Friday, February 12, 2016

Timor-Leste Progressing With ASEAN Accession

I've been tardy in posting to the blog recently, due to work commitments.  I am on the Asian Development Bank (ADB) team advising Timor-Leste on its ASEAN accession.  This week we briefed Nobel Peace Prize laureate and former Timor-Leste president Jose Ramos-Horta on the status of the accession:


All I can say at this point is that Timor-Leste has made great strides towards membership.  For more, please see this Straits Times article by Shane Rosenthal, the ADB's country director for Timor-Leste (on the left side of the above photo).

I'll have more soon. 

he impending launch of the ASEAN Economic Community is being marked this week at a summit in Kuala Lumpur. It should also be the time for ASEAN to consider opening the door to a new member. Timor Leste is Asia’s youngest country — a stable democracy at the crossroads of Southeast Asia and the Pacific. Acceptance as a member country would enhance its prospects for economic development, while further strengthening the organization’s centrality and relevance.

Timor Leste has made remarkable progress since gaining independence in 2002. Its infrastructure was in disrepair, social services absent, and government institutions at their inception. Despite brief periods of instability, the country now has a well-functioning government and is using its modest petroleum wealth to foster long-term economic growth.

Gaining membership has been a priority for Timor Leste throughout its short history. Successive governments have made the case through diplomatic efforts such as signing onto the ASEAN Regional Forum in 2005, and the Treaty of Amity and Cooperation in Southeast Asia two years later. By next year Timor Leste will have embassies in the capitals of every ASEAN member country.

These are impressive achievements for a young country, but not surprising to development partners that are helping rebuild its infrastructure and develop the skills needed for the economy to continue expanding.

Newly paved roads now connect Timorese with their Indonesian neighbors, and electricity reaches almost every corner of the country. Deregulation has transformed mobile telecommunications to such a degree that companies from two member countries — Vietnam and Indonesia — are now competing for a growing and increasingly connected customer base.

While many of Timor Leste’s nearly 1.2 million people remain poor, huge strides have been made to improve living conditions and increase life opportunities. Infant mortality has halved since independence, and the incidence of malaria has fallen by 95 percent. Primary school enrollment rose from 65 percent in 2001 to 92 percent in 2013, and the proportion of parliamentary seats held by women stands at 38 percent, the highest in Asia.

The ASEAN Charter sets out four criteria for membership, three of which are met by Timor Leste: It is located in Southeast Asia, is recognized by the 10 ASEAN nations, and would agree to be bound and abide by the organization’s charter.

The fourth requirement, demonstrating an “ability and willingness to carry out the obligations of membership”, is for ASEAN’s members to judge. Concerns have been raised about its readiness to participate in the organization’s economic, political-security, and socio-cultural communities, given the hundreds of meetings it holds each year.

Timor Leste’s track record on governance suggests it would be a worthy member. The country has held three open elections without incident, and participates actively in international organizations such as the G7+ group of post-conflict states and the Community of Portuguese Language Countries. Timor Leste represents a model for managing natural resources wealth, ranking near the top of the international Resources Governance Index, ahead of several ASEAN members.

ASEAN members appear open to Timor Leste’s application. The country’s ambassador to the Jakarta-based Secretariat was accredited in 2011, the same year the ASEAN Coordinating Council established a working group that commissioned studies on what it would mean for Timor Leste to join.

Membership is a win-win proposition. It would help Timor Leste to attract investment, develop trade links, and diversify its economy. It already has one of the most open trade policies in the region, but joining such a high-profile organization would send a powerful signal to investors and help to accelerate integration with the rest of Southeast Asia.

ASEAN, too, would benefit from the young population and strategic location of Timor Leste. The inspirational story of Timor Leste and its impressive development would be a shining example for all member states. It would give added meaning to the grouping’s members as they journey toward its Vision 2025, which calls for a “politically cohesive, economically integrated, socially responsible” ASEAN.

Timor Leste has emerged as an able and willing member of the community of nations. The time has come for this country to take the next step on its road to prosperity. - See more at: http://www.thejakartapost.com/news/2015/11/21/timor-leste-belongs-asean.html#sthash.B4EcUsFt.dpuf
he impending launch of the ASEAN Economic Community is being marked this week at a summit in Kuala Lumpur. It should also be the time for ASEAN to consider opening the door to a new member. Timor Leste is Asia’s youngest country — a stable democracy at the crossroads of Southeast Asia and the Pacific. Acceptance as a member country would enhance its prospects for economic development, while further strengthening the organization’s centrality and relevance.

