Equitable Economic Development in ASEAN and Social Development

Social and Equitable Economic Development in ASEAN1

Introduction

The Association of Southeast Asian Nations (ASEAN) was established on 8 August 1967 in Bangkok by the five original Member Countries, namely, Indonesia, Malaysia, Philippines, Singapore, and Thailand. Brunei Darussalam joined on 8 January 1984, Vietnam on 28 July 1995, Lao PDR and Myanmar on 23 July 1997, and Cambodia on 30 April 1999. The ASEAN Declaration states that the aims and purposes of the Association are: (a) to accelerate economic growth, social progress and cultural development in the region and (b) to promote regional peace and stability through abiding respect for justice and the rule of law in the relationship among countries in the region and adherence to the principles of the United Nations Charter.

In 2003 the ASEAN Leaders resolved that an ASEAN Community shall be established by 2015. In this connection, the Leaders adopted the ASEAN Charter during their Summit in Singapore in 2007. The Charter, which took effect in December 2008, establishes the legal and institutional framework of ASEAN and defines its purposes and principles. Among its purposes, as stated in the ASEAN Charter, are: (a) to create a single market and production base which is stable, prosperous, highly competitive and economically integrated with effective facilitation for trade and investment; facilitated movement of business persons, professionals, talents and labor; and freer flow of capital; and (b) to alleviate poverty and narrow the development gap within ASEAN through mutual assistance and cooperation.

The ASEAN region has a total area of 4.5 million square kilometers. In 2007, it had a population of about 576 million. The diversity of the region is apparent in the fact that the two largest countries in terms of land area, namely Indonesia and Myanmar, are, respectively, 2700 and 970 times larger than the smallest country (Singapore) while the two countries with the largest population, namely Indonesia and the Philippines have, respectively, 570 and 220 times more people than the smallest country (Brunei Darussalam). All the major religions are present in the region: Buddhism, Christianity, Hinduism, and Islam. ASEAN countries have various forms of government ranging from monarchy to presidential and parliamentary. The people in the region speak different languages and a great multitude of dialects.

Table 1: Area and Population

1 Paper presented by Dr. Filemon A. Uriarte, Jr., Executive Director, ASEAN Foundation, during the conference on “Competitiveness of ASEAN Countries: Trade and Investment Issues” held at the National Institute of Development Administration, Bangkok, Thailand, 8-9 January 2009.

1 Land Population (million) Country (1000 km2) 2007 Brunei Darussalam 5.8 0.396 Cambodia 181 14.5 Indonesia 1,891 225 Lao PDR 237 5.61 Malaysia 330 27.2 Myanmar 677 58.6 Philippines 300 88.9 Singapore 0.7 4.59 Thailand 513 65.7 Vietnam 329 85.2 ASEAN 4,464 576

Economic Disparity

In terms of economic development, there is also great disparity between countries. Data for 2007 show that the region has a combined gross domestic product of around US$ 1,282 billion and a total trade of US$ 1,616 billion. The richest country has a GDP per capita that is 160 times the poorest country. In terms of volume of trade, Singapore’s total trade volume is 560 times that of Lao PDR and 75 times that of Cambodia. Seven ASEAN countries are net exporters while three (Lao PDR, Philippines and Vietnam) are net importers. Although the CLMV (Cambodia, Lao PDR, Myanmar, Vietnam) economies have on average grown faster than the ASEAN-6 countries during the past decade (5.7% compared to minus 8.8% in 1998 and 8.5% compared to 6.4% in 2007), their share in total GDP is only about $97 billion or a mere 7.5% of the nearly $1.3 trillion total ASEAN gross domestic product.

Table 2: Economic Performance (2007)

2 GDP per capita GDP total Country (USD) (billion USD) Brunei Darussalam 31,076 12.23 Cambodia 598 8.66 Indonesia 1,920 432 Lao PDR 736 4.13 Malaysia 6,880 187 Myanmar 216 12.63 Philippines 1,653 146.9 Singapore 35,200 161.5 Thailand 3,740 246 Vietnam 837 71.3 ASEAN 2,227 1,282

Table 3: Trade Value (2007)

