NUSA DUA, INDONESIA — Despite Europe’s struggles with a debt crisis holding out a warning signal, Southeast Asian nations are sticking to their own ambitious plans for economic integration by 2015. Whether they will be able to do it is another matter.

The 10-member Association of Southeast Asian Nations (ASEAN), ranging from impoverished Laos to resource-rich Indonesia to developed Singapore, is planning a union which allows for a free flow of goods, capital, services and labor within four years, but many economists say it is not even close.

For many global funds, the region’s main financial markets are already a unified investment destination. But ASEAN’s mix of authoritarian states and relatively young democracies may struggle to find the political will for a true common market.

“It’s a great vision but there is not much implementation so far, in other words it’s too ambitious for what it can be,” Hal Hill, a professor of Southeast Asian economies at the Australian National University, told Reuters.

“The ASEAN economies are becoming more and more open and so in the process of becoming more open there will be a lot more integration.

“But in terms of formal integration, a common market like the European Union, there’s no way they will achieve it.”

Locked between economic powerhouses China and India, ASEAN has a combined GDP of $1.5 trillion and is home to nearly 600 million people, rich raw materials, natural resources and cheap labor.

Its 10 members comprise Singapore, Indonesia, Malaysia and the oil-rich kingdom of Brunei among the wealthier nations, Thailand and the Philippines in the middle and Cambodia, Laos, Myanmar and Vietnam making up the rest.

So far in its goal of integration, ASEAN has eliminated 95% of tariffs and non-tariff barriers, and is working on deepening transport links and on a common visa.

The remaining issues, which include each country legislating and implementing agreements, represent the difficult part. And unfortunately in the past, ASEAN has a credibility gap when it comes to pushing through a political agenda.

Dismissed as little more than a talking shop, its policies of consensus building and non-interference in the internal affairs of members mean it has been able to do little in disputes such as the Thai-Cambodia border row, overlapping territorial claims over the South China Sea and pushing for democracy in Myanmar.

“The new members of ASEAN, Cambodia, Laos, Myanmar and Vietnam, would prefer to keep to the non-interference principle, refuse to talk about democracy, do not care about human rights,” said Rizal Sukma of Jakarta-based Centre for Strategic and International Studies.
“This gap makes it difficult for the ASEAN community to be achieved by 2015. Not only is it a dream, it’s a wild dream, I dare say.”

A recent Asian Development Bank report said ASEAN so far only partly has free trade in goods, services and capital, but no labor mobility, no convergence of laws on competition, and no common monetary or fiscal policy.

NAFTA, a free trade area in North America, is slightly better with free flow of goods in the region but closed in everything else, while the EU has unified mostly in all fields except for fiscal policy.

In terms of bureaucracy, the gap is huge: a World Bank report on the ease of doing business puts Singapore first in the investor-friendly list, Thailand 19th, Malaysia 21st, Vietnam 78th, Brunei 112th, Indonesia 121st, Cambodia 147th, Philippines 148th, Laos 171st, while Myanmar was not even ranked.

Singapore’s GDP per capita was $37,597 in 2008 while Myanmar was at the other extreme with GDP per capita of $466, according to IMF and World Bank data.

Different languages, ethnicities, political systems, historical grievances against one another, contrasting economic policies, will all have to be overcome.
Commercial organizations, however, have done much of that already, said Joseph Tan, Credit Suisse’s chief economist for Asia.

“Already, the businesses are very adept in operating in this environment, the opacity of the regulation, and the way the government and bureaucracy and the red tape goes on and on in ASEAN,” he said.
However, ASEAN is optimistic it can realize its dream of integration in 2015.

Surin Pitsuwan, secretary general of the grouping, said 2015 integration was a goalpost rather than a goal, in that it was something to aim for.

“But certainly the basic pillars, the basic foundation of the community, are being put together progressively,” he said. “We have four more years and we are on course.”

Asked if the problems in Europe would be a warning to any Southeast Asian integration, he said: “European union is an inspiration, not a model. Integration has brought a lot of challenges, closer integration will certainly expose yourself to each other’s weaknesses. — Reuters