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Sep 15, 2016 | 08:00 GMT

ASEAN: The Limits of Consensus

ASEAN: The Limits of Consensus
(Stratfor)
Summary

Editor's Note: This is the fourth installment of a seven-part series examining how the world's regional economic blocs are faring as the largest of them — the European Union — continues to fragment.

The Association of Southeast Asian Nations (ASEAN), home to some 635 million people and a collective gross domestic product of nearly $2.6 trillion, is one of the largest economic blocs in the developing world. Its importance in the global economy will likely only grow in the coming decades as economic, military and political might shifts from Europe to the Asia-Pacific region.

Much of that power, however, will be concentrated among the bloc's neighbors — namely, China, Japan and India — whose economies dwarf ASEAN states' in both size and scope. They, and external powers such as the United States, will jockey for influence in Southeast Asia, creating a competition that could drive ASEAN members closer together in search of mutual protection. Yet the same contest may also aggravate the differences that have historically prevented the bloc from fully unifying. As the "all or none" mantra upon which ASEAN was founded becomes increasingly difficult to follow, the bloc's path toward deeper integration will remain as slow and incremental as it has been for the past half-century. 

The political barriers that divide ASEAN today are a consequence of the geographic barriers scattered throughout Southeast Asia. The Malay Archipelago is composed of thousands of tiny islands inhabited by a variety of ethnic groups. Steep mountains and dense forests disrupt transportation among them, isolating the region's ethnically, religiously and linguistically diverse populations from one another. Continental Southeast Asia, meanwhile, is split down the middle by several river systems running north to south, severing the connections between the region's eastern and western halves.

The core of Southeast Asia stretches from peninsular Malaysia, through Singapore, to the island of Java. It includes the metropolises of Greater Kuala Lumpur, Singapore, Batam, Johor and Jakarta, as well as the rest of Java, which alone accounts for roughly a quarter of ASEAN's collective GDP. Sizable cities exist beyond this region — Bangkok, Ho Chi Minh City, Hanoi, Manila and Yangon, to name a few — but each is largely secluded from the others, creating a natural gulf between Southeast Asia's continental and maritime countries.

Uniting Core and Periphery

These were the circumstances that shaped the course of Southeast Asia's newly independent states in the decades after World War II as they entered a world sorted into U.S. and Soviet alliances. Throughout this formative period, the Philippines, Thailand, Malaysia, Indonesia and Singapore repeatedly tried to create a regional organization, and after several failed attempts, they established ASEAN in 1967. The group eventually aligned militarily and economically with the United States, forming a wall that blocked communism from spreading deeper into Southeast Asia.

For the first two decades of its existence, ASEAN did not try to cooperate on economic, political or security matters. Instead, it rested on the tenet of noninterference in states' sovereign affairs and championed causes common throughout the developing world, such as the Non-Aligned Movement. It was not until the 1990s that ASEAN shifted its attention to integration, and even then it remained primarily focused on economics. In 1991, for example, the bloc's members signed the agreement that formed the basis of the ASEAN Free Trade Area. Seven years later, they reached a deal that created an investment area meant to encourage foreign investment in every sector. When the Asian financial crisis struck in 1997, shaking Southeast Asian economies to their foundations and breaking the region's currencies, ASEAN members erected a currency swap mechanism known as the Chiang Mai Initiative with China, Japan and South Korea.

Membership in the bloc, meanwhile, began to balloon. The fall of communism and the stabilization of several Southeast Asian states drew neighboring countries to the organization. From 1995 to 1999, Cambodia, Laos, Myanmar and Vietnam joined ASEAN's ranks. This was a transformative moment for the bloc, for its original members were maritime states with similar agendas. The addition of new members, many of which were less developed and were strangers to capitalism, set the bloc on two separate paths: one for core members, and another for the newcomers.

Even so, ASEAN members began to push for greater unity in the early 2000s, leading to the bloc's defining achievement: the ASEAN Charter. Signed in 2007 and ratified in 2008, the accord formalized and established an institutional framework for the association, a far more definitive deal than any the bloc had previously reached. The organization also signed free trade agreements with India, South Korea and China, marking another step toward greater cooperation among its members.

A Marriage of Convenience

Of course, ASEAN's leaders hope that this will be just the beginning. With the simplest measures of economic integration complete — the ASEAN Economic Community, free trade agreement and free investment zone — they could pave the way for the bloc to become a true economic union. ASEAN's members might then be able to match China's rapid pace of industrialization and development, attracting investment into many different supply chain sectors.

