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The "dynamism in business activity" in the newly launched ASEAN Economic Community has an upwards trajectory already enhanced by developments in logistics connectivity and huge cross-border business projects, says Malaysian business leader Tan Sri Dato' Dr Mohd Munir Abdul Majid. However the 2015 Chairman of the ASEAN Business Advisory Council and President of the ASEAN Business Club warns of impediments in continuing NTBs and NTMs and the reticence of AEC Blueprints to identify China as the future economic "centre of gravity" for both mainland and maritime ASEAN.
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| Tan Sri Munir Majid: "Business is agnostic. Investments are being made. Economic activities are taking place. The Greater Mekong Sub-Region is throbbing" |
THE ASEAN ECONOMIC COMMUNITY (AEC) could turn out to be the
saviour of the Association of Southeast Asian Nations (ASEAN). Whatever its shortcomings, it is real, unlike largely mere
words of the ASEAN Political and Security Community, and the tamasha (carnival)
of the Socio-Cultural communion.
Even so, there are developments worth noting which would
make the AEC, or the ASEAN Community, not what is envisaged in the fine
official plans.
But first let us acknowledge the so many things that are
happening in the ASEAN economy, facilitated by economic ministers and
officials, but most of all driven by business people who see its huge
potential.
Business people appreciate all too well the size of the
ASEAN market (at 640 million people, the third largest in the world), the total
economy (US$2.6 trillion, the world’s seventh biggest), healthy growth rate of
4%-5% (which could make the ASEAN economy number four in the world in a little
over a decade), and the powerful demographics (65% of the population under 35
years of age).
Despite complaints about non-tariff barriers and measures
(NTBs and NTMs) that impede virtually zero tariffs for trade in goods in most
places, despite still limited openness for trade in services, for investments
in some strategic sectors, and for mobility of skilled labour, there is a
dynamism in business activity not much seen elsewhere in a lacklustre global
economy.
In economically under-rated Laos (with GDP of US$13.5 billion the
smallest in ASEAN, not counting Brunei), there is potential and activity that
belie its size. The proposed Kunming-Vientiane high speed railway, with a
price tag over half the size of the country’s economy, will transform the
country.
Already, huge projects in special economic zones are taking
place whose activities cut across mainland South-East Asia. For Laos, conversion from being land-locked to being
land-linked, is not just a slogan.
The connectivity from north to south, and east to west, is
driving economic activity in what is commonly called the Mekong sub-region way
beyond it, even into extra-ASEAN territory. There is a “T” in the traditional
CLMV (Cambodia, Laos, Myanmar and Vietnam) countries – Thailand – which is very
much in the mix.
The kingdom has great ambition to be ASEAN’s logistical hub,
based on its central location in mainland South-East Asia, bordering Malaysia,
Cambodia, Myanmar and Laos, with access to the Mekong, the Gulf of Thailand and
the Andaman Sea.
But not just Thailand.
Under Prime Minister Modi India, which has been “Looking
East” for a mighty long time, is moving to “Act East”.
Last November it was announced that India is providing a
US$1 billion line of credit for a 3,200km highway linking the country with Myanmar
and Thailand. Once completed it would add to pre-existing, largely
historical, land and maritime linkages.
While significant, this is some way behind what is already
happening in the CLMVT ASEAN sub-region, which is served by improving
north-south connectivity and the East West Economic Corridor stretching 1450km
from Danang in Vietnam, through Laos and Thailand, terminating at Mawlamvine
Port in Myanmar.
Distance to global markets from Laos has already been
considerably shortened, as with the other countries.
According to one calculation, with the East West Economic
Corridor, existing global sea routes have been shortened by 3,000 nautical
miles, “or a 10-day sea journey from east to west and vice versa” - generating
enormous savings of freight and time costs for all investors along the region.
What with tax breaks and governmental support, many
businesses are seizing the opportunity.
This “Greater Mekong sub-region” is getting linked up with
China, particularly the provinces of Yunnan and Guangxi. Its growth rate is higher than the overall ASEAN average.
