Address at ASEAN Economic Integration Forum 2017
Delivered at ASEAN Economic Integration Forum 2017 “50 Years and Beyond: Forging an Inclusive ASEAN” in Bangkok, Thailand
Ladies and gentlemen,
Fifty years ago, five nations signed the ASEAN Declaration here in Bangkok with the vision of “uniting all nations of Southeast Asia under one roof”. Fifty years on, we are again gathered here to celebrate ASEAN’s achievements and to engage in building its future. ESCAP member states have used this hub in 2013 to adopt the Bangkok declaration and to advocate for further Asia-Pacific wide cooperation and integration. There is an immense potential for these two integration processes to be mutually reinforcing, particularly as the rest of the region has so much to learn from ASEAN.
ASEAN has a lot to celebrate and offer. From a group of five countries with a combined GDP of $22.4 billion in 1967, ASEAN grew into a community of 10 nations with a combined GDP of $2.55 trillion in 2016.1 With its 640 million people, ASEAN is the world’s 6th largest economy, 4th largest trading partner and attracts 7 per cent of global FDI inflow. These achievements were shared across the communities in ASEAN. The proportion of people living below the national poverty lines has been halved in the past two decades. ASEAN infant mortality ratio today is only a third of what it was in 1990. The net enrolment rate of children in primary schools now stands at a remarkable 96 per cent.
Given mutual benefits across the regional bloc, ASEAN regional cooperation and integration has allowed it to further their individual interests, while supporting regional peace and security. They agreed on fundamental principles: mutual respect of independence and sovereignty; non-interference in internal affairs; settlements of disputes through peaceful means; and the renunciation of the use of force. Those principles have stood the test of time and have underpinned the integration process over the last half century.
The challenges to ASEAN’s continued progress are many. These include avoiding the middle-income trap, loss of competitiveness, weakening of external demand, financial volatility and many persistent environmental issues. Some of these challenges affect not only ASEAN members, but all ESCAP members to different degrees, which underscores the need to work collectively to find common solutions.
Let me mention two principal challenges, which relate to the theme of this conference, “Forging Inclusive ASEAN.”
First, since the rising tide did not lift all the boats – one primary challenge is to have a policy and financing mechanism to help close the development gaps with special attention given to CLMV countries. While progress has been made in fighting absolute poverty, with rapid economic growth, inequality within the regional bloc has become worse. All measures point in the same direction. The per capita GNI of Singapore is 52 times that of Cambodia. Six members of ASEAN are still listed in the “Medium Human Development” group, while two members belong to the “Very High Human Development” group, according to the 2016 Human Development Report.2 This is a concern, because rising inequality cannot support sustained growth and results in economic instability.3 IMF research shows that on average, a 10-percentile decrease in inequality increases the expected length of a growth spell by one-half.4
The second challenge is the emerging economic nationalism and resentment towards multilateralism, which affects Asia-Pacific in general but is also reflected in ASEAN policy frameworks, even though it has succeeded in integrating global value chains and production networks. Today, we face mounting economic uncertainty mostly driven by populist protectionism in countries which used to be the cradle of free market thinking and strong proponents of globalization. A recent WTO report found that between mid-October 2015 and mid-May 2017, 256 trade restrictive measures were introduced at the global level. In the Asia-Pacific region, 69 new trade-restrictive measures were imposed, accounting for 27 per cent of those introduced globally. While the protectionist actions are still lagging the rhetoric, it is worrying when individual economies openly disregard multilateral frameworks which were long sought and fought for, such as the WTO trading regime with its dispute settlement mechanism or the Paris Climate Agreement.
From the outset, ASEAN members understood they would not succeed if they built a fortress bloc. The ASEAN Economic Community, launched in 2015, opted for a broader outlook, an "open regionalism" style of integration, putting ASEAN at its heart, but forging strong relations with many other countries. They became a hub for regional trade agreements. Out of 170 agreements of Asia-Pacific countries, 43 involve the ASEAN bloc or ASEAN members. Most of the ASEAN’s merchandise trade today is transacted with the partners in those agreements helping intra-ASEAN trade to remain steady – standing at 25 per cent of the bloc’s global trade.
