Chapter (5): ASEAN
5.3. Why ASEAN was established
In order to fully understand the ongoing process of ASEAN integration, we need to capture the main reasons for founding such organization while taking into consideration the manner in which it developed, and realizing its modus operandi in international and regional relations.339
As mentioned above, ASEAN was established by the five founding members (Indonesia, Malaysia, Philippines, Singapore, and Thailand) in Bangkok Thailand on the 8th of August 1967 thus signing the Bangkok Declaration (“the Declaration”). Following that Brunei Darussalam joined the organization on 8 January 1984, Viet Nam on 28 July 1995, Lao PDR and Myanmar on 23 July 1997, and Cambodia on 30 April 1999, all together making the ten member states of ASEAN as we have today.
In most cases of regional integration, prior to the formation of such associations, some effects of regional conflicts and wars are apparent. In case of ASEAN, from 1962 to 1966, the main regional conflict was Konfrontasi; an undeclared military conflict between Indonesia and Malaysia (which included Singapore for part of that time). Even though it was mainly a dispute over the island of Borneo, it was also an exercise of hegemony by the Sukarno government of Indonesia. The Konfrontasi followed some small skirmishes which eventually caused diplomatic break off between Malaysia and Indonesia and also strained diplomatic ties between the parties and other Southeast Asian nations.
At the same time, the Vietnam War was escalating and there was a fear in the region that the idea of communism would spread as predicted by the domino theory. Hence, after ousting President Sukarno by General Suharto in 1966, the five founding members of ASEAN tried to restore diplomatic ties and thus created an organization to mainly encourage peaceful relations with each other. As such they limited external interference as the initial raison d’être which found its clearest expression in the 1976 Treaty of Amity and Cooperation,340 thus providing the six main principles for ASEAN members to abide by, as enumerated and aforementioned.341
In fact the above outcome (TAC) has been mainly gained as the result of a righteous policy-making which took place by the aftermath of the conflict and war resembling other cases such as Europe that confirm a change in political system under the circumstance, which may serve as a progressive and dynamic factor
339 Ibid, (Ewing-Chow and Hsien-Li. “The Role of the Rule of Law in ASEAN Integration.”) p. 4.
340 Ewing-Chow and Hsien-Li. “The Role of the Rule of Law in ASEAN Integration.” pp. 4-5, referring to: “Treaty of Amity and Cooperation in Southeast Asia (TAC), 24 February 1976. Retrieved from: http://www.asean.org”
341 Ibid, with reference to the Article 2 of the Treaty of Amity and Cooperation in TAC.
towards integration. As such, the above six principles have led ASEAN to develop what is known as the ASEAN WAY which has been shaped under the banner of the rule of law in a regional context to the extent that according to many commentators such strict adherence to non-interference and consensus might undermine the rule of law and that of ASEAN’s seriousness to integrate.342
Yet, to ASEAN; culturally speaking the ASEAN Way has proved to be the more effective method for resolving disputes in South East Asia as introduced by the lyrics proclaiming that “we dare to dream, we care to share, for it’s the way of ASEAN.”343 The Bicycle Theory of integration (which developed within the EU), indicates that, like bicycle, integration projects must keep having some minimum forward momentum otherwise they will fall. And the new legal framework under the rule of law in ASEAN can act as such momentum. Accordingly, with more of focus on integration within ASEAN, more legally binding frameworks would emerge to govern economic relations between and among member states.344
Indeed, economics can serve as a common language to start resolving regional conflicts while further expanding cooperation in a regional context. Economic cooperation has been, indeed, the main driving force for community-building within ASEAN along with its integration efforts. And from this angle, with a view to its achievements, ASEAN can perhaps render lessons for the integration scheme in MENA, as a more suitable model than that of MERCOSUR. After all, MENA has gone through similar historical experiences like those of Asian conflicts and wars with much more vast consequences.
The footsteps of the rule of law can be traced in the first generation of the economic agreements adopted by ASEAN. This includes specifically the 1977 Agreement on ASEAN Preferential Trading Arrangements, and the 1979 Agreement on ASEAN Food Security Reserve, as well as the 1980 Basic Agreement on ASEAN Industrial Projects.345
Also more seminally perhaps, the ASEAN Charter was signed on 20 November 2007 in Singapore (13th ASEAN Summit) setting out the purpose of ASEAN. Article 1 of the Charter clearly expresses that ASEAN was to “create a single market and production base.” Such a goal has been also iterated in the
