Two years after the start of the financial and economic crisis, do you think the countries of the region are about to “see the end of the tunnel”? What is your assessment of the current Political and economic situation of the ASEAN member countries?
In the latter half of July, the ASEAN member-countries had their annual foreign ministers’ conferences with their ten dialogue partners- Australia, Canada, China, the European Union, India, Japan, the Republic of Korea, New Zealand, Russia, and the United States. A consensus emerged that the economics of the region had “bottomed out,” but the reform measures must not falter. Participants cited the return of the economics to positive growth, the stabilization of their currencies, the rise in exports, the drop in interest rates, and the slowing down of inflation.
Will the “surveillance mechanism” be sufficient to give an early warning next time around?
The ASEAN surveillance process involves an early warning system by which any adverse developments in either the global or regional financial and economic situation can be detected and acted upon. These developments arc brought to the attention of ASEAN finance and central bank officials and the ASEAN finance ministers. Through a peer review process, the finance ministers jointly formulate national or collective policies or measures to prevent the situation from developing into a crisis. The finance ministers meet at least twice a year for the peer review. The effectiveness of the surveillance mechanism in preventing future crises relies not only on its ability to give an early warning signal but also on the capacity of ASEAN bodies or member countries to take timely action on it. The finance ministers have gone through the first peer review, in Hanoi early this year. The first surveillance report contained an analysis of global economic developments and their implications for ASEAN and of member-countries’ economic situations and outlooks. Based on the report, the finance ministers exchanged views on the economic situation and discussed policies and measures that can contribute to the early and sustainable recovery of the region’s economy. A study on the recovery indicators is also being undertaken and should be finalized within the next few months. Once completed, it will provide the region with a tool to monitor the progress of the economic recovery of ASEAN and its members. The second surveillance report is being prepared for the second peer review, which is to be conducted by the finance ministers in late September.
Are you getting any help from other international institutions?
The ASEAN surveillance process has the support of the Asian Development Bank and the cooperation of the IMF and other international financial institutions. It is managed by a unit in the ASEAN Secretariat and a counterpart unit at the ADB. The surveillance process is a regional undertaking and is only one of a broad set of many measures that must be taken to deal with the current and future financial upheavals. The international financial order must be reviewed and, if necessary, overhauled. National governments, too, have to do their part by way of reforms in government supervision and in the corporate and banking sectors.
Lessons for ASEAN
What are the major lessons for ASEAN as a regional grouping?
The first lesson is that the countries in a region, certainly in Southeast Asia, are more inter-connected and more interdependent than previously thought. What one country does with its economy and even with its politics almost invariably affects its neighbors. Therefore, a country’s policies must have a regional outlook, and regional institutions in which to carry them out have to be developed. The day of beggar-thy-neighbor policies is past. The second lesson is that economic liberalization and integration within ASEAN cannot falter. It is in the light of this lesson that ASEAN has decided to strengthen its economies and enhance its competitiveness by reaffirming and accelerating the ASEAN Free Trade Area and other integration measures. The third lesson is that measures to facilitate trade and build infrastructure linkages have to be pursued relentlessly, so as to further integrate the region and reduce business costs. The fourth lesson is that financial cooperation is very important. The growth of capital flows has occurred at such rapid pace that it now seems odd that financial cooperation had started so late in ASEAN. The ASEAN members now realize that, in this area, there is no choice but to broaden and deepen cooperation, even to the extent of coordinating policy. They are only too aware that any financial or economic dysfunction in one country can seriously damage another either through monetary or real mechanism. Hence, the swap arrangement has to be strengthened. Regional exchange rate systems have to be looked into. ASEAN has to cooperate in strengthening the financial sector and deepening financial markets. Doing so would help to mobilize capital and reduce the region’s dependence on capital from the more developed countries. The final lesson is that ASEAN must play a more active role in re-shaping the international financial architecture.
Is the “ASEAN Free Trade Area” on track? Is it an effective tool for the new member countries Vietnam, Laos, Myanmar and Cambodia in order to catch up?
