Global Policy Forum

Mid-Life Crisis for ASEAN


By Chan Akya

Asia Times
December 16, 2006

A mid-life crisis usually comes about when an individual realizes that he/she has been chasing the wrong goal, rather than when the person realizes that their goals are unattainable. Much the same is apparent for ASEAN - the Association of Southeast Asian Nations - that last week canceled its planned get-together in the Philippines, ostensibly to avoid a typhoon but more likely because of the threat of a terrorist attack. In itself, the cancelation may have been a good thing, because ASEAN has very little to discuss in the first place. (All mentions of ASEAN in this article refer to the organization, rather than member states.)

The disparate range of demands from ASEAN members as they evolve economically and politically has the effect of pulling the organization in multiple directions. This would be challenging for any grouping, but for one that lacks basic infrastructure, the effect has been deadly. ASEAN has a small secretariat in Jakarta, but most of the coordination is achieved through national secretariats in member countries. That's a polite way of saying that nothing of importance can really be enforced. In and of itself, this is the biggest factor that will cause the unraveling of ASEAN.

Buying the peace

The formation of ASEAN in 1967 was almost directly a result of a desire by the United States to forge a common front against communism, given the slide apparent in Indo-China at the time. As a grouping aimed at an obvious external threat, it would have been easier to start off with a central organization.

Instead, due to personality and political conflicts between members (for example, between Singapore and Malaysia), the grouping became a talk-shop in order to avoid giving the impression that countries could interfere in each other's affairs. Even so, it achieved a key goal of member states vowing to avoid war with each other, recognizing that the slide towards poor neighborly relations often proves fertile ground for malcontents such as communist rebels.

The original members of ASEAN also benefited from the sharp increase in global trade beginning in the 1970s, aligning themselves with the rapid growth of the US and Japanese economies during the period. The impetus toward job creation was helped by significant investments from US companies in sectors ranging from natural resources to automobile manufacturing. This period of rapid growth was however a mixed blessing, as ASEAN failed to make the transition into an integrated economic zone. The decline of the Soviet Union effectively ended the grouping's raison d'etre, as all subsequent crises have led to a weakening of the group, exposing as they did its failure to integrate economic and political interests. The two most important were of course the Asian financial crisis of 1997-98, and the increase in terrorism across the region.

Asian financial crisis

The unwinding of the Thai currency peg in 1997 led to an increase in currency speculation across Asia, and eventually the contagion spread to virtually all parts of Asia. In the first instance, the failure of ASEAN to rally behind Thai authorities in their defence of the currency peg marked an abject failure to foresee the potential wider impact of the crisis - a function of the lack of central leadership at the organization as countries sought to protect their own interests rather than any common good.

Particularly galling for both Thailand and subsequent victims Malaysia and Indonesia was the fact that currency speculators in the main operated from fellow ASEAN member Singapore. Malaysia's then Prime Minister Mahathir Mohamad made outrageous remarks condemning a "Jewish conspiracy", but many media analysts at the time assumed that his "intended" target was actually Singapore.

Further inflaming the situation, Indonesian politicians blamed ethnic Chinese businesspeople for the crisis affecting their country, leading to widespread riots against Chinese families across the country. Many businesspeople fled to Singapore, where they felt safer and more welcome. This naturally led to accusations in the Indonesian media that Singapore was shielding the businesspeople from legal action back in Indonesia, causing relations to decline further. Once again, the ambiguity of ASEAN as an organization proved a hurdle in any attempt to reconcile the two sides.

As the crisis ended, Singapore lost a significant opportunity to export its more sophisticated business and legal practices to the rest of ASEAN. The main reason was members' promise not to interfere in each other's affairs, and yet in an increasingly global environment, such strictures were largely pointless. A failure to address basic corporate governance and bankruptcy procedures slowed down the recovery from the Asian financial crisis across Southeast Asia.

This is in contrast to the experience in many other Asian countries, for example South Korea, which rebounded much more quickly by adopting improved procedures. The fact that Singapore's relations with its neighbors had deteriorated due to the above factors played a part in this eventuality. Ironically enough it was these countries rather than Singapore that actually bore the full brunt of the mistake.

The second missed opportunity following the Asian financial crisis was a failure to push through a free trade zone. Malaysia in particular objected, due to the impact on its palm oil and auto manufacturing businesses. This failure to integrate quickly meant the continuation of wasteful government support for failed businesses across the region, in turn delaying recovery from the crisis.

ASEAN could still have gotten away with sub-optimal practices, but for the emergence of China at the same time as a higher value-added producer. China's rise came at the expense of ASEAN countries, whose failure to create more viable and global businesses has meant a continuation of the downward spiral from the 1990s in certain areas of manufacturing.

The crisis had its upsides, as Singapore cemented its position as the sole financial center of South and Southeast Asia in the aftermath of the Asian financial crisis. Putative competitors such as Kuala Lumpur fell by the wayside due to their failure to improve governance and the rule of law, as demonstrated so clearly in the aftermath of the financial crisis.

Terrorism resurgent

By far the biggest crisis confronting the region now came about in 2002 when terrorists struck at the tourist resort of Bali in Indonesia. Subsequent expansion in terrorist activity is apparent elsewhere in the region. The failure of ASEAN to address the problem comprehensively can be laid to Malaysia's intransigence on key issues.

With both the Philippines and Thailand adversely affected in recent years, it only seems a matter of time before the entire region is tarred with the label of being unstable in coming years. Here too, the grouping has lacked a central leadership that could have examined the problem in its entirety rather than the specifics of actual terrorist attacks. This failure shows that nothing was learned from the experience following the Asian financial crisis. It is my opinion that a resurgence in Islamist terrorism across Southeast Asia will push growth rates down sharply over the next few years.

Unlike the more successful European Union, ASEAN is quickly headed toward becoming a nonentity. The group, which can claim to be a success in dealing with its original objectives of securing the peace and promoting economic prosperity, has now clearly failed to do either in a changed environment.

This failure is all about the inability of member states to accept the need for a strong central authority, like the EU Commission and parliament, that could essentially legislate across the region. In turn, this will cause ASEAN to unravel as a grouping in the coming years, as countries adopt bilateral agreements in place of multilateral or collective bargains, and economic and political threats emerge.

ASEAN has a mid-life crisis, from which it may never really recover.

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