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Reinventing Asean : A Review Article

George Fane

To cite this article: George Fane (2002) Reinventing Asean : A Review Article, Bulletin of Indonesian Economic Studies, 38:3, 393-402, DOI: 10.1080/00074910215537

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Thisbook isaboutthedevelopment of theAssociation ofSoutheastAsianNa

-tions(ASEAN)andthechallengesitnow faces. The contributors area groupof eminentscholarsfromASEANcountries who, though often critical of the association’sshortcomings, are quietly optimisticaboutitsoverallachievements andlong-termprospects.Althoughsev

-eralchaptersoverlapunnecessarily,and someoftheproposalsaremoreexpres

-sionsof hope than policies that could actually be implemented, there are plentyofinterestingideasabouthowa regional institution like ASEAN needs tochange to preservea usefulrolefor itselfinthefaceofcompetitionfromglo

-balinstitutionsandbilateralagreements. Thecontributorsbuildaconvincingcase that ASEAN hasmade several useful contributionstothedevelopmentofthe region, and that their restrained opti

-mismaboutitsfutureisjustified.

THECREATIONAND

EXPANSIONOFASEAN

ASEAN was founded in 1967 by the main non-communist countries ofthe

region:Indonesia,Singapore,Malaysia, the Philippines and Thailand. Jusuf Wanandi (chapter 2) and Narongchai Akrasanee(chapter3)attributeitsestab

-lishmenttopoliticalandsecurityobjec

-tives, thoughit waslabelled by cynics asmerelya‘letterbox’(TayandEstanis

-lao:10).1

Since 1967, ASEAN has gradually expanded both its functions and its membership. The Bali summitin 1976 proclaimed the goal of increased eco

-nomic cooperation and set up the ASEANIndustrialProject(AIP),which aimedtoreapeconomiesofscalebydes

-ignatingparticularASEANfirmsasthe preferredsuppliersofvariousproducts to all ASEAN countries.The AIPand otherrelatedjointventureandcomple

-mentation schemes were undermined bythelackofinvolvementoftheprivate sector,andbythefactthatgovernments werenotwillingtogiveuptherightto investfreelyintheirowncarindustries, fertiliserindustries,chemicalindustries andsoforth(Soesastro:288–95).

Asecondstrandofeconomiccoopera

-tion was initiated in 1977 withthees

-tablishment oftheASEANPreferential Trading Arrangements (PTA). These aimed at promoting closertrade links amongmembersbyapplyinglowertar

-iffstoimportsfromotherASEANcoun

-triesofitemsincludedinthePTAthan toimportsofthesameitemsfromnon

-ASEAN countries. Initially, the PTA madelittleprogress;however,spurred on by the example of the European Union(EU)andbytheriskthatASEAN wouldbemadeirrelevantbythetrade liberalisingobjectivesoftheAsia–Pacific

EconomicCooperation (APEC) forum, the1992ASEANsummitestablishedthe ASEANFreeTradeAgreement(AFTA),

REINVENTING

ASEAN

_:

_A

_REVIEW

_ARTICLE

*

GeorgeFane

AustralianNationalUniversity

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whosegoalwastoreduceintra-ASEAN

tariffs—the‘CommonEffectivePrefer

-ential Tariff’ (CEPT)—on most tariff

linesto between 0 and5% by2008. In contrasttothelackofprogressunderthe PTA,progress onAFTAhas generally been even faster than was originally planned.

The importance of internal ASEAN tradeliberalisationhasalwaysbeenlim

-itedbythefactthatintra-ASEANtrade

is less than one-fifth of total ASEAN

trade.2 _In _practice, _however, _ASEAN

governmentshavegonefarbeyondtheir AFTAcommitmentstoreducetariffson internal trade,and havegenerally ex

-tendedtariffreductionstoimportsfrom allcountries.TheextenttowhichAFTA canbecreditedwithglobaltradeliber

-alisation by ASEAN countries is dis

-cussedbelow in thesubsectionon the scopeforregionalcooperationintrade liberalisation.

