Menon • Lee An Evolving ASEAN Vision and Reality The formation of the Association of Southeast Asian Nations (ASEAN) in was originally driven by political and security concerns In the decades that followed ASEAN’s scope evolved to include an ambitious and progressive economic agenda In December the ASEAN Economic Community (AEC) was formally launched Although AEC has enjoyed some notable successes the vision of economic integration has yet to be fully realized This publication reviews the evolution of ASEAN economic integration and assesses the major achievements It also examines the challenges that emerged during the past decade and provides recommendations on how to overcome them About the Asian Development Bank AN EVOLVING ADB is committed to achieving a prosperous inclusive resilient and sustainable Asia and the Pacifi c while sustaining its e orts to eradicate extreme poverty Established in it is owned by members— from the region Its main instruments for helping its developing member countries are policy dialogue loans equity investments guarantees grants and technical assistance ASEAN: AN EVOLVING ASEAN VISION AND REALITY VISION Edited by Jayant Menon and Cassey Lee SEPTEMBER AND REALITY ASIAN DEVELOPMENT BANK 6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines www.adb.org 9 789292 616946 ASIAN DEVELOPMENT BANK AN EVOLVING ASEAN VISION AND REALITY Edited by Jayant Menon and Cassey Lee SEPTEMBEr 2019 ASIAN DEVELOPMENT BANK Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) © 2019 Asian Development Bank 6 ADB Avenue, Mandaluyong City, 1550 Metro Manila, Philippines Tel +63 2 632 4444; Fax +63 2 636 2444 www.adb.org Some rights reserved. Published in 2019. ISBN 978-92-9261-694-6 (print), 978-92-9261-695-3 (electronic) Publication Stock No. TCS199043 DOI: http://dx.doi.org/10.22617/TCS199043 The responsibility for opinions expressed in signed articles, studies and other contributions rests solely with their authors, and publication does not necessarily reflect the views or policies nor constitute an endorsement by the Asian Development Bank (ADB) or its Board of Governors or the governments they represent, nor by ISEAS. Neither ADB nor ISEAS guarantees the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. By making any designation of or reference to a particular territory or geographic area, or by using the term “country” in this document, neither ADB nor ISEAS intends to make any judgments as to the legal or other status of any territory or area. 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Please contact [email protected] if you have questions or comments with respect to content, or if you wish to obtain copyright permission for your intended use that does not fall within these terms, or for permission to use the ADB logo. Corrigenda to ADB publications may be found at http://www.adb.org/publications/corrigenda. Notes: In this publication, “$” refers to United States dollars. ADB recognizes “China” as the People’s Republic of China, “Korea” as the Republic of Korea, and “Hanoi” as Ha Noi. On the cover: Indonesia signed the ASEAN Declaration with Malaysia, the Philippines, Singapore, and Thailand in 1967 (photo from the ASEAN Secretariat Photo Archives). Printed on recycled paper This book is dedicated to former Ambassador and ASEAN Secretary-General Rodolfo C. Severino. 27 April 1936–19 April 2019 iv CONTENTS Tables and Figures v Foreword vii About the Editors ix About the Contributors x Abbreviations xiv Introductory Remarks 1 Narongchai Akrasanee Chapter 1 The Evolution of ASEAN: An Overview 4 Jayant Menon and Cassey Lee Chapter 2 ASEAN Economic Cooperation: Vision, Practice, and Challenges 21 Emil Salim Chapter 3 Staying the Course: From a Southeast Asian Community 36 to an ASEAN Community Delia Albert Chapter 4 The Evolution of ASEAN: From Political and Security Concerns 56 to Regional Economic Integration Rodolfo C. Severino Chapter 5 The Development of ASEAN Economic Cooperation 72 and Governing Institutions Suthad Setboonsarng and Chayut Setboonsarng Chapter 6 Singapore’s Participation in Evolving ASEAN Economic 87 Cooperation and Integration Chia Siow Yue Chapter 7 ASEAN Economic Community: Malaysia’s Evolving Perspectives 115 Tham Siew Yean Chapter 8 Gearing the Philippines for the ASEAN Economic Community 135 Florian A. Alburo Index 164 v TABLES AND FIGURES TABLES 2.1 ASEAN Key Development Statistics, 2017 24 2.2 ASEAN Gross Domestic Product Growth Rates, 2000–2017 26 2.3 ASEAN’s 10 Major Export Markets by Value 31 and Share of Total, 2017 3.1 Bilateral Visits between ASEAN