The ASEAN

Experience:
Delusions of
Regional
Integration
Eduardo C. Tadem, Ph.D.
Professor of Asian Studies
University of the Philippines
Diliman

Outline of presentation
1. Is there a basis for Southeast
Asian regionalism?
2. ASEAN beginnings
3. What has ASEAN achieved?
4. Shortcomings and setbacks
5. The AFTA Experience
6. Other ASEAN weaknesses
7. Addressing poverty and
inequality in ASEAN
8. Trends in SEA regionalization
9. The ASEAN Charter
10. Conclusions

1. Is there a basis for Southeast

Asian regionalism?
1. similarities and differences across the region cultural practices, languages, religious mixes; colonial
experiences; structures and systems of government
2. interaction among countries and peoples in the
region - historic trade ties; active transnational
business networks; interaction through family ties,
migration and tourism
3. cooperation among governments in the region, but
also conflicts
4. whether there is a regional identity defined by
political and economic elites

2. Association Of Southeast Asian

Nations (ASEAN) - Beginnings
In 1967, ASEAN was established with the Philippines,
Indonesia, Malaysia, Thailand and Singapore as founding
members
Context:
change of regime in Indonesia ended the latters
confrontation with Malaysia;
cold war era a group of anti-communist countries with
governments that faced significant threats (ongoing or in
recent past) from domestic left-wing movements
Concern with the ongoing Indochina conflict gave ASEAN an
implicit political dimension.
From the start, ASEAN was a political project of Southeast
Asias elites which highlighted the concerns of their social class
orientations.

 Original member states led in late 60s by groups and

leaders with conservative, anti-Communist, pro-Western
orientations. Political elites of the era were still products
of the colonial period.
April 1975 (marking the end of the Indochina Wars)
changed the context of ASEANs activities dramatically.
Member states recognized need for security cooperation
from 1976 on. Also began to discuss more extensive
economic cooperation: trade liberalization, attention to
prices of the regions key commodities.
Brunei joined in 1984, Vietnam in 1995, Laos and Burma
in 1997, & Cambodia in 1999. Admission of
Indochinese states reflected a change in context since
the 1960s, change in these countries themselves, and
end to fears of aggressive Communism.

3. What has ASEAN achieved?

First 20 years, in terms of
concrete projects, generally low
level of activity
The 1978/1979 Vietnamese
invasion of Cambodia became a
key ASEAN issue.
United the group as never
before. ASEAN efforts led to
Paris Accords in 1991
Vietnamese withdrawal, to
elections in Cambodia under
UN supervision in 1993.
The Cambodian success came at
a time when SE Asian economies
were starting to attract attention
for their high growth rates.

 In 1990s, activity increased with major initiatives

1992, creation of ASEAN Free Trade Area (AFTA), to
bring down tariffs among the ASEAN countries to zero
originally by the year 2003; and create a market of
some 400 million that could serve as the basis of
regional industrialization.
1994, the ASEAN Regional Forum (ARF) was formed
to foster dialogue and consultation on political and
security issues (included US, Japan, Australia, Russia
and China)
1995 signing of the SEAsian Nuclear WeaponsFree Zone Treaty
accelerating range of contacts in many other areas,
on official and semi-official bases: universities, thinktanks, chambers of commerce, government bureaus;
seen as elite socialization

 The Chiang Mai Initiative

Known as the CMIM Chiang Mai Initiative Multilateralized
A regional financial safety net; a common liquidity pool in case of
BOP or liquidity crisis
As a response to both the 1997-1998 Asian financial crisis and
the 2008 global financial shock
Includes ASEAN (20%), China (32%), Japan (32%), and Korea
(16%)
Total capitalization = US$240 billion; but is not a common or
central fund
Has never been used, though
Sums are still very low only 1.5% of ASEAN+3 GDP
Still tied to an IMF program and its conditionalities
Lacks a rapid response capacity
Equity issues, especially for poor countries

