LEADERSHIP CHALLENGES IN THE 21ST CENTURY
SOUTHEAST ASIA: REGIONAL INTEGRATION, COMPETITIVENESS AND COMMUNITY BUILDING
ONG KENG YONG
Secretary-General of ASEAN
Opening Address at the ASEAN Leadership Forum
Kuala Lumpur, 22 March 2004
INTRODUCTION
1. I wish to thank the Asian Strategy and Leadership Institute (ASLI), the ASEAN Business Forum and the Institute for Southeast Asian Studies for getting together to co-organize and launch this ASEAN Leadership Forum.
2. Let me start by sharing with you an interesting definition of leadership according to Peter Drucker, a well-known writer on contemporary issues in the public and private sectors. Leadership, he says, is not just about a dynamic personality - that can just as well be a glib tongue. It is not just winning friends and influencing people - that could just be flattery. Leadership, he believes, “is about lifting a person's vision to higher sights, the raising of a person's performance to a higher standard, the building of a personality beyond its normal limitations.”
3. In these interesting times of our lives, people look for such kind of leadership. It is a role ASEAN cannot escape from if the challenges are to be overcome and the opportunities are to be fully exploited for the present and future generations.
4. In our region, the challenge is how ASEAN can provide such leadership in managing regional interdependence and its impact and in overcoming some inherent contradictions between being competitive and being part of a community.
REGIONAL INTEGRATION
5. Economic integration in Southeast Asia and in the broader East Asian region is underway. It is not so much a matter of policy as it is an economic trend. It has built up its own momentum long before the push extended by the ASEAN Plus Three (China, Japan and the ROK) process. Our job is to manage that integration to make it smooth and not disruptive, equitable and not one-sided, and inclusive not divisive.
6. Between 1993 and 2001, intra-ASEAN trade registered an average growth rate of 9.4 percent annually compared to the total ASEAN external trade which grew by 7.6 percent. The share of intra-ASEAN trade as a percentage of total ASEAN trade increased from 19.3 percent in 1993 to 22.6 percent in 2002. In value terms, the growth doubled from US$ 82.4 billion to US$ 159.5 billion during the same period. This clearly implies an increasing trend in Southeast Asian economic integration.
7. While it cannot be fully attributed to the ASEAN Free Trade Area (AFTA), there is no doubt that AFTA has contributed to the creation of an enabling environment for free movement of goods in Southeast Asia. The average tariff rate of the ASEAN-6 when AFTA began in 1993 was 12.76 percent. Now it's down to 2.39 percent.
8. In sync with the demand for greater economic openness, ASEAN has decided to move from AFTA to an ASEAN Economic Community (AEC). The AEC will be characterized by a single market and production base, with free flow of goods, services, investment and skilled labour, and freer flow of capital by 2020.
9. Beyond liberalization, economic integration will be pursued through human resource development and capacity building; recognition of educational qualifications; closer consultation on macroeconomic and financial policies; trade financing measures; enhanced infrastructure and communications connectivity; development of electronic transactions through e-ASEAN; integrating industries across the region to promote regional sourcing; and enhancing private sector involvement.
10. On the broader East Asian level, the pace of economic development leading to greater interdependence is dramatic. The share of East Asian intra-regional exports vis-à-vis its global exports grew from 32 percent in 1980 (when the process of financial liberalization started culminating with the Plaza Accord) to 40 percent in 1990 and 47 percent in 2001. Today, East Asia represents 23 percent of the world’s GDP and 40 percent of its foreign reserves. It constitutes roughly one third of the world’s population. These figures illustrate the vast potential of East Asia and its clear standing as one of the three major economic regions in the world.
11. What is remarkable about the increasing convergence of the East Asian market is that it is happening even without regional schemes driving it. It was only recently when the East Asia Study Group, established by the ASEAN Plus Three Leaders in 2000, recommended the establishment of an East Asian Free Trade Area as an eventual goal. For the time being, bilateral economic arrangements are being established between ASEAN and China, Japan and the Republic of Korea.
12. Regional integration also expresses itself in other forms. Most of these trends fall into an aggregated subject we call transnational issues. Thus, leadership is also required in addressing such problems as communicable diseases, arms smuggling, trafficking in persons, piracy, and international terrorism among others.
COMPETITIVENESS
13. The context in which ASEAN operates today has changed significantly over the past decade and even more since its establishment. The impact of China’s economic development is among the most recent and challenging. The infocomm revolution, despite recent setbacks in the online business (bursting of the dot.com bubble), will continue to transform business operations and relationships. The outsourcing of skills and relative mobility of labor across countries and regions have also added complexity in managing the regional and global economy.
14. Demonstrating its seriousness in maintaining the Southeast Asia’s competitiveness, the ASEAN Economic Ministers commissioned McKinsey & Co. in early 2002 to undertake a competitiveness study of the region. The conclusion of the study is that ASEAN has the “intrinsics” to be competitive on a global scale, such as its market size and growth, liberal economic policies, educated and skilled labor, natural resources and others. But more needs to be done to leverage these intrinsic advantages.
15. The study has revealed that most businessmen in the region perceive that, while integration is underway, Southeast Asia is still a disparate mix of ten fragmented markets. Thus, meeting the competitiveness challenge will require a stronger commitment to business-friendly reforms at the domestic level and a rapid acceleration of economic integration at the regional level.
