Maastricht-Shy, Asia Frets Over Its Trade Area
International Herald Tribune
October 14, 1992
Michael Richardson  

Anxious to avoid being marginalized as Europe and America form regional markets, Southeast Asian countries face a problem: Can they move fast enough toward economic integration without becoming embroiled in Maastricht-type conflict over national interests and sovereignty that would make unity impossible?

The issue is being put to the test as economic ministers of the Association of South East Asian Nations prepare to meet in Manila next week to lay the groundwork for launching a free-trade area in January.

Economists are expressing increasing doubts that the ASEAN free-trade zone, which is to be phased in over 15 years, will get off to a credible start.

They say that with the global economic slowdown beginning to affect Southeast Asia, officials of a number of countries are yielding to pressures from powerful industry lobby groups for protectionist measures.

Such measures would undermine efforts to build a barrier-free ASEAN market of more than 330 million consumers for trade in all goods except unprocessed agricultural commodities.

"There are now reasons for concern," said Florian A. Alburo, professor of economics at the University of the Philippines, referring to ASEAN's ability to fulfill expectations about the free-trade agreement.

Mohammed Sadli, the chairman of the Institute for Economic Studies in the Indonesian Chamber of Commerce and Industry, said that ASEAN was still "groping" for a new direction as it sought to add closer economic ties to a successful record of cooperation in other areas since the group was formed in 1967.

The greatest obstacle to ASEAN economic integration, he said, is "nationalist sentiments, either to protect domestic industries or to resist the loss of some sovereignty or national decision-making power to an ASEAN arrangement."

Mr. Sadli said that the same phenomenon was causing intense debate in Europe, although the integration process there is much further advanced than in ASEAN.

Despite doubts about the future of the Maastricht treaty that would increase political ties between the 12 EC members, give new powers to the European Parliament and create a single European currency by 1999 at the latest, the Community is on track to become a single market for goods, services, capital and labor from January.

ASEAN links Indonesia, Malaysia, the Philippines, Singapore, Thailand and Brunei. Its external trade has boomed in recent years and the group has been a magnet for foreign investment because the ASEAN region has a faster rate of economic growth than any other part of the world.

In an effort to retain this momentum and prevent diversion of trade and investment to Europe and the planned North American Free Trade Area, the heads of government of ASEAN states decided in January that the group should form its own free-trade zone within 15 years.

Some ASEAN countries want to move faster and extend the scope of economic cooperation beyond trade.

Prime Minister Mahathir bin Mohamad of Malaysia said last week that ASEAN should hasten implementation of the free-trade zone because the group had little time to prepare itself for "challenges which, if not successfully met, would threaten our economic well-being."

He said that ASEAN should strengthen industrial joint ventures, develop complementary industries in member countries, and cooperate more closely in transport, tourism, joint energy-development projects, energy supply, monetary matters "and much, much more."

Some economists and businessmen in the region said that ASEAN should also harmonize its foreign-investment laws and open national borders so that manpower can flow more freely from labor-surplus nations such as Indonesia and the Philippines to labor-short countries such as Malaysia and Singapore.

There should be manpower planning for the whole ASEAN region "if we are to be competitive in the future," said Mohammed Sopiee, vice president of the Malaysian Employers Federation.

At the ASEAN summit meeting in January, it was agreed to strengthen the small ASEAN secretariat in Jakarta and enlarge its budget. But the heads of government stopped well short of laying the basis for a strong EC-style executive body.

Moreover, the framework agreement on the ASEAN free-trade zone is couched in such general terms that officials of member states have been left to work out details.

If ASEAN is to achieve its economic objectives, "clearly there has to be an enhancement of the institutional and organizational underpinnings" of the group, said Noordin Sopiee, director-general of the Institute of Strategic and International Studies in Kuala Lumpur.

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