The main achievement of ASEAN has been the maintenance of an uninterrupted period of peace and stability during which the individual Member Countries have been able to concentrate on promoting rapid and sustained economic growth and modernization. The dynamism of the Southeast Asian economies is something many countries would like to acquire for themselves. For about 25 years from 1970 to 1995, ASEAN’s GDP grew at an average annual rate of 7.0 percent. Today, Southeast Asia has a total market of about 500 million people and a combined GDP of more than US$ 700 billion.
Over the years, ASEAN’s overall trade grew from US$ 10 billion in 1967, US$ 14 billion in 1970, US$ 134 billion in 1980, US$ 302 billion in 1990 to US$ 650 billion in 1995. With its combined trade value, ASEAN is the fourth largest trading entity in the world after the European Union, the United States and Japan.
ASEAN belongs to the wider East Asian region which is approaching economic parity with the North American region and the European Union. While the combined GDP of East Asian countries was only 4 percent of world GNP in 1960, it was 25 percent in 1992 and is projected to be 33 percent by 2010. East Asian central banks now hold close to 45 percent of the world’s foreign reserves.
ASEAN’s modernization efforts have brought about changes in the region’s structure of production. Between 1970 and 1993, the primary sector’s share decreased from 27% to 20%, secondary sector increased significantly from 26% to 33%, while the tertiary sector sustained its share at 47%. The same trend was reflected in the region’s labor force composition. The proportion of the region’s labor force engaged in agriculture declined from 61% in the mid-70s to 53% in 1990. Industrial and service sectors have rapidly become the region’s major sources of employment. These developments have advanced ASEAN members’ efforts to attain a status of newly-industrializing economies.
Although there is no denying the economic achievements of the ASEAN countries, the efficacy of ASEAN’s economic cooperation has been the subject of mixed reviews, largely because of an insufficient appreciation on the part of ASEAN’s critics of some fundamental constraints that the ASEAN economies had to contend with. The ASEAN economies were so diverse in their stages of development, with very little complementarities to start with, the adoption of common economic policies could have created winners and losers. Also, there was not much intra-regional trade. They were all looking to external markets in which they were competitors. The effort to avoid a situation where there are lucky winners and bitter losers could have thoroughly paralyzed any other group. But in the case of ASEAN countries, it only made them judiciously deliberate during the initial stages. Given that alone, the development of effective modalities of intra-ASEAN economic cooperation was bound to be a long and tedious trek.
The first milestone in ASEAN economic cooperation was the First ASEAN Summit held in Bali in 1976. Attached to the Declaration of ASEAN Concord, one of two historic documents yielded by the Summit, was a Program of Action that set forth three important instruments of ASEAN economic cooperation: the ASEAN Industrial Projects (AIP), the Preferential Trading Arrangements (PTA) and the ASEAN Industrial Cooperation (AIC) schemes. Later, the AIC would be complemented by the ASEAN Industrial Joint Ventures (AIJV). The ASEAN Leaders also decided to launch joint efforts on such areas as food, energy, cooperation to improve access to markets outside ASEAN and coordination of their positions on global economic issues.
The following year, at the Kuala Lumpur Summit, ASEAN vigorously advanced its economic cooperation with its major trading partners through the launching of dialogue relations with Japan, Australia and New Zealand. This was the start of ASEAN’s extensive linkages with its Dialogue Partners which were mostly the region’s major sources of trade, capital, technology and development assistance.
The Manila Summit of 1987 revitalized ASEAN’s economic agenda. There, the ASEAN Leaders agreed on a package of measures and understandings to widen the coverage of the Preferential Tariff Arrangement (PTA) through such measures as progressive reduction in the number of items in the exclusion list, deepening of the margin of preference and relaxation of the ASEAN-content requirement in the rules of origin. ASEAN also decided to make the ASEAN Industrial Joint Ventures (AIJV) Scheme more flexible, quicker to implement and more attractive to private investors. Closer cooperation in the fields of finance and banking, commodities, trade in services, energy, transportation and communication and food, agriculture and forestry were also encouraged. Furthermore, the ASEAN Leaders declared 1992, the 25th Anniversary Year of ASEAN, as “Visit ASEAN Year”.
