Monday, January 26, 2015

What ASEAN Can Learn from “Deflategate”

I have often made the analogy between ASEAN and a professional (or even collegiate) sports league.  The U.S. brouhaha of the week shows how ASEAN’s institutions are even weaker than those of a typical sports league.

In my analogy, ASEAN is less like the EU or NAFTA and more like a league of sports teams which cooperate to deal with external and internal issues, but with relatively weak central institutions.  The teams/countries cooperate to negotiate with outside parties (TV contracts for the sports leagues, free trade agreements for ASEAN).  Both organizations want to attract investments of time and money (fans for the sports league, investors for ASEAN).  Both organizations have a central office that has limited authority over operations (central office/commissioner for the sports league, ASEAN Secretariat) to improve the quality of the games but ultimate authority rests with the leaders (the team owners in the sports league, national leaders in ASEAN). The central office has limited authority only to set the rules of operation (the scheduling of games or the size and shape of the ball used in a sports league, or the basic functioning of the bloc for ASEAN).

You may ask why the size of the ball is important. This issue has predominated American media for the past week, as it pertains to the National Football League (NFL) there.  The NFL commissioner (central office) sets rules for the size and shape of footballs, even addressing their air pressure.  This is supposedly important because it is believed that balls with lower air pressure are easier to handle.  However, the league office is not responsible for ensuring that balls are at the proper pressure; instead, the teams themselves are responsible for administering the balls during games. 

Hence the fury that erupted when it was discovered that the host New England Patriots had been using underinflated balls (a.k.a. “Deflategate”) during last week’s playoff semifinal game with the Indianapolis Colts. Supposedly this gave them an unfair advantage during the game, which was held under adverse weather conditions, particularly because the other team did not use underinflated balls.  Whether this actually affected the outcome is dubious because the Patriots won by an overwhelming margin.  Nevertheless, there is major outrage among fans and players over a rules infraction by a team which has been caught violating league rules in the past.

“Deflategate” shares some of the characteristics of an ASEAN dispute.  Like the NFL, ASEAN has rules but the ASEAN Secretariat largely relies on its constituent members to administer and implement AEC agreements.  When a member state violates a rule, other parties (e.g., investors) are most likely to raise the violation rather than member states themselves; in “Deflategate” the losing team has not aggressively pursued the matter with the NFL commissioner but the media and fans have kept the issue alive.

However, the analogy begins to break down here.  In the NFL dispute, the NFL Commissioner is empowered to investigate the rules infraction.  The ASEAN Secretariat has no such powers and must rely on self-reporting by its members.  The NFL Commissioner is authorized to impose penalties on the offending party, such as fines or forfeiting draft picks, and will do so in all likelihood, given the Patriots’ history of infractions.  The ASEAN Secretariat has no such power of sanctions. 

The analogy begins to right itself when you think of the probable ultimate resolution of “Deflategate”.  The NFL Commissioner will investigate, but will likely limit his sanctions to a modest level, far from ordering the forfeiture of the game or termination of Patriots’ management that irate fans suggest.  This reflects the fact that ultimately the NFL Commissioner is an employee of the NFL team owners, much like the ASEAN Secretariat is responsible to the ASEAN national leaders.  The NFL Commissioner is not going to disrupt the league championship (Super Bowl) by imposing harsh sanctions, just like the ASEAN Secretariat tries to be discreet in dealing with member states. Furthermore, both organizations have more pressing issues that need to be addressed (brain injuries in the NFL, environment, security and other cross-border issues in ASEAN).

Nevertheless, the “Deflategate” controversy shows the value of having rules that can be fully enforced through investigations and sanctions.  Without such rules in American football, dissatisfied fans and team owners could elect to break away and form their own leagues (this has happened in the past), or even stop watching the games.  Having such rules dissipates negative sentiments and allows the overall enterprise to develop.   This is why the NFL Commissioner will ultimately impose some sort of penalty, although likely in the off-season.

ASEAN potentially faces similar pressures and stresses, as expectations for the ASEAN Community heighten.  That the ASEAN Secretariat has less authority in its organizational context than a sports league central office does in its context is not a good thing.   Without strengthening the ASEAN institutions to deal with the inevitable big and small issues that will arise, ASEAN risks losing the confidence of investors, consumers and other economic actors in the AEC, particularly if ASEAN member states repeatedly flout AEC commitments.   Except in the case of ASEAN, there is more at stake than deflated footballs; we are talking about the prosperity and well-being of about 600 million people.

Thursday, January 22, 2015

When Is ASEAN Common Time?

This week Kavi Chongkittavorn, with whom I have been honored to appear on several panels, writes in the Nation that Malaysia as ASEAN Chair has been revisiting several old ideas to promote the ASEAN Community. Among these ideas are the ASEAN business travel card, ASEAN common curriculum and a single ASEAN time zone, known as “ASEAN Common Time.”

I’ve covered ASEAN visa-free travel and regional education efforts in this blog before, but when a reader asked about ASEAN Common Time, I had to dig back a bit.