16. The McKinsey study estimated that an economically integrated ASEAN could increase the region’s GDP by at least 10 percent and reduce the operational cost by up to 20 percent. This translates into additional GDP of US$50 billion per year for the whole of ASEAN.
17. The competitiveness study has recommended a sector-based approach to economic integration in ASEAN. Separately, the ASEAN Leaders had also read the key trends and decided that a sector-based priority approach is an effective way forward. They endorsed the recommendations of the High-Level Task Force on ASEAN Economic Integration to pursue priority integration of eleven identified sectors. At the top of these is the electronics sector which is the largest export product in the region.
18. In this competitive environment, we must learn the attributes of being adaptive, pragmatic, flexible and swift decision makers while keeping our feet on the ground. We must have foresight in anticipating future challenges and opportunities.
19. As the region becomes more integrated, it is not only the opportunities that are multiplied, but also the instability and dislocations associated with this process. Thus, while important in inspiring economic competition, leadership is also required in mitigating the socio-economic impact of the polarization effect between the competitive and less than competitive economies. We need to establish effective and sustainable social safety nets for this purpose.
COMMUNITY BUILDING
20. If community building is possible among interest-based groups like the Organization of the Petroleum Exporting Countries, the Cairns Group of agricultural exporting countries and the G-7 of industrialized economies, there must be something in geographic proximity that could draw countries together even more intensely.
21. Beyond the manifest interests, ASEAN is an expression of shared values and aspiration, which have been shaped through centuries by common geography, climate, culture, and shared historical experiences among the Southeast Asian countries. In this sense, the Leaders’ resolve to establish an ASEAN Community with capital C is not a deviation but a reaffirmation of the Bangkok Declaration of 1967 “to strengthen the foundation for a prosperous and peaceful community of Southeast Asian nations”. Thus, the aspiration of Southeast Asian nations to build a community finds its roots from their conscious or unconscious recognition of their common identity, interests, and space.
22. In her 2003 ASEAN Lecture at the ASEAN Secretariat last August, President Megawati Soekarnoputri urged ASEAN to move with more than just the economic leg. She said that ASEAN “must now use both the leg of economic cooperation and the leg of political cooperation so that it can move forward faster and in a more balanced manner.” Recognizing the value of socio-cultural relations in community-building, the Declaration of ASEAN Concord II, commonly called the Bali Concord II issued by the ASEAN Leaders in October 2003, has included socio-cultural cooperation as the third element. Therefore, the ASEAN Community will be built under the three pillars of ASEAN Security Community, ASEAN Economic Community and ASEAN Socio-Cultural Community.
23. Even the case of the AEC is as much a community building exercise as it is a set of economic activities. As envisioned, the AEC would include cooperative activities that would help bridge the development gap between the old and new members of ASEAN through the Initiative for ASEAN Integration or IAI. This policy direction is inspired by the ‘prosper thy neighbor’ principle.
24. For an ASEAN Community to evolve, we need to build the social fabric among our societies. ASEAN governments cannot do this alone. We need leadership in the private sector and the civil society. We need more people-to-people interactions through our schools, theaters, the Internet, tourism, commerce and others.
25. I believe that community building has transformative value in promoting friendship and cooperation within Southeast Asia and in creating a positive disposition vis-à-vis other regions and countries. ASEAN should take pride and inspiration in this noble endeavor.
CONCLUSION
26. Once in a while, we hear comments that the ASEAN Vision 2020 is too much of a visionary, impaired with a lack of a sense of presence and urgency. While such comments are well meaning and well taken, we should gain comfort in the thought that the implementation through a series of action plans is more dynamic than what some perceptions might suggest. As in several cases, including the timetable of AFTA, ASEAN has found the will and ability to shift the gear up as and when necessary.
27. Having said that, we may wish to look beyond the dates to appreciate the bigger picture that comes with the ASEAN vision. The adoption of the ASEAN vision is a profound expression of a sense of community in the region. Put together at the height of the financial crisis in 1997, it is a demonstration of collective leadership in the midst of the individual member countries’ preoccupation with their respective domestic situations at that time. It is this long–term outlook and reciprocity that separates a community from a fair-weather alliance characterized by short-term benefits and reciprocity. [Add: SARS crisis]
28. The challenge to our leadership is to inspire extraordinary aspirations to break out from the confines of our borders, limitations, and mind-sets. Leadership must discern, reconcile and maximize the complementarities of regional integration, competitiveness and community building while mitigating their inherent contradictions. We need to lead our competition into positive sum situations; preserve our national identities and cultural diversity within the Southeast Asian community; blend our national interests with the regional interests; and craft a balance in the exercise of national sovereignty with shared responsibility and a sense of community. These are the challenges of our times that require leadership to lift our vision to higher sights and raise our deeds to new heights.
29. I am optimistic that ASEAN can do more. We are on a journey in a bus. Bumps on the road and erratic driving in the crowded highway give us headache and stomach butterflies. Yet, we are still in one bus together. We have overcome more severe and bigger problems in the past. ASEAN’s navigational hazards and travel glitches are not unique and peculiar to our region. Others have similar experiences. Let us endeavour and not underestimate our own resilience, capability and determination to lead the way forward.