricultural goods such as papaya, guava and banana. There is limited drugs use.

It’s liberating to do research beyond the classrooms. To observe real live, real changes. I learnt more than I set out to do and they are all interrelated to a bigger picture.

Intersectionality between culture, migration and forest management

Karen hill tribes migrate in a cluster. There are more than 3 families migrating together to the new fertile forest land. They will migrate together when land is exhausted. This is most evident in the borderland between Thailand and Myanmar. Back then they did not have official documentation but slowly they do. There has been an influx of hill tribes from Myanmar to Thailand due to political conflicts from Myanmar. From my observation, they are very conscious about forest conservation and resources management. They said: “no forest, no water”. They are compelled to protect the forest from pesticides in order to keep the water clean and their health well. They are very logical. Although they grow rice, it’s very subsistent and only for household consumption. They don’t grow rice for commercial purpose. This is the land use for Karen hill tribe.

I also studied in Kampeangpetch, Nan, Chiang Rai, Phrae and Lumphun. Each place is diverse and the situation is really different. Some local tribes are preserving of the forests, others are more detrimental. We need an in-depth study to understand the cultural dimension of land use for each tribe.

The heart of forest management

People. It’s the people. People must particulate in the forest management. Otherwise, it is very difficult. When we go into each location, we must approach people and bring them into the conversation. I have tried to do all my life. Civil servants must approach people, not other way around. People are looking up to our action. They look into our sincerity and commitment. If they see that we are committed to study about their livelihood, they will share the right information and they will help.

Indonesia is a good example of successful forest management. The state get people involved. In every kilometer, there are four actors involved in protecting the forest: soldiers, policemen, villager and forester. They help each other protecting the wildlife and forest resources.

Can legal change help the people?

Legal relaxation can help lessen the pressure between man and forest. Before the legal requirement was very strict. Any kind of forest intrusion would be caught including small hunters gatherers. I think that is too strict. That put people against the law. People should be able to go into the forest and pick up some mushroom and bamboo and some wild products to lessen their poverty and hunger.

As long as people are still hungry, it’s very hard to manage the forest. There must be a way to balance the two: people livelihood and forest management.

Capitalists invasion

Much of the legal attention is paid to small farmers use of the forests. However, the real issue is big corporations invade the forest. This is very significant. Deforestation happens mostly from large scale corporation rather than small scale farmers. There are many loopholes in the system that lead to systemic corruption and mismanagement of land use. Many wealthy houses are built on large scale timber to exemplify wealth and status. It saddens me.

Would the next generation get to see large tree in the forest?

Less likely.

What can we do to protect the forest?

There are many organizations that responsible for the forest protection such as Royal Forest Department, Department of National Parks, Wildlife and Plant Conservation and Department of Marine and Coastal Resources. But the manpower are not sufficient to cover the large area of forest in Thailand. There are not enough permanent manpower to go on the ground and protect forest resources, while the intruders to National Parks are equipped with more advanced weaponry.

To protect the forest, the state must be committed and the people must participate in the process.

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Southeast Asia

Possibilities for a Multilateral Initiative between ASEAN-Bangladesh-India-Japan in the Indo-Pacific

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In the Indo-Pacific context, there are multiple partners all aiming for economic fulfillment along with maritime security and safety. Countries ranging from the Indian Ocean to the South China Sea seem to be more worried about the freedom of navigation and overflight as Chinese aggressiveness is rampant and expansionist is a scary idea. The region from India to Bangladesh has a huge potential of interconnectedness and if connected to the Southeast Asian countries, it would also help in India’s Act East Policy and India’s neighbourhood first policy and further help out in strengthening relations to the far East as in Japan. All these countries combined can create an interconnected chain of mutual and common interests with balanced ideas of economic, military, social, political and people to people exchanges which would in turn help develop a multilateral.

Who can lead this Multilateral Initiative and Why?

Japan can be the prime crusader for this multilateral as it has excellent relations with all the parties and is the pioneer of the free and open Indo-Pacific. Japan has excellent diplomatic, economic and infrastructural relations with all the possible partners as it provides ODA loans, aid and assistance. Japan being the pioneer of Free and Open Indo-Pacific can be guiding force for this multilateral in the maritime domain which would help create a new regional grouping consisting of South Asia and Southeast Asia primarily based on maritime. Japan is the only developed country among all the other players and with its expertise, it can surely guide, help, support and take along all the countries. Japan most importantly is a non-aggressive nation and believes in mutual respect unlike China. Japan has no dept trap issue unlike China. Japan is known for quality in infrastructural development and with their expertise in science, technology and innovation can well lead these countries. Japan’s reputation of honesty, no corruption and extreme detailed paper work is commendable.

What are the benefits from this Multilateral Initiative?

This multilateral would help connect the Indian Ocean (India) to Bay of Bengal (Bangladesh) to the South China Sea (ASEAN) and the East China Sea (Japan)- would help in the creation of water interconnected network from South Asia to Southeast Asia. This could be the first regional maritime grouping covering South Asia to Southeast Asia. This maritime grouping can create a network of ports which could also become an economic hub and intersecting points of investment and infrastructural development (already Japan is investing in a big way in all these countries). India’s Northeast would get a greater economic, infrastructural and people-to-people exchange as it would connect India to Bangladesh and Myanmar. Mekong Ganga Economic Corridor already exists and could pave the way for Bangladesh and Kolkata greater port exchange which could be developed as nodal points in Bay of Bengal and would help in easy and cheaper freight. These countries can also aim for the strengthening of defence and security relations in the domain of maritime and can also aim for a logistics support agreement and a network from Indian Ocean to Bay of Bengal to South China Sea to East China Sea and would help tackle Chinese aggressiveness and China has been mapping the waters in all these waters and so, to protect one’s territorial sovereignty and integrity, defence relations must be build.

An ecosystem based on Digitalization, Science, technology and Innovation can be formed which would help create a united cyber security law and all this could ultimately lead to the 4th Industrial Revolution. South Asia and Southeast Asia would be lucrative markets and labour distribution and generation of employment can be done through the ports, logistics network, economic and trade exchanges and interactions. This multilateral would form a resilient supply chain in the region of South Asia and Southeast Asia in the domain of Indo-Pacific. Marine economy can be a major factor of this multilateral initiative as it would be a major success in the maritime domain. This multilateral can also work on vaccine diplomacy and work on future health hazards mechanisms.

Why Bangladesh must think of adopting the Indo-Pacific Strategy?

Bangladesh must adopt the Indo-Pacific strategy and create its own objects and call it the SAMODHRO NITI. Bangladesh has the capability of being an excellent maritime power and it is a major leader in the Bay of Bengal and to be an effective part of this multilateral. The Bay of Bengal Industrial Growth Belt (BIG-B) would be a key binder. Bangladesh must realise that China by building dams on the Brahmaputra River would actually create issues for Bangladesh’s fishery catchment areas as it would get inundated with salt water and to stop that Bangladesh must work to strengthen its position to tackle China. Also, China could also create water issues for Bangladesh and Bangladesh must look at ways to safe guard its water resources. Thereby, Bangladesh must work towards countries who face similar issues with China. The Indo-Pacific Economic Corridor is an excellent example of cooperation but this Multilateral if formed can be a stronger initiative and Bangladesh benefits from it as being a hub of textile, leather and pharmaceuticals and this Multilateral has all the efficiency of becoming an economic hub which would benefit Bangladesh too. If Bangladesh adopts an Indo-Pacific Policy, then its market in Japan, the US and Europe would become stronger due to shared interests and can also sign a Free Trade Agreement with EU like Vietnam did.

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