The first new member was Brunei Darussalam, which joined in 1984. It andthefivefoundermembersmakeup a grouping often referred to as the ASEAN–6,todistinguishthemfromthe

four countriesthat joinedmuch more recently—Vietnam in 1996, Laos and

Myanmar in 1998, and Cambodia in 2000.

Throughout the1990s, ASEAN con

-tinued toexpandtherangeofsubjects on which group cooperation was planned. In 1997, these plans were broughttogetherinASEAN’s‘2020Vi

-sion’,asetofambitiousgoalsfortheyear 2020 that include the promotion of peace, freedom, neutrality, justice, the ruleoflaw,nationalandregionalresil

-ience,developmentandsharedprosper

-ity, confidence-building and conflict

resolution(Ariff:53;Hernandez:112–4).

Whilethesegoalsareutopian,theHanoi PlanofAction(HPA),adoptedin1998 asawayofpromotingthem,ismorepre

-cise.ItincludesanASEANsurveillance

process, liberalisation of the financial servicessector,developmentofregional capital markets, acceleration of the AFTAprocess,intensificationofindus

-trial cooperation, promotion of small andmediumenterprises,cooperationin enforcing intellectual property rights, developmentofe-commerce,promotion

ofASEANtourism,developmentofre

-gional infrastructure, development of growthareas,andestablishment ofthe ASEAN Information Infrastructure (Ariff:54).

ASEANhasalsodevelopedintoalink betweenthecountriesofSoutheastAsia andtherestofEastAsiaandthePacific. ASEAN Plus Three (APT) links it to China, Japan and South Korea. APEC excludes Cambodia, Myanmar and Laos,butlinkstherestofAPTto11other countriesintheAsia–Pacificregion,in

-cludingAustralia,CanadaandtheUSA. The ASEAN Regional Forum (ARF) links ASEAN not only to mostof the membersofAPEC,butalsotoIndiaand theEU.

ASEAN’s vigorous expansion has createdtensionsandproblems.Thein

-clusionofthefournewestmembersis rightly hailed as the fulfilment ofthe founders’ dream of creating ‘One SoutheastAsia’(Wanandi: 29;Soesas

-tro: 228). However,this achievement has comeatthecostofincreasing the diversity of an already very diverse group. Average annual per capita in

-come in the new members is around $300, whereas it is over $25,000 in Singapore, about $18,500 in Brunei, $3,000 to$4,000inMalaysiaandThai

-land, and $1,000 in Indonesiaand the Philippines (BinhandDuong:201).

Thelackofprogresstowardsdemoc

-racyinthenewmemberscontrastswith the more democratic systems in the founder members.For this reason,the newest membersare among the most reluctanttoabandonASEAN’soriginal

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ReinventingASEAN:AReviewArticle 395

principle ofnon-interference intheaf

-fairsofothermembercountries.Nguyen Phuong Binh and Luan Thuy Duong, whopresent aVietnameseperspective onthe‘ExpectationsandExperiencesof the New Members’, are critical of the founder members for moving away from the traditional ‘ASEAN way’ of doing things, which meant that each memberagreednottocriticisetheinter

-nalpoliciesoftheothers,andthatplans for group action were indicative, not binding:‘Newmemberstateswhohad hopedthattheycouldfindinASEANa sourceofsupportindealingwithWest

-ern countriesthat have been hard on democracy and human rights issues have been disappointed’ (Binh and Duong:199).

Severalofthecontributors notethat ASEAN’s credibility has recentlybeen dentedbyitsinabilitytodealwiththree regional crises—the collapse of confi

-denceinAsiancurrenciesandfinancial systemsin1997–98;thecollapseoflaw

andorderinEastTimorafteritsvoteto secedefromIndonesia;andthesmoke pollution causedby Indonesia’s forest fires,whichwasparticularlyseriousin 1997andearly1998.Themainattempts toresolvethesecrisesweremadeeither by international organisations, or by non-ASEAN governments, or on a bi

-lateral basis—the InternationalMon

-etaryFund(IMF)andJapan’sMiyazawa Plan in thecase ofthe financial crisis; theUnitedNationsandtheAustralian

-ledpeacekeepingforceinthecaseofEast Timor;andSingapore’ssharingof sat

-ellitephotographswithIndonesiainthe caseoftheforestfires.

