Singapore's trade initiatives undermine ASEAN economic policy
| Stratfor.com
Analysis November 28, 2000 Summary: The Association of Southeast Asian Nations held its annual summit in Singapore Nov 22-25. But Singapore, the most modernized of the organization's members, has embarked on a separate series of trade initiatives without the consent of its larger, poorer partners. While the nations signed several new regional initiatives at the summit, Singapore's actions place the economic future of the organization in doubt. ASEAN has always been a strange animal. Its 10 members ranging from democracies to dictatorships have little in common. Singapore is a squeaky-clean, politically stable global transshipment and financial hub. Cambodia, ASEAN's newest member, is still reeling from a brutal civil war and remains almost totally dependent upon foreign aid. Per capita income in Cambodia is less than 1 percent of Singapore's $30,000 per capita income. This year's ASEAN summit threw these differences into sharp contrast. Agreement upon an e-commerce treaty was one of the summit's successes. But in Myanmar, ASEAN's most politically repressive member, simply owning a computer requires government approval. Talk of a wider free trade agreement among members, in the works for decades, remains just talk. Most ASEAN states export strikingly similar goods, undermining arguments for a free trade agreement. In its most ambitious incarnation, the ASEAN Free Trade Area would not achieve zero tariffs until 2010. Singapore's government, frustrated by the slow pace of integration, feels its neighbors' economic shortcomings should not weigh it down. At the summit, Singaporean Prime Minister Goh Chok Tong stated, Those who can run faster should run faster. They should not be restrained by those who don't want to run at all. To this end, Singapore continues efforts to bolster its trading position independent of ASEAN. It has signed bilateral trade deals with Australia, Canada, Chile, Japan, Mexico, New Zealand, South Korea and the United States, and it is negotiating more comprehensive deals with almost all of them. Singapore's unilateral actions have upset many of its ASEAN partners, most notably Malaysia. The latter wants ASEAN to conclude its own trade agreement first, then negotiate with other countries as a bloc. Singapore, however, sees this idea as a nonstarter. Differences among ASEAN's 10 economies make for an awkward grouping, and the negotiations predicated on ASEAN's founding principle of noninterference are excruciatingly slow. In contrast, Singapore's small size and lack of an agricultural sector allow its government to negotiate free trade deals quickly. Furthermore, its position as the world's largest transshipment center means the economy benefits from trade, so Singapore supports free trade among all states even in the rare occurrences when it is excluded. In making itself a major economic entrepot and transit point, Singapore has attained additional political clout as well. Singapore's total 1999 trade flows including re-exports totaled more than $210 billion. That sum is roughly equivalent to the combined GDPs of Indonesia and Malaysia. Politically, ASEAN hits rough patches from time to time as well. After Singaporean Prime Minister Lee Kuan Yew predicted Indonesian President Abdurrahman Wahid would resign soon, the often- unpredictable Wahid stated Singaporeans despise Malays and threatened to shut off Singapore's fresh water supplies. This is not to say ASEAN is useless as a political group. ASEAN allows 10 Southeast Asian states to speak with a coherent voice in international forums, thus granting them stature none could hope to have alone. It allows them to stand up to the major regional powers, China and the United States. It also is evolving into the region's political fulcrum: China, Japan and South Korea recently agreed ASEAN is an ideal forum for their own trilateral cooperation. It even has some rather clever mechanisms like the ASEAN Regional Forum, Asia's premier security talk-shop for allowing states to communicate frankly without risking diplomatic breaches. But tensions among the wildly varied states constantly crop up. It is these tensions that will limit ASEAN's future as an economic entity. Governments willing to trade with Internet-savvy Singapore cringe at the thought of investing in some of its more unstable partners, such as Indonesia, the Philippines or Vietnam. Singapore largely has written off free trade within ASEAN as a viable short- term goal, preferring instead to focus its efforts on more developed partners outside Southeast Asia. Without Singapore's leadership, an ASEAN free trade agreement and regional economic integration are doubtful. |