Sunday, March 31, 2013

The "Third Rail of ASEAN": Internal Migration

ASEAN’s national borders, many of which were set by colonial powers, have always been relatively porous.  Long stretches of interior frontiers in Indochina are surpassed by the miles of coastline in the archipelagic states of Brunei, Indonesia, Malaysia, Singapore and the Philippines. 

Thus, it should come as no surprise that migration within ASEAN, temporary and permanent, has been a recurring issue.  The incursion by armed Filipino militants into the Malaysian state of Sabah, eventually resolved through air strikes and commando raids, is an extreme example.  More prosaic is the current debate in Singapore about the presence of foreign workers, many from Malaysia and the Philippines.  Nor is the issue a new one; recall the Vietnamese boat refugees of the 1970’s.

In international trade parlance, migration issues come under the rubric of “movement of natural persons.”   In a fully functional market, both consumers and producers of services, e.g., people, would be able to cross borders at will.  This is largely the case in the European Union, for example. 

In ASEAN, there is a much more limited Movement of Natural Persons Agreement that applies only to temporary residence for managers and professionals on assignment (this agreement has not yet been fully ratified).   Full movement of natural persons within ASEAN would be extremely controversial, as the above examples from Malaysia and Singapore illustrate.

Yet the movement of natural persons issue demonstrates how the three pillars of the ASEAN Community interact.  Economically, workers would be displaced by incoming migrants.  From the socio-cultural point of view, migration would affect health, environment and other issues.  Perhaps most importantly, from the political-security point of view, would free migration within ASEAN for economic purposes come with legal and political rights?  For example, in the EU, EU nationals resident outside their home countries have such legal and political rights, such as voting in European Parliament elections.  Would ASEAN leaders be willing to give internal migrants similar rights?  Recognizing the fundamental nature of this issue, U.S. Ambassador to ASEAN David Carden identified the natural movement of persons as the most important issue facing ASEAN integration during one of my NUS Law seminars.

It is doubtful that ASEAN will be willing to address this issue anytime soon, because of the difficult nature of the associated side-issues.  Even in more mature regional economic integration projects, the free movement of natural persons is a controversial issue.  The EU does not have complete freedom of movement, and immigration remains a hot-button issue in the major NAFTA member, the United States. 

Because it touches so many key issues for regional integration and development, the movement of natural persons will be the last major hurdle for the AEC and other regional economic integration projects.  However, because of the less mature political and social development within ASEAN, it will take that much longer to achieve in Southeast Asia. 

Again, this illustrates why ASEAN leaders are correct in prioritizing the development of the AEC as a single production base rather than the creation of the AEC as a single market.  The production base will deliver more benefits to ASEAN’s citizens on a faster basis. Nevertheless, ASEAN needs to keep an eye on this long-term goal of free movement of natural persons.  Just don’t expect to see ASEAN leaders address this “third rail” of regional integration any time soon.

Wednesday, March 20, 2013

Aviation: Another Example of ASEAN Members Treating Partners Better Than Other Members

Last week my NUS law colleague Alan Khee-Jin Tan published an excellent analysis of the ASEAN aviation market.  Anyone interested in a summary of how ASEAN has dealt with its own aviation market and aviation policy with their bilateral FTA partners should go here.

One point I have discussed in previous posts is that ASEAN often gives better trading terms to its bilateral partners than it does for intra-ASEAN trade among its own members.  Alan explains that this is also the case for aviation services, comparing the ASEAN Multilateral Agreement on Air Services (MAAS) and the ASEAN Multilateral Agreement for the Full Liberalization of Passenger Air Services (MAFLPAS) with the ASEAN-China Air Transport Agreement (ACATA).  Alan notes that Indonesia, in particular, has opted out of the MAAS and the MAFALPAS:

Indonesia’s rationale for staying out is simple – unlimited third/fourth freedom access into its cities, including Jakarta, translates into unlimited sixth freedom opportunities for Singapore, Malaysian and Thai carriers (including aggressive low-cost airlines such as AirAsia, Tiger and Jetstar).  To protect themselves from such competition, Garuda and other Indonesian carriers lobby their government aggressively to steer clear of the ASEAN agreements. In turn, this restricts the other ASEAN carriers’ operations into Indonesia, subjecting them to finite capacity that remains negotiated bilaterally.  With Indonesia alone accounting for almost half the entire ASEAN population, its decision to stay out hampers the Single Market project significantly. Intra-ASEAN liberalisation is thus far from complete. In sum, if the relatively modest third/ fourth freedom relaxations do not even enjoy full acceptance from member states, prospects are bleaker still for any future relaxation to seventh freedom and cabotage restrictions.