ASEAN has also worked on two other fronts. Firstly, it has sought to make better use of the trade agreements by firms and secondly it has worked to ensure transparency and inclusiveness in the process of negotiating regional trade agreements and through its strategy for regional integration.
ASEAN has reflected its readiness to base its future development on the pursuit of integration, and has adopted the ASEAN Economic Community (AEC) 2025 Blueprint. This promotes a resilient and integrated economy through inclusive growth, innovation, and good governance. Among other things, our principal focus remains on harnessing the trade in goods through an elimination of tariffs and trade facilitation to reduce trade costs and increase competitiveness. Efforts are now also underway to support investment facilitation through improvements in legal and regulatory frameworks.
Turning to the ASEAN-UN partnership, ESCAP has ensured coherent and solid support for the organization. The AEC 2025 Blueprint is the first international agreement to align with the SDGs and ESCAP is working closely with ASEAN to enhance the complementarity of its Action Plan with the 2030 Agenda. The ASEAN Institute for Peace and Reconciliation is being strengthened by drawing on ASEAN and broader global experiences in this area. In support of ASEAN's long-term vision, ESCAP is promoting ASEAN Highways, ASEAN ICT network and the ASEAN Power Grid.
ESCAP members are fundamentally rethinking traditional Regional Economic Cooperation and Integration models and policy frameworks. This requires a transition from a traditional “growth-centric” approach to one driven by sustainable development, incorporating social and environmental considerations. Sustainability demands the regional cooperation framework be guided by the 2030 Agenda which includes a wide range of new elements. These include peaceful and inclusive societies (SDG16), thematic areas such as eliminating inequalities, managing the global climate change (SDG13) and how to regionally foster partnerships and the means of implementation (SDG17) including statistics, finance and trade and investment to implement Agenda 2030. With ASEAN already having adopted its ASEAN 2025 Blueprint based on sustainable development, it is seen as a champion of the SDGs from which other subregions could learn.
Market integration is the core driver of regional integration. The recent rise in global protectionism and disruption in labour mobility prompted by growing nationalistic sentiments have cast a shadow over efforts to pursue the gains of market integration. There are considerable challenges facing deeper market integration across the region, including remaining protectionism in many economies and obstacles to the mobility of capital and labour. Diversity and weaknesses in regulatory approaches and institution building have become one of the more serious obstacles for the emerging industries as the fourth industrial revolution, involving the digital economy and services sectors, gains momentum.
Over the past 50 years ASEAN has demonstrated the virtues and high dividends of regional cooperation, both on development, and peace and security which reinforce each other. Today, ASEAN is positioned to be a key driver of further integration in the Asia Pacific region guided by the 2030 Agenda. The obstacles to achieving a fully integrated Asia-Pacific region should not be underestimated. They require continuous efforts to deliver the trust and political commitment so essential to building regional governance, harmonizing complex regulatory frameworks and funding cross border infrastructure. But working together and building on ASEAN’s experience, we have an opportunity to take integration in Asia and the Pacific a step further and support growth, jobs and sustainable development across Asia and the Pacific.
I thank you.
1ASEAN collective GDP grew from being less than the Australian GDP in 1967 to more than twice the Australian GDP in 2016.
3Stiglitz, J. (2016) “Standard Economics Is Wrong: Inequality and Unearned Income Kills the Economy” available from http://evonomics.com/joseph-stiglitz-inequality-unearned-income/
4Or as OECD shows that income inequality has a negative and statistically significant effect on medium-term growth. It estimates that in countries like the US, the UK, and Italy, overall economic growth would have been six to nine percentage points higher in the past two decades had income inequality not risen.