Address of Former President Fidel Valdez Ramos
of the Republic of the Philippines
The Economic Strategy Institute’s (ESI)
Global Forum 2000: “The World to Come -Value and Price of Globalization”
Ronald Reagan International Trade Center
Washington D.C., U.S.A.
0815h 17 May 2000

I. ASEAN a Generation After

I am delighted - and honored - to be asked to start off today’s ESI Global forum 2000 series at this exemplary gathering.

As my contribution to these proceedings, let me survey the political and economic prospects of ASEAN the 10-Member Association of East Asian Nations - in the early years of the new century.

The next 20 years seem a good terminal date for my speculations: 2020 is also the benchmark year for the vision for the region of the present generation of ASEAN leaders.

Just now ASEAN’s reputation is at an EBB.

Doubts are being expressed - in the light of recent events - about its effectiveness.

Generally, people think ASEAN should have done more to mitigate the East Asian financial crisis and its violence-ridden political consequences in Indonesia.

And, during the East Timor troubles, ASEAN - deferring to Jakarta’s officialdom - ended up supporting the initiative of the western powers led by the assertive Australians.

More recently, disputes over the spratlys among china and three of the four East Asian claimants are complicating ASEAN’s efforts to respond as one to China’s incursions into the South China Sea.

In every one of these crises, ASEAN’s non-interference principle prevented it from taking purposeful action.

Ultimately, ASEAN must be measured against the goals - and the limitations - it has set for itself.

ASEAN is not - and was not - meant to be a supranational entity acting independently of its members.

It makes no laws and it has neither powers of enforcement nor a judicial system.

Having said that, it must also say that, over these next few years, ASEAN must change - if it is to keep pace with East Asia’s evolving circumstances.

Because East Asia must become more closely integrated, ASEAN’s member-states must seek a new balance between national sovereignty and regional purpose.

But even within its self-imposed limitations, ASEAN has made a difference in East Asia’s circumstances this past generation.

And, to appreciate this fact, all we need to do is to think back to how turbulent our region used to be.

When ASEAN’s five founding states first got together 33 years ago - the Philippines and Malaysia were estranged over north Borneo: Malaysia and Thailand had border problems; and Indonesia’s relations with both Malaysia and Singapore were even worse - deteriorating into ”confrontasi.”

In fact, diplomatic relations between Indonesia and Malaysia were restored after - not before-ASEAN was founded.

In the wider area of East Asia, the Vietnamese civil war was escalating, and American ground troops were starting to venture in what was to become the Indochina graveyard, involving Cambodia and Laos as well.

Against that grim background, Indonesia, Malaysia, Singapore, the Philippines, and Thailand all seemed potential “dominoes” - and the “cultural” association of East Asian Nations they organized seemed an innocuous reply to a very real communist threat.

If East Asia today is surprisingly different, a great part of the credit must accrue to ASEAN.

How effectively ASEAN facilitates the management of conflict among its members can be seen from how quickly cordiality among the “anticommunist” founding members and “communist” Vietnam developed - after the latter’s incorporation into ASEAN in 1995.

For the smaller East Asian states, ASEAN has also worked to “constructively engage” Indonesia - to transform it from a potential threat to a benign, bigger brother.

In a word, ASEAN has been able to manage the immense diversity of East Asia and its multitude of bilateral disputes, so that conflict among its member has become all but unthinkable.

Keeping the peace among the East Asian states is not all ASEAN has done. It has also kept the region secure against interventionism by the great powers.

Historically, conflict and stability in East Asia have depended on the impact of foreign intervention.

East Asia’s strategic location and its accessibility to Sea-Power have always made it permeable -and vulnerable - to the currents of great-power competition.

East Asia has always been a tempting prize for which powerful outsiders have contended.

And every East Asian culture has a variation of the Malay proverb, “when elephants fight, the mousedeer between them is killed.”

When ASEAN was founded, all the great powers were engaged in East Asia. At that time, the cold war was at its highest intensity, and the United States, the USSR, France and China all had stakes in the Vietnam war’s outcome.

Only now have the countries of ASEAN won the self-determination they desire - to insulate the region from big power rivalries, increase their collective attractiveness to foreign investors, and facilitate concerted action on their common problems.

Rather than unraveling the fabric of ASEAN cooperation, the financial crisis is driving it to greater cooperation - to dealing directly with the political and economic weaknesses the crisis has exposed.

Not only is ASEAN now well-established, ASEAN is moving ahead.

In Manila last November, the ASEAN heads of government took an unprecedented political stand. They publicly gave Indonesia’s Abdurrahman Wahid their full support in his effort to meet Aceh’s demands for autonomy short of granting independence to the rebellious province.