4. Shortcomings and setbacks

Failed Projects:
ASEAN Industrial Projects (AIP) - assigning capitalintensive projects to different countries to develop;
ASEAN Industrial Complementation Scheme (AIC) dividing different production phases of auto and
other industries among member countries;
Currency swap only US$2 billion committed out of
US$20 billion needed; the US wanted IMF to be part
of the process; ASEAN gave in
The U.S. and Chinas undermining of the SEAsian
Nuclear Weapons Free Zone initiative by refusing to
be signatories

 ASEAN did not act

collectively over the East
Timor crisis (due to
principle of noninterference) the UN had
to take the lead in dealing
with violence that erupted
after Timorese voted for
independence in 1999

East Timor Founding President

Xanana Gusmao

ASEAN turned a blind eye

to the brutal crackdown in
Burma (1988) and the
militarys refusal to
recognize results of 1990
election won convincingly
by Aung San Suu Kyis
National League for
Democracy
Aung San Suu Kyi

5. The Asean Free Trade Area (AFTA)

experience
The AFTA program was initiated in 1992 to create an
integrated market among ASEANs close to half a billion
people, make the ASEAN economies more efficient and
competitive, and attract investments into the region.
Involves the removal of obstacles to freer trade among
member states. This includes the abolition of high tariffs
or taxes on traded goods and the scrapping of
quantitative restrictions (QRs) and other non-tariff
barriers (NTBs) that limit the entry of imports.
The ultimate target of AFTA was to eliminate all import
duties by 2010 for the six older members of ASEAN and
by 2015 for the four new members.

Strengths
1. By January 2010, 99% of tariff lines have been reduced to
zero among the six long-standing members of Indonesia,
Malaysia, the Philippines, Singapore, Thailand, and Brunei.
2. The plan is to deepen AFTA by integrating the four newer
members (Cambodia, Laos, Myanmar and Vietnam), tackling
non-tariff barriers and expanding its scope to new areas
such as investment. Have concluded collective free-trade
agreements with China and Japan.
3. Agreement (2007) to establish an ASEAN Economic
Community (AEC) by 2015 as a single production base and
market.
4. According to the ASEAN Secretariat, trade among its
members increased five-fold from 1993 to 2009.
5. High growth rates for ASEAN (ave, of 5.7% from 20102013)
6. Large inflows of foreign direct investment. From 20122013 7 times more than India and almost same amount as
China

Weaknesses
1. ASEAN leaders promise to build an economic
community is weakened by a strong aversion to
diminish national sovereignty for the sake of deeper
economic integration. This reflects the absence of a
distinct and unifying regional identity.
National strategies clash with ASEANs internal goals.
Relatively open economies, e.g., Singapore and
Thailand, see ASEAN as a means to increase their
exports, attract more foreign investments and are
concentrating on their own market-opening measures
depriving the grouping of its best integrators in the
process. Investments still come from outside ASEAN,
and most exports end up overseas.

Several members refused to lower tariffs on certain

critical products. Malaysia, insists on protecting its
state-owned car industry, fearing competition from
Thailand. Caps on foreign ownership are still in
place in the Philippines and Indonesia.
At the April and October 2013 ASEAN Summits in
Brunei, the goal of forming an ASEAN Economic
Community (AEC) by 2015 was downplayed,
merely stating that the leaders are pleased with its
progress.
This was due to slow progress on eliminating nontariff barriers (NTBs)
Impediments to the free flow of labor sour relations
between Malaysia and Indonesia and the Philippines
over the treatment of migrant workers.

 80 percent of AEC have been implemented but

the remaining 20 percent are the toughest ones.
A 2013 survey by the Economist of 147 big
companies operating in the ASEAN region
shows that only 6.3 percent expect that the AEC
can be put in place by 2015.
A 2013 study by the Asian Development Bank
and Institute of Southeast Asian Studies
concludes that ASEAN has no prospect of
coming close to (a) single market by the
AECs 2015 deadline or even by 2020 or
2025.