342 Ewing-Chow and Hsien-Li. “The Role of the Rule of Law in ASEAN Integration.” p. 5.
343 Ibid, referring to: “ASEAN Anthem Competition.”
344 Ewing-Chow and Hsien-Li. “The Role of the Rule of Law in ASEAN Integration.” p. 5, referring to: “Paul J Davidson, “The ASEAN Way and the Role of Law in ASEAN Economic Cooperation” (2004) 8 S.Y.B.I.L. 165 at p. 168-169”
345 Ibid, p. 6, referring to: “Basic Agreement On ASEAN Industrial Projects, Kuala Lumpur, 6 March 1980, at:
http://www.aseansec.org”
AEC Blueprint346 during the 13th Summit in which in indicates:
“The AEC Blueprint will transform ASEAN into a single market and production base, a highly competitive economic region, a region of equitable economic development, and a region fully integrated into the global economy.”347
The above lines as reflected in the AEC Blueprint as well as the Article 1 of the Charter confirm the fact that a major part of ASEAN’s raison d’étre has been either based on realism that is the self-interest of each state, or based on functionalism representing the common interests of each state.348 In other words, such reflection proves that ASEAN was not the consequence of the Second World War but rather arising out of the realpolitik of the Cold War.
Nevertheless, what lacks here is a clear vision like that of the European Union with principle of liberalism and democratic peace as presented in the Schuman Declaration of 9th May 1950 describing that the European Coal and Steel Community (ECSC) was created to establish the solidarity in production so that
“any war… becomes not merely unthinkable, but materially impossible.349 The intention was to pool, through the transfer of sovereignty, the key strategic sectors – coal and steel – making it impossible for any member state to use these resources for rearmament, though it did indirectly lead to a more integrated production base in Europe.”350
The absence of such vision is perhaps why the ASEAN project has been imaged like that story of blind men and the elephant. In comparison with the EU, unlike the single market experience in Europe in which clear benefits were generated for the union, in case of ASEAN unfortunately the benefits have been
“more complex and less obvious”. If we take into consideration the combined population of ASEAN being approximately 600 million and compare it favorably with that of EU’s 500 million, the combined
346 Ibid, with reference to: “AEC Blueprint, Supra note 11.”
347 Ibid, with reference to: “Declaration on the AEC Blueprint, Supra note 37, paragraph 1.”
348 Ibid, with reference to: Michael Ewing-Chow. “Culture Club or Chameleon: Should ASEAN Adopt Legalization for Economic Integration? (2008) 12 SYBIL 225 at 228.”
349 Ewing-Chow and Hsien-Li. “The Role of the Rule of Law in ASEAN Integration.” p. 7; referring to “Schuman Declaration, 9 May 1950.” Retrieved from:
http://europa.eu/about-eu/basic-information/symbols/europe-day/schumandeclaration/index_en.htm
350 Ibid; “See Heribert Dieter. “Transnational Production Networks in the Automobile Industry.” (Notre Europe, 2007) Study No.58.” at: http://www.notre-europe.eu/uploads/tx_publication/Etud58_01.pdf.
GDP of ASEAN is only US$1.8 trillion whereas the overall GDP in the EU is US$16.3 trillion.351
One main reason for such a contrast would be the fact that purchasing-power within ASEAN in comparison with the EU is relatively less. Michael Ewing-Chow and Tan Hsien-Li in their article believe that the main driver of ASEAN integration is the Integrated Production Network (IPN). An IPN is comprised of a network of enterprises that are selected to base their production upon cost effectiveness to the extent that it would not be viable to stand outside of such a network.352
The IPN can take the forms of being either horizontal or vertical. When an IPN becomes transnational, it creates some challenges among which is ensuring that the rules applicable to each actor of the network would be certain and predictable beyond the cost of transport and logistics planning.353 As such, when for example the IPN operates in countries with weaker status of the rule of law, it cannot certainly be guaranteed that arbitrary intervention and/or discrimination would not take place on the way of effective functioning of the IPN. The Automobile industry would be an example of IPN in Europe. Production of cars directly amounts for 2.2 million jobs while 9.8 million other jobs come in closely related sectors. In such cases, interestingly countries such as Denmark with 7000 jobs or Finland with 6000 jobs can reap job benefits out of the IPN without having any kind of automotive industry.354
In addition to the above analogy, Richard Baldwin’s book “The Great Convergence: Information Technology and the New Globalization” also expresses such transition from the great divergence era to the great convergence and a new age of globalization. Baldwin reasons that as the result of early globalization the share of world income has gone to today’s wealthy nations thus soaring from twenty percent to nearly seventy percent between 1820 and 1990. But after the lowering costs of moving goods and ideas across borders particularly into the developing world a new wave of convergence emerged.
