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At 40, ASEAN Still Striving To Become Powerful Bloc
The Washington Diplomat / August 2007

By Larry Luxner

On Aug. 8, 1967, five countries Indonesia, Malaysia, Singapore, Thailand and the Philippines formed the Association of Southeast Asian Nations (ASEAN) in a symbolic attempt to promote human rights and stop the spread of communism in Southeast Asia.

Forty years later, ASEAN's membership roster includes two of the world's five remaining communist countries Vietnam and Laos as well as Burma, one of the world's worst human-rights violators.

Yet veteran diplomat Chan Heng Chee doesn't see any irony in this.

"Since the fall of the Soviet Union, many communist countries have become market economies," says Chan, Singapore's ambassador to the United States. "We are interested in regional stability, and countries change slowly. ASEAN has become even more relevant with the rise of China and India."

Regarding Burma whose name was officially changed to Myanmar in 1989 Chan says that "when ASEAN admitted Myanmar [as a member] in 1997, we hoped that constructive engagement would bring about changes. But the change has come about slower than we thought. We don't see sanctions as the way forward, because it doesn't help the country open up. And if the country doesn't open up, it cannot welcome the liberalizing forces of economic change."

Today, ASEAN includes some of Asia's wealthiest countries and some of its poorest. At one extreme is the oil-rich sultanate of Brunei, with annual per-capita income of $30,928), while at the other are impoverished Burma ($208) and Cambodia ($436).

According to 2006 statistics, the 10 countries comprising ASEAN cover 4.46 million square kilometers, have a combined population of 567.3 million, and boast a total GDP exceeding $1 trillion. In addition, East Timor and Papua New Guinea have observer status within ASEAN.

"East Timor has asked to join," said Chan, "but we're in no hurry to enlarge at the moment."

One country alone Indonesia accounts for 42% of ASEAN's total land area, 39% of its population and 34% of its total GDP. Other economic giants include Thailand, Malaysia, Singapore and the Philippines.

Yet when it comes to trade, Singapore is way ahead of its ASEAN partners.

Last year, Singapore recorded $510 million in exports and imports nearly twice the amount of trade recorded by neighboring Malaysia, and almost three times as much as Indonesia, with 50 times the population.

Singapore is also ASEAN's leader in foreign direct investment. In 2005, it managed to rack up over $20 billion in FDI, more than 52% of ASEAN's total, despite its smallness (Singapore is only half the size of Montgomery County, Maryland).

"Singapore has no resources. We have no water, no oil, no land, no minerals and no forests. We rely on our strategic location and human resources," said Chan, whose country currently occupies the rotating chair of ASEAN; she therefore speaks for the Washington ambassadors of all 10 ASEAN countries.

"Lee Kwang Yu, the founding father of Singapore, realized that for Singapore to survive as a city-state, we had to be a First World country in a Third World region. By that, he meant not only good roads and buildings, but the rule of law, good governance and transparency as well," she said. "We have tried very hard to be relevant to the world. Our prosperity and stability depend on what happens in the region, so Singapore is extremely plugged into international affairs."

She added: "Another suprising feature of Singapore is that when you arrive, you see trees. We've always been environmentally conscious, even before it was trendy to be green."

Chan said that her country's authoritarian reputation hasn't stopped it from becoming a leader in innovation.

"Singapore is not seen to be an open society, but I think democracy is elastic to some degree. Some countries have more, others less," she said. "Singapore is much more centrist and regulated than others, but it's open in the sense that you can leave any time you want, and anyone can buy property. We educate our citizens, we give them scholarships and we send them overseas. We are always searching for new ideas."

Early next month, President Bush will travel to Singapore to attend a commemorative summit marking the 30th anniversary of relations between ASEAN and the United States.

Chan, who's represented Singapore in Washington for 11 years, says ASEAN is now one of the most vibrant and institutionalized regional groupings in the world. Based in Jakarta, ASEAN is not quite as large as NAFTA, the European Union or even the African Union, but in terms of total GDP, it's much larger than the six-member Central American Common Market or the 15-member Caricom (the Caribbean Community).

Furthermore, every ASEAN member nation is enjoying 4% annual growth or better, with some countries like Singapore and Vietnam exceeding 8% this year.

"I think many people in the United States and Europe underestimate the regionalism that's developing in the Asia-Pacific region. It is real, growing and dynamic," she said. "We must strengthen ourselves by becoming one market wherever possible, one production platform so that our countries become even more attractive to foreign investors."

At the moment, ASEAN represents one of the world's largest export markets for the United States, with two-way trade running at $168 billion last year.

In June, the Senate unanimously passed a resolution calling for an ASEAN-US Trade and Investment Framework Agreement that will serve as a mechanism to ease trade and investment flows between the United States and ASEAN's 10 member countries. The resolution also requires Washington to work with ASEAN to develop a regional energy strategy and appoint a U.S. envoy for ASEAN affairs.

"Unanimous passage of this resolution demonstrates the respect and high regard of the U.S. Senate for Southeast Asia and ASEAN," said the bill's sponsor, Republican Sen. Richard Lugar of Indiana. "It is also a strong vote of support for implementation of the ASEAN-United States Enhanced Partnership."

