Speech by Professor S Jayakumar Minister for Foreign Affairs and Law to the US-Asean Business Council Shangri-La Hotel, 14 July 2003 - ASEAN today: From Challenges to Opportunities

"ASEAN today: From Challenges to Opportunities"

1 The last year and a half has been testing years for ASEAN, and indeed for the region. After reeling from the 1997 financial crisis, we seemed to be on the road to recovery when - with the rest of the world - the post 9/11 crisis hit us. Terrorism and the fear of terrorism fundamentally changed the world, as we knew it.

2 Next, terrorism emerged in our very midst when we discovered Al Qaeda cells in our own region. Singapore was first to expose the existence of the Islamic group called Jemaah Islamiah (JI) and arrested the group before they unleashed their plans. Soon after, JI cells were also uncovered in other ASEAN countries. So far, six out of the 10 ASEAN countries [Singapore, Malaysia, Indonesia, Philippines, Thailand, and Cambodia] have taken actions against terrorists.

3 Then came:

- the tragic Bali terrorist attack last October; followed by
- the negative impact of the Iraq War.

4 On its heels, came the next crisis - SARS (Severe Acute Respiratory Syndrome). While SARS directly affected only some countries, its effects cast a pall over the region with the travel and tourism industries being hardest hit.

Current State of ASEAN

5 It was against this unpromising backdrop that I attended the annual ASEAN Foreign Ministers' Meeting in Phnom Penh last month. Scheduled back to back with that were also our meetings with our dialogue countries outside the region like the US, Russia, Japan, China, South Korea etc in forums like the Post Ministerial Conference, the ASEAN Regional Forum (ARF), and the ASEAN+3.

6 As I prepared for the meeting - I wondered: Would the other countries still be interested in engaging with ASEAN? What messages, we in ASEAN should convey to our dialogue partners on the state of affairs in ASEAN? What would be their prognosis of the health of ASEAN after the battering the region has taken with all these crises?

7 Have I come away from those meetings with an upbeat view of ASEAN or with a downbeat view? I would say that I am quite encouraged about ASEAN's future. We need not be despondent about ASEAN's future. At the same time, we must be realistic that there are serious challenges lying ahead.

8 Why am I encouraged? Let me give my reasons:

- First, I am glad that ASEAN has shown awareness of the need to get our act together and be competitive. In an unprecedented move, the consultancy firm, Mckinsey, briefed the Foreign Ministers on their report on ASEAN's competitiveness. While I cannot disclose the details of their recommendations yet, let me say that their briefing drove home a clear point - that we have a very narrow window to get our act together. It became clear to the Foreign Ministers that if we fail to do so, ASEAN's relevance to the region and to the world would be very adversely affected. I hope that the report and its recommendations will be endorsed at the ASEAN Leaders' Summit in Bali.

- Second, I am encouraged by the fact that although member countries have their various internal preoccupations, ASEAN continues to be outward looking. This is important as ASEAN must continually strengthen its linkages within and outside Asia to buttress its competitiveness.

For instance, ASEAN is negotiating a Free Trade Agreement (FTA) with China, potentially creating a free trade area of 1.8 billion people. This has spurred a positive competitive dynamic with overtures from Japan, South Korea, and India, all signalling their intention to conclude FTAs with ASEAN. At APEC last October, President Bush announced a new trade initiative with ASEAN called the Enterprise for ASEAN Initiative (EAI). This signalled the US' readiness to enter into closer economic engagement with ASEAN countries that were committed to economic reforms and openness. The aim is to create a network of bilateral FTAs that will increase trade and investment, and tie the ASEAN economies more closely with the US.

- Third, ASEAN has shown that it can rise to the occasion when faced with crisis. Terrorism was one challenge and SARS another. Both crises saw ASEAN responding promptly and decisively. There was a Declaration on Joint Action to Counter Terrorism in November 2001, followed by a Declaration on Terrorism in November 2002. These were complemented by Ministerial Meetings on Transnational Crime, working level cooperation among law enforcement agencies, as well as agreements like the ASEAN-US Joint Declaration on Cooperation to Combat International Terrorism.