In 1995, it was proposed that ASEAN follow a single time zone, to promote trade and business links in the region. As the below map indicates, ASEAN currently has four time zones:


Indonesia has 3 time zones (UTC + 7, UTC + 8, and UTC+9).  Singapore, Brunei, Malaysia and the Philippines follow UTC + 8, while Vietnam, Cambodia, Thailand, and Laos follow UTC + 7.  Myanmar follows UTC + 6:30.    These time differences contribute to scheduling and planning difficulties. The idea behind ASEAN Common Time is that aligning into a single time zone would eliminate such difficulties within ASEAN. 

ASEAN Common Time, however, was shelved because ASEAN member states could not agree on which time zone would become the standard.    Adopting UTC + 8 would align ASEAN with China and Western Australia. However, it would mean that Indochina would have to move forward by 1 to 1:30 hours, and most of Indonesia would have to move both forward and backward.  Adopting UTC + 7 would mean that half of ASEAN would have to move back 1 hour, and the linkage to the China time zone would be gone.  Either way, there would be the inevitable complaints about going to school in the dark or waking up earlier in countries who have to shift time zones. 

Hence the idea was shunted off for further study, only occasionally coming up since then.   Presumably these same arguments raised in the 1990’s would be raised again if ASEAN Common Time were put back on the agenda this year.  We could also expect the predictable argument that aligning ASEAN with UTC + 8 would be at least a symbolic or prosaic sign that ASEAN is falling under dominance by China.  However, going by that reasoning, Detroit would be dominated by Washington DC’s influence because both cities are in the Eastern time zone of the US, outweighing any historical and cultural ties to the rest of the Midwest.  That’s not the case.

In any event, having a common time zone is helpful to the ASEAN Economic Community, but not critical.  After all, the EU has three time zones and the NAFTA countries have eight time zones and both regional blocs seem to operate just fine. 

The real value of ASEAN Common Time, as with most ASEAN initiatives, lies in the process of the proposal rather than the end point.  It is not necessary that ASEAN be covered by a single time zone.  Perhaps reducing the four zones into two or three zones, with keeping the extreme western (e.g., Myanmar) and eastern (e.g., Indonesia and Timor Leste (one day)) areas of Southeast Asia in their own time zones would achieve the same economic benefits. 

Rather, the process of engaging ASEAN leaders and citizens in formulating ASEAN Common Time or ASEAN Central Time would strengthen ASEAN identity as the ASEAN Community develops after 2015. This would be useful for all three pillars of ASEAN, not just the AEC, and particularly if done in conjunction with strengthening the ASEAN institutions. 

Saturday, January 17, 2015

EIU Survey Says Regulations Most Important Barrier to AEC Integration

This week the Economist Intelligence Unit (EIU) published “Redrawing the ASEAN Map,” a survey of the business environment in ASEAN, sponsored by CIMB Bank and Baker & McKenzie.   The EIU survey focuses on how companies view the ASEAN Economic Community as a market and a production base. 

I recommend the EIU survey as a pretty good overview of corporate opinion of ASEAN, although it is probably a tad optimistic.  This optimism reflects the survey participants, as 85.8% of the participating companies were headquartered outside of ASEAN, and 77.6% had a capitalization of over US$ 1 billion.  Hence the participants were primarily large multinationals with operations in ASEAN, and as I have noted earlier, these business segments are indeed more optimistic about the AEC. The SME sector and the indigenous ASEAN sector were not significant segments of the survey, and they have not been as involved in regional economic integration.

Nevertheless, from the law and policy point of view, the EIU survey does indicate how ASEAN government policies are negatively impacting private sector sentiment towards the AEC.  “Different laws & business regulations” were listed as the most important barrier to to adopting a consistent approach to sales and marketing across different ASEAN countries.  The EIU survey takes this in a positive light, noting as follows:

For the ASEAN organisation this must be encouraging news. The results suggest that the greatest barriers preventing companies from treating ASEAN as a single market are institutional barriers that can be addressed. Language, religion  and culture cannot be changed. But disjointed regulations and unharmonised standards are more easily fixed.

That’s true. Regulatory issues are indeed easier to address than non-regulatory structural impediments.  The more difficult question is how the ASEAN institutions will deal with the regulatory barriers.  The EIU survey does recognize this:

Not that anybody is suggesting the process of integration at this level will be simple. Certainly many companies express concern at the slow pace of change. . . . Nonetheless, as these results show, if governments really want to link ASEAN markets into one, and thereby reap the benefits of creating regional scale, then addressing these institutional barriers will go a long way towards achieving their goal.

There’s the rub. The EIU report was limited to a survey, and so it did not mention how ASEAN should address these regulatory barriers.  However, regular readers of this blog know what I would recommend: strengthening ASEAN by further empowering the ASEAN institutions and/or providing for a robust ASEAN dispute resolution system.  Without some sort of reform of the ASEAN institutions, the institutional barriers will continue hinder the AEC from benefitting all ASEAN citizens.