THEASEANFREETRADEAREA

Mohamed Ariff (chapter 4) and Hadi Soesastro(chapter12)describetheemer

-genceofAFTAfromthe1977PTAand thesubstantialprogressthatithasmade towardstradeliberalisation.

UndertheAFTAarrangements,each country specified a schedule of CEPT rates and an inclusion list(IL) of im

-portedproducts,classifiedbytariffcode,

that are potentially eligible for AFTA

preferences, whichmeansthattheyare exemptfromnon-tariffbarriers(NTBs)

andpay importdutyattheCEPTrate.

ToactuallyreceiveAFTApreferences,an

importeditemmustnotonlybeonthe ILoftheimportingcountryandsatisfy a rule of origin requirement (namely, thatatleast40%ofitsvaluemusthave beenaddedinASEAN),butitmustalso satisfy two reciprocity conditions de

-signedtoencouragememberstomove towardsinternalfreetradebyprevent

-ingfreeriding.First,theexportingcoun

-try mustalso have placed theproduct onitsownIL.Second,iftheimporting country’sCEPTratefortheitemis20% or less, theexporting country’s CEPT rateforthesameitemmustalsobe20% or less(FukaseandMartin 2001:143).3

Takentogether,theseconditionsreward countriesthatplaceitemsontheirILsat CEPT ratesof 20% orlessby allowing theirexporterstobenefitfromwhatever AFTApreferences othermembersmay grant onthe same items, and onlyre

-quiringthemtogranttheirownprefer

-ences tomembers that impose CEPT ratesonthoseitemsof20%orless.

Unprocessed agricultural products (UAPs)wereoriginally excluded from theCEPTscheme,aswereproductscov

-eredbyarticleXXoftheGATT,suchas those that threaten national security, public morals, health, religion or the preservationofthenationalheritage.In addition to these ‘generalexclusions’, eachcountrywasallowedtolistgoods thatweretemporarilyexcluded,butthat had tobe graduallymoved ontotoits IL ata specifiedrate.Accordingtothe originalagreement,theASEAN–6were

scheduled to complete thetransfer of temporarily excludedproductstotheir

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ILs by 2008, when the CEPTrates on these products were to have been re

-ducedtobetween0and5%.

Intheevent,AFTAmovedfasterand furtherthanwasoriginallyplanned.It hasbeenwidenedbyputtingUAPsonto a‘sensitivelist’ofitemsthataregradu

-ally being movedonto the ILs. NTBs musteventuallyberemovedevenfrom ‘sensitive’items,andtheASEAN–6have

agreed to eliminate tariffs on intra

-ASEANimportsofmostoftheseitems by 2010. The mainexceptions arerice andsugar.Thecountriesthataremost reluctanttoeliminaterestrictionsonrice imports are Indonesia and Malaysia. EventheyhaveagreedtoremoveNTBs onrice,buthavenotmadecommitments toreducetariffsonricebelow20%.

InSeptember1999,thegeneralexclu

-sionlistwasnarrowedby29%byexcis

-ing 230 tariff lines, and the eventual target for CEPT rates was setat zero, rather than 0–5%. The date by which

this target is to be achieved by the ASEAN–6 was broughtforward from

2008toeither2002or2003foralmostall productsother than UAPs. However, Malaysiaistobeallowedtodefermov

-ingcertainautomotivesectorproducts fromitstemporaryexclusionlisttoits includedlistuntil2005(Soesastro:231). Mostof theoriginal AFTAcommit

-mentshavenowbeenfulfilled.ByMay 2001,theASEAN–6hadincluded98.3%

ofalltariffcodesintheCEPTarrange

-ments and 92.7% of these included items already had CEPT rates in the rangeofonly0–5%.Thenewmembers

had only included 54.2% ofall tariff codes,butsincetheyalsohad43.1%of all tariffcodes ontheir temporaryex

-clusion lists, they were committedto eventual intra-ASEAN free trade on

97.3% of their tariff lines (Soesastro: 230–1,tables12.1and12.2).

