ASEAN's Next Chapter

12 September 2002

By George Yeo

The next chapter of the Association of Southeast Asian Nations' story is worth following because of the growing importance of Southeast Asia to the major powers in the world. This week's meetings in Brunei of the Asean economic ministers with their counterparts from around the world will confirm this evolving reality.

First, Asean as a regional grouping has shown resilience. It has held together throughout the Asian financial crisis, which is now behind us. Despite serious domestic difficulties, we pushed to integrate our economies further. Most importantly, unlike many other regions in the world, we have kept our relations with one another warm and friendly. Although there have been occasional difficulties, good sense has always prevailed and no bilateral problem has been allowed to get out of hand.

Second, the challenges that Southeast Asian countries are now facing have forced us to do things that we would not consider in the past. In response to globalization and competition from China, India, Latin America and Eastern Europe, we are broadening and deepening the region's economic integration and moving toward an Asean Economic Community of independent nations.

Asean is becoming a common economic space for manufacturing and other sectors. For trade in goods, the six older Asean members are already in an effective free-trade area. For investments in manufacturing, agriculture, forestry, mining, and fishery, and the services incidental to them, we have in place a scheme where national treatment is granted to all Asean companies including companies partly owned by non Asean investors. In sectors like electronics, Southeast Asia is already a single economic space, where components made in various parts of the region are freely traded within it.

Third, we have our comparative advantages, not least our abundance of natural resources. Over the years, we have created a good industrial base in Southeast Asia with sound infrastructure and a reservoir of skilled workers; Education is emphasized in all of Asean and English has become our common language. At the maritime crossroads of East and West, the countries of Southeast Asia have always been outward-looking and open to trade. We are not on diverse; we accept diversity as a way of life. Our openness to foreign cultures distinguishes us from Northeast Asia. These are advantages for us to exploit and build on.

Fourth, Asean is of strategic importance to the United States, Japan, China, India, Australia and Europe. Since we have no nuclear weapons and pose no threat to anyone, everyone wants to be our friend. Indeed, for reasons of geopolitical balance, it is essential for Southeast Asia to diversify its external links. We are in a good position.

Asean's relationship with the U.S. is of particular strategic importance. Both politically and economically, strong links to the U.S. enable us to diversify our portfolio and give us more maneuvering space internationally. An unexpected result of Sept. 11 is the increased strategic interest by the U.S. in Southeast Asia not seen since the end of the Vietnam War. The U.S.-Singapore  Free Trade Agreement, which is likely to be concluded soon, symbolizes long-term U.S. interest in the region.

The agreement to establish an Asean-China Free Trade Area in 10 years has helped to rekindle interest in Asean worldwide. This decision, taken by the leaders of China and Southeast Asia in November last year, is of great historical significance. While in the short term, the rapid economic growth of China is disruptive to some sectors in Asean, in the medium- and long-term,  China's prosperity will bring prosperity to all of Southeast Asia.

The Asean-China FTA will create the largest free trade area in the world with a combined market of 1.1 billion people, a combined GDP of $2 trillion and total trade of $1.23 trillion, based on last year's numbers. But the impact goes beyond numbers. Provided East Asia remains at peace, which the Asean-China FTA should help to maintain, the connectivity between China and Southeast Asia will multiply-air, sea, river, road, rail and electronic.

Within a few years, one will be able to drive on reasonably good roads all the way from Singapore to Vladivostok. Out of all this, a different pattern of life will emerge in East Asia.

In the case of Japan, its strategic interest in Southeast Asia goes back to the period before the Second World War. Japan is Asean's largest source of imports and our second largest export market. Japan is one of Asean's largest sources of foreign direct investment. Southeast Asia can be Japan's alternative manufacturing base to China. We have energy and other resources that Japan needs. Indeed, both sides are determined to strengthen this relationship through the Asean- Japan Comprehensive Economic Partnership.

Next week, for the first time, the Asean Economic Ministers will be meeting their Indian counterpart to discuss ways to enhance our economic links. Asean, Australia and New Zealand will make a joint ministerial declaration to form a Closer Economic Partnership.

Our links to the European Union are also improving. As the economic weight of East Asia grows (and it will likely outweigh that of the EU or the U.S. in about 15 years), Europe's Interest in Southeast Asia must increase and stronger institutional links will be needed.

In an interesting way, Asean and the various Asean plus meetings help to pull together all of East Asia, and connect East Asia to the U.S., the EU, India and Australia. By doing this, Asean stabilizes its external environment and maximizes its economic prospects.

Finally, compared to a year ago, the political leadership in Asean member states has strengthened considerably since the Asian financial crisis. This has created a better climate for trade and investment. In the next chapter of Asean's development, we will make a major push to integrate our economies, co-ordinate our external policies and fight together for our place in the sun.

Mr. Yeo is the Singapore minister for trade and industry.