Alan then compares this situation with that of the ACATA, in which Chinese carriers have better access to ASEAN markets than the ASEAN carriers themselves:

ASEAN airlines are only able to operate to the Chinese points from points in their own territory. The Singapore carriers, for instance, can only operate to China from Singapore, and not from other points in ASEAN. Similarly, the Malaysian carriers have unlimited access into China, but only from points in Malaysia. To connect China with other ASEAN points outside the airline’s home country would require the grant of seventh freedom rights among the ASEAN countries themselves, something that is not (yet) contemplated. On their part, the Chinese carriers can effectively connect any point in their backyard with any point in the ASEAN countries that have accepted the ASEAN-China Agreement. If all 10 ASEAN countries eventually accept the agreement, the Chinese airlines will still remain the only carriers that can connect any point in China with any point in ASEAN. 
This inconsistency has been repeated in various other ASEAN agreements.  The ASEAN FTAs with China, et al, accorded the trading partners better treatment than the ASEAN members accorded to each other, such as in investment.  Resolving this inconsistency was a reason for implementing the ASEAN Comprehensive Investment Agreement (ACIA). 

Resolving this inconsistency is, or should be, one of the goals for the Regional Comprehensive Economic Partnership (RCEP) talks between ASEAN and its FTA partners.  Much of the media analysis of RCEP has been on how RCEP will create a gigantic FTA.  However, the goals of RCEP are more modest and prosaic, with much of the efforts devoted to rationalizing trade and investment terms among the various ASEAN FTAs.  ASEAN’s harmonizing the terms of trade and investment with its various FTA partners is indeed an important goal. Yet if the RCEP help ASEAN members harmonize trade and investment terms among themselves that may be its most immediate and lasting benefit.  For perhaps only with the external pressure of the FTA partners can ASEAN actually resolve the many differences that currently exist among the members for its own internal trade and investment.  RCEP may thus provide the additional push to help establish the ASEAN Economic Community by end 2015.

Sunday, March 17, 2013

Examining Attitudes Towards ASEAN

Last week ASEAN released a Survey on ASEAN Community Building Efforts.  Not surprisingly, the survey showed that the overall understanding of ASEAN by its own citizens is relatively low.  While 81 percent of those living in the capital cities of ASEAN can recognize the name of the regional grouping, 76 percent lack a basic understanding of what ASEAN actually does.  The survey blames this perception gap on language barriers and differences in educational levels among member states.

Of note to the ASEAN Economic Community, the survey, funded by the Japan-ASEAN Integration Fund, found that

In terms of perceptions, businesses and the general public both perceive ASEAN integration as having positive impacts to ASEAN. Businesses express a view that AEC will improve the overall ASEAN economy and this will aid them in competing within the global arena. The general public, on the other hand, believe that the integration will create more employment opportunities and allow them to travel more freely within ASEAN. Furthermore, they believe moving towards ASEAN Community will help bring peace and security throughout the region. However, there are some negative perceptions of ASEAN integration. Businesses and the general public are afraid that labour migration might be intensified to the extent that it could cause local employees to lose their jobs. Another concern is that local producers could face greater competition from companies of other ASEAN countries and beyond.

These findings are consistent with media coverage and my own anecdotal experience, as I often describe in this blog.

Statistics from this blog also indicate that interest in ASEAN varies widely among the ASEAN members and the world at large.  Here are the top ten countries in terms of page views:

United States
United Kingdom

As I am based in Singapore, that Singapore would be ranked first is no surprise. The posts on stamp duty on property purchases by foreigners have been the most viewed pages.

Thailand is second, reflecting the “Thai anxiety” that has manifested itself in that country’s insecurity regarding its competitive position within ASEAN and with other countries.

Indonesia’s high ranking is consistent with the ASEAN Secretariat’s location in Jakarta and with Indonesia’s historical leadership of ASEAN as the largest country in the grouping.

Cambodia is surprisingly high, but perhaps not so, given that Cambodia served as ASEAN chair in 2012.

What does surprise me is that readership in Malaysia and the Philippines is much lower, almost as low as Vietnam’s readership. Both countries have wide internet penetration, good English language capabilities and an active media.  These attributes are not shared by Vietnam, yet the three countries are at the same apparent interest level.  The relatively low interest level in these two founding members of ASEAN in the blog, and presumably, the AEC, is something I will continue to study.