The ASEAN Free Trade Area is not only on track; it has been deepened and accelerated. For the original six signatories, completion of AFTA has been advanced to the beginning of 2002. By that time, the products of these countries that are subject to AFTA treatment will have tariffs of only 0-5 percent. By the beginning of 2000, 90 percent of such products, and at least 85 percent for each country, will be subject to these minimal tariffs. This represents 90 percent of all intra-ASEAN trade. Each country will strive to have most of their AFTA products tariff-free. Thus, within a few months, AFTA will have been substantially achieved. Vietnam, Laos, Myanmar and Cambodia are given few more years similarly to drop their own tariffs on other ASEAN products. In the meantime, the AFTA process will help these countries adjust to more open economic regimes, strengthen them for competition, and give them the benefits of regional economic integration, including investments and infrastructure.
An ASEAN Economic Community?
Do you see ASEAN on the way to an “Asian Economic Community” like the EEC in the 50s or 60s?
Each regional group of countries is different from all others, and ASEAN has to develop and evolve in its own way, responding to its own requirements and in accordance with its own circumstances. However, it is clear that ASEAN is firmly committed to progressive regional economic integration while being open to the rest of the world. AFTA is moving faster toward completion. ASEAN economics are opening up to investments from one another. ASEAN is preparing for negotiations on trade in services. Product quality is progressively being standardized throughout ASEAN. Customs procedures are being harmonized. ASEAN countries are linking themselves to one another through road systems, pipeline networks and communications connections. Finance ministers and officials are consulting one another frequently on economic policy and have established the economic surveillance process. Thus, the economic integration of Southeast Asia is steadily progressing.
Some political observers mention these days that too many discussions concentrate on the economic and financial turmoil. They feel that the social impact of the crisis has been left out. What are the major social consequences of the crisis and what is ASEAN, what are the member countries doing in order to soften its impact?
The social impact of the crisis has been uppermost in the minds of ASEAN’s leaders, officials and peoples and of the association itself. The impact of unemployment, increased poverty and lower incomes on people’s lives cannot be ignored, even if one wanted to set them aside. One of the principal elements of the Hanoi Plan of Action of December 1998 is a set of measures to mitigate the social impact of the crisis. Among the five issues examined by the finance ministers in the first report of the ASEAN surveillance process was what each member-country was doing to protect the poor.
Talks are gaining ground that East Asia has come to terms in the near future with two monetary blocks dominated by the US Dollar and the Euro. Is there something going on within ASEAN to study the idea of an exchange rate mechanism, even of a common currency? What role do Japan, China and Korea play?
ASEAN countries, for the most part, continue to denominate their trade in US dollars. They also consider the Euro as an important development international finance and trade. They view with interest the idea of internationalizing the yen. They are encouraging the use of ASEAN currencies in the settlement of trade through bilateral payments arrangements. The Hanoi Plan of Action calls for a study of an ASEAN currency and exchange rate mechanism. ASEAN and China, Japan and the Republic of Korea undertake regular and frequent consultations on these matters at various levels, including the summit, in the light of the closer inter-relationships among them.
External Challenges for ASEAN
As far as security issues are concerned, the Philippines has entered into some serious trouble with China on the Spratly issue. What could ASEAN do to solve the problem? Did ASEAN do enough in the past to tackle this problem? Will the Spratly topic affect the relationship between ASEAN and China?
ASEAN has been deeply concerned over the disputes about jurisdiction over the South China Sea and the potential for conflict that they bear. ASEAN has called for the peaceful settlement of the disputes in accordance with international law, including the UN Convention on the Law of the Sea. It has urged self-restraint on all parties involved and pushed for cooperative activities in the area. Indonesia has been sponsoring, with Canadian support, the series of informal workshops on managing potential conflict in the South China Sea. ASEAN has been engaging China on this issue, bilaterally, in the ASEANChina political consultations, in the ASEAN Regional Forum, in the ASEAN-China Post Ministerial Conference, at the ASEAN-China summit meetings, and so on. ASEAN is working on a regional code of conduct in the South China Sea. It is also promoting the protection of the marine environment there, particularly against destructive methods of fishing, such as the use of dynamite and cyanide. The disputes in the South China Sea are one of the very few contentious issues in an otherwise excellent relationship between China and ASEAN and between China and individual ASEAN members.