In Manila, the decision was also made to shorten the target date for zero tariffs throughout ASEAN from 2015 to 2010. For the six original signatories to the AFTA treaty, the ASEAN Free Trade Area is to be completed at the beginning of 2002. But already 90% of goods traded among them are subject to tariffs of less than 5% -- and some to no tariffs at all.

Negotiations on trade in services are to be completed next year. Barriers to investment are also being dismantled - so that ASEAN investors can invest without hindrance in much of the manufacturing sector of the other ASEAN States. The ASEAN leaders have also agreed on a common set of incentives - in addition to the national benefits they already offer - for investments from outside the region.

To prevent future financial crises and to encourage one another to carry out structural reform, the ASEAN economies already have put in place an informal surveillance mechanism. Ministers and officials are exchanging data and sharing insights on economic trends and macro-policies in a kind of “peer review.”

Apart from free trade, ASEAN has set up other networks of cooperation - to deal with growing cross-border problems such as environmental pollution and transnational crime: to carry on shared programs of human resources development; and to enable East Asian states to speak with one voice at the United Nations and other global forums.

Today ASEAN can even afford to dream.

By 2010, there will be one ASEAN investment area. In fact, ASEAN “think tanks” are already talking seriously about a common currency, a customs union, and a common market. ASEAN currencies are already being used in intra-regional trade - notably between Malaysia and the Philippines.

Meanwhile, the interconnection of electric and energy utilities through and ASEAN power grid; and of natural gas and water through trans ASEAN gas and water pipelines, will be binding mainland and archipelagic East Asia physically.

By 2020, ASEAN will also have fully realized its vision of the region as a Zone of Peace, Freedom and Neutrality (ZOPFAN) - with all the nuclear-weapons states adhering to its nuclear-weapons-free protocol.

Should ASEAN begin to involve itself in the political problems of its member-countries which could have regional implications?

The level of mutual trust must determine the answer to that question every time it is raised - in the context of a concrete situation.

But such involvement would be the natural consequence of growing East Asian integration.

Deeper economic integration, closer political cooperation and more people-to-people interaction among the East Asian states is essential - even unavoidable - in an increasingly interdependent, yet also more competitive world.

ASEAN must respond to the problems - and the challenges - of rapid technological change, of migratory capital, and of globalization.

Adjustments in the economy must be accompanied by adjustments in the political order.

Should ASEAN change its decision-making style?

The time-honored institutions of mushawarah and mufakat - consultation and consensus - still seem the best modes for organizing regional agreement on collective action by partners of diverse strengths, cultures, and methods of governance.

But, as our countries themselves develop, as their fledgling democracies evolve, so must ASEAN change as it matures.

Let me now elaborate briefly on ASEAN’s economic prospects.

In the beginning, economic cooperation was the least controversial topic on which to anchor the concept of one East Asia now. It has become one of ASEAN’s main purposes - alongside political and security cooperation.

It is to a convergence of national goals that East Asia owed its initial stability.

Beginning in the late 1970s, most of the East Asian countries following the example of East Asia’s “Little Dragon” states of South Korea, Taiwan, and Hong Kong - made economic development their paramount goal.

Turning away from ideology and partisanship in the cold war, they adopted the market economy with its culture of private property and entrepreneurial capitalism. The initial results were growth rates unprecedented in regional history - and dramatic reductions in regional poverty.

Within ASEAN, governments have deliberately used the market system as an aid to political cooperation - locally through cross-border groupings that bring together capital, labor and natural resources from neighboring states in what are now known as “growth triangles” (sijori) or “growth areas” (eaga) and ultimately through AFTA, which goes further than any previous economic agreement among the ASEAN states.

Already AFTA has greatly stimulated intra-ASEAN Trade, since 1993 (when AFTA began) to 1997, intra-ASEAN Trade rose from one-fifth to one-fourth of all ASEAN Trade. In absolute terms, intra-ASEAN trade expanded from us$84.4 billion in four years.

In addition, ASEAN nationals made up 40% of all total tourist arrivals in ASEAN; and three million migrant workers working in Asia-Pacific are from within the East Asian region itself.

Can East Asia’s emerging tiger economies regain their preeminence? Will they once again set the pace for the developing world - as they did over this last generation?

The Columbia University economist Jagdish Bhagwati thinks they will.

Professor Bhagwati says East Asia’s fundamentals remain in place, together with the policy framework of the era of steady growth - marked by high investment rates geared towards export development.

Thus, Bhagwati reckons regional post-crisis growth should once again hit 7% -- if no longer the phenomenal 9%-10% rate during East Asia’s boom years.

