ASEAN’s Bright Future

Extracted from a presentation by Professor Danny Quah, Director, Saw Swee Hock Southeast Asia Centre, London School of Economics.

ASEAN’s Bright Future

“ASEAN has a wonderful story of optimism and hope attached to it,” said Prof. Danny Quah. In 2015, ASEAN’s 633 million people will form a US$2.5 trillion economy that collectively will be the world’s 7th largest economy and that is growing at 5% p.a. The only large bloc that matches ASEAN is China, ASEAN’s number one trading partner.

In addition to its economic good fortune, ASEAN also sits in a sweet spot politically and geographically. ASEAN lies between the West and the East, with an intellectual and cultural heritage that is partly inherited from Europe, allowing ASEAN to engage with the West very easily while at the same time remaining distinctly Asian, with a set of values that the West sometimes finds confusing but that works for the region.

“ASEAN is also at the centre of the world,” said Prof. Quah. By drawing a circle 4,000km in radius centred at a point off the northern coast of Vietnam (see below), we define a region that is a tiny thing on the world map. This circle contains 25 million sq. km. of habitable land which is only a sixth of the world’s land area, yet more people live inside the circle than outside. In a world of true representative democracy, that seeks out the preferences, wishes, desires and aspirations of the individual, this circle would be where global decisions would be made.

 

 

However, it may not matter whether we have yet to achieve such an egalitarian global society. The reality of global influence is that the world’s economic centre of gravity is shifting towards the East. By examining data from the World Bank, and cross referencing that with information about populations, economic productivity, and from several other databases, Prof. Quah has created a map of the world with more than a thousand reference points weighted by economic value. From this, he has calculated the world’s economic centre of gravity.

In 1980, the world’s economic centre of gravity sat firmly in the middle of the Atlantic Ocean. At that time, about 70% of the world’s GDP was distributed between the United States and Western Europe. Over the last 30 years, the world’s economic centre of gravity has moved 5,000km east into the Arabian Peninsula, pulled by the rise of China and India, and by the 5% growth p.a. of the ASEAN economy. By extrapolating this trajectory, we can see that by 2050 the world’s economic centre of gravity will be just north of ASEAN.
 

 
The establishment of the ASEAN Economic Community at the end of 2015 will transform the lives of the 633 million people who live in ASEAN creating new opportunities for them to build better and more fulfilling lives for themselves. “Looking ahead, ASEAN will sit at the heart of the world’s political and economic centre within our lifetimes,” said Prof. Quah.

ASEAN is poised at the confluence of fortune and circumstance but to seize this opportunity the 10-nation bloc must act quickly and decisively. This is where ASEAN struggles and Prof. Quah believes that it is crucial that ASEAN rethinks how it makes decisions and enacts policies.

Is the ASEAN Way the Right Way?

When ASEAN was formed in 1967, it adopted a series of principles that have collectively come to be known as “the ASEAN Way.” These principles place extreme emphasis on national sovereignty and the commitment to non-intervention into the affairs of member countries. ASEAN takes great pride in the fact that community decisions are made through extreme consensus. Prof. Quah hypothesized that the ASEAN Way is an obstacle to greater economic integration.

ASEAN’s commitment to national sovereignty places national priority ahead of community priority. “This cultivates an atmosphere that is akin to the politics of envy across the ASEAN community,” said Prof. Quah. In this environment, countries with less developed infrastructures believe they will get the short straw when entering into free trade agreements with countries with well-developed infrastructures. They potentially become obstacles even though economic research and the history of trade both support the view that free trade agreements are not a zero-sum game and that all participating countries will benefit. The ASEAN Way resolves this situation through lengthy non-confrontational consultation that may take years to arrive at a mutually satisfactory decision. ASEAN does not have the luxury of years in today’s global economy.

Prof. Quah believes that by pursuing extreme consensus, ASEAN misses many good things. Free trade liberates resources and improves productivity, but in the immediate future it dislocates industry and destroys many jobs. This disruption is painful but it does lead to a brighter future.

ASEAN governments need to communicate the long-term benefits of free trade to their people so that they understand the reasons for going through short-term challenges. ASEAN governments must also build institutions and social protection schemes to take care of, guide and transition people through the dislocation of jobs due to free trade and into the true formation of an ASEAN Economic Community that benefits its entire people.

However, instead of making the hard decisions that will secure the region’s prosperity, ASEAN governments turn to the ASEAN Way and delay implementing necessary policies. To overcome this, Prof. Quah suggests that ASEAN governments consider three alternative ways that they can make decisions that advance the region’s best interests.

The first way is through hegemony that would provide ASEAN with absolute but benevolent leadership. Prof. Quah speculates that if Indonesia were pointed hegemon of ASEAN economic integration, as it is ASEAN’s largest economy, then this may alleviate many of the political concerns that arise when Singapore seeks to lead free trade negotiations. Indonesia, as hegemon, would then have the authority to drive initiatives and put policies in place throughout ASEAN that would accelerate the pace of ASEAN economic integration and benefit the entire region.

The second way to accelerate ASEAN economic integration is for an ASEAN country to take unipolar leadership through soft power. Prof. Quah cites how the US achieved global leadership by giving away power to construct an international world order that is open and transparent, democratic and inclusive. He suggests that this model of leadership may also be effective in achieving greater ASEAN economic integration.

The third way is the path of supra-nationalism. Instead of choosing one ASEAN country to lead as hegemon or through soft power, Prof. Quah asks if it would be feasible for all ASEAN countries could give away a part of their sovereign authority to a delegated non-national ASEAN authority. Prof. Quah suggests that this supra-national ASEAN authority could then construct a civil service that cuts across countries and could make decisions that are in the best interest of the ASEAN community.

To those who point out that the ASEAN Secretariat exists to fulfil some of this purpose, Prof. Quah points out that the European Union and ASEAN have about the same number of people, yet the European Commission employs 800 times the number of people that the ASEAN Secretariat does, and has a budget that is 10,000 times larger.
 

“If we are serious about an ASEAN Economic Community and we do not want it to get bogged down in jingoism—in fighting for national priorities over community good—we need to think hard about the institutions we might build to make this happen,” said Prof. Quah.
 
Extracted from a presentation by Professor Danny Quah, Director, Saw Swee Hock Southeast Asia Centre, London School of Economics.

 

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