This whole area, with the two Chinese provinces, has a
population of more than 400 million people. One calculation has it that it is
more than half the size of the ASEAN economy. Thus there is an economic reality
in mainland ASEAN with a gravitational pull towards China.
Of course all this is part of the AEC scheme. Construction
materials and equipment, for example, moving seamlessly from Thailand to Laos
for development projects. Car parts going from Laos to Thai assembly plants.
Connectivity across ASEAN member countries.
Open regionalism, linking up with China and to a lesser
extent with India which, after all, is part of Regional Comprehensive Economic Partnership (RCEP).
Business is agnostic. Investments are being made. Economic
activities are taking place. The Greater Mekong Sub-Region is throbbing.
However, from the viewpoint of the AEC and ASEAN generally,
a few points need to be observed. The first is that antecedent to ASEAN economic centrality there are centrifugal forces pulling outwards.
This means policies for an ASEAN single market and production
base must be enhanced so that whatever hubs that develop occur also because of
the ASEAN economy even if there will always be extra-regional and global market
attractions as well. Therefore removal of all those NTBs and NTMs remains
essential for natural economic flow.
The ASEAN Business Advisory Council, as the lead and apex
private sector body, is pushing hard for elimination of NTBs and NTMs in four
key sectors – healthcare, retail, logistics and e-commerce, and agri-food.
The working groups, which ASEAN economic ministers again
agreed last week should be formed, must get cracking.
The official sector is also doing its bit with the launch in
Vientiane of the ASEAN Solutions for Investments, Servicesand Trade (ASSIST) web portal where sustained complaints against NTBs and NTMs will be
posted.
This kind of name and shame way is a good start, but much
more needs to be done particularly at the front end of such barriers.
A second observation to be noted is the possible bifurcation
of ASEAN. Mainland and maritime South-East Asia not quite gelling together
economically, with trade, investment and movement of peoples between the two
areas becoming secondary or minimal as they forge different hubs and look more
to extra-regional economic relationships.
This would be nothing new for Singapore which has always
looked outward. Indonesia is huge enough to go ahead with its maritime
development plans at whatever pace it can achieve.
The Philippines has always been a bit apart, but it is well
integrated in trade with China whatever South China Sea problems it faces with
the Asian giant. In any case, with a population in excess of 100 million
there is plenty of unfulfilled potential in the domestic economy.
It is Malaysia that could be squeezed. With a relatively
small population of just over 30 million, ASEAN offers the country a huge
hinterland which it could benefit enormously from if the economy is not caught
in the middle income trap, moves into higher value products and services,
invests out of sectors it no longer is competitive in, and becomes a hub in
modern services using advanced technology.
The great irony will be what is now called a two-speed ASEAN will become a two-part ASEAN, with mainland South-East Asia no longer looking
like the poor cousin.
The final and most significant point to note is that the
centre of economic gravity is China, whether for mainland or maritime Asean.
Through sheer economic and financial resources, and total
strategic commitment, such as through One-Belt-One-Road (OBOR) and the Asian Infrastructure Investment Bank (AIIB), it
has caused a frustration of the ASEAN community, including of the AEC, without
actually willing it.
This does not mean there will be no ASEAN Community, based
largely on economic foundation, but it will be one subsumed within a Greater
China political economy, and not in the way intended.
This will be neither a good nor a bad thing. It all depends
on the basis of relationships countries in the region, not just ASEAN, have
with China, and what hold China would exercise over them.
The realist therefore might contend the ASEAN Community 2025
Blueprints, including on the AEC, would need to take into greater account the
Greater China superstructure than they have done.
It would be useful if top ASEAN policy makers could have
this conversation, but I doubt they ever will except in national confines.
Tan Sri Munir Majid, Chairman of Bank Muamalat and visiting Senior Fellow at LSE Ideas (Centre for International Affairs, Diplomacy and Strategy), is also Chairman of CIMB Asean Research Institute. This article was first published by The Star, Malaysia.