A 2011 dispute pitted the Philippines

against Thailand on the issue of
discriminatory taxes, duties, and
health measures against Phil.-made
cigarettes exported to Thailand. In
June 2011, WTO ruled against
Thailand.

Whatever shape the AEC

ultimately takes, it is becoming
increasingly obvious that the
group will belong to big business
leaders with the right political
connections who can take
advantage of removing tariffs and
laws that impede cross-border
traffic. The Diplomat.

INTRA-ASEAN TRADE

2. ASEAN's trade with the

rest of the world has grown
just as fast as trade among
its members. Trade with
China has actually grown
much faster and more
consistently. Intra-ASEAN
trade growth, by contrast,
has been patchy and
virtually stagnant for 18
years (1995-2013).
Intra-ASEAN Foreign Investments
Year
2008 2009 2011 2013
Percent 21.3
11.2
23.0 17.0

YEAR

PERCENT

1985

20.3

1990

18.9

1995

24.1

2000

24.7

2002

24.4

2005

24.9

2007

25.0

2009

24.5

2011

25.0

2012

24.3

2013

24.2

Regional Trade Blocs (2010)

Regional
Blocs

APEC
EU
NAFTA
ASEAN
Mercosur

Merchandise
exports w/in
bloc (% of total
bloc exports)

Merchandise
exports by bloc
(% of world
exports)

67.5
67.3
48.7
25.0
15.7

47.3
32.7
12.9
6.9
1.9

3. ASEAN economic cooperation has been tough going; ASEAN

economies are not complementary and in many ways compete
with each other.
Exports of ASEAN Countries
Products

Brunei

Oil/oil prods

Chemicals

Metal & metal prod

Burma

Camb

Indon

Laos

Malay

Phil

Sing

Thai

Viet

Machinery/equipment

Textiles / Clothing

Travel goods, bags,

Wood/wood products

Fruits/vegetables

Rice

Fish/fish products

Food/Live animals

Rubber/rubber prod

The Common Effective Preferential Tariff (CEPT)

scheme - main instrument for turning ASEAN into a free
trade area.
It is a cooperative arrangement to reduce intra-regional tariffs and
remove non-tariff barriers. But only 5% of intra-ASEAN trade
makes use of CEPT due to:
1. High costs of applying for preferential rates
2. Bureaucratic red tape procedures
3. Reluctance to liberalize (Malaysia motor vehicles & parts,
Indonesia agricultural products, Philippines petrochemical
products)
4. Minimal differences between CEPT and MFN & ordinary tariff
rates
5. Countries with high tariffs, e.g., Burma, are reluctant to cut into
their own revenue by promoting the exploitation of the CEPT.
6. Existence of non-tariff barriers esp. on agricultural products
7. Lack of information on existence of CEPT

5. Trade inequalities
abound. In 2013,
Singapore, Malaysia,
Thailand & Indonesia
dominated ASEAN
trade with a 86.1%
share. Singapore alone
has 34%. The bottom 6
countries have only a
13.9% share.
Historically, Malaysia &
Singapore have
dominated regional
trade - two-thirds of
total intra-ASEAN trade
in previous years.

Intra-ASEAN Trade, 2013

(Value US$ million)
Country

Value

Singapore

206,672.3

33.95

Malaysia

119,106.3

19.57

Thailand

103,668.6

17.03

Indonesia

94,661.8

15.55

Vietnam

39,531.9

6.49

Philippines

22,786.2

3.74

Burma

9,869.0

1.62

Cambodia

4,119.1

0.67

Brunei

4,488.0

0.74

Laos

3,729.3

0.61

Total

608,632.4

% share

100

Investment Inequalities in ASEAN

ASEAN Six Majors
Foreign Direct Investment (2012)

Singapore
Indonesia
Malaysia
Thailand
Vietnam
Philippines

US$56.7 billion53.3%
US$19.9 billion 18.7%
US$10.0 billion 9.4%
US$ 8.6 billion 8.1%
US$ 8.3 billion 7.8%
US$ 2.8 billion 2.6%