The SARS outbreak posed an unprecedented challenge for ASEAN. The Leaders swiftly convened a Special Summit - the first ever in ASEAN's history - to discuss collective measures to combat SARS. The Summit was buttressed by Ministerial and working-level meetings by Health, Interior, and Civil Aviation authorities. There were also bilateral measures to help ASEAN members cope, including technical assistance and the provision of thermal scanners. ASEAN did not do this alone. We also reached out to dialogue partners like the US, Japan, and China. We worked together to defeat SARS - a transborder problem requiring transnational solutions. The region did not take long to become SARS-free.

- Fourth, I was encouraged by the approach we took on Myanmar. The good discussion on Myanmar at our Ministers' only Retreat, as well as ASEAN's call for the lifting of restrictions on Aung San Suu Kyi (ASSK), would not have been possible, say a few years ago. Myanmar's Foreign Minister was at the meeting. He did not oppose or resist advice from ASEAN colleagues and took the view that he knew that there was concern internationally, there was concern in the region, and he wanted to give his explanation. He was prepared to listen to various views and convey them to the authorities.

This was not a case of ASEAN dictating to, or imposing on, a fellow member any particular solution. But it was really a sharing of views and expression of concern by fellow ASEAN members on a matter which took place in one of our member-countries. I would not describe this as ASEAN departing from our principle of non-interference. It is about ASEAN reaching a new level of comfort level among themselves.

- Fifth, that ASEAN is being courted by many of our dialogue partners. This is a healthy sign. Many of them are very keen in engaging ASEAN. China has proposed a Strategic Partnership for Peace and Prosperity between China and ASEAN; Japan is holding a Summit to commemorate the 30th Anniversary of ASEAN-Japan relations and seeks adoption of a document to chart ASEAN-Japan relations in the 21st Century; and most recently, last week, the EU published a communication "A New Partnership with Southeast Asia", describing ASEAN as a region of great economic importance, and one of the most dynamic growth engines of the world economy.

- The final point I want to make is that ASEAN members have not let their occasional bilateral spats and hiccups affect cooperation within the organisation. It is inevitable that in a grouping of 10 countries, there will be periods of strains and stresses among some of the member countries. It would be a pity if these countries carried their bilateral problems into the ASEAN meetings. Fortunately, this has not happened and I believe the reason is that over three decades, ASEAN has nurtured habits of cooperation which enabled us to interact at the broader regional level. I believe this habit of cooperation in turn has also enabled member countries to try to contain and manage their bilateral problems.

Challenges Ahead

9 Confronting the economic challenges of a globalised world is daunting. How we do so will determine ASEAN's continued political and economic relevance. Today's world is different. Technology has compressed time and space. Interdependence has increased. We need look no further than the financial crisis, terrorism, and SARS for first hand examples. Globalisation did not create these problems, but amplified them. The knee-jerk reaction would be to withdraw. This is wrong. Greater economic integration is inevitable and a retreat from openness is a temporary solution. The lessons of the Great Depression are instructive. Erecting walls - as all experiments in autarky have shown - is futile. The price of disconnecting from the global network is a significant loss of growth.

10 Stay Open and Competitive. ASEAN's prosperity has been built on openness to trade and investments. So in some ways, we have no choice but to adapt to economic globalisation. We must stay competitive. It will be difficult and at times painful, but it is something we must do to remain economically competitive and vibrant. Within ASEAN, we know we need further integration. The ASEAN Free Trade Area (AFTA) came into effect this year reducing tariffs on most goods. The original ASEAN-6 are committed to extending this to all goods by 2010. Many investors have provided feedback that ASEAN must also move faster to remove non-tariff barriers, provide for better investment protection and liberalise their services regime. ASEAN is now working on an ambitious vision of an ASEAN Economic Community (AEC). The AEC will draw together existing initiatives into a comprehensive roadmap for economic integration. We envisage ASEAN to be a single production base and a single market of 500 million people. To achieve that, implementation is key. We will have to establish clear timelines, and strengthen the dispute settlement mechanism, to assure investors and member countries that the agreements will be observed strictly.