But this plan is rather optimistic, considering how far ASEAN has left to go in forming a cohesive economic front. One of the ASEAN Economic Community's primary goals, for example, was to establish a common market. Though one nominally came into force at the end of 2015, encouraging freer movement of goods, services, capital and skilled labor, it still has not been fully implemented in practice. Moreover, the ASEAN free trade agreement, which took nearly 20 years to put in place, has reduced tariffs among the bloc's members to less than 1 percent. And yet in spite of this success, only 25 percent of ASEAN exports go to its members. Likewise, only 25 percent of the bloc's total trade activity remains within its borders. (By comparison, those figures are closer to 33 percent and 60 percent, respectively, in more developed free trade areas such as NAFTA and the European Union.) This highlights one of ASEAN's biggest issues: Because its members export similar goods, such as raw materials and finished manufactured products, there are limits to how much a free trade agreement can encourage higher levels of trade among them. Though it is possible that outside investment could give regional trade a boost, differences in ASEAN states' economic development and policies make it more likely that foreign funds would simply increase the amount of finished goods being sent to consumer markets in China, South Korea, Japan and the West.

Physical integration via connective infrastructure has lagged as well, especially beyond continental Southeast Asia. Many proposals exist to change that, including ideas for ASEAN natural gas and power grids, but few moves have been made to act on them. Perhaps more important to the bloc, though, are efforts to align members' broader economic policies, regulations and structures. Yet these, too, have failed to progress beyond declarations of intent. Features that are incompatible with common economic markets, including state planning and price controls, still exist in places such as Vietnam, and until they are removed, they will stand in the way of a closely knit union.

But a closely knit union — at least of the kind that shares a currency, external tariffs and a political bureaucracy — may not be what ASEAN is looking for. The bloc is unlikely to ever seriously consider becoming more like Mercosur or the European Union. In fact, ASEAN members regularly negotiate their own trade deals with non-ASEAN states, suggesting that the bloc's coordination efforts are less about forming a binding policy and more about working together as it suits individual members' interests. The Trans-Pacific Partnership is a case in point. Of ASEAN's 10 members, the deal includes only Vietnam, Singapore, Malaysia and Brunei. Furthermore, Indonesia — which, lying at the heart of ASEAN, is by far the bloc's most important member — has taken clear steps to move away from cooperation within the organization in recent years. Under President Joko Widodo, Indonesia has routinely sent lower-level officials to bloc meetings or, in some cases, missed them entirely. On July 18, it also opened its own trade negotiations with the European Union, independently of ASEAN.

To Each Its Own

The bloc's deference to its members' individual agendas has made cooperation on political and security matters similarly difficult. Because Southeast Asia rests at the intersection of the Indian and Pacific oceans, countries outside the region with designs for those basins — and the strategic advantage they bestow — tend to take a keen interest in Southeast Asian straits and the states that control them. Historically, this manifested in the region's colonization by Europe, China, the United States and Japan. But now it has taken the form of China's steady expansion into the South China Sea — something that has elicited different responses from ASEAN's maritime and continental members. While Vietnam and the Philippines have fixed their gaze firmly to the east, for example, Myanmar is more concerned with events in South and Southeast Asia. At the same time, the dizzying array of peoples, ethnic groups, conflicts and threats that characterize ASEAN's member states have made all of them more susceptible to the meddling of outside actors seeking a foothold in the region. It comes as little surprise, then, that there has been little discussion of trying to coordinate the foreign policies of ASEAN states or form a joint legislative body within the bloc. (The organization's reliance on unanimous agreement has also prevented it from adopting a coherent stance on territorial claims in the South China Sea, precisely because of its members' competing objectives and varying relationships with Beijing.)

Of course, ASEAN was not built to provide a joint defense framework or regional security. Members may, however, stand united on particular military issues or form their own multilateral units outside the bloc's domain. Singapore, Indonesia, Malaysia and Thailand have formed the Malacca Strait Patrol, which includes air, naval and intelligence-sharing components. Similarly, the Philippines and Indonesia have agreed to a joint naval patrol, and Malaysia recently joined them in a counterterrorism program centered on the Celebes Sea. Because these initiatives, like so many others, were undertaken in pursuit of each member's unique imperatives, it is unlikely that their future will be much affected by the bloc, regardless of the course it takes.

Staying the Course

As competition within the Asia-Pacific region heats up in the coming decades, the fissures within ASEAN will likely become more pronounced. The bloc's maritime members — the Philippines, Indonesia, Singapore, Malaysia, Vietnam and Brunei — will all seek to strengthen their relationships with countries that can help them counter China's naval encroachment in the region, including the United States, Japan and India. By comparison, continental Cambodia, Laos and Myanmar will continue to move closer to China. Moreover, because these states receive more direct investment in areas such as infrastructure, the gap between them and their maritime peers will probably widen.

As it does, the bloc's "all or none" approach to policymaking will become increasingly unsustainable. This is not to say that ASEAN will abandon its integration efforts entirely. But as long as its members continue act in accordance with their own interests, the chances of a more united and cohesive ASEAN emerging from the version than exists today will be slim. For now, ASEAN will stay the course it has followed for the past 50 years, slowly inching toward integration but delayed indefinitely by the constraints of geography.

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