7. Other ASEAN weaknesses

ASEAN seems to be running out of steam in trade and
investment liberalization. Average growth rates of 5%
(2000-04) and 4.84% (2005-2009) were below 1990-95
level of 7.3%. In 2009, growth rate was only 1.5%. China
and India have quickly eclipsed ASEAN as the toast of
bankers and investors.
Continued vulnerabilty to challenges posed by
globalization of financial markets. Risks associated with
volatile capital moving across borders creating
instabilities and crises.
The 2008-2009 global economic meltdown resulted in
lower export earnings, job losses and declines in GDP
growth rates.
Difficulty of integrating new members: different stages of
development and different systems of government.
The ASEAN Secretariat is weak, with only 1% of the staff
complement of the European Commission. Staffed mainly
by bureaucrats on short-term secondment from their
national governments in a building full of empty corridors
and echoing atriums.

 Perceived ASEAN weakness on the

matter of the South China Sea.
ASEAN members have competing
claims in this area.
A toothless 2002 Declaration on
the Conduct of Parties in the South
China Sea (bet ASEAN and China).
Formal talks on a Code of Conduct
still to commence.
For the first time in its 45-year
existence, an ASEAN foreign
ministers meeting in Phnom Penh
in July 2012 failed to issue a joint
communique due to a
disagreement on whether to
mention the South China Sea
territorial disputes.
Inability to deal with the regions
financial crisis of 1997-98;
necessitated IMF intervention, with
large role for US and Japan. Malaysia
took an independent approach.

 ASEANs claim to fame appears to rest more on its

longevity and frequency of meetings (average 700+ per
year).
Asean had made little headway in persuading the
Burmese military junta to end its human rights abuses.
This illustrates the failure of the consensual, nonconfrontational approach that ASEAN diplomats call
"the Asean way". There are no minimum standards
for members and only the vaguest principles to which
they must adhere. When action is needed, ASEAN
governments resort to excuses about not wanting to
interfere in the internal affairs of member
governments.

 In the 2011 Summit in Jakarta, ASEAN leaders failed to

make progress in resolving the deadly border dispute
between Thailand and Cambodia.
At the November 2012 summit meeting, ASEAN heads of
state, could not agree to set up a crisis hotline. Even bitter
enemies like North and South Korea have a cross-border
hot line three, in fact.
ASEAN has also been silent on the issue of the Muslim
Rohingyas in the Arakan state of Burma who have, since
2012, been victims of ethnic cleansing instigated by the
Burmese government.
Negotiations on joint action between Indonesia, Singapore,
and Malaysia on the haze problem hit a snag in August
2013 when Indonesia refused to grant access to official
land concession maps which could have pinpointed the
culprits.

8. Addressing problems of poverty and inequality in

ASEAN - both between countries and within countries
ASEAN POVERTY
COUNTRY
BELOW
POVERTY
SINGAPORE
-----BRUNEI
-----MALAYSIA
3.8
THAILAND
7.2
INDONESIA
13.3
PHILIPPINES
24.0
VIETNAM
13.1
LAOS
24.0
CAMBODIA
26.1
BURMA
23.6

Greater economic openness in SEA coincided with a fall

in poverty incidence on the one hand and deterioration in
income distribution on the other hand.
ASEAN Indicators of Inequality
2007/2008
Country

Gini
Index

Malaysia
Philippines
Thailand
Singapore
Cambodia
Vietnam
Laos
Indonesia

49.2
44.5
42.0
42.5
41.7
34.4
34.6
34.3

Share of income
or consumption
Poorest Richest
10%
10%
1.7
38.4
2.2
34.2
2.7
33.4
1.9
32.8
2.9
34.8
4.2
28.8
3.4
28.5
3.6
28.5