Leaders 44 5.1 Ranking of ASEAN Competitiveness 80 6.1 Singapore’s Free Trade Agreement Partners 96 6.2 Most Favored Nation Tariffs on Nonagricultural Products 97 of Singapore’s Free Trade Agreement Partners 7.1 Real Gross Domestic Product Growth Rates, 1971–2017 119 8.1 Key ASEAN Agreements on Economic Integration 139 8.2 Agreements and Time Lines 140 8.3 Illustrative Economic Agreements That Contribute 141 to Key Areas in the ASEAN Economic Community 8.4 Illustrative Quality Indicators, 2011 151 vi ForewordTables and Figures FIGURES 2.1 Trade between ASEAN-5 and the Plus 6 Countries, 2004–2017 29 2.2 The Development Ladder 32 2.3 Growth of Total Factor Productivity, 1990 and 2015 33 5.1 The Value Chain of an Apple iPhone 82 8.1 Philippine Trade with ASEAN and Total 146 8.2 Export and Import Shares to Totals 148 of ASEAN-6 Member States, 2015 8.3 Common Effective Preferential Tariff Rates, 149 Original and Accelerated vii FOREWORD lthough the formation of the Association of Southeast Asian Nations (ASEAN) in the 1960s was originally driven by political and security Aconcerns, ASEAN’s ambit has evolved over the decades to include an ambitious and progressive economic agenda. Early attempts at economic cooperation among ASEAN member states included the adoption of the ASEAN Industrial Projects, the Agreement on ASEAN Preferential Trading Arrangements, the ASEAN Industrial Complementation scheme, and the ASEAN Industrial Joint Ventures in the 1970s and 1980s. The results from these ventures were mixed, perhaps reflecting the fact that ASEAN was not yet ready for effective trade liberalization and economic integration at that time. In 1992, ASEAN took another bold step and adopted the Common Effective Preferential Tariff scheme under the ASEAN Free Trade Area. This solidified the foundation for ASEAN economic cooperation and spurred the adoption of more ambitious initiatives such as the ASEAN Framework Agreement on Services in 1995 and the ASEAN Investment Area in 1998. All of these efforts eventually culminated in a vision to create the ASEAN Economic Community (AEC) by 2015. Despite recognized shortfalls in implementation in some areas, ASEAN formally launched the AEC in December 2015. With the discourse now having shifted to the vision and direction for ASEAN 2025, it is timely to reflect on the past and future of ASEAN regional economic integration. What has ASEAN already achieved, and how? Is the AEC headed in the right direction? And, more importantly, can it do a better job of binding ASEAN member states to their commitments? To address these questions, the Asian Development Bank (ADB) and ISEAS–Yusof Ishak Institute convened the High-Level Workshop on the Evolving Nature of ASEAN’s Economic Cooperation: Original Vision and Current Practice. ADB and ISEAS invited renowned economists and diplomats in the ASEAN region, many of whom were instrumental in the evolution of ASEAN’s economic agenda. This volume is a compilation of viii Foreword the papers presented at the workshop, containing the authors’ personal reflections on ASEAN’s journey toward economic integration. The papers review the historical evolution of ASEAN’s economic agenda, capture its achievements, examine the challenges that have surfaced in the last decade, and recommend a way forward. The papers in this volume emphasize that, while there have been notable successes, the remaining challenges suggest that ASEAN is still on its transition path in achieving full economic integration. This volume has benefited immensely from the efforts and contributions of several people. We gratefully acknowledge the support of ISEAS- Yusof Ishak Institute, which was actively involved in coming up with the initial concept, provided financial and other support for the workshop, and assisted in preparing the manuscript for publication. We also wish to express our deep appreciation to the authors for their enthusiasm and tireless commitment to this endeavor. Finally, we wish to thank the excellent team of reviewers and editors who worked on this volume and provided much-needed guidance. Yasuyuki Sawada Chief Economist and Director General Economic Research and Regional Cooperation Department ADB ix ABOUT THE EDITORS Cassey Lee is a senior fellow and co-coordinator of the Malaysia Studies Programme at the ISEAS-Yusof Ishak Institute, Singapore. Prior to joining ISEAS, he held academic appointments at the University of Wollongong, Nottingham University Business School, and University of Malaya. Lee received his PhD in economics from University of California, Irvine.