11 I am also encouraged to hear from Minister George Yeo last night that the ASEAN Economic Ministers met over the weekend in Bali. He said that they had agreed to accelerate integration in several areas, including electronics, tourism and air transportation, e-ASEAN, auto parts, wood-based, agro-based and rubber-based products, personal healthcare products, textiles and apparel and fisheries. The objective is to go beyond tariff reductions to trade facilitation including customs and standards harmonization and green lane procedures. The Economic Ministers also discussed the establishment of independent dispute resolution panels which are depoliticized.

12 Keep our Outward-Looking Approach. Externally, ASEAN will continue its efforts to strengthen linkages with key trading partners, such as the US, Japan, China and India. To these partners, ASEAN represents an economic opportunity. The 10 member states have a combined market of 500 million people.

13 These linkages are but nascent steps toward an East Asian Free Trade Area, potentially the largest Free Trade Area in the world. In fact, an East Asian regionalism is slowly evolving around ASEAN's annual summit meetings with China, Japan and South Korea (the Plus 3 process). China's proposal for an FTA with ASEAN and Japan's CEP should be seen in this light. The push ahead for greater East Asia integration will continue. This will put ASEAN in a better position to respond to geopolitical and economic changes in Europe and the Americas, where large economic blocs are being formed.

Importance of US Role

14 Herein lies the importance of the US working with ASEAN.

15 As East Asia slowly integrates, the US must remain engaged in ASEAN. The development of exclusive and distinct "blocs" is not in the interests of ASEAN or the US.

16 ASEAN will continue to remain relevant as long as it serves as a catalyst and interlocutor within and between Asia and external parties. The US needs to encourage and support ASEAN in this outward-looking role. In addition, the Plus 3 countries have delicate relations among themselves. They also have important interests in Southeast Asia that make them keen to maintain a significant presence. At the same time, they are exploring positive linkages among themselves. For Southeast Asia, this is a stabilizing trend. It also ensures the central role of ASEAN.

17 But clearly ASEAN cannot do it alone. Only the US has the clout to maintain the equilibrium between the two parts of East Asia. In this context, the recently concluded USSFTA is a landmark treaty. The economic benefits for Singapore-US relations notwithstanding, its greater import is political and strategic. It is perhaps the start of an inter-locking web of FTAs that will allow the US to entrench itself into the region. The USSFTA complements ASEAN and US treaty relationships by giving the US an institutional foothold in the emerging East Asian regionalism. This will place the US in a unique position to influence East Asian events and developments, as well as opinions and attitudes. The USSFTA also signals continued US engagement in the region. It states clearly that the strategic balance will remain.

18 It is in the US interest that ASEAN remains strong and cohesive. The US investments and MNCs had made significant contributions to the developments of many ASEAN members - generating new transparency in corporate governance, building capacity in financial and services sectors, and most recently, helping the region develop capability to deal with terrorism and disease epidemics. The US is also assisting ASEAN in the Initiative for ASEAN Integration (IAI) to ease the 2-tier divide in the organisation. Only when ASEAN is strong could it withstand the different pulls and influences of other external powers.

Conclusion

19 ASEAN faces serious challenges in the future. Past experience has shown that ASEAN has the capacity to pull together when faced with adversity. This trait remains important today. ASEAN continues to face serious questions about economic competitiveness in a globalised world, its raison d'etre, and its ability to adjust to new realities. ASEAN's main challenge in the next few years will be to deal with these issues and adapt. ASEAN must meet them head-on. I believe it is taking steps in the right direction. Eventually, my hope is for a stronger, more relevant and more competitive ASEAN. The US will play a key role in helping ASEAN succeed.

20 I would like to thank the US-ASEAN Business Council for its support for ASEAN. I know that you will continue to be an integral part of ASEAN's future.

21 Thank you.