BUSINESS IN EAST AND SOUTHEAST ASIA Regional economic cooperation in Southeast Asia: ASEAN Dr. Erja Kettunen-Matilainen Helsinki School of Economics, Center for Markets in Transition

The Association of Southeast Asian Nations Background and establishment: Cold War in the 1960s: political and security conflicts in Asia Bangkok Declaration 1967 Five founding members Formal objectives: economic and cultural cooperation Loose agreement Common policy towards Vietnam in the 1970s and 1980s

Map of ASEAN © Erja Kettunen

The Association of Southeast Asian Nations Background and establishment: Cold War in the 1960s: political and security conflicts in Asia Bangkok Declaration 1967 Five founding members Formal objectives: economic and cultural cooperation Loose agreement Common policy towards Vietnam in the 1970s and 1980s

ASEAN: enlargement and functions Globally, from ’geopolitics’ to ’geoeconomics’ in the 1990s Easing of political tensions General trend of regionalism Enlargement of ASEAN Functions of ASEAN: mutual consultation on external relations; international diplomacy Objective of ASEAN: sustaining political stability Stability attracts FDI into the region  economic growth

Vietnam became a member of ASEAN in 1995 after the end of Cold War. (Hanoi, Vietnam)

ASEAN: enlargement and functions Globally, from ’geopolitics’ to ’geoeconomics’ in the 1990s Easing of political tensions General trend of regionalism Enlargement of ASEAN Functions of ASEAN: mutual consultation on external relations; international diplomacy Objective of ASEAN: sustaining political stability Stability attracts FDI into the region  economic growth

ASEAN cooperation: economic and trade issues 1977 ASEAN Preferential Tariffs Arrangements (PTA): import tariff reductions ASEAN Industrial Projects; ASEAN Industrial Complementation; ASEAN Industrial Joint Ventures Slow progress in implementation However, ASEAN became model for third world cooperation In the 1990s, regional cooperation in trade began among ASEAN

ASEAN Free Trade Area (AFTA) Response to regionalism and regionalization trends in Europe and North America Common Effective Preferential Tariff (CEPT) scheme 1992 Trade preferences among the member countries Gradual tariff reductions in intra- ASEAN trade (tariffs to 0-5 %) Faster tariff reductions for 15 product groups

Historically and today, Singapore is the centre of trade in ASEAN. (Restored shophouses in Singapore)

ASEAN Free Trade Area (AFTA) Response to regionalism and regionalization trends in Europe and North America Common Effective Preferential Tariff (CEPT) scheme 1992 Trade preferences among the member countries Gradual tariff reductions in intra- ASEAN trade (tariffs to 0-5 %) Faster tariff reductions for 15 product groups

Other forms of ASEAN cooperation In the 1990s, sub-regional cooperation in trade and investments –Growth Triangles: cross-border areas between three countries –E.g. Singapore-Johor-Riau (SIJORI) In 2004, decision to establish a common market by 2020 –’ASEAN Community’ –Free flow of goods, services, investment, and a freer flow of capital

Singapore-Johor-Riau Growth Triangle © Erja Kettunen

Other forms of ASEAN cooperation In the 1990s, sub-regional cooperation in trade and investments –Growth Triangles: cross-border areas between three countries –E.g. Singapore-Johor-Riau (SIJORI) In 2004, decision to establish a common market by 2020 –’ASEAN Community’ –Free flow of goods, services, investment, and a freer flow of capital

ASEAN organization Loose institutional structure: consultation and cooperation Central unit: ASEAN Secretariat (in Jakarta) Decisions made by consensus Cooperation is slow and subject to fluctuations See for basic information and documents ASEAN logo:

Trade regimes and policy-making No common trade policy, but different approaches based on industrial structures From import substitution policy to export-oriented strategy Main export sectors Indonesia: labour-intensive manufacturing Malaysia: palm oil, electronics Philippines: agriculture, electr. Singapore: trade, banking, finance Thailand: labour-intensive manuf. Brunei: oil and natural gas

Tourism is an important industry in many ASEAN countries. (Trishaws in Melaka, Malaysia)

Trade regimes and policy-making No common trade policy, but different approaches based on industrial structures From import substitution policy to export-oriented strategy Main export sectors Indonesia: labour-intensive manufacturing Malaysia: palm oil, electronics Philippines: agriculture, electr. Singapore: trade, banking, finance Thailand: labour-intensive manuf. Brunei: oil and natural gas

External relations: Dialogue Partners System Annual meetings with the dialogue partners within the DPS Objectives: market access, science and technology, social and cultural development, etc. Unique procedure in the developing country groupings Committees with diplomatic missions around the world