Exports Imports Total Country (billion USD) (billion USD) (billion USD) Brunei Darussalam 7.65 2.10 9.75 Cambodia 3.91 3.67 7.58 Indonesia 114.1 74.5 188.6 Lao PDR 0.382 0.711 1.093 Malaysia 176.4 147.1 323.5 Myanmar 5.93 2.79 8.72 Philippines 50.5 55.5 106.0 Singapore 301 267 568 Thailand 153.5 138.7 292.2 Vietnam 48.3 61.7 110.0 ASEAN 862 754 1,616

Social Inequity

3 The economic disparity between the ASEAN-6 and the CLMV countries is reflected in the social statistics, for example, in the school enrolment and adult (15 years and above) literacy rate, percentage of population with access to safe drinking water and sanitation facilities, and life expectancy at birth and infant mortality. The combined percent enrolment at the primary, secondary and tertiary levels in Singapore (94%) is nearly twice that of Myanmar (49%). Singapore also has the highest literacy rate at 95.1% with Lao PDR at 72.7%). Brunei Darussalam, Malaysia, Singapore and Thailand have the highest percentage of population with access to safe drinking water (98-100%) while Cambodia and Lao PDR have the lowest. Malaysia, Singapore and Thailand have good access to sanitation facilities while Cambodia and Lao PDR rate poorly. The highest infant mortality rates of 70 or more per 1000 live births are in Cambodia and Lao PDR while the lowest rates are in Singapore and Malaysia. Singapore has the longest life expectancy at birth at over 80 years while Myanmar has the lowest at 60.8 years.

Table 4: School enrolment and adult (15 years and above) literacy rate (2005)

Country Enrolment Literacy

Brunei Darussalam 78 92.7 (2004) Cambodia 60 (2003) 78.7 Indonesia 68 (2003) 90.9 Lao PDR 61 72.7 Malaysia 74 (2004) 91.6 Myanmar 49 (2003) 94.1 Philippines 81 92.6 Singapore 94 95.1 Thailand 71 (2003) 93.5 Vietnam 63 93.0

Table 5: Percentage of population with access to safe drinking water and sanitation facilities (2005)

4 Country Water Sanitation

Brunei Darussalam 99 80 (2003) Cambodia 44 (2004) 23 Indonesia 80 80 Lao PDR 51 (2004) 30 (2004) Malaysia 99 (2004) 94 (2004) Myanmar 78 (2004) 83 Philippines 80 86 Singapore 100 100 Thailand 98 (2004) 98 (2004) Vietnam 85 (2004) -

Table 6: Life expectancy at birth and infant mortality (2005)

Expectancy Mortality Country (years) (per 1000 live births) Brunei Darussalam 76.7 7.4 Cambodia - 73.0 Indonesia 69.0 30.8 Lao PDR 61.0 70.0 Malaysia 73.7 6.7 Myanmar 60.8 45.1 Philippines 67.1 24.0 Singapore 80.1 2.1 Thailand 69.6 7.6 Vietnam 73.7 16.0

Addressing Social and Economic Disparities

The ASEAN Vision 2020, adopted by the ASEAN Leaders in Kuala Lumpur in 1997, aims to promote equitable economic development and reduce poverty and socio-economic

5 disparities in the ASEAN region. This aim is reiterated in the 1998 Hanoi Plan of Action and the 2001 Hanoi Declaration on Narrowing Development Gap for Closer ASEAN Integration. Furthermore, the 2003 Declaration of ASEAN Concord II states: “The ASEAN Economic Community shall ensure that the deepening and broadening integration of ASEAN shall be accompanied by technical and development cooperation in order to address the development divide and accelerate the economic integration of Cambodia, Lao PDR, Myanmar and Vietnam (CLMV countries) through the Initiative for ASEAN Integration (IAI) and the Roadmap for the Integration of ASEAN (RIA) so that the benefits of ASEAN integration are shared.”

At the 13th ASEAN Summit in Singapore in 2007, the Leaders defined the three pillars of the ASEAN Community, namely, the ASEAN Economic Community, the ASEAN Political-Security Community and the ASEAN Socio-Cultural Community and tasked the Ministers and officials to draft the Blueprints for the ASEAN Political-Security and Socio- Cultural Communities, while welcoming the finalization of the Blueprint for the ASEAN Economic Community. The three pillars are to be interrelated and the blueprints mutually supportive. For example, there are basically two ways in which the socio-cultural component of community building contributes to regional peace and security. The first is at the domestic level where progressive social welfare, development and justice contribute to building greater social harmony, contentment and sense of belonging. The second is at the inter-state level where cooperation in social and cultural spheres creates positive mutual perceptions, make people identify with each other, and address potential irritants among neighboring states with adjacent borders and resources. At the Singapore Summit, the Leaders also “agreed that narrowing the development gap remains an important task which will ensure that the benefits of ASEAN’s integration efforts are fully realized.” They further noted that efforts to narrow the development gap, such as the IAI, should be aligned with the broader objectives of ASEAN’s integration efforts.