The U.S. department of commerce itself has estimated that by 2010, ASEAN alone will have a GDP $1.1 trillion, close to three times its GDP in 1995.

At that point, U.S. exports to ASEAN will equal - or exceed - its exports to China or Japan.

Under the impact of globalization, the international economy is segmenting into various functional levels of hierarchy. Some cooperative economic arrangements are best made within national units or even subunits. Others are easier achieved at the regional level - and some are attainable only at the global level.

Drawing a lesson from the world trade organization’s failure in Seattle to balance the interests of rich and poor Nations, ASEAN is aggressively seeking to ingrate markets not only in East Asia but in the larger East Asia region.

Such a balance it sees as necessary - to prevent the stronger and more efficient economies from swamping the weaker ones. But this balance will not be achieved unless each side brings some clout to the negotiating table.

This appears as the main reason why ASEAN has just floated the idea of an economic bloc made up of the 10 East Asian states plus china, Japan and South Korea.

As I understand it, the three Northeast Asian states would - in the first instance - simply accede to the AFTA Treaty.

The proposal resurrects the “East Asian Economic Caucus (EAEC)” idea conceived by Malaysia’s prime minister Mahathir Mohamad, which the united states had opposed. It may represent ASEAN’s continuing effort to keep in balance the three legs of the stool of global interdependence - Europe, East Asia and North America.

An East Asian economic grouping will also have the virtue of keeping China’s vigorous economy contained in a larger regional setting.

Certainly, the de facto integration of the East Asian economies with their Northeast Asian counterparts is well along - as we can see from ASEAN’s concern about the stability and value of the renminbi and its receptiveness to the idea of internationalizing the yen.

Trade within East Asia is fast expanding. In 1997 alone, ASEAN exports to northeast Asia grew by 30%. In that year, they accounted for one-fourth of total ASEAN exports-surpassing ASEAN exports to the United States (20%); and the European Union (15%).

Intra-regional investments are becoming just as important - Japan and South Korea being the leading investors in both ASEAN and China, and we may expect these synergies of trade and investment to intensify, as each batch of East Asian economies moves up to the development ladder.

As within ASEAN, growing synergies in the economies of Northeast and East Asia will strengthen not just East Asia’s clout in world economic councils but also its moves toward political cooperation.

In fact, Beijing is using much the same strategy in Deng Xiaoping’s phase - of “using economics to outflank politics” (in its efforts to win back its estranged province of Taiwan) by offering opportunities for large-scale capital investments in China to Taiwanese corporations.

China, Japan and south Korea seem to have accepted the idea of an East Asian economic grouping enthusiastically. On the suggestion of president Kim Dae-Jung, an “East Asian vision group” is being convened. It will work, through this year and the next, to propose concrete steps for closer political, economic and cultural cooperation in East Asia.

Meanwhile, the larger Asia-Pacific grouping (including Australia and New Zealand) is also exploring economic cooperation with Latin America; and seven of the ASEAN states plus the three Northeast Asian ones are dealing with the European Union in the Asia-Europe Meetings (ASEAM).

Let me now turn to the East Asian political landscape of the early years of the 21^st century.

Some western analysts argue that, if East Asia is economically vigorous, it is also politically fragile.

And it is true there is still no regional status quo to which every regional power subscribes.

In China, North Korea, Myanmar, and Indonesia, the military possesses a great deal of political power.

And open markets, interregional trade and economic growth have barely papered over historical grievances, irredentist claims, and quarrels over geopolitical resources.

Ballistic missiles are being built competitively on the Korean Peninsula and the Taiwan straits. North Korea may have already developed the capability to target Alaska and the American west coast with its missiles; it has proved it can easily reach the vulnerable Japanese mainland.

South Korea is negotiating with the United States the lengthening of the reach of its own missile systems, and Japan has agreed to take part in an American proposal for the coverage of its heartland by a theater-missile-defense system. Japan is also launching its own spy satellites - to give it independently early warning of any potential missile threat.

On the other hand, Taiwan is apparently contemplating its own missile defense system - against what it sees as china’s growing capability is cruise-missile technology.

Within ASEAN, pockets of grave poverty pose a threat to stability. Vietnam, Cambodia and Laos are among the world’s poorest countries; they must be helped to ingrate themselves into ASEAN’s economic mainstream. Development schemes that ASEAN is already packaging -such as the Mekong river project and the Singapore-Kunming rail link - will stimulate growth in these countries. But they will need a lot of capital, technology and years to harvest significant benefits.

In Myanmar, the ruling generals and their civilian opposition have reached a stalemate, which neither side is willing to break. In Indonesia - ASEAN’s key country - a weak and tentative quasi-democratic state is beset by threats of balkanization.

