Your Royal Highness
Ladies and Gentlemen
Major events have taken place since we last met in Singapore in January 1992. They compel us to re-examine ourselves and see where and how we go from here.
In the area of international trade, the Uruguay Round negotiations were finally concluded and the World Trade Organisation set up. Besides AFTA, other bigger regional trading arrangements have sprung up: APEC in the Asia-Pacific, EU enlarged in Europe, NAFTA in North America and the MERCOSUR Customs Union in Latin America.
At the national level, China and India have further liberalised their already big economies. Their integration with the international economy will increase competition for market shares, capital and foreign investments. But it also provides market ancd investment opportunities for ASEAN.
There have been significant political developments as well. The US and Vietnam have normalised ties. Vietnam was welcomed into ASEAN earlier this year. Cambodia and Laos have committed to join. Myanmar may follow suit. Before the turn of the century, the ASEAN vision of a community of 10 Southeast Asian countries is likely to become a reality.
ASEAN’s brainchild, the ARF, is now part of the regional security architecture. But at the same time, the general mood of optimism in the Asia-Pacific has been clouded by the downturn in Sino-US relations, the deterioration in China-Taiwan ties, the increasing difficulties in the US-Japan relationship, and the rival claims over the Spratlys Islands.
It is therefore timely to examine how ASEAN can manage the challenges, and seize the opportunities to sustain, and perhaps even accelerate, its growth momentum. Our Summit must focus on how ASEAN can remain competitive and relevant in the future, how it can integrate its economies and combine the members’ strengths and resources to give our people a better life and to keep the region free from tension, conflict and war.
ASEAN has done well. In the last 5 years, ASEAN grew at an average of 7% per year, outperforming the world average growth rate of 1.6%. ASEAN is the world’s fourth largest trader, after the US, the EU and Japan. With Vietnam’s inclusion, ASEAN now has a total market of over 400 million people. This will increase to nearly 500 million when we are joined by Cambodia,Laos and Myanmar.
Past success, however, is no guarantee for the future. New runners have joined the marathon. Will ASEAN stay ahead or will we be overtaken by others?
You will recall that in 1992, in response to the challenge of economic regionalism elsewhere, we decided to establish the ASEAN Free Trade Area (AFTA) within a period of 15 years. It was a bold move at that time. By today’s standards, however, this is no longer “bold”. For example, under the Uruguay Round, countries have agreed to bind their tariffs for both industrial and agriculture goods and to reduce them over the next 5 to 10 years. The EU common market is embracing eastern and central Europe, and goods are traded within the EU tariff-free. Under NAFTA, tariffs for most Mexican goods entering US markets are either eliminated immediately or will be removed within the next 8 years. The MERCOSUR Customs Union, established on 1 January 1995, has zero tariff levels for about 90% of its internal trade. They will free tariffs for the remaining 10% by the year 2000.
ASEAN is clearly no longer at the head of the trade liberalisation process. In terms of economic integration, ASEAN is actually behind other regions. But I am happy to note that ASEAN has not been complacent. It moved last year to shorten the timeframe for implementing AFTA from 15 to 10 years. There is a proposal to bring forward the end-date from 2003 to 2000. Symbolically, this is good if it can be done. Then ASEAN enters the new century with an important task completed. But while this is desirable, it is not critical. The key point is to find ways to increase intra-ASEAN trade. One such way is to increase foreign direct investment in ASEAN.
Foreign Direct Investment and Industrial Cooperation
ASEAN faces strong competitors for capital and foreign direct investment (FDI). ASEAN’s share of annual global FDI almost doubled from 5% in 1982-1987 to 9% in 1992. However, competition from China and Latin America and the Caribbean (inclusive of Mexico), has been intense. For example, China’s share of FDI more than tripled from 2% to 7%, while Latin America and the Caribbean’s share increased from 9% to 11% over the same period.
If we in ASEAN do not maintain our attractiveness for investors, we risk being overlooked by them. Besides the faster implementation of AFTA, ASEAN has developed a more attractive framework of industrial co-operation. It is thus timely that we adopt this new ASEAN Industrial Co-operation Scheme to replace outmoded existing ones.