Equitable social and economic development in ASEAN is a prerequisite and almost synonymous to full economic integration of the newer members, namely, Cambodia, Lao PDR, Myanmar and Vietnam. This goal is among the most important challenges to ASEAN. For this reason, in November 2000, the ASEAN Leaders agreed to launch the Initiative for ASEAN Integration (IAI), which gives direction to and sharpens the focus of collective efforts in ASEAN to narrow the development gap between ASEAN’s older and newer members. Then at the ASEAN Summit in Phnom Penh in 2002, the Leaders approved a Work Plan for the IAI comprising some 48 projects aimed at sustaining the growth of the sub-region and promoting the welfare of its peoples.

It is also recognized that there are pockets of underdevelopment in some older members of ASEAN (collectively known as ASEAN-6). The Vientiane Action Program (VAP), which was adopted by the ASEAN Leaders in 2004, addresses this concern. The VAP declares: “We shall address, by various ways and means, the development issues and special needs of the less developed ASEAN Member Countries and sub-regional areas of ASEAN, including the implementation of the concept of ‘Prosper Thy Neighbor’ by instituting programs to narrow the development gap, reducing socio-economic disparities and eradicating poverty within ASEAN, and by doing so, move forward in a unifying and cohesive manner to prosper ASEAN.”

The Initiative for ASEAN Integration is a policy framework which aims to contribute to narrowing the development gap within ASEAN. It involves the development of legal,

6 institutional, regulatory frameworks and technical capabilities and capacities of CLMV countries. It is complemented by parallel efforts in other areas in the ASEAN region including the Brunei-Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP- EAGA), Indonesia-Malaysia-Singapore Growth Triangle (IMS-GT), Indonesia-Malaysia- Thailand Growth Triangle (IMT-GT), and the inter-state areas along the West-East Corridor (WEC) of Mekong Basin in Vietnam, Laos, Cambodia and Northeastern Thailand within the ASEAN-Mekong Basin Development Cooperation Scheme.

The current IAI Work Plan (2002-2008) has been developed to assist the CLMV countries to catch up with the rest of the ASEAN-6. The experience in ASEAN during the past three decades indicates that measures to reduce inequality in income and wealth distribution can contribute to faster economic growth. The projects and activities in the IAI Work Plan are aimed at enhancing the productive capacities of the peoples in the CLMV countries and making their economies more competitive in the global market.

The IAI Work Plan is supported with contributions from the other six ASEAN countries (ASEAN-6), namely, Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore and Thailand. The contributions are in various forms including cash, training, provision of technical experts, supply of equipment, and others. There are four priority areas: infrastructure development, human resource development, information and communications technology, and promoting regional economic integration.

Infrastructure development, which is coordinated by Cambodia, is aimed at improving access, efficiency and quality of transport and energy infrastructure to enhance the sub- region’s ability to attract trade and investment and promote further integration. The human resource development, which is coordinated by Laos, aims to raise and strengthen the productive capacities of CLMV countries through higher education and skills training by supporting and developing their policy and institutional frameworks. Information and communications technology, which is coordinated by Myanmar, offers a means to leapfrog development of CLMV countries by supporting the development of ICT to reduce the digital divide and facilitate trade and investment in the ICT sector. Regional economic integration, which is coordinated by Vietnam, aims to enable CLMV countries to participate effectively in the ASEAN Free Trade Area, the ASEAN Investment Area, the liberalization of trade in services, and ultimately in the development of a single market and production base. In particular, support will be provided to: (a) improve customs facilities and procedures; (b) develop product standards; and (c) harmonize procedures and processes to expedite processing of imports and exports.

ASEAN economic integration involves not only removing trade barriers but also binding economies closer through infrastructure linkages such as highway and rail networks, interconnected power grids and gas pipelines, and the like. To bring about more equitable socio-economic development in ASEAN and reduce disparities among countries, CLMV countries will be provided with the needed physical and “soft” infrastructures. The first stage of the IAI Work Plan will provide assistance in conducting feasibility studies for the planned physical infrastructures, developing capacity and human resources, and formulating policy, institutional and legal frameworks.

