Asean Economic and Political Integration: Myth or Reality?

ASIA HAND

One step forward, two back for ASEAN

By Shawn W Crispin

BANGKOK - Just when it seemed the Association of Southeast Asian Nations (ASEAN) was united in its desire to establish a cohesive, rules-based economic bloc, a series of bilateral trade and investment spats has sent the 10-member regional grouping careering back toward collective irrelevance - only this time to potentially disastrous effect.

ASEAN members agreed last month to fast-track the establishment of a long-discussed regional free-trade area, moving the timetable by five years for eliminating tariffs and promoting the free flow of capital across regional borders from 2020 to 2015. More significant, ASEAN also unanimously approved a blueprint to transform the informal grouping into a legally defined entity, giving it the central authority to impose sanctions on members that break its rules and regulations.

Those were unusually bold moves for ASEAN, which throughout its 40-year existence has served more as a regional talk shop than a venue for hammering out binding trade and investment agreements. Formed loosely in 1967 to promote regional security, culture exchanges and economic prosperity, an expanded ASEAN now represents the region's best hope of engaging and counterbalancing China's economic rise on a somewhat equal basis. It includes Thailand, Malaysia, Singapore, Vietnam, Indonesia, the Philippines, Cambodia, Laos, Myanmar and Brunei.

Last year, ASEAN agreed in principle to establish a free-trade agreement with China, which by 2010 should represent the world's largest free-trade area, eclipsing both the European Union and the North American Free Trade Area. It was a deal that ASEAN's comparatively smaller economies could not refuse, but one that China could still go lukewarm on if the underlying conditions shift - as recent protectionist lurches across the region seem to indicate.



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Racial dimension
Bangkok's spat with Singapore, in which the former's military leaders have publicly accused the island state of violating its national sovereignty through its investments in communications infrastructure including satellites, is deeply enmeshed with Thailand's unfolding and unresolved political crisis.

Thailand's ruling generals have in effect ordered into bankruptcy the television station ousted prime minister Thaksin Shinawatra's family sold last year to Singapore's Temasek, demanding more than $2 billion in fines and delinquent fees. They are now threatening to follow up by rescinding the build-operate-transfer concession held by Advanced Info Services, Shin Corp's money-spinning mobile-telephone company now owned by Temasek.

The latter move would render Singapore's $1.9 billion investment in the conglomerate almost worthless and raise questions about whether the move represents a full-blown expropriation of a foreign investment. As currently constituted, Singapore would have little recourse through ASEAN's untested dispute-settlement mechanism, which historically has shied away from mediating in regional economic disputes


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I think there is something more sinister going on here. Thailand and Indonesia are corrupt 3rd World countries. Each has resorted to right-wing nationalism in their contemporary histories as an excuse to go after the economic assets of foreigners and ethnic minorities, especially the overseas Chinese. Also, both have used the US and former imperialist powers as scapegoats for their problems. As Singapore and China emerge as the economic powerhouses with a lot of capital to spend, they will be viewed as the new threat and be blamed and scapegoated for all of Southeast Asia's problems. Of course, the political elites in Thailand, Malaysia and Indonesia will milk this new Chinese threat for all its worth to preserve their own political power by using the nationalist card. Yet, at the same time, they will have their hats in hand begging from the Chinese and the US/Europeans for handouts and investments. This two-faced game has been played by Thailand and Indonesia for years; amazingly enough, they continue to get away with it. Nevertheless, foreign investors still go ahead with their business plans. Why? Because even with all the nationalist bullshit, I guess they are still making sweet profits.

If the Chinese/Singaporeans and US/Europeans were smart, they would get together and put a stop to this racist nonsense by forcing these Southeast Asian governments to make provisions in their economic and political agreements concerning direct or indirect nationalization of assets and stipulations against fomenting nationalism and racism against Chinese/Singaporean and US/European foreign investors(though I admit tricky because of free speech issues). Otherwise, foreign investors who do invest in Southeast Asia, especially in racist countries like Thailand and Indonesia, are going into these agreements with their eyes wide shut and deserve to be screwed. Foreign investors need to start doing their political due diligence.