TheASEAN InvestmentArea(AIA) wasestablishedin1995andisscheduled

toopenallsectors,apartfromspecified exceptions, toASEANinvestorsandto accordthemthesametreatmentasna

-tionalinvestors.Thedatebywhichthis istobeachievedwasoriginally2020,but ithasbeenbroughtforwardto2010for theASEAN–6andto2015 forthefour

newmembers.

THESCOPEFOR

REGIONALCOOPERATION

TheChallenges of

GlobalismandBilateralism

JesusEstanislao(chapter5)andSimon Tay (chapter 13) identifya theme that helps putproblemsdiscussedbyother contributors ina commonframework. This is the difficulty for a regional organisationoffindinganichebetween thecompetingforcesofbilateralismand globalism.

Globalorganisationsandforumsex

-isttocoordinatenationalapproachesto most problemsthatspill overnational boundaries.Forexample,peace-keeping

and securityissues arethe provinceof theUnitedNations;tradepolicyisdealt withby theWorldTradeOrganization (WTO); the Kyoto Convention is de

-signed to deal with international at

-tempts to coordinate environmental policy;andtheInternationalMonetary Fundhasbroadresponsibilityforinter

-nationalfinance.Theessenceofinterna

-tional agreements is the making of reciprocalconcessions.Thisismostob

-viousinthecaseofcarbonemissions:it is notin the interestof anyone small countrytocutbackonitsownemissions unlessitisdoneinthecontextofagen

-eralagreementthatmostothercountries cut back on theirs. Similar reciprocal concessions areinvolvedintheresolu

-tionofterritorialdisputesandinpush

-ingtradeliberalisationbeyondthepoint thatwouldotherwisebechosenbygov

-ernments influenced by protectionist lobby groups. The existence of global

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bodiesthereforemakesitdifficultfora regionalassociationtoplayausefulrole: ifmembers of a regional group make theirowninternalconcessionsavailable to outsiders,they allow others to free rideonthem,andsincethestartingpoint fornegotiationsisusuallythestatusquo, membersofregionalgroupingsreceive little orno credit at global forumsfor concessions that have already been madeattheregionallevel.

There are, nevertheless, two possi

-bilitiesforcooperation thatcanbeuse

-fully adopted by groups of countries operating below the full global level. First,regionalcooperation isneededin situations in which effects that spill over national boundar ies remain largely within regionalones.Interms of theenvironment, carbonemissions donotmeetthiscriterion,butthehaze fromIndonesia’sforestfiresdoes;and so too, to take another example dis

-cussedin Reinventing ASEAN, do the effectsof upstreampollutionand wa

-terextractionondownstreamusersof theMekongRiver.Second, ifbargain

-ing costs aresohigh that cooperative actionisnotpossibleatagloballevel, acoalitionofthewillingwhosemem

-bers grant concessions only to each othermaybemutuallybeneficial, even ifthecountriesinvolvedarenotallin thesameregion,providedthattheyare preparedtomakecommitments tofol

-low the kinds of detailed plans on which global agreement cannot be reached.

Whiletheexistenceofglobalinstitu

-tionslimitstheusefulscopeforregional institutionsononeside,thepossibilityof bilateralagreementslimitsitontheother. Itisobviouslyeasiertoobtainacoalition ofthewillingatthebilaterallevelthanat theregionallevel,anditregularly hap

-pens that effects that spill over one nation’s boundaries spill mainly into thoseofatmostoneortwoothers.

TheimplicationofallthisforASEAN isthatifit istoresistglobalandbilat

-eral pressures and be effective over a wide range of subjects, each member willhavetoacceptmuchmoreinterven

-tionbyothersinitsaffairs,andallwill have to enter into detailed, legalistic, rules-basedagreements, withmonitor

-ingandtimetablesfortheachievement ofsettargets.Severalcontributorstothe presentbookshowthatthisisindeedthe directionin whichASEAN ismoving, despiteoppositionandoccasionaldeni

-alsbysomeministersandofficialsthat itisabandoningtheoldASEANway.