As of May 2008, there are a total of 203 projects in the IAI Work Plan at various stages of implementation. Of these, 116 projects have been completed, 37 under implementation, and 5 under planning. In addition, 6 projects have secured partial funding

7 and under planning or implementation, 15 projects are looking for matching funding and 24 projects have yet to find funding support (Table 7). The 203 projects cover various areas as shown in Table 8. The ASEAN-6 has contributed almost US$31 million to the IAI Work Plan to support the implementation of 130 projects, as shown in Table 9.

Table 7: Status of IAI Projects

Projects with full funding 158 Completed 116 On-going 37 Planning for implementation 5 Projects with partial funding 6 Projects being considered for funding 15 Projects with no funding 24 Total 203

Table 8: Program Areas Covered by Projects

Infrastructure 24 Transport 12 Energy 12 Human Resource Development 69 Public sector capacity building 51 Labor and employment 12 Higher education 6 Information and Communications Technology 31 Regional Economic Integration 53 Trade in goods and services 19 Customs 14 Standards 14 Investments 6 Tourism 8 Poverty and Quality of Life 5 General Coverage Projects 13 Total 203

Table 9: ASEAN-6 Contribution to IAI Projects

Country Number of Projects Amount (‘000 US$)

Brunei Darussalam 8 1,500 Indonesia 9 805

8 Malaysia 58 4,823 Philippines 9 558 Singapore 33 22,811 Thailand 13 481 Total 130 30,978

In addition to the ASEAN-6’s multilateral contribution to the IAI Work Plan, the six ASEAN countries have also supported development cooperation projects in CLMV countries on a bilateral basis amounting to nearly US$160 million for 221 projects. The breakdown is shown in Table 10.

Table 10: Bilateral Contribution to CLMV Countries

Country No. of Projects Amount (‘000 US$)

Brunei Darussalam 4 359 Indonesia 29 1,662 Malaysia 62 5,874 Philippines 31 262 Singapore 56 53,055 Thailand 97 100,358 Total 221 160,570

The Dialogue Partners of ASEAN as well as international development agencies have also contributed to the IAI Work Plan supporting 62 projects amounting to over US$20 million. The largest donors are Japan with almost US$7 million, Republic of Korea, US$5 million, India, US$3 million, Norway, US$1.5 million, and the European Union and Denmark with about US$1 million each.

At the coming 14th ASEAN Summit, the Leaders are expected to adopt the Second Initiative for ASEAN Integration Work Plan to be implemented in tandem with the ASEAN Socio-Cultural Community Blueprint, ASEAN Economic Community Blueprint, and ASEAN Political-Security Blueprint. While capacity building and human resource development was a key focus of the 1st IAI Work Plan, the 2nd will focus on the development of infrastructure as a means to deepen ASEAN integration and competitiveness.

Contribution of the ASEAN Foundation

In recognition of the fundamental importance of improving the well-being of the peoples of Southeast Asia, the ASEAN Leaders agreed to establish the ASEAN Foundation on 15 December 1997 during the 30th ASEAN Anniversary Commemorative Summit in Kuala Lumpur. Its aim is to help bring about shared prosperity and a sustainable future to the

9 entire ASEAN region. The twin objectives of the ASEAN Foundation as reflected in the Memorandum of Understanding establishing it are as follows:

 It shall promote greater awareness of ASEAN, and greater interaction among the peoples of ASEAN as well as their wider participation in ASEAN’s activities inter alia through human resources development that will enable them to realize their full potential and capacity to contribute to progress of ASEAN Member States as productive and responsible members of the society.

 It shall also endeavor to contribute to the evolution of a development cooperation strategy that promotes mutual assistance, equitable economic development, and the alleviation of poverty.

In line with the second objective of promoting equitable economic development and the alleviation of poverty, the ASEAN Foundation has supported a total of 58 projects related to this objective with emphasis on CLMV countries amounting to about US$ 11 million of which 47 have been completed totaling close to US$ 6.2 million and 11 still on-going amounting to about US$ 4.8 million.