Singapore’s Senior Minister Lee Kuan Yew praises China as the economic and political powerhouse in the region. Will it be China or will Japan remain the primary regional economic partner for Southeast Asia despite current problems in the Japanese economy?
China and Japan have developed and are developing in different ways and at different paces. Each of them has a great deal to offer by way of constructive and mutually beneficial relationships with ASEAN. ASEAN seeks productive relations with both China and Japan in accordance with the conditions in each of those countries, in ASEAN, and in the individual ASEAN countries, and within the context of the overall relationships. ASEAN does not consider one as more important than the other. It also places great importance on good relations between the two of them.
How would you like to see the relations between ASEAN and the European Union being developed? How would you describe the relationship? What do you expect from Europe? Are there some areas of concern where you would you like to see the European Union move faster?
The European Union was one of the first dialogue partners of ASEAN, and ASEAN and the EU have had a Very productive relationship since then. Only last May, ASEAN and the EU agreed on a work program for future cooperation. ASEAN would like to see this implemented as soon as possible. The relationship could proceed more smoothly if political issues were not allowed to get in the way.
The EU-ASEAN relations were recently overshadowed by the question of the integration of Myanmar in the talks. What is the position of ASEAN on that?
The ASEAN-EC Joint Cooperation Committee met successfully last May in Bangkok, going over the many areas of development cooperation between the two sides. Unfortunately, the ASEANEU ministerial meeting could not take place as scheduled last March, because of the EU policy of not issuing v1sas to high-ranking officials of Myanmar. ASEAN could not possibly agree to a meeting involving ASEAN as an association with one of its members prevented from participating fully. Any regional association would take this position. Recently, however, Myanmar received, at the most senior and other levels, a mission from the EU Troika and the European Commission. I hope that the clearer understanding arrived at on this occasion will help to overcome some obstacles to normal ASEAN-EU relations.
After some delay, Cambodia has recently joined ASEAN and became the 10th member. That is, after 32 years, the fulfillment of the vision of the ASEAN Founding Fathers to unite all nations of Southeast Asia under one ASEAN roof. What role will Cambodia play within ASEAN?
Even before its formal admission into ASEAN on 30 April 1999, Cambodia has been participating as an observer in most ASEAN meetings and other activities. It has been a constructive and responsible participant. What it requires primarily – and Cambodians themselves emphasize this – is the development of their human resources, particularly in enabling Cambodia to participate fully and integrate itself quickly in such ASEAN schemes as the ASEAN Free Trade Area, customs harmonization, and negotiations on trade in services. Cambodia also needs to build up its private sector, as much of ASEAN’s economic integration is carried out through the private sector. The Secretariat is at the core of programs to develop Cambodia’s human skills. ASEAN considers the development of the human resources of its newer members as the primary way of enabling them to catch up with the older members.
The enlargement process of ASEAN has come to an end. What are the lessons? What is the major difference between the “old” ASEAN-6 and the new “ASEAN-10″?
Clearly, ASEAN’s enlargement has brought about not only a larger ASEAN but also a more diverse one. It is self-evident that expansion brings greater diversity. Special measures are being taken to ensure that the newer members adjust quickly to their membership in ASEAN and that they have the capacity to fulfill their obligations in terms of participation in ASEAN activities and in the ASEAN Free Trade Area and other schemes for regional economic integration. This would make sure that Southeast Asian cohesion and solidarity are preserved and strengthened. ASEAN places great emphasis on Southeast Asian cohesion and solidarity as essential for peace, stability and progress in the region. It would be unacceptable to have a Southeast Asia divided between ASEAN and non-ASEAN. Moreover, regional integration is the only way for countries such as those in Southeast Asia to make their way in the World. Individual countries would find it extremely difficult to thrive in a globalized economy and in the uncertain configuration of power in the region.
