04 Jul 2019
Singapore’s Permanent Representative to the WTO and WIPO Tan Hung Seng was invited as a panellist for the session on “Economic integration in the Maghreb – An Untapped Source of Aid for Trade and Growth” on 3 July 2019, where he shared on ASEAN’s experience in regional economic integration. His remarks are in full below. The 7th WTO Global Review of Aid for Trade from 3-5 July 2019 is focused on “how Aid for Trade supports economic diversification and empowerment, with a focus on eliminating extreme poverty, particularly through the effective participation of micro, small and medium enterprises, women and youth”.
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REMARKS BY AMBASSADOR TAN HUNG SENG
SINGAPORE’S PERMANENT REPRESENTATIVE TO THE WTO AND WIPO
ASEAN’S EXPERIENCE IN REGIONAL INTEGRATION, 3 JULY 2019
1 Thank you for inviting me to participate in this panel session, and to share about ASEAN’s experience in regional economic integration. Over the next ten minutes, I will try to do so by answering the following three questions:
(a) Why did ASEAN pursue economic integration?
(b) Where is ASEAN economic integration now?
(c) What can we learn from ASEAN’s experience in economic integration?
Why did ASEAN pursue economic integration?
2 As many of you are aware, Southeast Asia was known as the “Balkans of the East”. When ASEAN was formed in 1967 by five founding Members, namely, Indonesia, Malaysia, the Philippines, Singapore and Thailand, it was against a backdrop of mutual suspicions, simmering border disputes and a burning Cold War. For example, Indonesia, Malaysia and Singapore were embroiled in Confrontation, and there were multiple border disputes among all five countries. Fortunately for ASEAN, the political leaders of the five founding Members had the wisdom to understand that unless our five countries hang together, we will be hung separately. And the best way to overcome their political differences is to embark on economic cooperation. This was articulated clearly in the Bangkok Declaration of 8 August 1967, which is the founding document of ASEAN. It is significant that even though ASEAN is essentially a political project, the Bangkok Declaration, in listing the aims and purposes of ASEAN, ranks economic cooperation ahead of political cooperation. The first aim of ASEAN, as contained in the Bangkok Declaration, declared that ASEAN should “accelerate the economic growth, social progress and cultural development in the region through joint endeavours in the spirit of equality and partnership in order to strengthen the foundation for a prosperous and peaceful community of South-East Asian Nations”. The second aim is “to promote regional peace and stability”.
3 Over the years, ASEAN has expanded to embrace all the ten Southeast Asian nations, with the subsequent admission of Brunei, Myanmar, Vietnam, Laos and Cambodia. In 2008, when we adopted the ASEAN Charter, the goal of regional economic integration was more fully fleshed out as follows: “To create a single market and production base which is stable, prosperous, highly competitive and economically integrated with effective facilitation for trade and investment in which there is free flow of goods, services and investment; facilitated movement of business persons, professionals, talents and labour; and freer flow of capital”. As you can see, ASEAN has consistently attached great importance to regional economic integration because we regard it as a critical ingredient to achieving regional prosperity and peace. Consequently, this approach has nurtured a “prosper thy neighbour” mind-set among ASEAN Member States. This stands in sharp contrast to a “beggar thy neighbour” mind-set, which is unfortunately, still prevalent in other parts of the world, and which has led to the many failures of regional economic integration efforts. In fact, this is a strength that has enabled ASEAN to weather the 1997/98 Asian financial crisis as well as the 2008 financial crisis.
Where is ASEAN economic integration now?
4 In fact, the 2008 global financial crisis provided the impetus for the Leaders of ASEAN Member States to take the decision to accelerate the pace of regional economic integration, by advancing the target date of establishing the ASEAN Economic Community (AEC) from 2020 to 2015. Essentially, the AEC envisages the following five goals:
(a) A highly integrated and cohesive economy.
(b) A competitive, innovative and dynamic ASEAN.
(c) Enhanced connectivity and sectoral cooperation.
(d) A resilient, inclusive, people-oriented and people-centred region.
(e) A global ASEAN.
5 In this context, ASEAN has made considerable progress. ASEAN is currently the 7th largest economy in the world with combined GDP of US$2.7 trillion (which is larger than India). Total ASEAN trade amounted to US$2.6 trillion in 2017, with intra-ASEAN trade accounting for 23%. Foreign direct investment reached US$137 billion that same year. With a combined population of 642 million, ASEAN represents an attractive market.