Perhaps one reason the United States wants to get closer to ASEAN is to offset the growing influence of China. Trade between China and the bloc's 10 member countries is expanding by 15% a year, and Beijing is beginning to make major investments in the region as it negotiates a free-trade agreement with ASEAN.

"China's strength is that it has quality labor. We have to match that," she said. "All investors want to diversify. They don't want to put all their eggs in one basket. So U.S. or Japanese companies will produce one part of a final product in Malaysia, another part in Singapore, and another part in China. It's not a zero-sum gain. China's growth enables other activities to develop."

Singapore's envoy in Washington downplayed suggestions that China represents an economic or military threat to Southeast Asia.

"In the last few years, we've seen Chinese foreign policy towards our region to be very effective. Some American scholars call it the smiling Chinese policy, but for ASEAN, China has been a very friendly and cooperative partner," she said. "We've worked out many of our issues, and even though we originally considered China to be a threat, in recent years we've seen the other side."

In addition to the 40th anniversary of ASEAN, this summer also marks 10 years since the East Asian financial crisis, which hit Indonesia, South Korea and Thailand the hardest. Hong Kong, Malaysia, Laos and the Philippines were also affected by the upheavals, though China, Taiwan, Japan, Singapore and Vietnam emerged relatively unhurt.

Many economists believed the crisis was created not by market psychology or technology, but by macroeconomic policies that distorted information, which in turn created the volatility that attracted speculators.

Others blamed a "herd mentality" among investors that magnified a relatively small risk in the real economy, though some leaders in Southeast Asia publicly charged that currently manipulators were deliberately trying to ruin the ASEAN economies.

In the decade since then, "ASEAN has, in fact, proven to be very resilient. It's been a quiet and steady recovery," said Chan. "Because of the financial crisis, the 10 countries that were affected have gone through economic reforms, and that has strengthened us. Asia is in a good situation right now. It has greater stability, growth and prosperity than any other region in the world."

Singapore is doing particularly well, thanks in part to a free-trade agreement it signed with the United States in 2004. Since then, bilateral trade has grown by 18%. But what Chan would really like to see is more trade among the ASEAN nations themselves.

Two years ago, the trade bloc formed the East Asian Summit, which includes all 10 ASEAN nations plus Australia, China, India, Japan, New Zealand and South Korea. Issues tackled at previous summits include bird flu and energy security; this year's theme was global warming.

"These initiatives have been able to take off because ASEAN is accepted and trusted. We have a very important role to play in creating a regional architecture for the peace, stability and prosperity of this region," said Chan.

"And as we integrate, I expect ASEAN will move its goalposts further. Right now, in our 40th year, we are going to produce an ASEAN charter, which is like a constitution. This will bring us further along than we were in 1967. This charter will emphasize transparency and the rule of law. It will include dispute-solving mechanisms, and it will hold countries to their commitments."

She added: "It is our vision that we will create an ASEAN Community by 2015," Chan continued. "By then, we hope to have abolished all tariffs. We haven't said whether we'd go the Caricom way or the Mercosur way, but we would like to see free movement of trade and investment."

Chan concedes that while ASEAN is "very concerned" about North Korea's pursuit of nuclear weapons, "we are not a player there, and we have no clout on the Korean peninsula. The real players there are China and the United States."

Of much more immediate concern to ASEAN is the rise in home-bred Islamic fundamentalism. Indonesia is the world's largest Muslim country in population, and it's also been the scene of several terrorist attacks, including a 2002 suicide bombing on the island of Bali that killed over 200 people, most of them foreign tourists.

"There is anti-American sentiment, especially if you go to Muslim countries," Chan told the Diplomat. "Nevertheless, ASEAN citizens want to visit America, they want to study in America, they want to do business in America, and all these countries want American tourists."

Stephen Hadley, President Bush's national security adviser, praised ASEAN's efforts in fighting terrorism, amidst concerns that the Bush administration hasn't been paying enough attention to the region. That sentiment was intensified two years ago, when Secretary of State Condoleezza Rice skipped the ASEAN Regional Forum an event which Washington had not missed since its inception in 1994.

"The White House believes in active engagement with Southeast Asia," Hadley told a June 21 gathering of diplomats and guests in Washington marking ASEAN's 40th anniversary. "We worked closely with countries in the region in the capture of several Jemaah Islamiah terrorists in the Philippines and Indonesia."

Those arrested by Indonesian police in recent months include Zarkasih, the head of Jemaah Islamiah, and Abu Dujana, the group's military commander; six other suspects were also captured. In the Philippines, authorities have had some success gainst Abu Sayyaf, an extremist group, while in Singapore, said Chan, "we just picked up a self-radicalized militant, an educated man who was trained as a lawyer and worked in one of our leading law firms."

She added: "We don't deny that the problem exists, and I'm sure the U.S. wishes some countries would move faster than they have, but we are working with each other in intelligence and we're dealing with it."

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