An economic gang that thrives on elasticity
By design, the ASEAN Economic Community (AEC) has approached integration with an eye on creating headroom for its hyper diverse and rapidly expanding economies to grow. That has meant embracing pragmatism and flexibility—power is decentralized and there is no one-size-fits-all policy. It’s worked thus far: analysts project the union could become one of the world’s four largest economies by 2050.
For a time, European integration served as a model for countries looking to strengthen ties with close neighbors. The results weren’t always fruitful: African and Latin American nations tested trade areas and common markets, but saw little success.
Today it seems, however, globalism is out. And nationalism is in.
That appears to be the consensus in the aftermath of a string of unforeseen “black swan” events over the last year—from Brexit to Trump and the end of the TPP. The European experiment is under stress, and is being tested by a new nationalism that has reared its head in a few national elections.
But the European Union’s ideal of social, political and economic harmony isn’t necessarily on the retreat—it just lives on in different form. For one, South East Asia is embracing tighter integration with the new ASEAN Economic Community. If ASEAN can avoid the pitfalls facing the EU, the rewards may be sweet for the more than 600 million people the AEC brings together.
The union with uniquely Asian characteristics
The European Union has long been a beacon for ASEAN, offering a glimmering example of what might one day be possible. This has made the current struggles of the EU all the more significant and sobering in South East Asian policy circles.
That’s not to say that the two unions were ever on identical paths. The AEC offers far looser integration—its agreements focus on freedom of movement of goods and services, rather than people. Monetary union or a single currency have never really been on the agenda.
Nonetheless, Europe’s latest troubles have reinforced regional convictions to ignore the EU playbook, according to Kishore Mahbubani, dean of the Lee Kuan Yew School of Public Policy. “The EU has always been rigid and legalistic, while ASEAN has always been flexible and pragmatic,” says Mahbubani. “ASEAN believes in the principle of ‘ASEAN minus X’. Countries that are ready will proceed first—other ASEAN members can join in later.”
Our per capita diversity is not a weakness, it is a strength. It shows the potential for ASEAN to grow.
Arguably, that kind of pragmatic sensibility is necessary to accommodate the significant cultural diversity and far wider range of economic development in Southeast Asia: In Europe, the income gap between its richest and poorest state is about 14 times, while in the ASEAN, it’s more than 45 times. But where some see that discrepancy as a weakness, others eye an opportunity: “Our per capita diversity is not a weakness, it is a strength,” says Mahbubani. “It shows the potential for ASEAN to grow.”
A crab in a China shop
America’s turn inward is accelerating the shift to a new multi-polar world. This is especially evident in Asia, where the economic triumvirate of China, India and Japan hold court.
Dean Mahbubani and Professor Jeffrey Ng argue in their recently released book that historic cooperation between the world’s great powers—the US and China—has been helpful for Southeast Asia, and that rising competition between them could split ASEAN apart. For smaller economies in the region, that makes the AEC attractive—it offers a chance to pool resources and collectively promote and protect member interests.
“ASEAN often moves like a crab: it takes two steps forward, one step backwards and one step sideways,” says Mahbubani. “We know we’ll never become a major power that can balance regional giants like China or India.”
“Viewed in slow motion, it might look like a crab moving around in circles. Yet, miraculously when one analyses ASEAN’s progress decade by decade, it makes great strides.”
Bilateral deals with patron states like China can present challenges to ASEAN cohesion, but the bloc has a penchant for diffusing simmering tensions. In the end, the group’s success will be judged by the stability it can bring to regional framework—whether on economic, political or security grounds.
ASEAN upgrades its operating system
For South East Asia, the EU is both a blueprint and a cautionary tale. Brussels’ renewed efforts toward rethinking and reforming the bloc show that political discord need not be fatal, a lesson not lost on ASEAN policy makers.
The AEC will help bring member nations closer together as they contend with big shifts in business and dynamics, and ASEAN’s size and diversity present promising opportunities: the IHS has projected the bloc could become the world’s fourth largest economy by 2050.
To get there, more crab-like deal making will be critical.