The ASEAN Community and Australia
Address to the Australian ASEAN Business Forum by
Mr Simon Merrifield
Australian Ambassador to ASEAN
Adelaide, 12 February 2014
I’m delighted to be here this morning in Adelaide to speak with South Australian business people about ASEAN and Australia. I congratulate CITCSA for their excellent initiative, perfectly timed to commemorate the 40th Anniversary of our dialogue partnership with ASEAN, and to flag the advent next year of the ASEAN Community.
Our 40th Anniversary is an important milestone and we will mark it in a number of ways over the course of this year, culminating with a commemorative leaders summit in Myanmar in November – Prime Minister Abbott together with the ten ASEAN leaders. We shall do so because that partnership has been a strong, diverse and enduring one, and because it is one with a bright future.
Since its beginning in 1967, ASEAN has fostered a culture of cooperation, bringing together diverse countries and building regional trust, stability and development. The collective weight of ASEAN’s now ten members has allowed its influence to be felt across the region and beyond, and has cemented its members’ growing centrality in evolving regional architecture, contributing to the security and economic development of our region.
ASEAN is now a dynamic regional organisation and Southeast Asia is a region looking outwards to the world. At its inception, ASEAN’s original five members recognised that to drive economic development, they first had to ensure peace and security in a very uncertain corner of the world. Fast forward 47 years and we see not just an impressive record of peace, stability and vigorous economic growth, but a fully-fledged regional institution, joining up the region’s infrastructure and people through its connectivity master plan, and well down the path towards its vision of an ASEAN Community by the end of 2015.
So what is the ASEAN Community all about? It is a vision to integrate the region in three key ways:
- first, the political-security community, in which members aspire to live in peace and pursue political development based on the principles of democracy, rule of law and good governance.
- second, the economic community, which I will speak about most today, which will provide a thriving regional economy fully integrated into the global economy, and
- third, the socio-cultural community, people-centred, sharing a common identity, forming an inclusive society.
ASEAN began to focus on regional economic integration in the early 1990s following the end of the Cold War, with a renewed impetus following the East Asian Financial Crisis in 1997, where the prospect of integration offered greater macro financial resilience and, for foreign investors, the attraction of economies of scale. By 2003, ASEAN decided that integration as the ASEAN Economic Community should be achieved by 2020; if that wasn’t ambitious enough, in 2007 ASEAN leaders decided to bring that date forward to 2015.
So what will ASEAN look like after 2015? Well, it does not seek to be a monetary union or a customs union and nor will it be governed by supranational legislation or institutions. The project is an iterative one, so changes will felt over time. By ASEAN’s own definition, the Economic Community is to further integrate member states based on the principle of an open, inclusive and market driven economy consistent with multilateral rules. ASEAN describes the following four characteristics:
- A single market and production base, which promotes a free flow of goods, services, investment, skilled labour and freer flow of capital.
- A highly competitive economic region that supports competition policy, consumer protection, intellectual property rights, infrastructure development, double taxation agreements and e-commerce.
- A region of equitable economic development, involving SME development and a much narrower gap between the richer and less rich members.
- A region fully integrated into the global economy, with ASEAN a dynamic part of global supply chains and a favoured region of foreign investors.
It’s a widely-held view that progress towards 2015 has already delivered many significant benefits. There are figures that quantify those benefits but I won’t risk taking those out of context and being called on to explain the modelling. But I commend to you an ASEAN-World Bank joint report, due for release imminently, which contains high-quality empirical research detailing the impact of integration measures to date on GDP growth and other economic benefits, such as
- Increased incomes
- Greater inflow of FDI
- Expanded trade in goods
- More competitive consumer markets
- Lower cost of capital, and
- Flexible skilled labour markets.
These are compelling results and point to still greater prospects down the track. The plans are well developed and the commitment is there. The challenge is to get the implementation right. With ten separate and independent countries, with varying capacities, responsible for implementation, this is where the picture becomes somewhat complex and where the challenges hide.
The stand out achievement to date is in eliminating tariffs among ASEAN Member States. Tariffs among the older ASEAN 6 have been reduced to zero for 99.65% of the tariff lines while for the remainder, almost 98% of the tariff lines have rates ranging from zero to 5%.
Progress on non-tariff barriers has been less rewarding, notwithstanding robust work plans and reiterated pledges by member states. There is much to be done on this front but there is no question that ASEAN is seized of that.
ASEAN members have formally adopted a Customs Code of Conduct, the national and regional “Single Window” systems, the ASEAN Harmonized Tariff Nomenclatures, and the WTO’s mode of customs valuation.
