It is exactly the kind of investment on which heads of state and government will be focused as they fly into the Indonesian holiday island of Bali this week for the annual summit of the 10-country Association of Southeast Asian Nations.
Asean is the economic third pillar of emerging Asia – behind China and India, the region’s giants – which helps to explain why its leaders will be joined for a series of further summits over the weekend by eight of their counterparts with strategic interests in the Pacific. For presidents Barack Obama of the US and Hu Jintao of China, and prime ministers Vladimir Putin of Russia and Manmohan Singh of India, as well as the leaders of Japan, Australia, New Zealand and South Korea, the annual east Asia summit that follows the Asean meeting is one of the few events in the political calendar that provides a broad forum for discussing increasingly acute regional problems such as overlapping territorial claims in the South China Sea.
Economically, the agglomerated population and GDP numbers are a polite fiction. It remains a fragmented grouping of 10 separate, very different economies. Many people in business see it is as a perennially disappointing talking shop that happens to include several countries that offer an attractive alternative to China for manufacturing operations or regional headquarters.
Bali presents a rare opportunity to change that view, making the meeting a critical moment in the grouping’s 44-year history. Asean leaders will review progress on an ambitious plan to create an integrated economic community by 2015. It would build a regional free market in goods and services, with harmonised rules for investment, a common visa regime for professional workers and skilled labour, and liberalisation of capital movements.
As a single economic unit, Asean would have a lot going for it. For a decade, the region has achieved average annual economic growth of 6-7 per cent. Its favourable demographics, with a much larger proportion of young people than China, suggest that rapid growth is sustainable for many years as the workforce grows and consumer spending increases.
Some local companies are beginning to think more regionally, too. AirAsia, the Malaysian budget carrier, markets itself as Asean’s airline and wants to operate between all its major population centres. PTT Chemical, Thailand’s largest petrochemicals group, has a joint venture plant in Malaysia making speciality chemicals. CIMB, the Malaysian bank, has adopted an official “Think Asean” strategy. Axiata, the Malaysian telecoms group, has established operations in multiple Asean markets, as has Singapore Telecommunications.
Yet there is widespread, if discreet, scepticism in the region’s business and financial community about whether the economic community will happen, and how effectively it will be implemented. In a fairly common exchange, a senior international banker rolls his eyes when asked about its prospects. “I wouldn’t hold my breath,” he says. “Does Asean ever get anything done on time?”
More fundamentally, the study challenged the idea that the region has been a strong economic performer, noting that GDP per person has risen at an average rate of only 2.3 per cent a year in the past decade, just above the global average. That suggests that much of the growth has been the result of population increases rather than productivity improvements.
“South-east Asia was invented from the outside in and the topside down,” Mr Emmerson says. “It is an artificial identity. In a sense, you had the label before you had the reality. And it is a reality that is in many ways still coming about.”
In terms of wealth, Singapore produces GDP per capita at close to US levels, while Burma, Cambodia and Laos remain among the world’s poorest countries. A few members are democracies; most are not. Singapore is building an international business in arbitration, but corruption and official interference with judicial independence are widespread elsewhere.
These cultural, legal and governance differences have contributed to the development of the so-called Asean way – a system of progress by consensus. That means holding hundreds of meetings a year between officials and ministers of member states, who must agree unanimously before anything can be done.
ASEAN best interest is to look for FDI. This means IMBA should cultivate negotiation skills to shine in attracting investments from the west and China