The ASEAN cornerstone: Regional integration is entering a critical phase

The government has long sought to deepen the country’s links with its neighbours, as well as with the wider Asia-Pacific community. The country became a founding member of the Association of South-east Asian Nations (ASEAN) with this goal in mind – and ASEAN has gone from strength to strength ever since. Now, the association is facing some of its toughest challenges, both economic and political. While moving towards a single market in 2015, ASEAN also faces complex geopolitical and security realities. Malaysia’s role will be a key one, as the 10-nation grouping addresses global power structures and local rivalries.

FOUNDING MEMBER: Back in 1967 Malaysia was one of the first to sign the Bangkok Declaration, the treaty establishing ASEAN, alongside Thailand, Indonesia, Singapore and the Philippines. The motivations for forming the association varied, yet all the founding states were united in a common Cold War-era political and security front against communism. Fundamental to bringing the nations together was a shared belief that economic cooperation was the way to greater prosperity; a belief borne out by the rapid growth the member economies have since shown. Indeed, the latest available figures from ASEAN show the 10 members as responsible for 4.1% of global GDP in 2010, or some $3.2trn, measured at purchasing power parity (PPP). In 2010 there was an average 7.4% annual GDP growth across the region, the third highest in the world. At PPP, per capita income almost doubled between 1998 and 2010, from $2749 to $5411 – a figure around 72% that of China, or 7% of the US. Malaysia has been a star economic performer, having the third-highest GDP per capita in the association after Singapore and Brunei Darussalam. Malaysia supported the ASEAN Vision 2020 issued in 1997, the Bali Concord of 2003 and the 12th Summit’s decision in 2007 to bring Vision 2020’s aims forward to 2015.

ECONOMIC COMMUNITY: This meant creating an ASEAN Economic Community (AEC) built on three main pillars – politics and security; economics; and socio-cultural community. For many, the second pillar is the one that has seen the clearest developments, with a single regional market and production base its main goal.

Central to this are the 2009 Strategic Schedule for the AEC and Roadmap for the AEC, which propose a free flow of capital, investment and labour within ASEAN by 2015. In practical terms, this has meant gradually lifting tariff barriers, although countries have been able to maintain “sensitive” and “highly sensitive” lists to protect certain industries. At the same time, in recognition of the different level of economic development between Cambodia, Laos, Myanmar and Vietnam (known as CLMV) and the older six members, some duties can remain for CLMV until 2018.

LOWERED BARRIERS: According to the Ministry of International Trade and Industry (MITI), 98.69% of all tariff lines between Malaysia and ASEAN members had been eliminated by the end of 2011, with only 66 lines still imposing 5-20% tariffs. These were largely for highly sensitive products, such as tropical fruits, tobacco and rice. In addition, some 96 tariff lines have been placed on the government’s “exclusion list”, mostly comprising weapons and alcoholic beverages, which will continue to attract tariffs even after 2015. The impact of removing these barriers has been demonstrable – MITI says total trade with other ASEAN countries rose from $85.1bn in 2008 to $95.6bn in 2010, a 12.3% hike, while total intra-ASEAN trade rose 10.5%.

MOVING ON: Now, moves to integrate policies on the political and security fronts have been receiving more attention. Key to this is the continuing dispute over maritime limits in the South China Sea, where Vietnam, Brunei, Malaysia and the Philippines have competing claims with each other and with China. Malaysia has urged a united front in ASEAN, suggesting members resolve their own competing claims, then take the joint resolution to the Chinese. It has also pushed for a code of conduct in the sea. This issue may well prove to be a test case for ASEAN integration, as well as for regional peace, and Malaysia will have a key role to play.