Most unsettling of all is a resurgent China’s effort to project power beyond mainland East Asia - where its strategic authority is already widely accepted -to the continent’s maritime regions - particularly into the South China Sea, which East Asia has long regarded as its maritime heartland.

However, despite these causes for concern, I continue to be optimistic about East Asia’s prospects, beneath the region’s surface political, fragility. There is a basic stability underwritten by two factors: (1) the American military presence - call it “the balance of power” - and, (2) East Asia’s longstanding consensus on cooperative economic development.

This basic stability we may expect to prevail over the next 10 years or so. During this period, East Asian leaders must nurture cooperative habits and self-help attitudes - to enable the region to replace the regional stability now enforced by American arms with a more enduring, interwoven stability of an Asia-Pacific community.

The institutional tools for achieving this ideal are already on the ground. They are the ASEAN Regional Forum (ARF) for political and security discussions and the Asia-Pacific Economic Cooperation (APEC) grouping. The two are complementary tying together otherwise disparate states in networks of common purpose. In both forums, ASEAN has a leading role.

Already, ASEAN exerts a political influence far beyond the material power it can exert. Because their own relationship are still unstable, the great powers with interests in East Asia have been content to let ASEAN take the initiative on regional security problems.

ASEAN has thus become the hub of confidence-building activities and preventive diplomacy in the Asia-Pacific. APEC has even adopted its negotiating methods derived from traditional Malay governance of mushawara and mufakat.

The ASEAN regional forum is East Asia’s only regional venue for political and security dialogues. Started in 1993, the ARF developed from the yearly conferences at which the ASEAN Foreign Ministers invite their counterparts from key countries to talk informally about current political and diplomatic issues.

China, Japan, the United States, and even the European union are now all members of the ASEAN Regional Forum.

At the moment, the ASEAN Regional Forum seems the only practical way of evolving Asia-Pacific Cooperation in Political and Security matters - given the disparities in interest, power and even diplomatic style among the countries taking part in its councils.

The forum follows the ASEAN approach. It accentuates the positive focusing not on controversy, but on areas of common interest from which multilateral cooperation can be developed. Divisive issues it simply passes over for later resolution or waits out until they have been made irrelevant by time and events.

Over these next 10-15 years, the ASEAN regional forum must take every advantage of the stability underwritten by the American military presence to create an integrated Asia-Pacific community. APEC itself is working toward the same goal by organizing free trade and open investments among the countries of the Pacific Rim, programmed for completion by 2020.

Dense regional networks associated with ASEAN bring together statesmen, business-leaders, intellectuals and ordinary people from all around East Asia. Since December 1997 at Kuala Lumpur, the ASEAN heads of government have met informally with their counterparts from China, Japan and South Korea in a yearly East ASEAN political summit. Their Trade, Finance and Foreign Ministers together with their deputies and other senior officials meet even more frequently on ASEAN, ARF and APEC business.

At these “ASEAN-plus three” summits and “ASEAN-plus one” meetings, East Asian leaders are now able to discuss a broadening range of political and economic issues including problems like the conflicting claims to the South China Sea.

These meetings have also dealt with East Asian economic problems and prospects such as the region’s recovery from the financial crisis; the promise of Information Technology; and cooperation on Social Safety Nets. From these broadening networks could also emerge an East Asian consensus on the reform of the International Financial Framework.

ASEAN’s experience over this past generation has proven that the plural, multi-ethnic communities of East Asia can be brought together with greater solidarity, despite the lack of an overarching civilization similar to that which facilitated the unification of western Europe after world war II.

The key relationship in East Asia is of course that of the three great powers China, Japan and the United States -whose interplay will ultimately decide the region’s future.

The benign hegemony the United States is able to exercise in the region (and in the world) derives from its commanding lead in the technological and ideological - revolution that has been taking place over this last 20 years of so.

Japan itself is likely to be more assertive regionally in the future. But it is on China’s aggregate economic and military capabilities that much of East Asia’s attention will focus.

China’s entry into the World Trade Organization (WTO) should deepen the economic liberalization initiated by Deng Xiaoping two decades ago. And it will unavoidably result in some loosening of the communist party’s control of the political structure. Membership in the WTO will also compel China’s domestic economy to become more open, more efficient and more competitive.

Rapid growth these past 20 years has trapped china’s rulers in a classic rulers dilemma. Unlike their Russian Communist counterparts, had to give up political power. They have offered the Chinese people economic development in exchange for their continued central control. But any further deepening of economic reform is virtually impossible without some accompanying reform of its political system.