No data for Burma and Brunei

ASEAN Poverty & Inequality Rates

Country

GDP per
capita
(in US$) 2011

Share of income or consumption

% Below
poverty
line

Gini index
Poorest 10%

Richest 10%

Singapore

51,162

NA

42.5

1.9

32.8

Brunei

41,703

NA

NA

NA

NA

Malaysia

10,304

3.8

49.2

1.7

38.4

Thailand

5,678

7.2

42.0

2.7

33.4

Indonesia

3,592

13.3

34.3

3.6

28.5

Philippines

2,614

24.0

44.5

2.2

34.2

Vietnam

1,528

13.1

34.4

4.2

28.8

Laos

1,446

24.0

34.6

3.4

28.5

Cambodia

934

26.1

34.8

2.9

34.8

Burma

835

23.6

NA

NA

NA

Note: Poverty for 2011, Gini index & income share as of 2007-2008
Sources: International Monetary Fund, Association of Southeast Asian Nations, Asian Development
Bank, & Economic Intelligence Unit

 Cielito Habito, Narrowing the gaps in Asean, Phil

Daily Inquirer, 27 Sept 2011
In 1970, of the five founders, average income of the
richest member country, Singapore, was 11 times that
of the poorest, Indonesia.
In 1990, this ratio was now 19 times; 2000, 29 times
In 2010, gap narrowed to 14 times. This time,
Philippines was now the poorest.
In 1990, of the ten members, the richest, Brunei was
201 times richer than the poorest, Burma. By 2000,
Singapore, the richest, had 129 times Burmas
average income. The gap narrowed to 62 times in
2010, but still worse than in 1970.

 Habito, cont.
In Cambodia and Laos, more than 25% of population live on less
than US$1.25 a day.
In contrast, Malaysia, Singapore, Thailand, and Brunei, poverty
is either non-existent or very slight
Despite the Philippines higher average income than Vietnam,
the latter has a lower poverty incidence, indicating a worse
Philippine income distribution
Indonesia has better record than the Philippines in average
income, poverty incidence, and income distribution
ASEAN can be divided into three groups accdg to infra dev
1. Singapore, Malaysia, & Brunei
2. Thailand, Indonesia, & Philippines
3. Cambodia, Laos, Vietnam, & Burma

But the richest countries, Singapore, Malaysia & Thailand, have

the worst income distribution while poorer ones, Laos, Vietnam &
Indonesia, have better income distribution. Economic growth has
benefitted only a few

Poverty and Inequality Factors

Weak linkages between developed areas and the rest
of the country.
Most jobs created were among unskilled and
semiskilled workers who are subjected to greater
levels of exploitation
Social protection, especially of women labor, has
weakened due to part-time, piece work, and
informalized subcontracting (incl home-based) work
Job losses also take place due to loss of
competitiveness or relocation of industries to other
countries.

 Emphasis on international competitiveness and export

promotion often replaced policy measures against
poverty and social inequality.
Regional trades impact on poverty is hampered by
dominance of vertically integrated TNCs with little or no
backward and forward linkages with the economy and
whose production is for US and Japan market.
Phenomenon of jobless growth - the tendency for
productivity to grow without concurrent growth of jobs
impedes the positive effects of AFTA
Agriculture only accounts for 10% of intra-ASEAN
trade despite the importance of this sector to most
member countries. There is little complementation in
agricultural products.

9. Trends in SEAsian regionalization

ASEAN seems to be moving away from integration
It is developing organizational ties with other countries:
ASEAN+3 (Japan, China and South Korea),
2004 ASEAN-China Free Trade Area, Nov 2004 agreement to lower tariffs on goods
by 2010, but excludes services, non-tariff barriers, and thousands of sensitive
products; also excludes Laos, Vietnam, Cambodia, and Burma
2005 East Asia Summit, ASEAN, China, India, Australia, Japan, South Korea, New
Zealand; excluded the U.S.; focused on trade; progress could be very slow given the
great range of political systems; conflicts between China and Japan over WWII
issues, between China and India
2005 ASEAN-Korea Free Trade Area,
2008 ASEAN-Japan Comprehensive Economic Partnership, covers only trade in
goods
2009 ASEAN-India Free Trade Area, and
2009 ASEAN-Australia-New Zealand Free Trade Area.
Currently being negotiated is an ASEAN-Hong Kong free trade agreement.

