Friday, December 28, 2012

ASEAN in 2013: New Leadership, Same Challenges

The coming year presents great challenges and opportunities for ASEAN.  In some ways, the external environment for ASEAN has stabilized, with most of ASEAN’s major trading partners having undergone leadership transition periods or elections (e.g., China, Japan, Korea and the United States).  Australia and India will have elections in the near future, but in neither case should a change in government have major effects on the region.

We can look forward to a drama-free year coming from Brunei as ASEAN Chair.  This may be bad for headline writers, but it will be good for the ASEAN institutions.  Brunei has a small, well-run and professional bureaucratic corps supported by the Sultan’s resources and long experience in the region.  The ASEAN Deputy-Secretary General for the AEC, Dr. Lim Hong Hin, is also from Brunei and will be able to work closely with the ASEAN Chair during what promises to be a critical year in the run-up to 2015. 

An immediate example of Brunei’s experienced and steady hand was its decision not to hold the informal ASEAN foreign ministers’ meeting next month.   This eliminates the potential for publicly rehashing the disputes that arose from the July 2012 ASEAN foreign ministers’ meeting and the November 2012 ASEAN Summit in Cambodia.  The Senior Officials Meeting will still be held, but in private, giving ASEAN leaders sufficient time to prepare for the formal meetings and ASEAN Summits to be held later in the year. 

A drama-free year would be good for the ASEAN institutions as well.  Le Luong Minh will start his term as ASEAN Secretary General and will benefit from having Brunei as ASEAN Chair.  If Brunei could also pursue the administrative reforms advocated by Dr. Surin Pitsuwan for the ASEAN institutions that would be even better.  In particular, Brunei should revive its proposed surcharge on air travel that would generate funds for the ASEAN institutions.  This would both provide much-needed funds for the ASEAN institutions as well as promote greater awareness of ASEAN.

There will be challenges to ASEAN, of course. The International Court of Justice will issue another ruling in the Preah Vihear case.  Cambodia and Thailand currently have good relations, but would Cambodia react badly to an adverse ruling, particularly since it is no longer ASEAN Chair?  How would Thailand react to an adverse ruling?  The South China Sea dispute continues to rumble on, with no sign of immediate resolution in sight.  The ongoing global economic crisis threatens ASEAN prosperity.    The EU-Singapore FTA and ASEAN-India FTA services and investment agreements need finalization of the text, and the EU-Malaysia FTA talks need to reach completion soon before Malaysian goods get subjected to higher EU duty rates in 2014.  ASEAN and its trading partners will start the RCEP talks.  Indonesia and Malaysia both hurtle into election seasons, while Myanmar rushes to make its reforms irreversible before its own elections in 2015.  Economic development, the environment, improving human resources, and other issues may also come into play next year.

The next year will require even “more ASEAN” than ever before.  This will strain ASEAN’s resources and institutions. Fortunately, the new leadership coming in, both at the ASEAN Chair and ASEAN Secretary General, look to be capable.  Hopefully fortune will be kind and give us the drama-free year that ASEAN needs.

Tuesday, December 25, 2012

Taiwan Still Waiting for ASEAN FTAs

Overlooked in this month’s news of an agreement on expanding ASEAN-India FTA to cover services and investment and the EU and Singapore reaching agreement on a bilateral FTA is the absence of a major trading partner in ASEAN’s FTAs: Taiwan.  Taiwan has been pursuing FTAs with ASEAN and its members for several years now, with talks on a Taiwan-Singapore FTA having started in May 2011.   Yet until now Taiwan has yet to sign a single FTA with ASEAN or its members.

Almost all of ASEAN's other main trading partners, including Japan, Korea, China, India, Australia, the United States and now the EU, either have or are negotiating free trade agreements with ASEAN or its individual members. Taiwan  had been excluded primarily because of objections from China.   As a result, Taiwan’s agreements are limited to certain countries that recognize Taiwan as the government of China: El Salvador, Guatemala, Honduras, Nicaragua and Panama. 