Historically, China - during the periods it had been unified and stable has always exercised a natural preeminence in our part of the world.

How China exercises its potential political and military power must concern all the countries of the Asia-Pacific - and none more so than us in East Asia. Who are among the closest neighbors. The lingering question is: will China’s preeminence in our time be “Passive” (as it was in the past) - or “Active”?

This is why we all have a vested interest in the success of China’s market experiment. We want the market system to succeed in China. We want it to complete the process of inducing the spontaneous democratization already going on in the Chinese mainland: in village governments; in the mass media; in the internet; and even in the people’s congress - because a pluralistic China will not likely spring any surprises on its neighbors.

In Taiwan, economic growth and democratization are raising the odds against Chinese reunification. Generations of Taiwanese are growing up without the cultural and ethic links to the mainland their elders had - and the deepening of Taiwan’s democracy is increasing the pressure they can exert on their political leaders. Fortunately, cross-straits trade and investment are pulling the island towards more moderate directions.

Our concern lies mainly in how Taiwan is to be reunited with the mainland because any protracted instability across the straits would be life threatening to the whole region.

I am optimistic about the recent political changes in Taiwan, and I do believe that Taipei could speed up the necessary rapprochement with Beijing. Secure in his credentials as a Taiwanese Nationalist, President-Elect Chen Shui-bian can win popular support for himself and his policies for any reasonable arrangement with China.

Both logic and practically call for the closer integration of East Asia -but there is nothing inevitable about it. Unification also requires our separate states to build up a higher level of mutual trust even the yielding of a measure of sovereignty - than now seems possible.

History, cultural diversity, ethnic differences, territorial conflict and economic rivalries continue to fragment East Asia. But events in the world make it clear that there are no alternatives to closer economic integration and political solidarity for East Asia. Our object should be to replace “the balance of power” as the organizer of state relationship in East Asia and the Asia-Pacific with “the balance of mutual benefit”

Even for ASEAN, formal unification of the 10 south East Asian states is merely the beginning. ASEAN has yet to evolve into a genuine East Asian community. Its Nations-states still must learn to hold the collective spirit above their own.

And lingering problems must be dealt with. Political rivalries and mutual suspicions left over from colonial history must be overcome. Irredentist claims must be resolved finally.

The financial crisis has been a watershed in East Asia’s economic and political development. All our countries will have to make painful adjustments if they are to restore their economies to their characteristic vigor.

The crisis has also strained the unity and the mutual trust the East Asian states had built up these past 33 years. Certainly ASEAN itself will emerge from the crisis different in some ways from what it was.

For instance, Thailand (supported by the Philippines) has already asked for a reexamination of ASEAN’s cardinal principle of non-interference-arguing rightly that domestic events in one ASEAN country could adversely affect a Neighbor-State.

In the larger East Asian and Asia-Pacific context of which East Asia is part, I see as the key to lasting peace in the new century the accommodation of the ambitions of the rising powers - China being the greatest among them - for influence in regional affairs.

Finding a practical way of doing this will not be easy. Fortunately, we have the leisure to do so. None of the powers faces an immediate threat; and rivalry among them has lost its ideological edge.

Meanwhile, unifying forces are at work. Growing economic interdependence may not guarantee peace and stability, but it does create an incentive for avoiding conflicts by raising their costs.

Now that the world’s center of gravity is shifting back to the Asia-Pacific, it is perhaps time for our statesmen to start conceptualizing the components of a ”Pax Pacifica”. And this must be the stability not of any single power’s hegemony. But the peace of virtual equals the product of Security Cooperation that comes, in the words of the prophet isaiah from sitting down and reasoning together.

Over these past two years, East and East Asia have been deep into portents of gloom and doom.

Now the financial crisis seems to have run its course.

The region’s devastated economies are bouncing back although a restoration of the kind of galloping growth they once enjoyed still seems some distance away.

Now to sum up and conclude.

History tells us that-long before the “westernization” of the world - a global economic system already existed -from the Persian gulf to the Indian Ocean, to the South China Sea, to the Sulu Sea, to the Celebes Sea and on to the Sea of Japan and to the Pacific.

That global trade was managed and mediated by Muslim, Indian and Chinese merchants long before the Venetian, Iberians, Dutch and English came into the picture. In short, what we are now seeing in our time might, in fact, be a rebirth of that ancient system born of the fusion of Asian commercial globalism and western capitalism.

That pre-industrial global system can become the historical foundation of the new East Asian civilization that ASEAN can help bring about; an Asia no longer merely the passive recipient of western-style globalization. But an Asia actively helping other civilizations create a new global system - in a world that can then truly - and finally - be one.

Mabuhay (best wishes) and thank you.