After 8 years of labour Southeast Asia summit to announce birth of economic community

KUALA LUMPUR, Malaysia – Southeast Asian leaders gathered Friday for a weekend summit at which they will formally create a unified economic community in a diverse region far larger than the European Union or North America, with hopes of competing with China and India.

The 10 leaders in the Association of Southeast Asian Nations will sign a declaration on Sunday establishing the ASEAN Economic Community, originally envisioned in 2002.

“The coming into being of the ASEAN community marks a new beginning for more than 630 million people, the birth of an integrated region — an entity that is a global economic force,” Malaysian Prime Minister Najib Razak told business leaders.

Creation of the AEC will be the centerpiece of a weekend summit that will also grapple with maritime disputes with their common rival, China. Not far from the surface will be worries about Islamic extremism, especially in the Muslim-majority nations of Indonesia and Malaysia.

Although ASEAN has helped greatly increase the region’s economic, cultural and political co-operation, there is a long way to go before the AEC becomes fully functional after becoming a legal entity on Dec. 31. ASEAN countries have torn down tariff barriers and have removed some visa restrictions, allowing people to work in other countries provided the jobs are in eight sectors, including medical, engineering and tourism.

But ASEAN falls short in more politically sensitive areas such as opening up agriculture, steel, auto production and other protected sectors. Intra-regional trade has remained at around 24 per cent of ASEAN’s total global trade for the last decade, far lower than 60 per cent in the European Union.

AEC “is not the finished article. Neither is it officially claimed to be. There is much work to be done,” said Mohamad Munir Abdul Majid, chairman of a council that advises ASEAN on business matters. “There is a disparity between what is officially recorded as having been achieved … and what the private sector reports as their experience.”

There are also other hurdles, such as corruption, uneven infrastructure and unequal costs of transportation and shipping. A wide economic gulf divides Southeast Asia’s rich and middle income economies — Malaysia, Indonesia, Singapore, Brunei, Thailand and the Philippines — and its four less developed members, Communist Vietnam and Laos, Myanmar and Cambodia.

“For instance, if you were to transit from one country to another, there are no tariffs at the borders. But once you enter … you may have to grease the palms of some people in certain ASEAN countries to proceed. These ‘behind the border’ barriers … are a key impediment slowing down the process of integration,” said Tan See Seng, a professor of international relations at the S. Rajaratnam School of International Studies in Singapore.

Malaysian Trade Minister Mustapa Mohamad agreed that non-tariff barriers remain. “There is a need for courage and political will. Sometimes we chickened out for whatever reason. It’s important for us to push forward, to run faster,” Mustapa told a regional business conference.

The AEC was envisaged in 2002 — and a blueprint created in 2007 — to face competition from China and India for market share and investments. While China’s economic growth is expected to slow to an average of 6 per cent annually over the next five years, India’s expansion is likely to pick up to 7.3 per cent in the same period, according to the Organization of Economic Cooperation and Development.

ASEAN’s relationship with China is highly complex and ambivalent. Despite being a competitor, China has also played the role of a principal financier in helping ASEAN reach its goals to temper its image as an economic threat.

At the same time, it has not hesitated to bully ASEAN countries in staking its claim to most of the South China Sea, where the Philippines, Malaysia, Vietnam, Indonesia and Brunei have competing claims. Diplomatic squabbles have frequently erupted over oil and gas exploration and fishing rights in the area. China has also irked ASEAN countries by creating artificial islands from reefs to bolster its claim.

A declaration that China signed with ASEAN in 2002 to resolve the disputes peacefully has become essentially worthless, prompting ASEAN Secretary-General Le Luong Minh to tell The Associated Press, “That’s why we need a new agreement which would be legally binding.”

ASEAN and its partners are also expected to affirm their commitment to co-operate in the war against terrorism following last Friday’s attacks in Paris, which killed at least 129 people and wounded hundreds.

The ASEAN summit will also include separate meetings with China, South Korea, India, Japan and the United States. On Sunday, those five countries along with the 10 ASEAN countries and Australia, New Zealand and Russia are to meet in the so-called East Asia Summit to discuss regional and global issues such as terrorism, the migrant crisis and cyber security.


Associated Press writer Annabelle Liang in Singapore contributed to this report.