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Hurdles seen in Asean’s way to achieve its goals

March 9th, 2009 · No Comments

ASEAN’S 14th summit concluded in Thailand on March 1 having made some significant economic and political developments, but the association’s lofty goals will be hindered by protectionism and its non-interference policy, experts say.

The Asean Cha-am Hua Hin Declaration affirmed the 10 member states’ commitment to free trade, the development of regional economic, social and cultural integration, and the creation of the Asean Economic Community (AEC) by 2015.

Side meetings led to the signing of a number of economic agreements, including the Asean Trade in Goods Agreement, the Asean Comprehensive Investment Agreement, and the Agreement Establishing the Asean-Australia-New Zealand Free Trade Area.

Asean+3, which includes Japan, China and South Korea, increased the Chiang Mai Initiative, a multilateral fund to aid member economies, to US$120 billion from US$80 billion.

‘Although Asean summits tend towards the symbolic, this one produced some concrete proposals, such as the creation of a common market by 2015, an ambitious and difficult to achieve schedule that nonetheless signals their commitment to free trade and unwillingness to resort to beggar-thy-neighbour policies,’ said Alaistair Chan, Moody’s economist. ‘So in economic terms this meeting was better than expected.’

However, bridging the gap between free trade rhetoric and practical reality will take time, experts said, as a number of Asean member states continue to interfere in the commodity markets.

‘While governments will probably not resort to outright protectionism, such as tariffs and other import barriers, they may implement some specific policies such as attempting to shore up export prices, encouraging the purchase of local goods, and other subsidies for domestic industries,’ said Mr Chan.

Thailand’s government recently committed 120 billion baht (S$5.15 billion) to support agricultural commodities by guaranteeing farmers minimum crop prices.

Thailand, Malaysia and Indonesia, the world’s three largest natural rubber-exporting nations, took tripartite action to withhold 700,000 tonnes of rubber from the market.

‘In general, we do not support interventions that raise prices of staple food commodities artificially,’ said William James, a principal economist at the Asian Development Bank. ‘In the case of rubber, such efforts are usually self-defeating as substitute products can always be found and other suppliers can eventually enter the market.’

Philippe Meyer, the European Commission’s directorate-general for trade, told the media that the EU-Asean Free Trade Agreement is far from being concluded as six rounds of talks held since 2007 have not yielded tangible results. As such, bilateral talks between the European Union (EU) and Asean members Singapore, Thailand, Brunei and Vietnam would progress first, he said.

Kasikorn Research Center said the Asean agreement could yield a short-term revival in inter-regional exports and tourism, but that longer-term goals would be hindered by economic inequalities and disparate trade laws, Asean’s relations with other East Asian economic powerhouses, a global revival in trade protectionism, and potential energy and food security threats.

The summit was the first held since the ratification of the Asean Charter in 2007, which includes socio-economic cooperation and pledges to uphold and promote human rights and democratisation in an association that includes active democracies and military dictatorships.

Removing Asean’s non-interference policy is essential if the charter is to be made a workable reality, said Thitinan Pongsudhirak, director of the Institute of Security and International Studies.

‘Asean has been stuck at a topsy-turvy crossroads for the past two decades,’ he said. ‘If its charter proves hollow in practice, Asia’s most resilient regional organisation is likely to languish in disrepute, bypassed and overtaken by other regional vehicles and global dynamics.’

Published March 9, 2009
© The Business Times

Tags: business · economy · news · Thailand · The Business Times (Singapore)

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