Following the Singapore Summit Declaration of 1992 elevating ASEAN economic cooperation to a higher plane, the ASEAN Economic Ministers signed the Agreement on the Common Effective Preferential Tariff Scheme (CEPT) for the ASEAN Free Trade Area (AFTA). The decision to create a free trade area was regarded as a qualitative leap in the history of ASEAN economic cooperation. The original CEPT Agreement covered manufactured products including capital goods and processed agricultural products. This was later expanded to include unprocessed agricultural products. Two years following its initial implementation, ASEAN decided to accelerate the time frame of AFTA from 15 to 10 years. In addition to tariff reductions and the elimination of non-tariff barriers, trade facilitation measures are also being undertaken, such as, adoption of an ASEAN Agreement on Customs, the implementation of Green Lane System for CEPT products to expedite customs clearance, adoption of ASEAN common customs form, elimination of customs surcharges and harmonization of standards, customs nomenclature and valuation.
With a view to rationalizing and broadening the scope of existing industrial arrangements following the implementation of the CEPT Scheme for AFTA, the ASEAN Economic Ministers adopted a new ASEAN Industrial Cooperation (AICO) scheme in 1996. The AICO scheme aims to promote joint manufacturing industrial activities between ASEAN-based companies. Under this scheme, AICO products, upon their approval, shall immediately enjoy preferential tariff rates of 0-5 percent. This is another policy initiative to further promote the ASEAN region as an investment area.
Economic cooperation between ASEAN and its immediate neighbors has been pursued both on a bilateral and regional basis. Realizing the economic potential of the Mekong Basin at the heart of the mainland Southeast Asia, a basic framework for the ASEAN-Mekong Basin Development Cooperation was adopted in June 1996. The Mekong Basin program complements various other cooperative activities being undertaken by the Mekong River Commission, donor countries like Japan and the Republic of Korea, and other multilateral agencies like the Asian Development Bank.
At the subregional level, ASEAN supports the formation and operation of “natural growth areas” involving contiguous localities of several states. There are now three active growth areas in operation, namely, the Singapore-Johor-Riau Growth Triangle (SIJORI), the Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT), and the Brunei Darussalam-Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP-EAGA).
After three decades, the main lines of ASEAN economic cooperation may be rounded up as follows:
Cooperation in trade and investment began with the introduction of the ASEAN Preferential Tariff Arrangement (PTA) in 1977 and will culminate in the attainment of the ASEAN Free Trade Area. ASEAN has also adopted a Plan of Action for the Promotion of Foreign Direct Investment and Intra-ASEAN Investment towards the realization of the ASEAN Investment Area by 2010 and free flow of investment by 2020. Cooperation on the protection of intellectual property, aimed at promoting the confidence of investors and sources of technology, is also underway.
Cooperation in industry started with the implementation of the ASEAN Industrial Projects (AIP) in 1976, followed by the ASEAN Industrial Joint Venture (AIJV) Scheme introduced in 1983 and the Brand-to-Brand Complementation (BBC) scheme of 1988. In 1996, the ASEAN Industrial Cooperation Scheme was adopted to replace the earlier schemes.
Cooperation in finance and banking is aimed at promoting the development of capital markets, free movement of capital and other financial resources, including further liberalization of the use of ASEAN currencies in trade and investments. The ASEAN Ministerial Understanding on Finance Cooperation also covers the areas of banking, customs matters, insurance matters, taxation and public finance, monetary policy cooperation and human resource development in the area of financial services.
Cooperation in food, agriculture and forestry began almost immediately following the establishment of ASEAN with the agreement to create a Committee on Food Production and Supply and Fisheries cooperation in 1968. Cognizant of the basically agrarian character of the region and noting its high vulnerability to wide fluctuations in the production and supply of basic foodstuffs, ASEAN established a Food Security Reserve and ASEAN Emergency Rice Reserve in 1979. Since then, many other forms of cooperation in the field of agriculture followed, such as, the enforcement of ASEAN Quarantine Ring and sharing of training and extension resources. ASEAN Members are also undertaking technical joint cooperation to better manage, conserve, develop and market forest resources.