Environmental CooperationPolicy

Kao Kim Hournand SisowathChanto (chapter9)describeattemptstosolvethe common property problems that arise because the Mekong River isused by ChinaandfiveoftheASEANcountries. Tay(256–61)summarisesASEAN’s at

-temptstopreventtherecurrenceofthe hazecreatedbyIndonesianforestfires. The worstyear was 1997, but serious pollution also occurredin severalear

-lierandsubsequentyears. Tayiscritical ofASEAN’sverylimitedachievements. He characterisesitsvariousattemptsto deal with environmental problems as plans forcooperationbetweennational institutions,ratherthanasthecreation or strengthening of regional institu

-tions,andarguesthatthisweaknessis endemictotheASEANway.Heargues thatthefiresin1997demonstratedthat few of the steps proposed by a 1995 plandrawnupinresponsetothe1994 fires wereactuallytaken,andthat the most important achievement of the 1995planwasabilateralone:Singapore providedIndonesiawithsatellitepho

-tographs. Tay welcomes the attempts at cooperation that have been made since 1997, but argues that little has beenachievedandthat‘thelackoflong periodsofhigh-levelregionalhazehas

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notbeenbecauseofanyASEANactions topreventfires,butbecauseofweather’ (Tay:259).

CooperationinTradeLiberalisation

Estanislaoarguesthatdespiteprogress byAFTA,ASEANrisksbecomingirrel

-evantin the economic field as it faces thetwinchallengesofglobalisationand bilateralism. Heis therefore criticalof Singapore’sdeterminedpursuitofbilat

-eral free trade agreements with non

-ASEANmemberslikeNewZealand,the USAandJapan,because‘itposesadan

-ger to ASEAN, indeed threatening to marginalize it for the long term’ (Es

-tanislao:93).

PrimeMinisterMahathirofMalaysia hasalsocomplainedaboutSingapore’s bilateralfreetradedeals,whichheviews asabackdoorentrytotherestofASEAN forSingapore’snon-ASEAN partners.

GivenAFTA’srelativelylaxrulesofori

-gin, Mahathir might seem to have a point. However—quite apart from the

standard economic case against trade barriers—hiscomplaintismisdirected:

anymemberthatsetslowMFN (‘most favoured nation’) tariffs4 _on_a _particu

-lar productprovides a back doorinto ASEANforthatproduct,regardlessof whetherornotithasbilateralfreetrade agreementswithnon-ASEANcountries.

To closethis back door completely it wouldbenecessarytoconvertASEAN from a free tradearea into a customs union with a commonexternal tariff. Bilateralfreetradeagreementsonlyfur

-ther open the access of non-ASEAN

countries to ASEAN markets if the ASEANpartnerdoesnothaveapolicy ofglobalfreetrade.SinceSingaporehas notariffs,itsbilateralfreetradearrange

-mentsaffect theaccess ofnon-ASEAN

countriestoASEANmarketsonlytothe extentthatthey allowitsbilateralfree tradepartnerstoavoidbureaucraticand non-borderbarrierstotrade.

As the case of Singapore shows, globalism poses a much moreserious threattoAFTA’srelevancethanbilater

-alism. This is confirmed by the negli

-gibleuseactuallymadeofintra-ASEAN

tradepreferences.In1988,only1.5%of theintra-ASEANimportsofIndonesia,

Malaysia,thePhilippinesandThailand usedthecustomsformthatisneededto proveASEANoriginifimportersapply forAFTAconcessions(Ariff:51).Since theothertwomembersoftheASEAN–6,

SingaporeandBrunei,havealmostcom

-plete free tradewithallcountries,itis mostunlikelythattheirimportersused theseconcessions.Thereforethepropor

-tion of intra-ASEAN imports of the

ASEAN–6 that useAFTA preferences

is probably muchlessthan 1.5%,and sincelessthanone-fifthofthetotalim

-ports of ASEAN countries are from otherASEANcountries(note2),itfol

-lows that AFTA preferences are used bylessthanone-quarterof1%oftotal

ASEANimports.

The main reasonsfor the negligible usageofAFTApreferencesappeartobe ‘thehassleassociatedwithbureaucracy inprocessingthenecessarypaperwork’, andthefactthattheyarezeroonabout two-thirdsofallitemsandlessthan10%

on73%oftheremainder(Ariff:51–2).