Since globalization is filled with fast-paced technological change and fragmentation of production, its impact has become more selective, more unpredictable and more uncontrollable. And therefore, the Great Convergence shows that in fact the new globalization is presenting rich and developing nations alike all facing unprecedented policy challenges in their efforts to keep social cohesion and reliable growth.355
351 Ibid, Referring to: “Report for Selected Countries and Subjects, International Monetary Fund, available at http://www.imf.org”
352 Ewing-Chow and Hsien-Li. “The Role of the Rule of Law in ASEAN Integration.” p. 7.
353 Ibid.
354 Ibid, p. 8.
355 Baldwin, Richard. “The Great Convergence: Information Technology and the New Globalization.” Harvard University Press, 2016.
All this shows that economic integration particularly in case of ASEAN is not merely about the development a single market but rather more importantly about the development of an IPN. Although the European Single Market was an impetus to indirectly create new networks of businesses and production, in Asia however, these networks already exist despite some trade barriers. Instead of changing the general environment for the allowance of such networks, Asian businesses chose the already available transparent discretion as provided to policy makers in their countries to reach specific solutions for the trade barriers they faced.356
According to Baldwin, there is a mess in East Asian regionalism in that while having a high level of regional division of labor in the production process, there is yet limited legislation of the process.357 As such he believes that plan with “Factory Asia” was not truly problematic but the management of the plan was in fact the problem highlighting that the unilateral tariff-cutting was the main cause for the creation of “Factory Asia,” which is not basically subject to WTO discipline (bindings) or any alternative legal disciplines.358
Along the same lines Ewing-Chow and Hsien-Li confirm (p. 8) that indeed, production integration in Asia takes a form of bottom-up process rather than a top-down one. According to Abo Tetsuo this process is called “spontaneous integration”359 also described as the de facto regionalization identified by Higgot360 according to which the business environment in Asia is less certain and less transparent than that of the European Union even though it is no less productive.
According to Dieter361 the development of the automotive market in Europe confirms the fact that the integration processes could not be possible without the creation of a single regulatory sphere. Moreover, there is an integration of the production of automobiles and electronics in East Asia facing a wave of
356 Ewing-Chow and Hsien-Li. “The Role of the Rule of Law in ASEAN Integration.” p. 8.
357 Ibid, referring to Richard Baldwin. “Managing the Noodle Bowl: The Fragility of East Asian Regionalism”, Centre for Economic Policy Research Working Paper No. 5561, March 2006.
358 Ibid (Ewing-Chow and Hsien-Li).
359 Ibid, p. 8; referring to: “Abo Tetsuo, “Spontaneous Integration in Japan and East Asia: Development, Crisis, and Beyond”, in G.L. Clark, M.P. Feldman, and M.S. Gartler (eds) The Oxford Handbook of Economic Geography (Oxford: Oxford University Press, 2000), Chapter 31.
360 Ewing-Chow and Hsien-Li. “The Role of the Rule of Law in ASEAN Integration.” p. 9, referring to “Richard Higgott, “De facto or De Jure Regionalism: The Double Discourse of Regionalization in the Asia Pacific.” 11 Global Society (1997) p. 166.
361 Ewing-Chow and Hsien-Li, p. 8: referring to “Dieter, Heribert; Transnational Production Networks in the Automobile Industry; (Notre Europe, 2007) Study No. 58, at:
http://www.notre-europe.eu/uploads/tx_publication/Etud58_01.pdf.
protectionism along with inconsistent governmental policies.362 He also describes that the response and solution to the problem would be through replacing the Brand-to-Brand Complementation (BBC) scheme adopted by ASEAN countries in 1988 with that of the ASEAN Industrial Co-operation (AICO) scheme in 1995. As for example, AICO has notably tried to broaden the scope of ASEAN cooperation beyond sheer automobile parts and has also finally included Indonesia in the regime.363
Now the question is, if “Factory Asia” already exists, what gains can be brought to the region through the ASEAN integration? In short the answer is that ASEAN integration may provide two core benefits for ASEAN member states. Firstly, the legalization and codification of existing policies for facilitating the IPN would create security and comfort for many of the MNCs who wish to invest in the region. The fact is that without such flow of investment an IPN cannot develop. The ASEAN member states are aware of this and their desire to protect investments (including intra-ASEAN investments) is clearly stated in Articles 1 and 2 of the 2009 ASEAN Comprehensive Investment Agreement (ACIA). Accordingly, ASEAN has proclaimed that it intends to “create a liberal, facilitative, transparent and competitive investment environment in ASEAN” and besides, “to improve transparency and predictability of investment rules, regulations and procedures conducive to increased investment among member states.”364
Second, despite some ASEAN successful prediction on particular industries in the past, it is difficult however to continue such forecasting because of the rapidly evolving global marketplace. Many ASEAN countries have also gone through the democratization process thus making autocratic choices for economic development more difficult which may eventually diminish over time.
