Sunday, September 7, 2014

ADB Institute Says Reform of the ASEAN Institutions Necessary for AEC Success

The Asian Development Bank Institute (ADBI) recently published a study on the ASEAN Economic Community (AEC), “ASEAN 2030: Toward a Borderless Economic Community,” which is available here.  According to the Jakarta Post, the dean of the ADBI predicted that the AEC could surpass the EU by 2030:

“I think ASEAN has a very high growth potential. If growth continues [at this rate], ASEAN countries will catch up with the EU by the end of 2030. It is important to maintain this growth in the region,” dean of the ADB Institute, Naoyuki Yoshino, said during a presentation of the study in Jakarta on Friday.

However, the ADBI stressed that institutional reforms at the national and regional level needed to be adopted for the AEC to reach its fullest potential.  I’ve read through the ADBI study’s proposed ASEAN-level institutional reforms, and many overlap with ideas presented in this blog and in my forthcoming book with Stefano Inama, “The Foundation of the ASEAN Economic Community: An Institutional and Legal Profile”:
  • Increasing flexibility in ASEAN decisionmaking by moving away from requiring  consensus and adopting majority or supermajority decisionmaking, perhaps with a form of weighted voting based on economic development or geographical size.
  • Revising the funding formula for the ASEAN member states to contribute to the ASEAN institutions, based on ability to pay and benefits received and possibly using the ASEAN Development Fund as a mechanism.
  • Delegating more authority to the ASEAN institutions, and creating sanctions, feedback and compensating mechanisms that would be operated by the ASEAN institutions.
  • Increasing staffing numbers and salary levels for the ASEAN Secretariat and developing an ASEAN civil service. This would include establishment of an ASEAN Academy for training.
  • Creating new ASEAN functional institutions to deal with specific issues, including a monetary fund, financial stability dialogue, convergence fund, competitiveness institute, rice, standards, tourism, governance, and competition policy.   
  • Distributing institutions and functions (e.g., the proposed ASEAN functional institutions) among various member states, not just Indonesia (as ASEAN Secretariat host country).
  • Sharing ASEAN responsibilities with the Committee of Permanent Representatives and the national ASEAN secretariats established at the national level.
  • Authorizing the ASEAN Secretary General and ASEAN Chair to present an official ASEAN position at the G-20 and other international meetings and organizations.
These are all commendable ideas.  The concept of distributing ASEAN institutions to other member states, in particular, could help convince ASEAN member state governments to accept giving more powers to ASEAN institutions.   Hopefully, this would be used sparingly to avoid the situation in the EU where  EU institutions were spread out in Brussels, Luxembourg, Strasbourg and elsewhere for similar purposes.

What I would add is that the AEC also requires greater buy-in by the private sector, and not just by the ASEAN member state governments.   Augmenting ASEAN institutions, whether through increasing authority or creating more institutions, will mean greater interaction between the regulated (the private sector) and the regulators (the ASEAN institutions).  Such an increase in authority in the ASEAN institutions should be balanced with greater legal safeguards to protect the expectations and rights of the private sector. Without such safeguards, whether in the form of improved dispute resolution or formalized processes for notice and comment on policies, the private sector will remain skeptical of the AEC process, resulting in reduced trade and investment. This does not mean that ASEAN needs to adopt EU-style institutions on a wholesale basis, but it does mean greater development of the rule of law and the role of law, such as establishing a hierarchy of norms for ASEAN agreements and agreeing on how ASEAN-level law affects domestic legislation at the national level. 

In any event, the ADBI report represents a worthy contribution to the study and analysis of ASEAN, explaining why the status quo in ASEAN cannot continue if the AEC is to reach its full potential.  How to address this situation is currently under discussion in this blog and elsewhere, and hopefully this discussion will result in corrective action.