Overcoming China’s objections was a major justification for the Economic Cooperation Framework Agreement (ECFA) between China and Taiwan.  Taiwan, negotiating as a separate customs territory (as per its WTO membership) concluded the agreement in 2010 with China, resulting in much closer investment and trade ties.  Taiwan President Ma Ying-jeou had indicated that with economic relations with China stabilized, Taiwan could pursue FTAs in the region, particularly with those countries which had their own FTAs with China.

Negotiating a sui generis FTA with ASEAN is a necessity.  Taiwanese investors and exporters have no FTA benefits or protections in ASEAN.  The ASEAN-China FTA would not apply to Taiwan, either, because of Taiwan’s status as a separate customs territory.  Although the initial ASEAN-China FTA agreement on trade in goods referred only to an undefined “China,” later agreements clearly specified that “China” referred to mainland China.  The option of having Taiwan accede to the ASEAN-China FTA, as has been proposed for Hong Kong, would be both a non-starter politically in Taiwan and difficult for ASEAN members.

The delay in getting FTA deals done with ASEAN will eventually limit Taiwan’s negotiating room.    China and other trading partners are negotiating the Regional Comprehensive Economic Partnership (RCEP) agreement to harmonize the FTAs with ASEAN.  Hence if Taiwan eventually does negotiate an FTA with ASEAN, that agreement will largely incorporate the RCEP terms, a process in which Taiwan has not participated.

Similarly, the delay in concluding an FTA deal with Singapore has become somewhat distracting, with many in the Taiwan media claiming that the delay is the result of pressure from China or diplomatic tensions with Singapore.   More likely the delay is due to the usual give and take of trade negotiations.

Nevertheless, ASEAN and Taiwan hopefully will get their FTA negotiations going, before the end of the Ma administration in Taiwan.  Taiwanese business is losing out on trade and investment with ASEAN members, and the continuing goose egg for Taiwan’s FTA talks risks becoming a political embarrassment for President Ma.  For ASEAN and its members, concluding FTAs with Taiwan would help encourage trade and investment, as well as improve relations with one of the claimants to the South China Sea dispute. We’ll have to see if 2013 brings greater clarity to the situation. 

Friday, December 7, 2012

Papua New Guinea as an ASEAN Member?

Yesterday a contributor to the Jakarta Globe suggested reasons why Papua New Guinea (PNG) would qualify to join ASEAN.  PNG has been attempting to join ASEAN since it received observer status in 1976.  The article provides strong reasons both for and against ASEAN membership for PNG.  The major reasons against membership are related to governance in the country.  However, the article did not discuss the institutional barriers in ASEAN against PNG membership.

Article 6 of the ASEAN Charter lays out the criteria for membership:

(a) location in the recognized geographical region of Southeast Asia;
(b) recognition by all ASEAN Member States;
(c) agreement to be bound and to abide by the Charter; and
(d) ability and willingness to carry out the obligations of Membership.

PNG qualifies under criteria (b) and (c), but the other criteria are more difficult.

First, PNG arguably does not fall within the recognized geographical region of Southeast Asia, a requirement of criterion (a).  Unlike Timor Leste, PNG was not directly administered by the British, Dutch, French or American governments that controlled the colonies of Southeast Asia (with the exception of Thailand).  PNG was partially under German control, then later administered by Australia (with a very brief stint under British control) until its independence.  This differs from Timor Leste, which was occupied by Indonesia and routinely considered part of Southeast Asia.

Second, the governance problems in PNG raise major issues regarding criteria (d).  As a Commonwealth member, the laws and regulations would appear to make PNG easier to comply with ASEAN Economic Community (AEC) commitments, much as Commonwealth members Brunei, Malaysia and Singapore have done.  However, the governance issues and poor infrastructure in PNG would make it difficult for the country to implement AEC obligations.  This is despite the head start that it has on Timor Leste as an independent nation. Yet as this blog has noted, ASEAN is not ready take on Timor Leste as a member, given its own difficulties (although it wil eventually join).  PNG as a member would be an even greater challenge, given its larger size and deep-set governance issues.

Both of these factors, in particular the sense that PNG is not part of Southeast Asia, will likely prevent PNG from receiving serious consideration as an ASEAN member.  Unlike Timor Leste, economics and history do not favor PNG.  Rather like Sri Lanka, PNG can play a supporting role in Southeast Asia even if it is not an ASEAN member.