Many changes in ASEAN governments affirm the above democratization process including the fall of Marcos in the Philippines, Thaksin in Thailand, or Suharto in Indonesia as well as the reduced parliamentary majorities of the People’s Action Party (PAP) in Singapore, also the Barisan Nasional (BN) and United Malays National Organization (UMNO) in Malaysia; or the decision for allowing election for the military junta in Myanmar may be considered as examples suggesting that centralized choices to favor industries may no longer work for the future of the ASEAN governments.365
Therefore, if a new environment is created to be conducive to an IPN, then it would be easier for the ASEAN member states to focus on macro-economic policies involving more private enterprise over their
362 Ibid, p. 9.
363 Ibid.
364 Ibid, p. 10; with reference: to “ASEAN Comprehensive Investment Agreement (ACIA), 26 February 2009, at:
http://www.asean.org”
365 Ewing-Chow and Hsien-Li. “The Role of the Rule of Law in ASEAN Integration.” p. 10.
industrial development. This, according to Porter, would be an easier step while bringing more success in developing industrial policy and it would also free ASEAN governments from obligation of making successful choices (as Porter suggests they do the job less well than it is done through private business) in supporting their perception of legitimacy through their electorate.366 This is in fact an adequate welcome of the private sector into the game.
It should be pointed out here that the ASEAN IPN is in fact a phenomenon beyond a purely intra-ASEAN encompassing a global sphere. Indeed, if we focus on relations among the ASEAN Plus Three (China, Korea, and Japan) it will underscore the point that ASEAN integration is in fact part of an Asian movement and cannot be understood as separate from Asian economic integration. Even though it is about Production Integration but it is by no means limited only to ASEAN.
Generally speaking, the three countries of China, Korea and Japan so called the ASEAN Plus are more looking for a regional free trade agreement with their ASEAN counterparts rather than having such individual agreements with each ASEAN state. In other words, they prefer to deal under the banner of ASEAN as an integrated scheme.
Accordingly, for example, the China agreement entered into force in 2007 and the ASEAN-Korea and ASEAN-Japan agreements entered into force in 2009. Two major exceptions occurred to the above generalization as being firstly the individual free trade agreements that the ASEAN Plus Three countries entered into with Singapore. And secondly, Japan as an exceptional example also pursued individual free trade agreements with many of the ASEAN states before entering into the Japan-ASEAN agreement.367
Under the circumstances, there are some challenges facing ASEAN notably causing a sense of uncertainty and fear within the ASEAN member states in respect to the future of the organization. Such challenges and the sense of uncertainty may also be rooted in the history of ASEAN since its inception in 1967. To mention some major examples, we can refer to the Vietnam War and the Khmer Rouge in Cambodia in the 1970s, while having the consolidation of nation states that continued in the war, post-independence period and was challenged by deep-seated inter-ethnic tensions, struggles that existed between political factions, separatist movements, and transitions from monarchy to constitutionalism.368
366 Ibid; with reference to: Michael Porter. “Competitive Advantage of Nations.” (USA: Simon and Schuster, 1998).
367 Ibid (EUI Paper-Michael Ewing-Chow and Tan Hsien-Li), p. 13.
368 Ibid. p. 15.
Besides, there was the Asian Financial Crisis that resulted in severe social and political upheavals in Indonesia, Malaysia, and Thailand in the late 1990s. Just as it was recovering from that Asian Financial Crisis, the rise of China and India also imposed a challenge acting as major competitors for FDI. In all these situations, ASEAN has always had to react, adopt, and readjust.
The existence of the rule of law has brought a spirit of hope and certainty to ASEAN as it has consolidated a greater role for the rule of law in governing the relationship between its members. As such, clear and binding obligations as well as rules for dispute settlement; and sanctions for breaches of such rules particularly in economic matters have been recognized within the 2007 ASEAN Charter.
Nonetheless, in practice ASEAN seems to have a long way to go for consolidating the status of the rule of law. As much that parallel to the IPN development and macroeconomic convergence, there has been a need for legalization and a stronger role given to the rule of law is deemed to be initiating the progress.
For such progress however, as far as internal institutions in ASEAN are concerned, its domestic courts in many members are still considered weak facing underdeveloped human capital, while no ASEAN supranational adjudication body has yet been proposed, and furthermore, the ASEAN Secretariat remains severely underfunded.369 Under such circumstances, the question remains as to what can and should propel ASEAN Integration? In this respect, it is thus imperative for ASEAN to create a more sound infrastructure in order to reach its ultimate goal of regional integration—namely institutions, legalization, and dispute settlement mechanisms.370