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NEWS UPDATES Asean Affairs    3 June 2012

Asean needs deeper, continued integration

1 June, 2012


Despite the painful lessons from Europe, Asean nations are moving towards integration as a way to boost regional resilience against external shocks.

At the World Economic Forum on East Asia session on "East Asian Models for Transforming the Global Economy", Gerard Mestrallet, chairman and executive officer of GDF Suez, a French multinational electric-utility company, and co-chairman of the forum, attributed decades of peace in Europe to its integration. Still, he foresees deeper integration.

Moreover, the current woes surrounding the single currency are a good lesson for Asean on the mistakes they should avoid, he said.

Eswar Prasad, a professor at Cornell University in New York state, said Asean integration "will not only draw capital but also strengthen domestic resilience".

While praising the region's rising prominence and calling for less protectionism to propel growth, Pascal Lamy, director-general of the World Trade Organisation, said regional growth could be sustained by regional interdependence.

With a combined gross domestic product of US$3 trillion, a wealth of natural resources and a demographic dividend, the Asean region has all the assets to become a global economic pillar.

"The main action, which has been going on for several years, is Asean integration," noted Lamy.

"That is the strong comparative advantage of this region. The more this happens, the more resilient the region will be."

Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong said the Asean Economic Community would come into effect in 2015 as planned.

Pro-integration, he said this would help strike a balance between driving domestic, regional, and global economic growth and creating a buffer for external shocks.

"East Asia and Southeast Asia have for too long been focused on export-led growth, and we forget that we have room for improvement in our own economies," he said.

"These days, the key word is balance. It is our job to help ourselves so we can help other economies, too."

He believes further integration will strengthen Asean, but the region may not go as far as a single currency like Europe.
While lauding the strengths of Asean nations, the panellists expressed grave concerns over the widespread corruption in the region.
Prasad said Asean needed to eradicate the "toxic combination" of corruption and inequality.

"Asean has to make sure that greater openness is not only benefiting the elite, as inequality and corruption will erode broader support for future reform," he told participants.

Kittiratt said there was a strong will among Asean leaders to deal with graft, besides the pressure from global investors.

Indonesian Trade Minister Gita Wirjawan said he was hopeful that reform of the tax system in his country, where only 10 million of its 245 million people are paying taxes, would benefit the nation. Coupled with greater education, this will lead to more jobs and a less corrupt society.

"[Defeating] corruption is a long-term game, as it took Hong Kong 30 years. In five to 10 years, there could be fewer corrupt people in Indonesia," he said.
Some government efforts are bearing fruit, as Indonesia, which adopted the democratic system 14 years ago, is showing a low unemployment rate of only 6 per cent.

Wirjawan expects that to fall to 4-5 per cent in the next few years. Meanwhile, the country has witnessed a sharp growth in investment in the past two years.

On integration, he noted: "We'll get there, but not in a grandiose way as we thought 10 years ago."

Mestrallet said Asean was one pillar of the world economy with capital, population, growth and resources. Yet the region faces four challenges, on economic sustainability, the environment, energy, and rural development.

He praised regional cooperation in energy but urged the countries to put in place stronger rules on water and air quality.

Still, just as Europe is going green, Asean need not go too quickly. He noted that Europe is doing that at a price.

In dealing with the challenges, "you have to avoid the European and US mistakes" given their excessive public debt, he said.

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