Timor Leste has made remarkable progress since gaining independence in 2002. Its infrastructure was in disrepair, social services absent, and government institutions at their inception. Despite brief periods of instability, the country now has a well-functioning government and is using its modest petroleum wealth to foster long-term economic growth.

Gaining membership has been a priority for Timor Leste throughout its short history. Successive governments have made the case through diplomatic efforts such as signing onto the ASEAN Regional Forum in 2005, and the Treaty of Amity and Cooperation in Southeast Asia two years later. By next year Timor Leste will have embassies in the capitals of every ASEAN member country.

These are impressive achievements for a young country, but not surprising to development partners that are helping rebuild its infrastructure and develop the skills needed for the economy to continue expanding.

Newly paved roads now connect Timorese with their Indonesian neighbors, and electricity reaches almost every corner of the country. Deregulation has transformed mobile telecommunications to such a degree that companies from two member countries — Vietnam and Indonesia — are now competing for a growing and increasingly connected customer base.

While many of Timor Leste’s nearly 1.2 million people remain poor, huge strides have been made to improve living conditions and increase life opportunities. Infant mortality has halved since independence, and the incidence of malaria has fallen by 95 percent. Primary school enrollment rose from 65 percent in 2001 to 92 percent in 2013, and the proportion of parliamentary seats held by women stands at 38 percent, the highest in Asia.

The ASEAN Charter sets out four criteria for membership, three of which are met by Timor Leste: It is located in Southeast Asia, is recognized by the 10 ASEAN nations, and would agree to be bound and abide by the organization’s charter.

The fourth requirement, demonstrating an “ability and willingness to carry out the obligations of membership”, is for ASEAN’s members to judge. Concerns have been raised about its readiness to participate in the organization’s economic, political-security, and socio-cultural communities, given the hundreds of meetings it holds each year.

Timor Leste’s track record on governance suggests it would be a worthy member. The country has held three open elections without incident, and participates actively in international organizations such as the G7+ group of post-conflict states and the Community of Portuguese Language Countries. Timor Leste represents a model for managing natural resources wealth, ranking near the top of the international Resources Governance Index, ahead of several ASEAN members.

ASEAN members appear open to Timor Leste’s application. The country’s ambassador to the Jakarta-based Secretariat was accredited in 2011, the same year the ASEAN Coordinating Council established a working group that commissioned studies on what it would mean for Timor Leste to join.

Membership is a win-win proposition. It would help Timor Leste to attract investment, develop trade links, and diversify its economy. It already has one of the most open trade policies in the region, but joining such a high-profile organization would send a powerful signal to investors and help to accelerate integration with the rest of Southeast Asia.

ASEAN, too, would benefit from the young population and strategic location of Timor Leste. The inspirational story of Timor Leste and its impressive development would be a shining example for all member states. It would give added meaning to the grouping’s members as they journey toward its Vision 2025, which calls for a “politically cohesive, economically integrated, socially responsible” ASEAN.

Timor Leste has emerged as an able and willing member of the community of nations. The time has come for this country to take the next step on its road to prosperity. - See more at: http://www.thejakartapost.com/news/2015/11/21/timor-leste-belongs-asean.html#sthash.B4EcUsFt.dpuf
he impending launch of the ASEAN Economic Community is being marked this week at a summit in Kuala Lumpur. It should also be the time for ASEAN to consider opening the door to a new member. Timor Leste is Asia’s youngest country — a stable democracy at the crossroads of Southeast Asia and the Pacific. Acceptance as a member country would enhance its prospects for economic development, while further strengthening the organization’s centrality and relevance.

Timor Leste has made remarkable progress since gaining independence in 2002. Its infrastructure was in disrepair, social services absent, and government institutions at their inception. Despite brief periods of instability, the country now has a well-functioning government and is using its modest petroleum wealth to foster long-term economic growth.

Gaining membership has been a priority for Timor Leste throughout its short history. Successive governments have made the case through diplomatic efforts such as signing onto the ASEAN Regional Forum in 2005, and the Treaty of Amity and Cooperation in Southeast Asia two years later. By next year Timor Leste will have embassies in the capitals of every ASEAN member country.

These are impressive achievements for a young country, but not surprising to development partners that are helping rebuild its infrastructure and develop the skills needed for the economy to continue expanding.

Newly paved roads now connect Timorese with their Indonesian neighbors, and electricity reaches almost every corner of the country. Deregulation has transformed mobile telecommunications to such a degree that companies from two member countries — Vietnam and Indonesia — are now competing for a growing and increasingly connected customer base.

While many of Timor Leste’s nearly 1.2 million people remain poor, huge strides have been made to improve living conditions and increase life opportunities. Infant mortality has halved since independence, and the incidence of malaria has fallen by 95 percent. Primary school enrollment rose from 65 percent in 2001 to 92 percent in 2013, and the proportion of parliamentary seats held by women stands at 38 percent, the highest in Asia.