Co-operation in Services and IPR
So too is our decision to expand trade liberalisation to include services and intellectual property rights (IPR). The services sector now contributes the largest share of GDP and employment in the world. The ASEAN Framework Agreement on Services provides for the establishment of preferential trade in services in ASEAN. This will prepare the ASEAN services sector to meet increased international competition.
The Framework Agreement on Intellectual Property Cooperation aims to establish a “safe” region for the international business community to confidently bring in its technology as well as to foster indigenous R & D. This will help trade and investment in ASEAN to move up the technological ladder.
For the future, ASEAN must firstly, accelerate the pace of trade liberalisation within itself, and secondly, forge closer links with other trade groupings as a stepping stone to achieve more multilateral liberalisation of trade. The two are inter-related. ASEAN countries do not have the market size of China or India. To be an effective player for trade liberalisation within broader fora like the WTO or APEC, ASEAN must move faster to bring down its own tariffs, and offer itself as one united region with uniformly low tarifes.
The AFTA-CER linkage is a good first step towards closer links with other regional groups. The Asia-Europe Meeting (ASEM) would be another good opportunity for us to strengthen European interest in our region. For the future, ASEAN should aim to establish and strengthen linkages with groupings like the EU and NAFTA.
Political/Security Challenges and Opportunities
The commitment of ASEAN and the countries of the Asia-Pacific to APEC and the ARF demonstrates their clear recognition of the key roles which both institutions play to help preserve regional peace and prosperity. It reflects our appreciation that economic prosperity is bound up with political security. ASEAN should continue to play an active part in wider regional fora such as APEC and the ARF.
We should also continue to use existing ASEAN instruments to build on regional peace and security and in engaging the major powers. Our signing of the SEANWFZ Treaty tomorrow is a significant step forward to make Southeast Asia free from nuclear weapons and nuclear proliferation. We invite the five nuclear weapon states to sign the Treaty’s Protocol and undertake to respect and contribute towards ASEAN’s aspirations.
ASEAN also would like non-Southeast Asian countries to associate themselves with its Treaty of Amity and Cooperation (TAC). The TAC contains principles and a code of conduct for the resolution of disputes. It provides a constructive approach to engage extra-regional states within a political and legal framework that is consistent with the UN Charter.
Your Royal Highness
Ladies and Gentlemen
As we look ahead, I see many parts of ASEAN enjoying Europe’s present standard-of-living in 20 to 30 years time. Certainly, some of us should then be classified as high-income countries and others middle-income countries. I hope none of us will be in the low-income category.
By 2025, ASEAN will have expanded to include all countries in Southeast Asia. But we must never become a closed, inward-looking regional bloc. We must practise outward regionalism, i.e. have an outward-looking attitude.
We have already denmonstrated this in Bangkok by inviting the other Leaders of Southeast Asia to join us here for an informal tete-a-tete among the Leaders only, without any Ministers or officials present. We should build on this precedent and invite other Asian Leaders to meet us regularly and informally to discuss common problems, challenges and aspirations.
At the 1992 ASEAN Summit in Singapore, we decided that our Summits should be held once every three years, with an informal Summit in between if necessary. So far, we have not held any informal Summit. It may be timely to do so after the Bangkok Summit because of the many rapid and profound changes in Asia and the world.
ASEAN’s relations with its East Asian neighbours have been growing by leaps and bounds. Just look at the trade figures alone. ASEAN also has had increased investment and other economic links with its East Asian neighbours. Much of our infrastructure will be built with Japanese and Korean know-how. As these links grow, we should begin to meet our East Asian neighbours more frequently. Let me suggest that we invite them when we have our first informal Summit, which we can hold 12-18 months from now.
The Europeans are building their common house of Europe. The extended-family home of Asia may be 50 years or even 100 years away. But if we start thinking about it now, and begin to take small but concrete steps towards it, Asia can achieve harmony and today’s European standard of living in the mid-21st Century, because we will be working towards a common vision.
At this Bangkok Summit, we must show the clarity of sight and the boldness of purpose on a range of important subjects. Then our peoples can look forward to a new century of peace, growth and prosperity.