Politics of Association of Southeast Asian Nations Economic Cooperation

• DOI: http://doi.org/10.1111/j.1748-3131.2011.01175.x
• Date: 01 June 2011
• Published date: 01 June 2011
• Author: Rodolfo C. SEVERINO

Politics of Association of Southeast Asian

Nations Economic Cooperation

Rodolfo C. SEVERINO†

Institute of Southeast Asian Studies

This paper discusses the political motivations behind the evolution of economic cooperation in the

Association of Southeast Asian Nations (ASEAN) from its founding to the measuresag reedupon to

integrate its economy. Those measuresinclude the reduction and elimination of tariffs on and the

removal of nontariff barriers to intra-ASEAN trade, customs reform, the harmonization of product

standards, the liberalization of trade in services, and the strengthening of transportation links. The

paper analyzes the failure to fully carry out those commitments, ascribing it partly to domestic

political obstacles. Finally, it discusses the efficacy of the ASEAN Charter in this regard and the

prospects of achieving an ASEAN Community by 2015.

Key words: ASEAN charter, ASEAN community, integration, obstacle

JEL codes: F1, F4, F5

1. Introduction

The Association of Southeast Asian Nations (ASEAN) Declaration that the founders of the

ASEAN issued in Bangkok on August 8, 1967 laid down seven“aims and purposes” of the

new association. Of these, four had to do with economic,social, and cultural development.

On the basis of subsequent statements and actions, however, one can say that the asso-

ciation’s real purpose was political in nature – to keep the Southeast Asian countries’

many disputes from turning into violent conflict and to keep the region as much as

possible out of the conflicts of major powers. In his book, Southeast Asia and the Great

Powers,the New Zealand scholar Nicholas Tarling(2010) states, “ASEANextended the idea

that, rather than seeking security from outside the region, its members could secure it by

agreement inside, perhaps more effectively.”aepr_117522..38

Before ASEAN, there were two attempts to organize Southeast Asia. MAPHILINDO,

for Malaysia, the Philippines, and Indonesia, agreed upon in August 1963 to co-opt the

plan to form Malaysia out of Malaya, Singapore, North Borneo (Sabah), and Sarawak,

which Indonesia and the Philippines opposed, quickly broke apart (Tarling, 2010).

Meanwhile, in 1961,Malaya, the Philippines, and Thailand had set up the Association

of Southeast Asia (ASA), ostensibly for purposes of economic, social, cultural, educa-

tional, and other nonsecurity or nonpolitical cooperation. With ASEAN’s founding in

August 1967,ASA’s projects were turned over to the new association, which now included

Indonesia and Singapore as well as the three ASA members.

†Correspondence: Rodolfo C. Severino, Institute of Southeast Asian Studies, 30 Heng Mui Keng

Terrace,Singapore 119614. Email: severino@iseas.edu.sg

doi: 10.1111/j.1748-3131.2011.01175.x Asian Economic Policy Review (2011) 6, 22–38

© 2011 The Author

Asian Economic Policy Review © 2011 Japan Center for Economic Research

22

The projection of ASEAN initially as an economic, social, and cultural association,

rather than as one pursuing political and security purposes, was meant to dispel the

notion that it was a military alliance or, worse, a toolof American foreign policy. At their

first summit, in February 1976, the ASEAN leaders issued the Declaration of ASEAN

Concord, in which they laid down ASEAN’s objectives and principles in much greater

detail than their foreign ministers had done eight and a half years before. The Declaration,

later known as Bali Concord I (Bali Concord II was issued at another ASEAN summit

meeting in Bali, in 2003), included a Program of Action covering the political,economic,

social, and cultural and information areas.

At that 1976 summit in Bali, ASEAN set up a central secretariat. The fact that the

Secretary-General was severely circumscribed and held on a short leash does not detract

from the significance that the establishment of a central ASEAN Secretariat held for

Southeast Asian regionalism.

2. Economic Cooperation to the Fore

Finally, theASEAN leaders directed the ASEAN economic ministers (AEM) to convene in

Kuala Lumpur in March1976 to discuss specific measures for the establishment of “large-

scale” industrial projects and a system of preferential trading arrangements.

The Preferential Trading Arrangement (PTA) agreement covered“basic commodities,”

particularly food and energy, the products of the ASEAN Industrial Projects (AIP), and

the goods agreed upon in negotiations among the member states. The PTA essentially

provided for “margins of preference”below normal tariffs on covered goods. The number

of items listed, the margins of preference, and the cutoff import value were raised peri-

odically until the ASEAN PTA was effectively superseded by the 1992 agreement on the

Common Effective Preferential Tariffs for the ASEAN Free Trade Area (CEPT/AFTA).

One basic difference between CEPT/AFTA and the PTA is that, in the case of CEPT/

AFTA, everything is included unless excluded,w hereas, in the PTA’s case, everything was

excluded unless specifically included. Another is that the PTA provided for “margins of

preference” for intra-ASEAN trade, that is, percentage discounts from normal tariffs, so

that the PTA tariff would remain high if the base tariff were high to begin with. The

CEPT/AFTA, on the other hand,prescribes the lowering of actual intra-ASEAN tariffs in

tranches until their eventual elimination.

The other pillar of ASEAN economic cooperation was the AIP. At their March 1977

inaugural meeting, the AEM assigned a urea fertilizer plant each to Indonesia and Malay-

sia, superphosphates to the Philippines, diesel engines to Singapore, and soda ash to

Thailand. The Basic Agreement on the AIP, signed in March 1980, subjected to ASEAN

consultation the establishment of similar projects in other ASEAN countries. This attempt

at a regional industrial policy soon foundered on the refusal of ASEAN member states to

refrain from putting up industries competing with an AIP, the decisions by member states

to change the industries that had been assigned to them, and the lack of member states’

enthusiasm for projects other than their own. The member states also refused to commit

Rodolfo C. Severino Politics of Economic Cooperation

© 2011 The Author

Asian Economic Policy Review © 2011 Japan Center for Economic Research 23