Finally, among non-ASEAN members, the United States has a keen interest in the blog. Yet ironically, it is not a bilateral FTA partner with ASEAN as a grouping.  Of such FTA partners, only India appears in the top 10.  Korea, Japan, Ausralia-New Zealand and China do not appear (although blogs are blocked in China).  Because the blog software does not consolidate data for the EU countries, its presence will be understated.

Thus, I would agree with the Survey on ASEAN Community Building Efforts that understanding of ASEAN is inconsistent within the region and elsewhere.   The interest in this blog is motivated by both optimistic and pessimistic views of the regional grouping. In fact, the much lower readership in Malaysia and the Philippines perhaps reflects indifference towards the AEC in general.

I would also agree with the authors of the survey that greater efforts need to be made to engage businesses and the general public in ASEAN.  For businesses, there needs to be a clear policy on the free flow of goods and services, the differences in competitiveness among member states and the impact of free movement of skilled labor.  For the general public, ASEAN needs to strengthen its organization and its ability to bring peace and security to its citizens, improve its economic situation and create more job opportunities. 

In other words, it is not just the message that needs to be improved, but the ASEAN “product” that needs to be improved.  Only by doing so will ASEAN’s people be best served by the ASEAN Community.

Thursday, March 14, 2013

Wrap-up of the ASEAN Economic Ministers Informal Retreat in Hanoi (Updated)

Last week the ASEAN Economic Ministers (AEM) conducted their informal retreat in Hanoi.  Although termed an “informal” meeting, substantive decisions are made at AEM retreats.  The EU also conducted bilateral talks with ASEAN, including a business summit on the sidelines of the meeting. 

The AEM conducted a general overview of ASEAN Economic Community developments.  Of note, the AEM adopted a revised protocol to the ASEAN Trade in Goods Agreement (ATIGA) and the ASEAN Comprehensive Investment Agreement (ACIA).  In addition the AEM signed off on the scoping papers for ASEAN’s Regional Comprehensive Economic Partnership (RCEP) talks with ASEAN’s bilateral FTA partners.  This will allow the RCEP talks to get underway soon (coincidentally another round of the Trans Pacific Partnership (TPP) negotiations took place in Singapore at the same time; the impending participation of Japan in the talks may delay the conclusion of the TPP talks beyond this year).  ASEAN intends to conclude RCEP talks by end 2015.

The EU also announced the start of FTA talks with Thailand.  The EU has already completed FTA talks with Singapore and is engaged in FTA talks with Vietnam and Indonesia, with the Philippines also interested in FTA talks. 

Also, according to Kyodo news service, Hong Kong failed to convince all ASEAN members to allow it to accede to the ASEAN-China FTA (ACFTA).  As discussed in an earlier post, Hong Kong is treated as separate from China under WTO rules and as such is not part of the ACFTA.  Kyodo reported that Singapore, the Philippines and Vietnam objected to accession. Officially, the AEM stated that the ACFTA was based on agreements made with China, and that as China was not willing to re-open the ACFTA, including Hong Kong in the agreement could result in an ACFTA that favored China/Hong Kong; the AEM also cited the potential effects on RCEP.  In my view, the reasons could be as varied as labor market access into Hong Kong, cigarette regulation and the competitive position of Singapore being eroded by Hong Kong’s entry.   Instead, ASEAN suggested that Hong Kong conduct negotiate a separate FTA with ASEAN, with Kyodo citing ASEAN officials who said that such talks could not take place under after the AEC was completed by end 2015.  What this means is effectively, Hong Kong will eventually be allowed to accede, but only after the RCEP talks are completed by end 2015 as well.  China thus will be negotiating in the RCEP not only for itself but for Hong Kong as well.

On non-tariff barriers (NTBs) the AEM encouraged the setting up of interagency body in each ASEAN Member State so that progress can be reported to the April 2013 ASEAN Summit. The AEM also tasked SEOM and CCA to identify and undertake 3 to 5 case studies to examine how to reduce NTB, with  standards (e.g. repetitive testing for different importers) specifically mentioned.  The AEM directed that SEOM should conduct a cross-cutting analysis of the case studies and draw up a set of general principles that could be applied to similar NTBs appearing in different guises in future. The AEM also noted that ASEAN should have a standardized way of notification and evaluation of the NTBs, so that the business community would know that there was a due process in place within ASEAN.

Finally, Brunei continued its welcomed streamlining of ASEAN meetings. It eliminated the preparatory meetings that used to be held before ASEAN Summits, starting with the April 2013 summit.