ThefactthatsomanyAFTAprefer

-ences are zero reflects the fact that severalASEANcountries,includingIn

-donesia,havemademostoftheirCEPT rates available toall countries on an MFNbasis.Soesastro(234–5)andAriff

(52) rightlyseethisasa virtue,but do notcommentonthefactthatitsuggests that the ASEANcountries’ movement towards globalfree tradeoccurredin

-dependentlyofAFTA.Noneofthecon

-tributorsaddressesthequestionofhow granting almostcompletely unutilised CEPTconcessionscouldhaveincreased ASEAN countries’ willingness to cut utilisedMFNtariffs,whichwereoutside

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theAFTAprocess.Butifthemakingof CEPT concessions did notaffect their willingnesstocutMFNtariffs,itwould follow that AFTA merely created an impression ofactivity and success,by takingadvantageofdecisionstolibera

-lisetradethatwereoccurringforother reasons—suchastheimplementationof

theUruguayRound,thegradualreali

-sationthatcountriesthatabandonedthe importsubstitutionstrategygrewfaster than those that clung to it and, in Indonesia’scaseafter1997,theneedto satisfyconditionsdemandedbytheIMF inexchangeforcrisislending.

ASEAN has provided a useful um

-brella under which itsmembers have lobbiedagainstbarrierstotheirexports, suchasthemulti-fibreagreement.Inits

recentdisputewithAustraliaoverquar

-antine restrictions on itsfruit exports, thePhilippinesmadeeffectiveuseofthe threat of seeking thesupport ofother ASEANcountries.

FinancialCooperation

Manyoftheauthorscommentfavour

-ably onthe agreement in 2000 by the finance ministers of the ASEAN Plus Three countriesto setup a system of bilateral swap arrangements among theircentralbankstohelpsupportcur

-renciesunderspeculative attack.How

-ever, thesearrangements are unlikely to beeffective. Similar swaparrange

-mentsamong thecentralbanks ofthe major industrialised countries were unable to prevent the decay of the BrettonWoodsfixedexchangeratesys

-temin the1960s and itseventual col

-lapsein1971.Thebasic reasonisthat, foraslongasswapsareeffective,they encouragecountrieswithweakfinan

-cial systems and over-expansionary

monetarypoliciestopostponetackling therootcausesoftheirproblems.Even

-tually, the central banks with strong currencies losepatienceand refuse to

continue to provide cheap loans to those that arereluctant tomend their ways.Sincethevolumeofinternation

-ally mobile capital is nowfar greater thanitwasinthe1960s,theefficacyof swaparrangementsislikelytobemuch less now than it was then. Swapping reserveswasalsothewayinwhichIMF loans to Asian crisis countries were implemented in1997–98.Itistherefore

interesting to notethat Taiwan’svery cautiousmacroeconomic policieshave beenattributedbyNobleandRavenhill (2000:102)tothefactthatitsdiplomatic isolation meantthat itcould nothope toborrowfromtheIMF,theUSAorJa

-pan.Thisatleastsuggeststhepossibil

-ity that arranging swapfacilities may becounterproductive.

Financialsurveillancealsoappearsto beanunlikelycandidateforproductive regionalaction,andtheauthorsdonot attempttospell outhowa regional fi

-nancialmonitoringbodymightperform ausefulrole.Itisveryhardtoseehowa regional bodycouldusefully augment themicro-surveillanceeffortsofnational

prudentialregulators. Detailedsurveil

-lanceatthenationallevelwassupposed tohavebeenhappeningbeforethe1997 crisis,butprudentialsupervisorsfailed topreventtheregulatorybreachesthat were later showntohave been occur

-ring(Fane1998).Atthemacrolevel,the IMF’s articleIV consultations already provideexternalsurveillance ofthefi

-nancial and debt management strate

-gies that countriesare following,and its data dissemination standards and codesofinternational bestpracticeat

-tempttopromotetransparency. Atthis level,regionalsurveillancewouldhave to replace or duplicate the IMF’s on

-going work. Duplication would be pointless, and replacement would be costlyandwoulddissipatetheconsid

-erable body ofexpertise that the IMF hasnowbuiltup.

