Asean: The next 50 years


First of 2 parts
NOW that the Association of Southeast Asian Nations (Asean) has turned 50 years old, I have been asked to look at Asean in the next 50 years.

If we are a market of 650 million people today, we will be over a billion in 50 years. If we are the fastest-growing region today, we will likely be a mature, modest growth region in 50 years. And if we are unsure about global security and the threats of nuclear war and terrorist conflict today, what will we face in 50 years?

Each question about tomorrow begs an answer hidden in the potentials of today. We must make sure that our answer supports our social needs, embraces a sustainable economic model, and buttresses regional and global peace. And of course, we would want the region to realize its full potential as a major global economic force.

But 50 years from now, I have no crystal ball, and neither does anyone. As veteran journalist Kavi Chongkittavorn put it, in today’s world it is hard to forecast the next five years, let alone the next five decades.

To illustrate the how hard it is to foretell, let’s go back 50 years ago—to Southeast Asia 50 years ago. Security concerns led five Southeast Asian foreign ministers to put Asean together. With that signed agreement, did anyone predict that that would blossom into an economic community today? Fifty years ago, did anybody predict China—50 years ago a sleeping economic dragon—would emerge today as the world’s second largest economy and counting? That’s how difficult it is to predict what will happen 50 years from today.

When we ponder the next 50 years, we see increasing prosperity, greater reliance on technology and artificial intelligence and yet we see greater income disparity. We see a more peaceful world but see more nations with nuclear capability. We see a cleaner environment, and global warming affecting government policies and our economic model and having a decisive impact on our lives.

Income disparity constitutes the paramount challenge for both development and globalization. If huge segments of a country and the community of nations are left behind by progress, then these disadvantaged sectors and states reject the development and globalization paradigms, and embrace alternative, often isolationist, and sometimes extremist and violent ideologies.

For open economies and free enterprise to win, everyone must win.

What happens 8 years from now
Some question why we are discussing what happens in 50 years. Why not see what happens in eight years, in 2025?

In 2015, Asean leaders crafted in the 27th Asean Summit, the Asean Vision 2025, that is a community highly integrated and cohesive; with enhanced connectivity and central cooperation; and a more resilient, inclusive, and people-oriented, people-centered community, integrated with the global economy. So, 2025 is supposed to be the year of full integration. That is only eight years away. If vision 2025 is achieved, the prospect for realizing the region’s full potential as a major global economic force will be bright.

The organizers of today’s session have put together guide questions that could help evaluate the chance of success of our integration by 2025. What are the chances of free flow of goods and free flow of labor? How will the report that some member nations have lagged behind in facilitating intra-Asean trade affect the desired level of trade for the entire region? The Asian Development Bank and the Institute of Southeast Asian Studies have an answer: that any failure to deliver leads to a loss of credibility, putting Asean countries in danger of falling behind in the global competition for export markets.

Some benefiting more than others
The organizers also asked about the argument that the community seems to be benefiting some members and is biased against others. Surin Pitsuwan, former Asean secretary general, agrees that some states are benefiting more than others. To the strong goes the victory. For the rest to benefit as much, they too must with the help of the community, become strong. That will require reforms in political governance and economic management.

Regional integration benefits those whose products complement the others’ and is biased against those whose products compete with each other. It benefits those who are efficient in production and governance, and those that use information technology more efficiently and is biased against those who are less efficient. But overall, regional integration’s advantages outweigh the disadvantages. It is better for all members to embrace regional integration while providing safety nets for the disadvantaged sectors and states.

The right reaction for the less efficient is to increase efficiency, with better infrastructure and better governance that includes a strong but competitive fiscal system, and monetary and political stability. Disadvantaged countries should try to maximize their benefits from regional integration by improving governance standards through greater transparency and an ethic of effective implementation.

Efficient infrastructure is both physical and digital and it is a must for member nations as well as for Asean as a whole. Surin reports that Asean has embarked on a connectivity plan to facilitate the transport of goods and people across the region, increasing the need for infrastructure financing. He suggests that the funding solution be the creative mobilization of the combined foreign exchange reserves of the Asean member states amounting to almost $1 trillion. So, we need to find ways to mobilize that for infrastructure and connectivity.

Financial and monetary policies
As for monetary policy, according to the International Monetary Fund, the original five countries have monetary frameworks that helped them well after the Asian financial crisis. It helped them through their transformation and it helped them in the global financial crisis in 2008 and the following years.

It has delivered peace and financial stability in a period of significant domestic and regional transformation and a global financial crisis. As for Brunei, its currency is pegged to the Singapore dollar, and IMF says that’s good because it provides for certainty and meets Brunei’s external investment needs. But in the CLMV (Cambodia, Laos, Myanmar, Vietnam) countries, the IMF said there is too much dollarization, meaning the widespread use of foreign currency deposits and loans, is considered not good for financial stability. And that is where a possible financial reform will have to happen.

On political stability, Asean harmony and solidarity have helped diminish disputes and tensions among members, so that even former conflict adversaries like Vietnam and Cambodia are now united in a common cause for regional peace and development.

Agriculture and integration
But not everything is perfect. It is said that Philippine agriculture is vulnerable to Asean integration. And even for rice-exporting countries, as Prime Minister Hun Sen remarked to me, Cambodia competes with Vietnam, Thailand and Myanmar. Thus, to reduce the prospect of greater income disparity, there is a need to modernize agriculture in a way compatible with equity. Since the Philippines has no great river basins like the Mekong, it needs to invest more in irrigation. The Philippines and the agriculture-exporting countries—except for Vietnam whose rice is highly competitive—need to invest more in agricultural infrastructure, credit, marketing assistance for farmers and fisherfolk, R and D, education, and IT. I remember when I was President, we were so happy that farmers could read what the prices were by looking at their cellphones. But today like in China, farmers get paid by WeChat and that is how technology can make agriculture more efficient.

On the regulatory framework, it is good we have land reform but it is more important that the regulatory system must empower the use of farmlands as collaterals so the small farmers can enter the formal financing system and again I cannot overstress that financial technology is so important for developing and modernizing any sector including agriculture.

Agribusiness should have rural non-farm activities like processing, where more diversification and complementation can happen. This is where SMEs can thrive rather than wither under the pressure of economic integration. But since to the strong goes the victory, the SMEs must also become stronger. This is where NGOs like Go Negosyo can make a difference.

I spoke at the SME Conference of Go Negosyo and how mentoring can help and one of the big factors that mentoring can help is to introduce your small brothers to technologies.

(The article is an excerpt from a speech delivered at the Asean Business and Investment Summit, Solaire Resort and Casino, 14 November 2017.)

(To be continued tomorrow)


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