ASEAN’s Expanded Role
“‘Meddling into each other’s affairs” seems to be a very hot topic of discussion within ASEAN. The former dominant ASEAN policy of non-interference is openly being questioned. It looks as if there is a split between those countries who are in favor of a more active involvement and those who would like to stick to the old rules. What is your opinion oil this issue
I think this is a False issue. Nobody in ASEAN favors “meddling” in one another’s internal affairs. The media have propagated the notion that only ASEAN subscribes to the principle of non-interference in the domestic affairs of sovereign states, when in fact this principle underpins the entire inter-state system. However, when events in one country – such as the contagion effect of the financial crisis and the haze arising from land and forest fires – affect neighboring countries adversely, those events become a matter of legitimate concern to the neighbors and, in some cases, to the region as a whole. The issue then is what is the most effective way of dealing with the problem. Most of the time, ASEAN prefers quiet diplomacy, either bilateral or multilateral or regional. When called for, joint action is undertaken to deal with the problem. Public posturing for domestic political purposes is avoided as not only harmful to the region but also counterproductive.
“Asiaweek” quoted you recently “As the ASEAN family, should be free to talk frankly”. What do you mean by that?
This statement was made in response to a question as to whether ASEAN avoids talking frankly about problems affecting the region. My response was that ASEAN leaders, ministers and officials should and often do talk frankly “within the family” even about internal events that affect others, but always politely, constructively and without gratuitous public posturing.
The ASEAN Secretariat is located in Jakarta, Indonesia. International observers from the EU, the United States and other countries were invited to observe the recent elections. Did ASEAN as a regional grouping consider to send “ASEAN observers”?
As far as I know, the foreign observers in the Indonesian elections came mainly from non-governmental organizations, with the UNDP playing a coordinating role. Some of the NGOs were from ASEAN countries. However, the question of ASEAN itself sending observers never came up.
One result of the crisis seems to be that more and more difficult tasks are being put forward to be handled by your secretariat. I just mention the areas of financial or information technology not to mention the coordinating and supervising tasks. Is your Secretariat in terms of personnel and funds up to the job? How many people are working in your office?
The financial crisis, emerging transnational problems, the expansion of ASEAN’s membership, and the increase in the areas of ASEAN cooperation have added greatly to the responsibilities of ASEAN committees and other bodies, including the Secretariat. The directives handed down by the ASEAN leaders in the Hanoi Plan of Action and the Bold Measures specify many of these responsibilities. The finance ministers, the central bank governors and their deputies have been meeting frequently to deal with the financial crisis and prevent its recurrence. Ministers and senior officials have been holding frequent consultations to deal with the haze, apart from the broader environmental problems. Two new units – one to handle the financial surveillance mechanism and the other the haze problem – have been established in the Secretariat. Regional economic integration is being accelerated, broadened and deepened. The ministers of tourism have started meeting formally. New ministerial forums on transnational crime and on rural development and poverty eradication have been set up. ASEAN and its Secretariat have to ensure that the new members adjust smoothly to their membership. The need for tighter coordination among the different sectors of cooperation is, of course, now more acute. In order to handle this increased workload, the staff of the Secretariat has been reorganized and slightly increased, with a small increase in the budget. The Secretariat now has 38 positions for openly recruited personnel and 104 for locally recruited staff.
What do you consider your biggest achievements in your term of office so far?
ASEAN’s achievements are beyond any one person’s responsibility or capability. I would rather discuss the most significant developments in ASEAN since I took over the office of Secretary-General at the beginning of 1998. To me, the most important development during this period was the Hanoi Plan of Action, a set of very specific measures that lays down the agenda and sets the direction for ASEAN through the turn of the century. These measures prescribe close financial cooperation to prevent financial crises from recurring in the future. They set the course firmly toward broader and deeper regional economic integration by breaking down barriers to trade and investment and making easier and more efficient and by tying national economics together through transportation, communications and infrastructure linkages. They lay down the foundations for the region’s future competitiveness by pushing the development of science and technology and the training of people for the skills required by the industries of tomorrow. They stress the importance of making ASEAN better known to its own people and to the world beyond. The Hanoi Plan of Action not only sets the direction for ASEAN itself but also provides a comprehensive framework and guide for ASEAN’s relations with its dialogue partners and others. A significant, even historic, ASEAN decision has been the leaders’ and ministers’ commitment not only to the maintenance of the movement toward regional economic integration but also to its deepening and acceleration. The implementation of the ASEAN Free Trade Area is being speeded up. ASEAN has decided to embark on a program for the liberalization of trade in services. Barriers to investment flows within ASEAN are being lowered. An other important move has been the establishment of an economic surveillance mechanism that would enable and encourage ASEAN countries to inform one another of economic developments within the region and of the measures being taken to improve governance in the public and corporate sectors. It would also make possible closer coordination of macroeconomic policies and mutual encouragement for necessary economic reforms. Still another significant step has been the development of ASEAN’s capacity, with support from others, to respond in a coordinated way to the atmospheric pollution arising from land and forest fires that has periodically ravaged large parts of the region. The Secretariat and ASEAN’s structures and procedures are being streamlined to enable them to handle ASEAN’s broadened functions and enlarged responsibilities.
