ASEAN & Regional Economic Integration

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ASEAN & Regional Economic Integration

With the changing global economic paradigm shifts the importance of close collaboration and integration between the regional blocs has further enhanced. World major powers use sanctions’ tools to obtain their economic objectives. This has increased the utility of trade and economic cooperation between the blocs so that the effectiveness of the sanctions may either be reduced or avoided.

However, multi polar world provides numerous options for skirting sanctions imposed by the a major super power on any country’s trade. For instance, major economic powers continued importing oil from Iran despite US sanctions. Similarly, Venezuela also used Russian channel to export oil and skirted US sanctions. Moreover, North Korean President Kim seems inclined to Russia to fight out US sanctions.

Amid this scenario, Association of Southeast Asian Nations (ASEAN) is also in dire need to integrate with other regional blocs to harvest economic yields as well as to avoid any kind of trade tariffs on exports to other regions. It is important because recently Indonesia President Joko Jokowi Widodo and Malaysian Prime Minister Mahathir Mohamad, have sent a joint letter to officially protest the European Union’s plan to remove palm oil from its market.

Indonesia and Malaysia produce over 80 percent of global palm oil output, created a historic moment for ASEAN because this is likely the first time members have jointly sent a protest letter to another country or trade bloc. They strongly warned they were prepared to take retaliatory measures. The two countries would not hesitate to take the case to the World Trade Organization, in addition to taking unilateral actions. Both the governments view this as a deliberate, calculated and adverse economic and political strategy to remove palm oil from the EU marketplace.

Last month, the European Commission dropped the use of palm oil as a base for biofuel, blaming the cultivation of the commodity for severe deforestation. Palm oil-based biofuels are to be completely prohibited by 2021. Should this delegated regulation enter into force our governments shall review our relationship with the European Union as a whole, as well as its member states. This may include the reviewing of our partnership negotiations, procurement contracts and key imports from the EU, the two leaders warned.

Earlier, in a letter to her ASEAN counterparts Indonesia Foreign Minister Retno LP Marsudi stated that developments in the EU were hurting the interests of ASEAN palm oil-producing states and caused the deferral of the elevation of the ASEAN-EU dialogue relations to a strategic level. The minister urged other members of ASEAN to follow suit. With Singapore an exception, all ASEAN members are major commodity and resource exporters. Therefore, ASEAN should send a strong warning to their trading partners, especially in the Western bloc, to think twice before playing fire with Southeast Asia.

The EU should remember that times have changed and ASEAN is in a quite strong position to retaliate against any punitive and discriminatory acts by their trade counterparts. Decades ago, European countries often acted arbitrarily citing various pretexts, such as the protection of the environment and human rights, to ensure their economic domination.

Notable progress has been made in areas such as traditional and non-traditional security, trade, tourism, agriculture, transport, education, health, culture and information, media, environment, and narrowing the development gap.19

We don’t believe the EU’s palm oil policy is solely based on noble motives to protect our planet. They pretend to forget the major efforts undertaken by Indonesia and Malaysia to protect the environment. Evidently the EU opts to punish ASEAN just to protect their uncompetitive products.

Issues of human rights, labor protection, unfair trade practices, corruption or abuse of power are often cited by Western countries to dictate to developing nations, although they are not entirely wrong. There are still many problems, but the EU should stop using rotten tactics to force it will in trade and economic affairs. ASEAN should unite as a regional grouping to oppose such practices.

At the same time, concluding the negotiations for the Regional Comprehensive Economic Partnership (RCEP) presents the biggest challenge to Thailand as this year’s Asean chair, trade officials said, as little tangible progress has been made in the talks so far. Good headway has been made in the development of the Asean Single Window to improve the flow of goods within the region at 25th Asean Economic Ministers’ Retreat (AEMR) in Phuket, where trade officials from the 10 Asean members discussed issues surrounding economic integration in the region.

