Malaysia pushes for greater ASEAN integration

Author: Shankaran Nambiar

One of Malaysia’s leading banks, the CIMB Group, released a statement last February in which its chief executive, Dato’ Sri Nazir Razak, stated that ‘we have to see ASEAN as a region and produce ASEAN champions’.

The statement is significant because CIMB is one of a handful of banks seeking to extend its operations across ASEAN countries.The statement has added significance because Malaysia has a growing services sector which it hopes will help drive the country’s future growth. Trade in goods is still a priority for Malaysia, but it will not be long before a transition toward trade in services takes place — and it is banks like CIMB that are already leading this trend.Nazir is right when he notes that ‘ASEAN needs to have scale in order to deliver in today’s world’. And ASEAN has just that: a community of 10 economies with a combined population of almost 600 million and a total GDP of US$1856 billion. The growth prospects of the middle class in economies like Thailand, Indonesia and even in Malaysia have not yet been fully realised.On the other hand, ASEAN member countries are at various stages of development. Singapore, for example, has reached economic maturity and may not be capable of greater incremental growth than other countries in the region such as Vietnam. Meanwhile, Cambodia is on the verge of starting off on its path to prosperity, and the possibilities that Myanmar will present in the near future are also immense. Regardless of these differences, ASEAN represents a significant source of market demand that has not been tapped to its full potential for one reason in particular: in a world where size matters, ASEAN has everything it takes to succeed, but it has not yet managed to act as a single entity.There have been various attempts at securing a more unified ASEAN, such as the plan to develop an ASEAN Community by 2020. This community is to be founded on three pillars: the ASEAN Security Community, the ASEAN Economic Community (AEC) and the ASEAN Socio-Cultural Community. Nazir also reportedly commented on constraints to cross-border trading throughout the ASEAN region, so an AEC would go some way in addressing obstacles to seamless trading in goods and services. But ASEAN economic integration must look beyond trade. Integration must occur at multiple levels: financial markets, environmental policy, trade facilitation, and standards and compliance. ASEAN’s institutional framework could also be improved by ensuring good governance across all ASEAN countries, with particular emphasis on the principles of economic freedom, liberty and the rule of law. If ASEAN countries commit to integration in this form, it will help them act more as a single entity.Consequently, a great deal of attention must be devoted to creating the right institutional architecture. This can only be achieved by maintaining a relevant bureaucracy, by introducing organisations with a trans-ASEAN jurisdiction, and by strengthening the ASEAN Secretariat.

These are important yet difficult things to do. Strengthening the ASEAN Secretariat means securing a stronger mandate for the secretary-general; it implies empowering the secretariat with more muscle and more authority, and not merely a bigger budget. This can only happen if member states agree not to defend their national interests at the expense of regional interests. It is concerns such as these that may have prompted Nazir to say that the ASEAN Secretariat needs ‘someone who can really shake things up’. This seems simple and obvious enough, but the enormity of the problem is quite another thing. The issues that have to be handled stretch across national boundaries and impinge upon national sensitivities. They also raise questions about national sovereignty.

Strengthening the ASEAN Secretariat requires that it adopt an institutional structure along the lines of the European Union, but a development of this magnitude needs the will of all ASEAN member countries. In this sense, it is misguided for Nazir to think that a single individual, no matter how dynamic he or she may be as secretary-general, can make such big things happen and take ASEAN to greater heights despite current trends in the opposite direction.

It is also unsure whether the post of secretary-general can be made attractive enough for corporate leaders, another of Nazir’s recommendations. ASEAN’s salary scales have not changed in the last decade and so they are not well positioned to entice corporate leaders, at least not from Malaysia. It is hard to imagine that the CEO of one of the region’s many corporations would take a massive salary cut to head the ASEAN Secretariat, august as that post may be. But anything is possible if the secretariat is strengthened, and that may be the first step toward achieving a more integrated ASEAN.

Shankaran Nambiar is Professor of Development Economics at Manipal International University, Malaysia. 

This article is reproduced from the East Asia Forum.

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