Implementing the Hanoi
Plan of Action
What will be the top priority in the year 2000?
The top priority will be the implementation of the Hanoi Plan of Action and other directives of ASEAN’s leaders and ministers. Specifically, we will seek to ensure that the process of regional economic integration is accelerated on schedule. This means lowering tariffs on AFTA products and doing away with temporary exclusion lists at the agreed pace. We need to begin negotiations on trade in services. We have to make sure that commitments on the liberalization of investment regimes under the ASEAN Investment Area are fulfilled and that ASEAN members jointly promote investments in the region. We will seek to move forward measures to make trade and investments within the region easier and smoother. Our efforts will also be focused on managing the economic surveillance process set up by the finance ministers to make sure that it works. Priority will be given to coordinating ASEAN’s efforts to deal with the problem of haze periodically arising from land and forest fires in the region. High on the agenda will be laying the basis for future competitiveness of the region through cooperation in developing human resources and science and technology, particularly information technology. We will seek to promote greater awareness of ASEAN in the region and in the world at large, an area neglected in the past. Work on building confidence and preventing conflict will be pursued so as to preserve the peace and maintain investor confidence in the region.
Some people are very critical about the decision process within ASEAN. They complain that it takes too long for ASEAN to come up with effective decisions. How do you react to that?
I do not think that ASEAN makes decisions any more slowly that any other, comparable association of sovereign states. Decisions, for example, relating to the ASEAN Free Trade Area have been made quite expeditiously. If people refer to the perceived slowness of decision-making by consensus, I say that there is no alternative to decision by consensus in ASEAN. Forcing a majority decision upon a dissenting minority just would not work, not in ASEAN and not in any other association of sovereign states other than the European Union. Taking into account the interests of the region as a whole is what has enabled ASEAN to thrive for more than three decades.
You said recently that “ASEAN may have to move toward the greater use of more formal instruments and binding instruments in the future. “What do you mean by that?
What I meant was that as ASEAN economics integrate and as more serious transnational problems emerge, more binding agreements rather than informal understandings may be needed to manage the integrated economy and the problems that transcend national boundaries.
Another major area of concern within the region is the environment. 7he “haze” disaster in Indonesia, Malaysia and Singapore is still very much alive in people’s minds. What are the lessons of this environmental catastrophe? Which measures have been taken by the Secretariat?
The main lesson from this environmental disaster is that countries must cooperate in coming up with regional solutions for transnational problems. ASEAN has learned this lesson well. ASEAN has adopted regional action plans on preventing land and forest fires and fighting them. These plans are mirrored in national haze action plans. Detailed implementation plans have also been worked out. Sub-regional firefighting arrangements have been set up in Borneo and Sumatra. ASEAN has adopted a zero-burning policy, which is being promoted among plantation owners and timber concessionaires. Laws and regulations against burning have been tightened. Enforcement has been strengthened. Ministers and officials meet frequently to make sure that these plans and measures are being carried out. These efforts are coordinated by a dedicated unit in the Secretariat with the support from the United Nation’s Environment Programme and the United Nations Development Programme.
The Hanoi Plan of Action from December 1998 is a very ambitious and detailed document. Out of that long list of possible achievements in the years 1999-2004, what would you personally like to see implemented first?
