Speech by Prof Tommy Koh on The US-Singapore Free Trade Agreement: Taking US-Singapore Relations Higher on 15 April 2002

Luncheon 2: South East Asia -
Restoring Social and Economic Stability

1 Let me first thank the Boao Forum for Asia for giving me this opportunity to address you.

2 The last few years have been challenging ones for Southeast Asia. The 1997 financial crisis resulted in a serious setback for the regional economies. To regain credibility and investor confidence, the affected economies have implemented tough but necessary measures. They have re-capitalised viable banks, put in place proper supervisory systems, and improved corporate governance.

3 Just as the region was making progress, and the outlook started to look brighter, the global economic downturn set in. The economic upheavals have also unleashed political and social changes in several Southeast Asian countries. In some cases, unemployment, poverty and economic dislocation have led to social unrest. These changes are still being played out.

4 The challenges faced by some governments are serious. In some cases, these are made more complicated because the economic and political problems are intertwined. Restoring political stability is as much dependent on achieving economic stability and vice-versa. While regional countries must find their own solutions to political problems, external participants can help in speeding up the economic recovery. With their economies back on track, governments in Southeast Asian countries will be better positioned to tackle their socio-political woes, thereby breaking the vicious cycle.

5 Despite Southeast AsiaA?s current problems, its potential over the medium and long-term are good. It is premature to write off Southeast Asia, which until recently, was one of the fastest growing regions in the world. It has an abundance of natural resources and a combined market of more than 500 million people. Investments over the past four decades have created a good industrial base, sound infrastructure and a reservoir of skilled workers. Education is emphasised and the use of English is widespread. Southeast AsiaA?s fundamentals are sound and given time, will bounce back.

6 Southeast Asian countries are aware that help must first come from within. Through ASEAN, regional countries have coordinated their efforts and remained outward looking and focused on -pushing through reforms. Significantly, ASEAN economies have pressed ahead with initiatives for deeper economic integration, such as the ASEAN Free Trade Area (AFTA) and the ASEAN Investment Area (AIA). We have also brought forward the implementation date of the AFTA to January 1st, 2002.

7 ASEAN leaders have also established two important initiatives to further integrate regional economies: the Initiative for ASEAN Integration (IAI) and the Roadmap for Integration of ASEAN (RIA). The IAI allows more advanced ASEAN countries and Dialogue partners to pool their resources to assist less advanced ASEAN members to catch up. This will bring all ASEAN economies up to par with one another in the long term. The RIA will harmonise the many ASEAN initiatives into a more coherent framework and allow ASEAN to identify the gaps in economic cooperation so that we can focus on closing them.

8 External players can, however, help ASEAN increase the momentum towards economic recovery and integration. China, Japan and the US can help by supporting ASEAN initiatives such as the IAI and RIA. Such support will also boost investor confidence in ASEAN.

9 In this context, we welcome the proposal by China to realise a Free Trade Agreement with ASEAN. The ASEAN-China FTA, when completed, will be the largest in the world in terms of its combined 1.7 billion population. The ASEAN-China FTA as well as the Japan-ASEAN Comprehensive Economic Partnership are positive steps that will lead to increased trade and investment flows between North and Southeast Asia and greater prosperity for the whole of Asia.

10 Indeed, as China grows economically, Southeast Asian countries also stand to benefit. ASEAN economies are already increasingly looking north, especially at China, to expand their markets and for direct investment. China's growth is a positive factor for ASEAN as it presents the region with an additional engine of growth.

11 However, as China is a large and populous country, there may, at times, be voices of concern about the challenges China's rise will pose. These concerns are often magnified by the media. In a way, we are all living in China's "shadow". So, is this a case of people being more afraid of shadows than the real thing?

12 It is therefore good that China has continued its efforts to reassure the region. The proposal for an ASEAN-China FTA is a strong signal of China's desire to remain constructively engaged with ASEAN and her faith in Southeast Asia's long-term prospects. Besides the proposed ASEAN-China FTA, China is also encouraging its businessmen to "move out" and to invest in ASEAN countries. Such moves benefit ASEAN and will also help assuage concerns about China's growth.

13 Next, I would like to touch upon an even bigger challenge faced by ASEAN and indeed the whole of Asia. September 11 and the arrests of terrorists in Southeast Asia have exposed the grave and immediate threat of terrorism. If not addressed quickly, terrorism will directly undermine the stability and security of ASEAN. Left unchecked, it can inhibit economic recovery in the region by driving away potential investors.

14 To deal with this problem, ASEAN countries again have to take proactive domestic measures, while enhancing international cooperation. Only a few months ago, Singapore uncovered and arrested thirteen members of a terrorist network Jemaah Islamiah (JI). The information we gathered on the JI also enabled Philippine intelligence to arrest a key Al-Qaeda member in the Philippines. But like a disease, even as one source of terrorism is eradicated, others will spring up. We must be prepared for a long struggle.

15 ASEAN Leaders have adopted a Declaration on Joint Action to Counter Terrorism, which signals ASEAN's commitment to enhance cooperation among themselves, and with the international community, on counter terrorism strategies. Only a determined, united, comprehensive and sustained strategy will enable us to root out the terrorism cancer from the region.

16 ASEAN countries have emerged from this difficult period with a better understanding of their strengths and weaknesses. They are more determined to work toward regaining social, political and economic stability, and sustaining them in the long term. There is some light at the end of the tunnel. A recent meeting of ASEAN finance ministers expressed confidence that the region's economies will strengthen this year with a regional growth of 3.5 to 4 per cent.

17 It is on this note of cautious optimism that I conclude my speech.

18 Thank you.

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