Some members have been establishing bilateral trade ties

with outsiders. Many more under negotiation. This
undermines ASEANs integration process.

Chinas Influence
Chinas involvement in Greater Mekong Subregion is dividing Asean between mainland
and maritime states.
Heavy investments in dams, transportation
routes, energy grids, trade bases and other
infrastructure
Weakens Asean and diminishes its influence
as a unified bloc
(Geoff Wade, Yale Global Online, 2-25-2011)

THE ASEAN CHARTER

New York Times (Nov 20, 2007)
Reaffirms Asean's longstanding policy of non-interference in
members' internal affairs and declares that "decision-making in
Asean shall be based on consultation and consensus;
Omits mechanisms to enforce compliance that were in the earlier
versions;
Economic blueprint falls short of establishing the customs union
many businesses in the region have been hoping for.
Nor does it appear to outline any consequences for failing to meet
the timelines;
Asean human rights body has no provisions for enforcing
compliance with any human rights standard;
Includes an "Asean Minus X" provision that allows members to opt
out of economic commitments if they can win consensual
agreement from other members; and,
The charter looks less like a newly unified Asean than the Asean of
old.

ASEAN Declaration on Human Rights, Nov 2012

Declaration could "weaken and erode" the UN Universal
Declaration of Human Rights, "undermines, rather
than affirms, international human rights law and
standards implies (ASEAN peoples) are less
deserving of human rights than the people of Europe,
Africa or the Americas".
Allows Asean governments to exclude serious abuses
because of "national particularities" or "cultural
background as well as restrictions on a wide array of
grounds, including "national security" and "public
morality", The Guardian, 23 Nov 2011
Eight out of ten ASEAN governments are authoritarian

11. Conclusions
The New York Times May 2011; 20 Nov 2012
Riven by factionalism, the group seems to have no clear
way forward, despite increasing tensions over several
implacable territorial disputes.
Asean has never been very efficient at making policy, nor
has it been very good at policing its own members, in part
because of the so-called Asean Way, which prohibits
members from interfering in each others domestic affairs.
An Indonesian Professor of International Relations: The
problem is that Asean has a limitation in solving the
problems that its members have because of the principle of
non-interference. If Asean continues to keep this so-called
sacred principle of noninterference, then I have some
pessimism that Asean will be able to solve problems in the
future.

 Aljazeera, Nov 22, 2012

ASEAN as a toothless mouse ineffective, irrelevant and a
trifle useless
All pomp and ceremony at the best of times with very little
substance. Its been termed a "loose grouping" with nothing
legally binding it together.
Agreement of non-interference meant that , there were
no condemnations of, or sanctions against, or even reactions to
human rights violations amongst them
It was the ASEAN way to be non-confrontational, put on a
united front and pretty much sweep things under the carpet.
Which is why most thought the group a "lame" body.
For many years, the only underlying consensus (was) making
sure everyone played nice, and kept the house clean and
presentable at all times. There was to be no rocking the boat.

 After more than four decades of

conscious efforts for greater integration of
their economies, the five original members
of the ASEAN, Indonesia, Philippines,
Malaysia and Thailand, find their
economies no closer to each other than
they were when they first formally got
together in 1967.
Cielito Habito, September 2011.

Despite similarities in historical

experiences; e.g., historical trade
ties, colonialism, and interactions
among peoples, ASEAN is
hobbled by:
Non-complementary economies
Dissimilarities in structures and
systems of government
Low levels of cooperation
among governments in the
region
National sovereignty
undermines regional integration
Lack of a common idea of a
regional identity
Absence of an enforcing
mechanism
END -