6 There are two particular elements of the AEC that I want to highlight here. The first is the importance of enhancing regional connectivity as an enabler to strengthen regional economic integration, such as open borders and road networks as highlighted by the Ambassador of Morocco. In this connection, ASEAN has developed the Master Plan of ASEAN Connectivity (MPAC) 2025, which is a long-term plan launched in 2016 to “achieve a seamless and comprehensively connected and integrated ASEAN to promote competitiveness, inclusiveness and a greater sense of ASEAN Community”, and covers five strategic areas of i) Sustainable Infrastructure; ii) Digital Innovation; iii) Seamless Logistics; iv) Regulatory Excellence; and v) People Mobility. Under Singapore’s Chairmanship in 2018, three priority deliverables relating to infrastructure, sustainable urbanisation and MSMEs were identified, and work is progressing well on implementing the MPAC 2025. Thesecond, as was highlighted by the Ambassadors of Tunisia and Libya, is the importance of building a “global ASEAN” by connecting ASEAN Member States to the world. In this context, ASEAN has steadfastly built a network of FTAs with our Dialogue Partners including Australia, New Zealand, China, Japan, ROK and India. In fact, ASEAN is currently negotiating the RCEP (Regional Comprehensive Economic Partnership) with these six countries. When concluded, it will form the largest economic bloc in the world, covering more than half of the global economy, and will enable ASEAN to better weather future economic storms. Similarly, four ASEAN Member States (Brunei, Malaysia, Singapore and Vietnam) are members of the CPTPP (Comprehensive and Progressive Trans-Pacific Partnership).
7 Even though we declared the establishment of the ASEAN Community in 2015, ASEAN economic integration is still very much a “work in progress”. There is still room to grow on intra-ASEAN trade, and ASEAN must continue to reduce non-tariff barriers to trade, which have worryingly increased to more than 5000 measures from 2007 to 2017. Due to the differences in levels of development and capacity, some initiatives have also taken more time to implement, such as the ASEAN Single Window.
What can we learn from ASEAN’s experience in regional economic integration?
8 Due to time constraint, I would like to highlight just three points. First, know what you want. But I will start with what ASEAN did not want. From the outset, ASEAN does not aspire to the EU model of political and economic union, involving inter alia, a single market, a single currency and large doses of supra-nationalism. Given the significant difference between ASEAN and the EU in terms of history, geography and culture, ASEAN Member States have long recognised that the EU model is not for us, simply because we know that it will not work for us. Similarly, as the Maghreb pursues regional economic integration, it will be helpful to do so in a realistic and pragmatic manner. As the IMF report on “Economic Integration in the Maghreb: An Untapped Source of Growth” has noted, “geopolitical considerations and restrictive economic policies have stifled regional integration”. Hence, the Maghreb may wish to take a building block approach towards regional economic integration, which recognises that efforts must be made to address the differences and mutual suspicions, like ASEAN did in 1967. In fact, the first preambular paragraph of the Bangkok Declaration acknowledges the differences and mutual suspicions among the five founding ASEAN Member States, when it stated that “Mindful of the existence of mutual interests and common problems among countries of Southeast Asia and convinced of the need to strengthen further the existing bonds of regional solidarity and cooperation.”
9 Second, understand your neighbourhood. The best way to know and understand your neighbours better is to increase the frequency of interaction with each other. In this connection, ASEAN Member States meet frequently, at all levels, across all sectors, throughout the year. In fact, ASEAN has often been criticised as a “talk shop” with too many meetings – 1300 per year. But what many critics fail to realise is that saliva is the best lubricant to smoothen relations. Over the last 52 years, the frequent meetings have enabled ASEAN Leaders, diplomats, civil servants and military personnel to know each other better, understand each other better and ultimately, work together better. I am not suggesting a proliferation of meetings for the Maghreb countries, but the point I want to make is that it is important to enhance people-to-people connectivity.
10 Understanding your neighbourhood also means understanding each other’s needs. In this context, ASEAN has agreed to apply the ASEAN Minus X formula for regional economic cooperation. Essentially, in the implementation of economic commitments, ASEAN-X is a formula for flexible participation that may be applied where there is consensus to do so”. The formula recognises the fact that some ASEAN Member States are at a different developmental stage and require some flexibility to implement economic commitments. As the Maghreb countries forge greater regional economic integration, it is important that they keep an open mind to seeking creative solutions that can meet the needs of their neighbourhood and the individual Member States.
11 Third, know how to adapt. ASEAN Member States recognise the critical importance of being agile in order to adapt to the rapid and relentless technological transformation that confronts us. Thus, we have not become complacent and rested on our laurels. ASEAN is constantly trying to up our game by strengthening the AEC. To respond to the digital transformation for example, ASEAN Leaders signed the ASEAN E-Commerce Agreement in 2018 to better harness the digital economy and to help develop the E-Commerce industry. By advancing trade rules and by building up better digital connectivity in the region, ASEAN aims to create a conducive environment for the growth of E-Commerce that will benefit all of its Member States. During Singapore’s ASEAN Chairmanship last year, we launched the ASEAN Smart Cities Network, which seeks to leverage on technology to address the challenges arising from rapid urbanisation and digitalisation. This is especially urgent given that more than half the population of ASEAN is forecasted to live in urban areas by 2025.
12 In closing, let me emphasise two points. First, regional economic integration is always a long-term undertaking. Second, in an increasingly interconnected and competitive global economy, it is imperative for small countries, like those in ASEAN and the Maghreb, to strengthen regional economic integration.