The issue is not what I prefer but what ASEAN’s leaders have directed. Each area of concern in the HPA has its own priorities. In macroeconomic and financial cooperation, the first priority clearly is to make sure that the economic surveillance process is working. We have to lay the foundations for the development of capital markets in ASEAN and for strengthening financial systems. In economic integration, we have to make sure that the tariff-cutting process, the dismantling of non-tariff barriers, the negotiations on trade in services, and the opening of the manufacturing sector to ASEAN investments are oil schedule. We have to attend to the measures to ensure greater food security in the region. Transport, communications and energy networks have to move forward. Cooperation in tourism has to be pushed urgently. In the area of technology, the setting up of the ASEAN Information Infrastructure and the development of its content have received the leaders’ priority attention. The area of social development requires giving urgency to softening the social impact of the financial crisis. The implementation of the plans of action on rural development and poverty eradication and on children is clearly in the leaders’ priority. So is the work program on drug abuse control. To ensure ASEAN’s competitiveness through human skills, the training of women and of out-of-school youth and the development of self-employment and entrepreneurship arc given importance. Measures to protect the region from transboundary pollution, including, in particular, those dealing with the haze problem, are of great urgency. The accession of non-ASEAN states to the Treaty of Amity and Cooperation and the operationalization of its High Council are considered important for the stability of the region. Also important are the negotiations with the nuclear-weapon states on their accession to the protocol to the nuclear weaponfree zone treaty. Measures toward the resolution of the South China Sea and other territorial disputes in the region need to be assiduously pursued. Finally, the ASEAN leaders call for a concerted communications program to make ASEAN better known among its people and in the world.
Open to the Rest of the World
In a speech in Singapore, you in a way warned ASEAN member countries not to turn away from regionalism at the time of economic and political stress in Southeast Asia. You urged them to intensify their efforts in order to hasten integration. What are the dangers, what are the alternatives?
In times of stress, there is always a temptation to turn inward and close oneself off from the world. There is also the danger of one country seeking the association of more powerful nations and larger markets at the expense of the region. Fortunately, the ASEAN countries have resisted the temptation and avoided the danger, recognizing that there is no alternative to regionalism, while keeping themselves open to the rest of the world, in coping with the powerful forces unleashed by globalization.
In economic terms, you foresee for ASEAN a zero-tariff market of half a billion people with a regional GDP today of US$7700 billion. When do you think this is going to happen?
What I have been saying is that by the beginning of 2000, or within a few months, the ASEAN Free Trade Area’s objective will have been substantially achieved. That objective is to reduce tariffs on the AFTA products of the six original signatories to the AFTA treaty to 0-5 percent. The official target date is the beginning of 2002, but ASEAN leaders have committed themselves to bringing down the tariffs to 0-5 percent on 90 percent of AFTA products and on no less than 85 percent of the products of any individual country. This would cover 90 percent of all goods traded within ASEAN. There will be a minimum number of exclusions. ASEAN has also committed itself to reducing tariffs to zero on as many goods as possible. The newer members, having signed on to the AFTA treaty later than the older ones, have somewhat later completion dates. Thus, 0-5 percent target of AFTA for the original six signatories is scheduled for official completion by the beginning of 2002 and for substantial completion by the beginning of 2000. Work on the removal of non-tariff barriers to intraASEAN trade is also proceeding.
How will ASEAN look in the year2020?
I expect to see ASEAN as the ASEAN leaders envisioned it in their Vision 2020 – a concert of nations at peace with one another and with the world, a partnership in development, and a community of caring societies. In particular, I wish to see most, if nor all, disputes between ASEAN states resolved. I look forward to ASEAN’s success in promoting good and peaceful relations between the major powers in Southeast Asia as well as between ASEAN and those powers. I expect ASEAN to be speaking with a much more unified voice in international and regional forums. I hope to see ASEAN so integrated economically that goods, services, capital and labor flow freely within the region. I am confident that all ASEAN members will be fully integrated into ASEAN’s structures, processes and policy of economic openness. I expect to see more areas, including transboundary pollution and transnational crime, subject to binding regional arrangements regionally agreed upon. Finally, I hope to see the broader and deeper involvement of the business sector, non-governmental organizations, academic institutions, and the young people in ASEAN’s activities and intellectual development.
Thank you with for your time and your insights.
This interview was conducted in August, 1999, questions were asked by Wolfgang Mollers.