Page last updated at 01:38 Asia/Manila, Wednesday, 10 December 2014 PH
Some professors at the University of Asia and the Pacific were fortunate to listen to a talk by prominent Filipino journalist Eddie Lachica in a recent Round Table Discussion held at the Center for Research and Communication, think tank of UA&P. Mr. Lachica, who is now based in Washington, D.C., USA, proposed some practical ways of overcoming some remaining obstacles to economic integration within the forthcoming ASEA Economic Community (AEC). He alerted us against thinking that AEC will descend on our region in one fell swoop in 2015. A long-time scholar on the ASEAN (he spent time at the Harvard University as a Nieman fellow) he is cautiously optimistic about the prospects of the AEC as a free market for goods, services, capital, technology and manpower. He emphasized the importance for the private business sectors in the ASEAN to exert “peer pressure in order to induce the Member States to work on trade and industrial policy reforms, even though they don’t necessarily advance at the same pace and may have to settle for results short of complete integration.”
His first advice is for the ASEAN to maintain its cohesion and strengthen its bargaining power in dealing with its trading partners as they negotiate the rules for the next stages of architecture building. An important part of this process is the consolidation of the Free Trade Agreements (FTAs) of the ASEAN with China, Japan, South Korea, Australia and New Zealand under a Regional Comprehensive Economic Partnership (RCEP). On the downside, Mr. Lachica fears that the AEC will not be as easily achieved as the European Economic Community in the last century. As he told us, “There are significant differences in capacity and scale between the EU and ASEAN. The EU has an annual budget of $200 million, the ASEAN’s is $15 million. The EU has 30,000 functionaries spread out all over the continent and in overseas missions. ASEAN has only 260 personnel, many just seconded from their home offices. The European Commission has full, supranational authority to enforce its rules while the ASEAN Secretariat does little more than take notes.”
As most observers, he thinks the easiest goal to achieve is the reduction of tariffs on goods, already at historically low levels. Thanks to MNCs, especially from Europe, who have set the pace, tariff reduction on goods has been almost completed much before the target of 2015. The hard part is to convince some members states with so-called infant or semi-mature industries to remove non-tariff measures. It could be years before most are eliminated, especially because some are actually inventing new barriers, as in the recent case of Indonesia prohibiting the export of unprocessed nickel ores or increasing the national equity requirements for strategic industries.
The geographical handicap faced by the ASEAN in comparison with the EU stems from the fact that the ASEAN states are not bunched up within a single continental land mass like the EU’s or Mercosur’s but strung out across more than 2,300 miles of land and water, effectively divided into two halves by the South China Sea. A solution to this problem is to make use of subregional groupings as “wedges” to the overall integration of the AEC. One such wedge is the IMT-GT or the Indonesia-Malaysia-Thailand Growth Triangle. Its flagship project is the Singapore-Kunming Rail Link which consists of two routes that include an eastern line passing through Thailand, Cambodia, and Vietnam. This railway goes all the way to Kunming, the capital of Yunnan province. The construction of 4,069 kilometers of track would enhance connectivity among six ASEAN member states plus China. Furthermore, another giant market can be linked to the ASEAN by the expansion of the capacity of 47 ports, which will lay the groundwork of the Mekong-India Economic Corridor. The integration of the ASEAN with both China and India will guarantee the openness of AEC to other markets and combat any “decoupling” syndrome among policy makers.
Another wedge which is in a less advanced stage is the BIMP-EAGA (Brunei, Indonesia, Malaysia, Philippines). Actually, there has been much “free flow of good, services, capital and people among the geographically proximate portions of these four nations through the underground economy or the informal economic sector. Despite “open skies” aviation agreements an “single window” customs, immigration and quarantine procedures, the potentials of this subregion have not been fully tapped because of pervasive poverty, poor infrastructures and benign neglect from the national capitals. Brunei is the richest of the EAGA partners but has not been willing to lead fuller integration. There is also the problem of maritime security. What is ironical is that most of the power to be generated by Sarawak’s Bakun Dam will be transmitted at great cost across the South China Sea to peninsular Malaysia rather than, more inexpensively, to southern Mindanao which faces serious power shortages.
Mr. Lachica suggests the following means of removing the obstacles to BIMP-EAGA integration: (1) Speed up the Mindanao peace process. The Bangsamoro initiative can bring the Central Mindanao and Sulu archipelago closer to peace and sustained development. (2) The Philippines should lobby international lenders and donors to provide as much support to port development as to road-building in order to give manufacturers better access to other ASEAN markets. I hope these strategic insights of an experiences journalist and ASEAN scholar will motivate the local government officials in Mindanao and the private business sector operating in their respective territories to work together to make the BIMP-EAGA an effective sub-region of the ASEAN Economic Community. I am convinced that empowered LGU officials can now more effectively compensate for the ignorance or lack of political will of national leaders. For comments, my email address is email@example.com.