Cooperation in minerals and energy is being pursued on the basis of an agreed framework and program of action in support of the industrialization of Member Countries and to meet the demands of the manufacturing and construction sectors. ASEAN is developing an Industrial Minerals Information System as a database for information exchange and dissemination for policy makers and investors. The ASEAN-EC Energy Management Training and Research Center, established since 1988 with funding and technical support from the European Union, has been serving as the center of excellence for joint energy studies and cooperation ventures among the ASEAN Member Countries and between ASEAN and the European Union.
Cooperation in transportation and communications is being carried out through the implementation of a Plan of Action in Transport and Communications to develop multimodal transport and trade facilitation, achieve inter-connectivity in telecommunications and harmonize road transport laws and regulations. Some of the projects undertaken included the ASEAN Optical Fibre Submarine Cable Network and Satellite Communication Development. In order to integrate the region more productively, ASEAN has started a feasibility study on the development of a rail link from Singapore to Kunming in southern China, passing through Malaysia, Thailand, Cambodia, Laos, Myanmar and Vietnam.
Cooperation in tourism is one of the earliest areas of ASEAN activities. Projects are aimed at promoting the ASEAN region as a tourist destination, preserving the ASEAN cultural and environmental heritage, promoting intra-ASEAN travel and human resource development in the tourism sector. The ASEAN Framework Agreement on Services includes tourism as a priority area. In a span of slightly over a decade, tourist arrivals in ASEAN countries have grown by an average of eight percent per year, moving the region from 12th to the 5th rank among the world’s top 15 tourist destinations. In 1995, ASEAN attracted over 30 million tourists. In view of such a trend, ASEAN aims to be among the world’s top three destinations within the next decade.
Cooperation with the Private Sector is a reaffirmation of the ASEAN policy that the private sector shall be the engine of economic growth. Various channels of consultations have therefore been established since ASEAN’s early years between ASEAN Senior Economic Officials and the representatives of ASEAN Chambers of Commerce and Industry (CCI). The CCI has established joint business councils between ASEAN and its Dialogue Partners. Representatives of these business councils usually attend the regular Dialogue sessions.
The development of external economic relations is high on the agenda of ASEAN. It has been pursued through the establishment of linkages and various fora for economic consultations with other major economies or group of economies. The original ASEAN Member Countries and Brunei Darussalam are founding members of the Asia-Pacific Economic Cooperation (APEC) when it was established in 1989 in response to the growing interdependence among Asia-Pacific economies. Today, APEC includes all the major economies of the Asia-Pacific region and the most dynamic, fastest growing economies in the world. APEC’s 18 member economies have a combined Gross National Product of more than US$ 13 trillion, about half of the world’s total annual output. Together, APEC member economies represent about half of the world’s total merchandise trade.
To bridge the missing institutional link between Asia and Europe, ASEAN initiated the establishment of the Asia-Europe Meeting (ASEM) which successfully held its inaugural meeting in March 1996 in Bangkok. Attended by the Heads of State and Government of 10 Asian nations and 15 European nations and the President of the European Commission, the meeting forged a new comprehensive Asia-Europe Partnership for Greater Growth. One of its early achievements is the establishment of the Asia-Europe Foundation, based in Singapore, to promote exchanges between think-tanks, peoples and cultural groups. The Asia-Europe Business Forum has also been launched.
To strengthen cooperative links among East Asian economies, ASEAN has launched an initiative to establish an East Asia Economic Caucus (EAEC) as an informal consultative forum to provide opportunities for discussion on economic issues among the prospective members.
In summary, ASEAN’s economic cooperation underwent two stages: The first stage covers the first 25 years of ASEAN’s existence, a period when the ASEAN countries laid down the foundations of cooperation and became familiarized with one another and initiated modest economic cooperation programs. The second stage began at the Singapore Summit of 1992, during which ASEAN launched the CEPT for AFTA promoting the whole ASEAN region as a competitive international production base for both local and foreign investors. This period also saw ASEAN actively involved in initiating and building regional economic linkages, engaging some of the most dynamic economies in the world. The next stage will be the implementation of ASEAN’s further commitment to move towards closer cohesion and economic integration while emphasizing sustainable and equitable growth.