Table 11a: Completed projects related to poverty alleviation and CLMV

Amount Title of Project (US$) Support projects for ASEAN’s small and medium enterprises 211,055 Training course for national economic management and poverty 46,727 eradication Workshop on technical vocational education and training for 59,797 women’s economic empowerment Trainers’ training on planning and management of literacy 43,248 programs for poverty alleviation Training course for the promotion of the ASEAN National 82,750 Agriculture Research System Training project for lecturers and farmers from ASEAN countries 61,255 in the area of rural development The promotion of sustainable fisheries through south-south 175,190 cooperation in the ASEAN region Conference on sustainable fisheries: food security for the people 418,275

Human resource development program 211,710

Looking to the future for deprived children in the ASEAN region 175,547

Table 11b: Completed projects related to poverty alleviation and CLMV

Amount Title of Project (US$) Cooperative capacity building on “The ASEAN Development 392,043 Experience”

10 Capacity building for the improvement of the fishery statistical 200,000 system Comprehensive capacity building for sustainable development in 353,584 the Greater Mekong Region Community based HIV/AIDS management course 400,736

Support program for AUN SEEDNet 317,510 Human resource development and institutional capacity building 86,903 in CLMV Energy efficiency and renewable energy for Greater Mekong 82,153 Region Capacity building for ASEAN SMEs 72,811 HRD program in participatory project cycle management for the 39,363 Mekong Region Productivity and quality management program for SMEs 72,084

Table 11c: Completed projects related to poverty alleviation and CLMV

Amount Title of Project (US$) HRD for sustainable development of fisheries 181,282

Capacity building in biomass utilization 80,635 Capacity building on supply chain management for small 29,848 agribusiness in the Mekong Region Development of productivity specialists 110,108 Women, gender and cooperatives: meeting challenges and 76,688 identifying opportunities Scholarships for the smart but poor in ASEAN 152,406

Training workshop on financial management for self-employment 91,102

Training on diversified farming using participatory approach 30,496

Training on integrated quality system for agri-food processing 94,284

Asian farmer’s exchange learning and networking 250,233

Table 11d: Completed projects related to poverty alleviation and CLMV

Amount Title of Project (US$) Capacity building for sustainable development in the Greater 24,891 Mekong Sub-region

11 Community leadership and entrepreneurship for young agri- 92,220 graduates Regional workshop on drying technology 219,103

Agri-food processing for ASEAN SMEs 114,704

Training on sustainable farming techniques 168,312

Regional agricultural modernization 68,209

HRD program on biotechnology for CLMV 74,869

Promoting economic empowerment of women 157,953

Training people to help the poor and disadvantaged 30,168

Table 11e: Completed projects related to poverty alleviation and CLMV

Amount Title of Project (US$) Technical vocational education and training for CLMV countries 73,978

Training on risk assessment of agriculture-related GMOs 83,555

Training on ground water resource development in CLMV 68,739

Strengthening of ICT in schools 209,439

Higher education management in CLMV 32,296

Community leadership and entrepreneurship for SMEs in GMS 29,307

Strengthening ICT in schools 63,823

ICT training in developing countries 73,282

Total 6,184,671

Table 12: On-going projects related to poverty alleviation and CLMV

Amount Title of Project (US$) Capacity building in poverty mapping in ASEAN 283,013

12 Promotion of FOVOP system to improve livelihood of fishery 241,246 communities Capacity building for gender, poverty and mobility analysis of 329,976 road transportation in GMS Region Regional conferences for AUN SEEDNet Phase 2 778,734 HRD on poverty alleviation and food security by fisheries 463,837 intervention Scholarships for postgraduate studies 734,668 Building capacities for women entrepreneur for micro-enterprise 180,785 development Linking small farmers to the market 439,725 Communication information system for the control of avian 1,051,248 influenza in Lao PDR and Vietnam Strengthening capacity of small holder aquaculture farmers 192,706

Collaborative project on nutrition surveillance 79,279

Total 4,775,217

To attain the vision of a caring and sharing ASEAN community, it is essential that the poorer, less-developed and mainly agriculture-based ASEAN countries be provided the means to participate actively in shaping the future of the region. For this purpose, it is essential to enhance agricultural productivity, promote enabling technologies such as ICT, and develop human resources in the CLMV countries and in some parts of the other ASEAN countries. Poverty, socio-economic disparity and digital divide will remain as important challenges to governments in the region and the ASEAN Community as a whole. For this reason, this area will remain an important focus of the work of the ASEAN Foundation at it also promotes ASEAN awareness and identity.