The ASEAN Charter sets out four criteria for membership, three of which are met by Timor Leste: It is located in Southeast Asia, is recognized by the 10 ASEAN nations, and would agree to be bound and abide by the organization’s charter.

The fourth requirement, demonstrating an “ability and willingness to carry out the obligations of membership”, is for ASEAN’s members to judge. Concerns have been raised about its readiness to participate in the organization’s economic, political-security, and socio-cultural communities, given the hundreds of meetings it holds each year.

Timor Leste’s track record on governance suggests it would be a worthy member. The country has held three open elections without incident, and participates actively in international organizations such as the G7+ group of post-conflict states and the Community of Portuguese Language Countries. Timor Leste represents a model for managing natural resources wealth, ranking near the top of the international Resources Governance Index, ahead of several ASEAN members.

ASEAN members appear open to Timor Leste’s application. The country’s ambassador to the Jakarta-based Secretariat was accredited in 2011, the same year the ASEAN Coordinating Council established a working group that commissioned studies on what it would mean for Timor Leste to join.

Membership is a win-win proposition. It would help Timor Leste to attract investment, develop trade links, and diversify its economy. It already has one of the most open trade policies in the region, but joining such a high-profile organization would send a powerful signal to investors and help to accelerate integration with the rest of Southeast Asia.

ASEAN, too, would benefit from the young population and strategic location of Timor Leste. The inspirational story of Timor Leste and its impressive development would be a shining example for all member states. It would give added meaning to the grouping’s members as they journey toward its Vision 2025, which calls for a “politically cohesive, economically integrated, socially responsible” ASEAN.

Timor Leste has emerged as an able and willing member of the community of nations. The time has come for this country to take the next step on its road to prosperity. - See more at: http://www.thejakartapost.com/news/2015/11/21/timor-leste-belongs-asean.html#sthash.B4EcUsFt.dpuf

Thursday, December 31, 2015

December 31, 2015: Time to Celebrate, Then Get Back to Work, ASEAN

At the stroke of midnight tonight, the ASEAN Economic Community (AEC) comes into being.   There will be no fireworks or concerts tonight devoted to the AEC, unlike the formation of the single market in the EU in 1992 (and definitely not a song like the Kinks’ Down All the Days (to 1992)).    Aside from a few ASEANcrats in Jakarta and elsewhere in Southeast Asia, probably not many people will directly celebrate tonight’s milestone.

Tonight does not mark the end of economic integration in Southeast Asia, nor even the beginning of the end.  Rather, December 31, 2015, represents the end of the beginning of economic integration in ASEAN, a long, often times slow, process. 

Intra-ASEAN duties have been eliminated on virtually all goods through the ASEAN Trade in Goods Agreement (ATIGA), and investment rules have been established through the ASEAN Comprehensive Investment Agreement (ACIA).   This represents significant progress since the early days of ASEAN economic efforts in the 1970s.  In some ways, we already have had an AEC for several years, and tonight only represents its formal recognition.

Granted, implementation of ATIGA, ACIA and other ASEAN agreements has been inconsistent.  Liberalization of trade in services through the ASEAN Framework Agreement on Services (AFAS) will not be completed by the 2015 timeframe.  By any measure, many AEC measures have not been completed as well.  Coupled with other perceived deficiencies in regional cooperation in Southeast Asia (haze, migration, South China Sea/West Philippine Sea, etc.), it is easy to discount ASEAN as an organization.

Yet focusing solely on the negative in ASEAN overlooks the positive achievements of the organization.  The fact remains that ASEAN is the most successful regional organization in the developing world.  No two members of ASEAN have engaged in outright hostilities, despite the long history of conflict in the region: even during the Preah Vihear dispute, ASEAN helped with its resolution.  ASEAN has helped Myanmar return to the global scene.  ASEAN helped with the birth of Timor-Leste (and possibly is part of its future as well).    Finally, ASEAN has provided economic deliverables from ATIGA, ACIA and (albeit incompletely) AFAS, as well as the ASEAN FTAs with Australia-New Zealand, China, India, Japan and Korea.

ASEAN has therefore achieved much, but as the deficiencies indicate, it could achieve so much more.  That is where the ASEAN institutions and/or the ASEAN processes need strengthening and improvement.  Without some relaxation of national sovereignty concerns that will allow for such augmentation of the ASEAN institutions and/or processes, ASEAN will find it increasingly difficult to deal with regional issues of economic integration (whose further progress will require dealing with issues within national economies, not just at the national borders), security, the environment, health and other issues.

