Keywords:

Virtual ASEAN; social diversity; internet technology; logistics; economic gap; climate change; China; Institutionalization

Idea:

Keywords used in the ASEAN Vision 2020 statement at Kuala Lumpur in 1997 implied an undefined view, almost a virtual ASEAN community. ASEAN was called variously as a partnership, a community, a market, a concert and a Zone.  Significantly, one word that was not used suggests there was no vision then of ASEAN as a Union governed by a supra-bureaucracy.

Strong and weak impulses constantly pull together or further divide the ten member nations. These impulses also interact with each other. ASEAN has come a long way from its founding in 1967 but will need to do more to build a stronger collective. Specifically these impulses that contribute to the grand scenario on what virtualization of ASEAN may look like are:

A. Impulses that tend to hold or pull together

1. Legacy and co-evolving institutions,
2. Links and networks from the Internet, communications technology and logistics, and
3. Centripetal attraction from climate change and sustainability.

B. Divisive impulses

1. Differences in development levels create a powerful centrifugal force,
2. Demographic size and diversity, and
3. China is the giant Panda?

From these considerations, our conclusion is not whether further and closer integration will happen but when. Meanwhile, the pressing needs and constraints of the time may create more bi- or multi-lateral ties between members on specific issues of interest.

Scenarios:

Differences in development levels create a powerful centrifugal force:

The differences in the levels and aspects of development are the biggest obstacles to closer ASEAN integration on the ground. The lessons from the painful early stages of German unification, and of EU’s current money problems, and the counterfactual success of the Hong Kong-China “one country-two systems” highlight the formidable obstacles that will confront any economic and political union.

Demographic Size and Diversity:

With an economy of US$3 trillion growing at 7.5% and a population of 613.8 million , ASEAN represents a market almost equal to India and half of China and growing at a respectable gallop.
China is the Giant Panda?

The influence of large and fast growing emerging markets at the periphery of ASEAN (particularly China) is a weak impulse pulling apart ASEAN integration. The relationship is defined by growing trade between China and ASEAN member countries and by four other current issues: the Spratly dispute, dams on the Mekong River, railways from Kunming to Singapore, and the gas lines through Myanmar. It will also be affected by China’s choices regarding North Korea and its relationship with Japan.

Legacy and Co-evolving Institutions:

The ASEAN Directorate is working hard to design programs to meet the 2020 vision from the Blueprints listed in the table below. This will tend to bring ASEAN members closer together even though some of these programs tend to create multi-speed development tracks that do not help integration.

Links and Networks from the Internet, communications technology and logistics:

Implementation of new institutions and infrastructure such as a customs union, together with improved air, sea land transport linkages and intellectual property protection as designed in the Blueprints, will further promote integration. Otherwise, the alternative scenario built around bilateral or sub-regional approaches will become de facto in a multi-track community building.

Centripetal attraction from climate change and sustainability:

One of the many key findings of an ADB report on climate change is that the region will lose 75% of its present rice growing areas in the worst case climate scenario when nothing is done today to address the potential problem . For ASEAN this of course is a common concern due to rice’s place at the heart of Asian diets, and the importance of rice exports to the economies of ASEAN nations.

Implications:

• Until ASEAN’s members agree on the need for a development strategy that leads to economic convergence, it will most likely remain a virtual collective. The overall level of concern will be an important factor driving the pace of integration into the ASEAN Economic Community (AEC).
• The large aggregate ASEAN market size remains a weak force for unification in the absence of more institutional innovations aimed at creating a more seamlessly connected market and investment area.
• China will be a focus of member states individually and not necessarily as a force towards Union. China will be happy to keep ASEAN weak institutionally.
• Policy implementation by sub-groups such as ASEAN-4 or ASEAN-6, have been used to overcome difficulties arising out of the distinctive flights noted above. Given the multi-speed tracks thus assumed, this can probably lead to an ASEAN community at some future time; as time goes by, the prospect of an effective functioning multilateral solution will be further hampered by ongoing proliferation of bilateral trade agreements among members and between members and third countries / blocs.
• The availability of these links and networks will themselves reinforce and promote unity.
• Loss of food growing areas and need for shared agricultural and food technologies, given similar cuisine and food requirements can be a strong unifying force.

Early indicators:

• Convergence in GDP growth rates per capita especially faster growth rates for those in catch-up will indicate a reduction on this centrifugal impulse.
• Success of initiatives such as the ASEAN free trade area and a customs union facilitates trade among member nations, as evidenced especially by inter-ASEAN investment by regional companies.
• For integration, a good early indication would be deals between China and an ASEAN-2 or an ASEAN-4 entity say on the Mekong River or better still ASEAN-5 with Myanmar taking its rightful place.1
• Success of ASEAN in meeting the key milestones in its Blueprint of integration in the political-security, economic and socio cultural fields.
• Construction of actual linkages and nodes in communications and logistics.
• Setting up of information and diffusion exchanges among member nations.

Drivers & Inhibitors:

Drivers:

• Investment flows especially those from other ASEAN members will stimulate convergence.

• Benefits of economies of scale as perceived by internal and external investors facilitated by investment flows and links above.
• China can be a force for unification if the ASEAN member-nations see unity as a source of bargaining power.
• Perceived benefits by ASEAN bureaucrats in implementing institutions at the regional center.
• An interesting story here is about the shift of the Taiwanese sugar industry to flowers where modern industrial policy facilitated the transition. If ASEAN is able to negotiate a convergence strategy for development, then approaches like this will help in integration.
• Perceived benefits of such integration. Singapore and Brunei can take the lead with investment projects within ASEAN being consumer countries with small food production areas.

Inhibitors:

• Investments in developing members will inherently be more risky and need to be mitigated with incentives to cover sources of added risks.
• National champions that are threatened by entry of competition from champions of other
• ASEAN countries are the main inhibitor.
• China will see it in her best interest to keep the ASEAN members as a loose confederation to limit its political and negotiating power.
• Power struggles among national political vested interests to protect their turf.
• Differences in levels of development especially in those factors directly affecting competitiveness – say in agricultural products such as rice and sugar – work to push apart and delay integration via political processes.
• Lack of political consensus given the voting power of rural interests.