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Time for a reality check

Updated On: Jul 26, 2012
This commentary was originally published in TODAY on Thursday, 26 July 2012.
Pressure is mounting for countries in the Association of Southeast Asian Nations (ASEAN) to get their act together as the 2015 deadline for the formation of an ASEAN Economic Community (AEC) looms ever closer.
Policy wonks have described ASEAN as a market of more than 600 million people with a gross domestic product equal to India, hence the inherent potential in a union such as the AEC.
The AEC is being touted as one of three pillars of a cohesive ASEAN Community, with the other two being the ASEAN Security Community and ASEAN Socio-Cultural Community.
The main objective of the AEC is to achieve economic integration in the region. The aim is to create a single market and production base; a highly competitive economic region with equitable economic development; and then to fully integrate this region into the global economy.
But the current reality is that few people see ASEAN as a single economy. Investors still view ASEAN as 10 separate economies, rather than a single market.
Citizens in countries like Singapore rarely see themselves as part of a greater ASEAN Community, at least not in the way that Europeans have come to think of themselves as part of the European Union.
It is not hard to understand why countries may be wary or less than enthusiastic about integration. To form an economic bloc, ASEAN needs to integrate across a wide range of areas, and many of these are potentially sensitive, either politically or socially, to member states.
The blueprint for realising the AEC by 2015 was adopted and signed by ASEAN leaders in 2007 in Singapore during their annual summit meeting.
Yet, in Singapore itself, the concerns are rarely about liberalising trade, investment and services, as the economy is largely predicated on being open in these areas and has been for a long time.
In comparison, labour is a more sensitive issue for Singapore. Academics and policy advisers call for the freer movement of labour in ASEAN as a necessary part of connectivity.
From an economic point of view, this makes sense. But in Singapore, there has been increasing worry that the island is becoming overcrowded as well as complaints about the low ratio of locals to foreigners in the job market. Under these circumstances, arguments to liberalise labour are a hard sell.
There have even been calls for countries to cede more authority to new regional institutions at the ASEAN level, allowing for better coordination of economic policy. But the government in Singapore and those of other ASEAN countries are naturally wary about such proposals.
There is also scepticism in the private sector over ASEAN's plans to integrate into an economic community. Singapore firms and foreign multinationals here have taken the promises of the AEC with a healthy grain of salt.
Some criticisms are fair, given that progress towards integration has lagged. There are still questions about how integration will work, given the differences in levels of economic development among ASEAN members.
To attract interest, ASEAN needs credibility in this area. Unfortunately, as a regional association of countries, everything done at ASEAN is by consensus. As the recent meetings in Phnom Penh proved, even reaching a compromise is not always possible. This is especially the case when dealing with delicate issues like competing claims over the South China Sea.
That said, Myanmar has made specific banking reforms to support its integration into ASEAN before 2015 and, from 2014, banks from ASEAN will be allowed to enter the Myanmar market. This gives hope that there is some political will in this area.
Singaporeans in general might be somewhat more pro-ASEAN than citizens of other nations in the grouping. As a small city-state, its people know that friendships with other countries are necessary in order to survive.
That said, Singapore's chief concerns remain the health of the local economy and its own growth projections. More attention is paid to the economies of China, Japan, the United States and the European Union, than to the markets of ASEAN neighbours. Unlike Europe, the idea of a united ASEAN has not quite entered people's hearts and minds. Creating a sense of belief in ASEAN will be a difficult task.
A solution might be increased dialogue and transparency. If the AEC has as much promise as politicians claim, the benefits need to be shown. At the same time, it is in the vested interest of businesses to keep themselves up to date about the latest developments in ASEAN, and to convey their concerns and needs to their governments, so that the AEC is a community that represents the interests of all stakeholders.