SUNS 4347 Thursday 17 December 1998
SOUTH-EAST ASIA: AFTER SUMMIT, SELLING PRESCRIPTIONS AT HOME
Hanoi, Dec 16 (IPS/Johanna Son) -- Nine South-east Asian leaders vowed Wednesday to "spare no efforts" in reviving their flagging economies by further speeding up trade and investment liberalisation -- at a time when the recession may well make these politically unpalatable.
Diplomats characterise the decisions of the Association of South-east Asian Nations (ASEAN) leaders, announced at the end of their two-day summit here, as a strong response to remain outward-looking in light of pressures to do otherwise.
"We shall spare no efforts to quickly restore financial and macroeconomic stability, bring about early economic recovery and maintain sustained growth," the leaders' declaration said.
The declaration was among the three documents issued by the leaders of Thailand, Singapore, Brunei, Malaysia, Indonesia, the Philippines, Laos, Burma and Vietnam. The other two were a plan of action for the next six years, and a "statement on bold measures".
The documents show ASEAN's desire to deepen integration in a region of some 500 million people and its hope that more intra- regional trade and investment will help see it through its toughest
crisis in decades.
The statement on bold measures says Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand will advance the reduction of tariffs to 0 to 5 percent under AFTA by one year, to 2002. Vietnam will have a 2006 deadline and Laos and Burma, 2008.
"We recognise that the economic and financial upheaval that currently afflicts our economies and societies has severely set back any of the gains that our nations and our Association have achieved," the declaration said.
"We shall overcome those economic and social difficulties by working together in ever closer cooperation and ever stronger solidarity," it added.
Beyond AFTA acceleration, the statement on bold measures says ASEAN will free up even further its investment climate for regional and non-ASEAN investors, especially in manufacturing, to woo back foreign capital and to help economies' exports. Special incentives are open to firms that apply for investment in ASEAN through 1999 and 2000.
Philippine Foreign Secretary Domingo Siazon says faster liberalisation will force ASEAN firms to be more competitive, adding the group should be lauded for its "bold economic measures". He said: "If you become more productive in sectors of industry because o competition and if you are giving signs of a more liberal policy, investors will come in."
"We assure the world that we are still committed to opening up liberalisation, to integration, to making our economies closer to each other. This is a very important message to the world," Thai Foreign Minister Surin Pitsuwan said earlier.
But hastening market opening and changing the rules to draw more investors involves changes in local policies that often have social costs during an already harsh slowdown, at a time when local businesses are hurting from low demand and workers are losing jobs.
This may well make it more difficult for leaders to push more rapid reduction of trade barriers or change investment rules.
In Thailand, critics have slammed the government for moves to amend long-time policies to lure foreign investors but are seen as "selling out" to them, such as allowing foreign ownership of land.
The statement on bold measures lists "new measures" offered by ASEAN countries.
Indonesia, hardest hit by the crisis, offers wholesale and retail trade and manufacturing up to 100 percent foreign equity ownership, along with full foreign ownership of listed banks.
Burma will extend its minimum three-year corporate exemption to all investment projects. The Philippines said it is in the process of opening retail trade and distribution to foreign equity, a touchy
measure in a country where retail trade has historically been shielded from foreign participation.
Thailand says it will allow 100% foreign equity ownership for manufacturing investments, regardless of locations.
But while their economies undertake reforms, ASEAN leaders said "reform efforts at the national level must be reinforced by corresponding reforms at the global level to address weaknesses in the international financial architecture".
Reflecting concern on damage done by speculators and rapid fluctuations in the financial markets, the leaders urged more discussion on financial reforms "within the Group of 22 or an expanded
version of it".
They resolved to address the social costs of the recession, improve the ASEAN surveillance process to warn about trouble in financial markets, and pursue "orderly capital account liberalisation".
ASEAN will study long-term proposals such as the creation of a regional currency and raising long-term financing in local currency, in order to cut overdependence on bank finance and limit financial
risks.
For now, ASEAN leaders are bent on showing that the 31-year-old group remains united and relevant crises, despite cracks in cohesion manifested in bilateral tensions and varied approaches to the recession.
Closing the summit, Vietnamese Prime Minister Phan Van Khai said: "We have demonstrated the determination to strengthen unity on the basis of traditional 'unity in diversity' and turn it into a driving force to elevate ASEAN's cooperation to a higher plane."
But for all the talk about unity and 'bold' steps, the differences in macroeconomic and financial policies of by ASEAN countries are clear. Some differences are due to different political systems, others due to different economic beliefs.
Malaysia's Prime Minister Mahathir Mohamad said Kuala Lumpur could not see its economy dragged down by predatory speculators while the international community "dawdled". In contrast, Thailand and Singapore stressed the need to stay on the path of economic openness if ASEAN was
not to be written off by foreign investors.
Apart from AFTA and investments, there was little talk of coordinating policies on other issues like debt repayment, even as some have suggested that greater transborder coordination would do ASEAN a lot of good.
"If there was any moment that ASEAN needed solidarity, it is now," said a recent paper by the Bangkok-based Focus on the Global South. "As the old saying goes, ASEAN countries must hang together today or they will surely hang separately tomorrow."