Thailand has set conclusion of the RCEP negotiations in 2019 as one of its 13 economic deliverables as Asean chair. The conclusion of the RCEP negotiations by the end of this year is the most important and challenging issue. It will be at the centre of discussions during the AEMR meeting, acting commerce minister Chutima Bunyapraphasara said.

RCEP is a 16-country mega-trade pact encompassing 10 Asean nations as well as India, China, Japan, South Korea, Australia and New Zealand. Negotiations have been going on for seven years, and seven out of the 20 chapters in the RCEP negotiations have been completed, leaving Thailand with the challenge of completing 13 chapters in one year. If the negotiations are successful, RCEP will be the largest multilateral trade pact in history.

The combined gross domestic product of RCEP members accounts for up to 28 per cent of global GDP and as much as 30 per cent of the value of world trade. In 2018, the trade value between Thailand and the RCEP countries was worth some US$70 billion. Thailand’s exports to RCEP countries currently account for 58 per cent of the Kingdom’s total exports, according to data from the Commerce Ministry. After the AEMR, Asean senior officials will meet for at least three more times through the rest of 2019 to conclude the negotiations by November.

Our negotiation strategy is to first make sure that Asean members have a common position on the different chapters of the RCEP negotiations. This will be the key goal of the AEMR and the following RCEP meetings. When Asean members stand on common ground, the 10 Asean countries can then start to push the remaining six members of the RCEP to come to a compromise on the current outstanding issues as a bloc, she explained.

At the same time it is welcoming development at the 20th ASEAN-China Joint Cooperation Committee (ACJCC) where both the sides reaffirmed their commitment to further strengthen their strategic partnership. The meeting welcomed the significant progress made in the implementation of the ASEAN-China Plan of Action 2016-2020 which included the large number of activities and projects implemented in more than 82% of the identified action lines. Notable progress has been made in areas such as traditional and non-traditional security, trade, tourism, agriculture, transport, education, health, culture and information, media, environment, and narrowing the development gap.

Progress was also achieved in following up the decisions made by the Leaders of ASEAN and China at the 21st ASEAN-China Summit last November, in line with the ASEAN-China Strategic Partnership Vision 2030 to further strengthen the relations. Both sides agreed on the need to further expand the substantive economic relationship, with efforts focused on strengthening trade and investment relations, including through the implementation of the Protocol to upgrade the ASEAN-China Free Trade Area as well as enhancing connectivity.

People-to-people exchanges will also be strengthened including through enhanced cooperation in tourism and education. ASEAN welcomed China’s continued support for ASEAN’s community-building efforts, including its intention to increase contribution to the ASEAN-China Cooperation Fund to support more cooperation projects.

The meeting discussed activities to be conducted during the ASEAN-China Year of Media Exchange 2019 to promote mutual understanding between the two sides. The ASEAN-China Year of Media Exchange was launched in January in Jakarta and in February in Beijing, and a joint statement on media exchanges is expected to be issued by the ASEAN-China Summit in November this year.

Besides China, ASEAN and Republic of Korea (ROK) reaffirmed commitment to further strengthen strategic partnership and enhance cooperation at the 6th ASEAN-ROK Joint Cooperation Committee (JCC) meeting. Both sides acknowledged the significant progress made in the implementation of the Plan of Action 2016-2020 with a large number of activities and projects implemented to address more than 88% of the identified areas of cooperation. They took note of the progress in non-traditional security, trade, transportation, agriculture, environment, culture and arts, and people to people exchanges. Both sides also agreed to further enhance cooperation in areas such as education, disaster management, cyber security, connectivity, and humanitarian assistance.

The meeting noted the positive status of development cooperation between ASEAN and the ROK, particularly in support of the ASEAN community building efforts. Various projects have been implemented or are ongoing to support ASEAN in narrowing development gaps and integration. ASEAN welcomed the ROK’s plan to double its contribution to the ASEAN-ROK Cooperation Fund (AKCF) by the end of 2019 to support more joint programmes and projects.

Writer is the CEO of Mélange IT Solutions & The Asian Telegraph, an expert on Political Economy, & Director of Bandial Group