ASEAN: Towards an Economic Community

Ladies and gentlemen

It is a pleasure to be here to launch the Economic Analytical Unit's latest report, ASEAN: Towards an Economic Community. It is an important topic and a timely publication as Australia and New Zealand start to engage in the substance of FTA negotiations with ASEAN.

As the title of the report suggests, ASEAN nations have set themselves the goal of achieving a regional economic community by 2020. Inside, the report takes an in-depth look at why the region is heading in this direction and outlines some of the challenges that lie ahead.

It also highlights why the ASEAN region is important to us:

Australia and the ASEAN economies are highly complementary
The region has a combined population of over 550 million and a combined GDP of over 800 billion USD
Many of the ASEAN countries are showing impressive levels of economic growth - predicted to be well above the global average
There is also high demand for Australian goods and services in the region:
- ASEAN countries are big buyers of our primary products
- And we are a major provider of services - such as education - which have a key role to play in ASEAN's ongoing development.

In fact, combined ASEAN trade with Australia is more than our trade with any single country - whether it's Japan, China or United States.

As with all successful trading relationships, the mutually beneficial nature of this one is clearly evident. Growth in ASEAN is good for Australia - and vice versa.

The Government is now pursuing an FTA with ASEAN together with New Zealand.
An FTA will build on the strong bilateral trade and investment networks that already exist in Asia, and will complement our FTAs with Thailand, Singapore and Malaysia.
This report gives us a thorough picture of the key sectors involved in ASEAN economic integration.

Goods, services, investment and legal issues are just some of the sectors examined. These are also areas we are looking at in the FTA negotiations. So policy makers and the business community will be reading this report keenly to understand how an ASEAN economic community might develop.

Ladies and gentlemen…there are a number of pressures that have driven ASEAN countries to this goal.

Amid the growing trend towards globalisation, the spectacular growth of China and India has placed particular pressure on ASEAN's long-term prospects.

Already, China is attracting the lion's share of foreign investment to the region. Investment into India is also starting to grow.

China's exports have grown far more rapidly than ASEAN's in the last decade. India is making huge inroads in global services networks.

It was in October 2003 that ASEAN leaders came up with a plan to meet this competitive challenge, the so-called Bali Concord II.

The aim was to move closer to a single economic entity. Through their economic community proposal, ASEAN's leaders are asking us to imagine a future where the ten countries of ASEAN function as a single market. This is a commendable vision.

It has the potential to enhance ASEAN's economic growth. And it will also make it easier for Australian business to operate there. The ASEAN Economic Community project aims to bring down the barriers that still exist in goods and services trade and investment in ASEAN markets. And to develop transport and communications infrastructure to connect its ten countries.

ASEAN is looking to move even more rapidly to integrate 11 priority sectors such as electronics, healthcare, air travel and tourism by 2010.The Economic Community is just one aspect of an ambitious agenda to increase ASEAN's influence and manage trans-border issues more effectively.

The other two pillars of the ASEAN Community are the ASEAN Security Community and the ASEAN Socio-cultural Community. There is also an important development component. An economic community could enhance the performance of ASEAN's stronger economies, which in turn could lead to accelerated growth in the less developed countries.

Economic integration has been a goal of ASEAN for a long time. And progress has certainly been made towards that goal, but the report concludes that ASEAN is still years away from becoming a fully integrated economic community. Building the ASEAN Community is a long-term endeavour that requires creativity, hard work and shared resolve.

The political will ASEAN has demonstrated in coming forth with this proposal will need to be maintained. ASEAN is one of the most diverse groupings in the world.
At one end of the spectrum is Singapore, an advanced economy and at the other are countries that are among the least developed nations in the world [Burma, Laos, Cambodia]. These diverse countries have different policy priorities and perspectives. Their capacity to participate in closer economic integration also varies.

For some ASEAN countries, closer integration increases concerns about more competition in their own markets. It may also raise the issue of transferring some sovereignty to a supranational authority. These are politically testing issues which require both determination and goodwill to overcome.

It is pleasing to see that ASEAN has set up an Eminent Persons' Group to work on an ASEAN Charter. This will provide a legal framework for ASEAN, clarify its strategic direction, and strengthen its institutional structure.

ASEAN has also begun exploring new ways of working together to speed up integration. One promising recent initiative is called the "2+X" approach - where ASEAN countries which are ready to liberalise certain sectors, can do so themselves.
Those who are not ready can join in later.

The countries that integrate first act as pioneers for other ASEAN countries. This approach was used successfully to conclude plurilateral agreements on cargo and passenger air services between Singapore, Brunei and Thailand.

Ladies and gentlemen, ASEAN is engaged in bold and strategic thinking. This is the kind of thinking we need to surmount the challenges in our region. And this Government supports ASEAN's efforts to follow these commitments with concrete action. If they do, the benefits of further integration will not stop at ASEAN's boundaries. Australia and the rest of the region have a stake in its success.

While this book is not about the FTA it does invite the conclusion that ASEAN's new direction can only enhance the importance of the Australia-ASEAN-New Zealand FTA. I look forward to seeing ASEAN unlock the region's deeper potential. And I expect this to bring about closer and mutually beneficial cooperation between us.

This book draws ASEAN's plans for an economic community to the attention of Australian business and policymakers. The message is: watch this region, important opportunities could open up here.

It is with great pleasure that I officially launch this publication. I congratulate the Department's Economic Analytical Unit on producing it. I thank AusAID for the support it has provided for its preparation, and the Australia-ASEAN Business Council for its role in co-hosting this launch.

Thank you.

ENDS