Thus, ASEAN, born in the 20th Century, needs to update itself for the 21st Century; the status quo is insufficient to deal with today’s issues.  That is not to say that ASEAN must follow the EU model of strong regional institutions or the NAFTA model of robust processes.  A grouping of relatively young nations with varying legal and political systems will necessarily have to find its own direction.  That process will appear slow and inconsistent, particularly to Western observers, but it will and must take place. Otherwise, ASEAN risks becoming as irrelevant as its predecessors became.

Tonight ASEAN should celebrate both its achievements and its potential.  It and the generations of leaders in the ASEAN governments and institutions who worked on its formation and operations deserve this.  Then the next morning, it will be time to get back to work, for there is much to be done.


Wednesday, December 9, 2015

With AEC in Sight, an Old ASEAN Project Lingers On

The Nation today reported on a controversial power plant being built to power a potash mine in Thailand.  What’s interesting about the dispute is that it involves an ASEAN project that dates back to the earliest days of ASEAN economic cooperation, just as the ASEAN Economic Community (AEC) is about to be launched formally later this month.

The AEC is just the latest iteration of economic cooperation in Southeast Asia, a process that dates back to the 1967 Bangkok Declaration. However, the scope and vision of economic integration has changed over the years. Originally economic cooperation was driven more by the ASEAN governments, rather than the private sector. As such, the priorities of ASEAN governments focused more on collaboration on economic matters to promote social and political stability, rather than economic competitiveness.  This is reflected in the 1976 Bali Concord I declaration, which called for ASEAN members to provide mutual support in food and energy.

This vision was implemented in the ASEAN Industrial Project (AIP) scheme of 1980.  Under the AIP, each ASEAN member would sponsor an industrial project. The host government and its private sector would take 60% shareholding, with the other member governments taking up the remaining 40%.  The output of each project would receive trade preferences for exports to other ASEAN countries under the ASEAN Preferential Trading Arrangements agreement (APTA), and would have exclusivity within ASEAN.

Given these priorities, it was no surprise that the AIP projects focused on agriculture, e.g., food security: Indonesia (urea), Malaysia (urea) and the Philippines (phosphates). Thailand started in soda ash, then changed its project to potash, which is used in the production of fertilizer. Singapore proposed a diesel engine project, which was somewhat related to agriculture since the engines could be used to power agricultural equipment. 

Unfortunately, the APTA and AIP schemes were not successful. APTA failed because it only provided for relative reductions in import duties, rather than absolute reductions (a 50% reduction of a 100% import duty leaves a significant duty in place) and because it only covered a limited number of products (the most infamous being snow removal equipment, useless in a tropical region). 

The AIP scheme was relatively more successful, with Indonesia and Malaysia successfully constructing their urea projects. The Philippine project became caught up in the post-Marcos era political and economic transition, with phosphates being replaced by fertilizer, then pulp and paper, then copper fabrication, then eventually becoming defunct.   The Singapore project was hampered by the reluctance of other ASEAN members to grant exclusivity to the diesel engines (Malaysia, in particular).  Singapore then shifted its project to a Hepatitis-B vaccine production plant, which can in retrospect be seen as inconsistent with the objective of the AIP scheme. More importantly, Singapore deliberately limited its investments in the other ASEAN members’ AIP projects to 1% shareholding to express its discontent with the program.  With other ASEAN members following suit on the basis of reciprocity, the AIP projects began to have funding shortfalls.

Which brings us to the Thai potash project, now called ASEAN Potash Mining Public Company Limited.  After much planning and effort, the company now plans to start mining potash next year, 36 years after the AIP projects were first envisioned.  The local community, however, objects to the construction of a coal power plant to power the mine, suggesting solar or natural gas. The mine’s management says that only its own coal-fired plant can make the mine economically viable.  The local community has resorted to protesting at the embassies of Brunei (which joined the AIP scheme when it became an ASEAN member in 1984), Indonesia, Malaysia, the Philippines and Singapore, because they still have equity in the potash project. 

Without making any assessments on the Thai company’s dispute with the local community, the AIPs in Thailand and elsewhere demonstrate the pitfalls when economic cooperation and integration is driven by government priorities, not market concerns.  A normal business would not take 36 years to come into fruition. Moreover, direct government ownership can bring unwanted criticism, as the Thai dispute illustrates. 

Fortunately, ASEAN economic integration has long since moved away from statist efforts and is based more on market-driven efforts by the private sector.  The continuing struggle of the Thai AIP to bring itself into being is another blast from the past demonstrating that ASEAN governments should support, but not lead, economic integration in Southeast Asia through the AEC.