They have concluded “framework” agreements on the liberalization of trade in services, investments, goods-in-transit, multi-modal and interstate transport, and ICT. They have agreed on MRAs or their equivalent for three types of goods and seven professions, as well as concluded a “framework” agreement on MRAs.
Although most of these agreements are qualified by provisions to afford flexibility to member states which are not yet ready to conform, and some of them have not been ratified by all ASEAN members, they do manifest ASEAN’s recognition of the importance of economic integration and each member state’s commitment to it.
ASEAN has the ability to deliver on its aspirations. No one is pretending that it is easy nor that the milestone of 2015 does not bring with it real pressure. The less advanced ASEAN countries will need to undertake major reforms. Governments will need to improve the rule of law, court systems and transparency, and tackle remaining protectionist policies. Bankruptcy protections need to be put in place. Dispute resolution mechanisms need to be implemented, and labor mobility must be improved throughout the region.
I am confident that ASEAN is up to the task of achieving these reforms. ASEAN has earned for itself an impressive reputation and that credibility has cemented its members’ growing centrality in evolving regional architecture – a centrality it has earned and that it does not take for granted.
So what does this mean for Australia?
Australia has a profound and enduring interest in ASEAN and ASEAN has never been more important than it is today. Our region's prosperity and security owe much to ASEAN's achievements. With a dynamic strategic order, a shift in economic weight to the Asian region and ever-growing demand for resources among emerging economies, Southeast Asia is an arena where the interests of world powers are at play, and where our interests are at play.
In 1974, the then Prime Minister Gough Whitlam said “Of all (the arrangements and associations) in this region, ASEAN is unquestionably the most important, the most relevant, the most natural”. Since then, ASEAN and Australia have both changed immensely, as has the world beyond, but Whitlam’s words still resonate. Southeast Asia remains our immediate neighbourhood and our future is inextricably linked to its future.
Australia has invested heavily in building the partnership over 40 years. The early focus was on aid but it is many years since cooperation with ASEAN was principally focused on that, important as it may be for some members. Our cooperation has evolved to reflect our respective policy priorities, the growing sophistication of our economies and the convergence of our interests.
In the 1980s, trade became a centre-piece and has, since then, been a crucial driver in bringing Australia and ASEAN together. Today, ASEAN is one of our most significant trading partnerships, collectively accounting for 14.7 per cent of Australian trade in 2012. If we counted ASEAN as a single economic entity now, it would be our number two trading partner, second only to China and ahead of Japan.
And there are strong prospects for further growth in our trade and investment relationship, particularly through the ASEAN-Australia-New Zealand FTA and the Regional Comprehensive Economic Partnership (RCEP), currently under negotiation by officials from ASEAN nations and those countries with which ASEAN has FTAs.
Although the investment story by Australians in Southeast Asia has never been a compelling one, the opportunities are only going to grow as the benefits of integration take hold. In the context of building the ASEAN Community, ASEAN’s clear focus on regional connectivity – linking infrastructure, people and institutions – is a major priority. To get where they want to be by the end of this decade, ASEAN estimates that it will need infrastructure investments of the order of $60 billion per year to 2020.
A more connected ASEAN is profoundly in Australia’s interests because it means a more cohesive and economically vibrant neighbourhood, and that if our neighbourhood is more joined up, then so are we. There is a multiplier effect for us in ASEAN connectivity as there is for ASEAN’s other near neighbours, not least China and India.
Australia has been a strong supporter of ASEAN’s vision of integration and has offered more than just moral support. We are working with ASEAN to help it fulfil its plans. In addition to our extensive development programs with the six aid-eligible member states (Indonesia, Philippines, Myanmar, Lao, Cambodia and Vietnam, valued at around a billion dollars per annum), we have highly-regarded programs within the ASEAN Secretariat to support economic integration and strengthen ASEAN’s institutional capacity. Under these programs, Australia is working to help improve the environment for investment, trade in services and consumer protection in the region.
ASEAN has identified the importance of reaching out to stakeholders in promoting change. There is the newly created Invest ASEAN website, which is specifically targeted at business, while ASEAN has sponsored the ASEAN Business Club to promote the needs of its businesses that are now more than ever beginning to look at regional rather than country business strategies.
We look to ASEAN to continue its work to help create a secure, safe, and prosperous region. We applaud its continued pursuit of the goals it has established for itself, and we reaffirm our continued staunch support in helping it deliver on its commitments. We will do all we can to support ASEAN’s evolution, because a secure, integrated and prosperous Southeast Asia is good for Australia, good for our region and good for the world.