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THEHANOIPLANOFACTION

ANDTHEGROWTHOF

INSTITUTIONALISM

Tay(chapter 13)suggeststhatASEAN shouldadoptamiddleroadbetweenthe old ASEAN way and full integration along thelines of the EU.Thiswould involveincreased ‘institutionalism’, in the sense of creating regional institu

-tions to guide and restrain national states.Hearguesthatinstitutionalismis in fact growing in importance within ASEAN and across theAsia–Pacific,

even though some ASEAN ministers and officials have denied that the old way is being abandoned. Carolina Hernandez(chapter6)alsoarguesthat the relaxation of theprinciple of non

-interferenceisessentialifASEAN’s2020 Visionistobeachieved,andifASEAN istobemorethanamechanismforcon

-flictavoidance.

The2001ASEANSummitpublished a mid-term review of theHPA which

supportstheviewthatASEANisindeed starting to pursue institutionalism,in Tay’ssenseoftheterm.Amongthemore specificclaimsmadebythisreviewwere that:

financial cooperation has been strengthened by making arrange

-mentsforfinancialsurveillance and forcurrencyswaps;

tradeliberalisationundertheAFTA planisontrackandinvestmentliber

-alisationunderAIAisaheadofsched

-ule;commitmentshavebeenmadeto liberalisesevenimportantservicesec

-tors:airtransport,businessservices, construction,financialservices,mari

-time transport, telecommunications andtourism;

anoutline plan fora pan-ASEAN

transport network is in place, and highways, railway lines, ports and airportsthataretobeupgradedhave beendesignated;

a feasibilitystudyonASEANinfor

-mationinfrastructurehasbeencom

-pleted;

a satelliteimagearchiveisbeingset up;

planshavebeendrawnupforcom

-bating AIDS, crime,terrorism and smokehaze.

Ineverycase,itispossibletoremain sceptical about the importance of the progress that has been made. The groundsforscepticismaboutthesignifi

-cance ofprogresson AFTAhave been setoutabove;sohavethegroundsfor scepticism about the effectiveness of currency swaps and financial surveil

-lance.Otherplansandfeasibilitystud

-ies may come to little. However, the HPA doesdemonstrate thatSoesastro, Wanandi,Ariff,TayandHernandezare right inclaiming thattherehas beena ‘paradigmshift’inthewaythatASEAN operates. ASEAN-wide institutions

clearly have been setup that willput pressureonall10nationalgovernments toimplementtheHPA,atleastinpart.

ASEAN’SACHIEVEMENTSAND

FUTUREPROSPECTS

Despiteitsmanyshortcomings,ASEAN hasfulfilledthemaingoalforwhichit wasoriginallyfounded:toresolveintra

-regional disputes by peaceful means. AlthoughIndonesiaand Malaysiahad confronted each other before ASEAN wasestablished, andVietnaminvaded Cambodia beforeeithercountrywasa member,ASEAN hassofarsucceeded in preventing open military conflicts betweenitsmembers.Ithelpedaverta possible militaryconflictbetween Ma

-laysia and thePhilippines overSabah, andwasunitedinitscondemnation of Vietnam’s invasionofCambodia (Wa

-nandi: 27–8). Sincethemaintenance of

peace and stability is a necessary, thoughnotsufficient,conditionforsuc

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cessful economic development, Wa

-nandi (28) isjustified in claiming that ASEAN‘hasindirectlygivenatremen

-dousboosttoeconomicdevelopmentin eachofthemembercountries’.

TheAFTAschemehasmovedalarge part ofthe way to achievinginternal freetradeandisaheadofschedule.By itself,this isa largely empty achieve

-ment since very little use is made of AFTApreferences bytheASEAN–6.It

maywellbe,however,thatAFTAwill bemuch moreimportant forthe new membersthanithasbeenfortheorigi

-nalones.Thecontributorstothepresent volumeclearlybelieve thatAFTAcan alsobecreditedwithmostofthereduc

-tionintradebarriersbetweenASEAN and the restof the worldthat hasac

-companied the reduction in internal tradebarriers.Althoughtherearegood groundsforscepticismaboutthisattri

-butionthatthecontributors fail toad

-dress,itmaynevertheless becorrect.If it is, thenAFTA’s achievements have indeedbeenveryimportant.

ForASEANtoplayanimportantrole incoordinatingthepoliciesofitsmem

-bers, it will need to be a more rules

-basedanddisciplinedorganisation,with timetables and external monitoringof eachgovernment’scompliancewithits commitments. Mostofthecontributors tothepresentvolumehopeandbelieve that ASEAN is indeedmoving tenta

-tivelyinthisdirection,andtheprogress made in implementing the HPA sug

-geststhattheyareright.

Adanger facingASEAN isthatfur

-therenlargementwillmakeitunwieldy. Since the combinedGDP of the three NortheastAsianeconomiesisabout13 times largerthanthatofASEAN (Soe

-sastro: 240), itis advisabletokeep the ASEAN Plus Three as a talking shop, andfocusattemptsatbuildingregional institutions with power to guide and control national governments at the levelofthepresentASEAN–10.

Several of the authors note that ASEAN isnotmeanttobeaunionlike theEU.Nevertheless,itisclearthatits members are already far moreclosely integrated than Europe was when the European Coal and Steel Community wascreatedin1952.

NOTES

* SimonS.C.Tay,JesusP.Estanislaoand

HadiSoesastro(eds)(2001),Reinventing

ASEAN, Institute of Southeast Asian

Studies,Singapore.Iamgratefultoaref

-ereeforhelpfulcommentsonanearlier

draft.

1 Throughoutthisarticle,referencessuch

asthisonethatgiveanauthor’snameand

apage reference,butomit thepublica

-tionyear, are toachapterbythe indi

-cated author in Tay, Estanisl ao and

Soesastro(2001).

2 In1994, 82.4% ofimports byASEAN

countriescamefromnon-ASEANcoun

-tries(ASEANSecretariat1995:46–9).In

addition,slightlyoverhalfofthe17.6%

ofASEANimportsfromotherASEAN

countries camefrom Singapore, and

some ofthese imports presumablyre

-sulted from entrepottrade thatorigi

-natedinnon-ASEANcountries.

3 Iftheimportingcountry’sCEPTrateis

over20%,thesecondreciprocitycondi

-tiondoesnotapply.

4 IftheMFNprinciplewereappliedwith

-outexceptions,eachmemberoftheWTO

would treat the imports of any other

memberatleastasfavourablyasittreats

thoseofthenationwhoseimportsittreats

most favourably.Thatis,importsfrom

all WTO members would be treated

equally.Inpractice,theexceptionsfrom

MFN treatment are very widespread.

Theyincludepreferentialfreetradeareas

(whichinpracticearedefinedsoloosely

thatagrouplikeASEANhasqualified

asafreetradeareasince1977,although

it still has notmade acommitmentto

(11)

completeinternalfreetradeevenin2020);

theGeneralizedSystemofPreferencesfor

theexportsoflessdevelopedcountries;

REFERENCES

ASEAN Secretariat (1995),AFTA Reader 3

(September),Singapore.

Fane,George(1998),‘TheRoleofPrudential

Regulation’,chapter 17 inRossH.Mc

-LeodandRossGarnaut(eds),EastAsiain

Crisis:FromBeingaMiracletoNeedingOne?

Routledge,LondonandNewYork.

Fukase, Emiko, and Will Martin (2001),

‘Economic and Fiscal Implications of

Cambodia’s Accession to the ASEAN

FreeTradeArea’,AsianEconomicJournal

15(2):139–72.

Noble,GregoryW.,andJohnRavenhill(eds)

(2000), TheAsianFinancialCrisisandthe

ArchitectureofGlobalFinance,Cambridge

UniversityPress,Melbourne.

Tay, Simon S.C.,Jesus P.Estanislao and

HadiSoesastro(eds)(2001),Reinventing

ASEAN, Institute of Southeast Asian

Studies,Singapore.

and the selective application of anti

-dumpingmeasuresandtariffsimposed

assafeguards.