by H.E. Ong Keng Yong
Secretary-General of ASEAN
Kuala Lumpur, 11 June 2007
Thank you for inviting me to this important Conference. Let me talk about what is going on in the political and economic situation which have an impact on the oil and gas scene.
Three developments in past few years are important to understand what is happening in ASEAN today, especially in the political and economic arenas. They are
Growing to a community
ASEAN was founded 40 years ago by the then Leaders of Indonesia, Malaysia, Philippines, Singapore and Thailand, with the main objectives of (1) accelerating economic growth, social progress and cultural development, and (2) promoting regional peace and stability in the region.
These objectives have been further refined in 1999 with an ASEAN Vision 2020, which portrays ASEAN as “a concert of Southeast Asian nations, outward looking, living in peace, stability and prosperity, bonded together in partnership, in dynamic development and in a community of caring societies”. In 2003, at the Bali Summit, ASEAN Leaders decided on the establishment of the ASEAN Community and the single market and regional production base in ASEAN.
On ASEAN economic integration, efforts have intensified since the adoption of the ASEAN Free Trade Area (AFTA) in 1992. Significant progress has been achieved since then particularly in reducing tariffs in the trade in goods. As of 2006, tariffs on 99.8 percent of the products in the Inclusion Lists of ASEAN-6 (Brunei Darussalam, Indonesia, Malaysia, the Philippines, Singapore and Thailand) had been brought down to 0-5 per cent, while 70 per cent of the products traded by the CLMV countries (Cambodia, Lao People’s Democratic Republic, Myanmar and Viet Nam) under the Common Effective Preferential Tariff (CEPT) scheme were within the 0-5 per cent tariff band.
In addition to trade in goods, ASEAN has also been making progress on liberalization of trade in services, opening up investment, streamlining customs procedure, harmonizing standards and reducing development gaps.
Twelve priority sectors have been identified for fast-tracked integration by 2010. These include agro-based products, air travel, automotive products, e-ASEAN, electronics, fisheries, health care, logistics, rubber-based products, textiles & apparels, tourism, and wood-based products. Nine of these sectors account for over 50 percent of total trade in goods.
As you can see, ASEAN today is much more integrated compared to a decade or so ago and always pushing ahead with greater integration efforts. Just early this year in Cebu, the ASEAN Leaders has decided, at their Summit, to accelerate the target for an ASEAN Community from the original 2020 to 2015.
The ASEAN Community comprises three pillars; the Security Community, the Economic Community and the Socio-Cultural Community.
ASEAN is therefore currently drawing up a comprehensive roadmap with clear targets and timeline to realize the Leaders’ vision of an ASEAN Community.
For example, for the ASEAN Economic Community, a Blueprint is being developed as a master plan to guide ASEAN economic cooperation and integration over the next eight years.
Integrating the economies
The ASEAN Economic Community or the AEC has been defined as a single market and production base, one that is highly competitive, equitably developed and well integrated into the global economy.
Liberalization and facilitation measures required to realize the above four characteristics of the AEC are being identified with clear milestones and timeline for their implementation.
Decision making, monitoring and compliance mechanisms will also form parts of the institutional requirements for an effective implementation of the Blueprint.
The AEC Blueprint is expected to be finalized by the ASEAN Economic Ministers and endorsed by the ASEAN Leaders in November 2007 in Singapore.
Already intra-regional trade has steadily increased and reached 25% of total trade in 2005. This intra-regional trade is expected to further improve as measures to foster closer integration such as elimination of tariff and non-tariff barriers, streamlining and simplifying customs procedure, harmonization of standards and practices, are carried out.
While intra-regional investment has been and still is lacking behind that in trade in goods, it too is expected to significantly improve over the coming years as the capital markets in the region are further developed and integrated, for both equities and bonds.
The challenge is of course to implement these liberalization and facilitation measures in an effective and timely manner.
Strengthening ties with neighbors
At the same time, ASEAN has also been strengthening its cooperation with Asian neighbors.
Through out the first decade of cooperation, ASEAN Plus Three countries have been formulating their vision of East Asia starting from the Joint Statement of East Asia Cooperation in 1999 to the East Asia Vision Group report in 2001 and the East Asia Study Group report in 2002. This year the group will issue the second Joint Statement of East Asia Cooperation to commemorate its tenth anniversary of cooperation.
Having benefited from 10 years of working together in East Asia and based on the findings and recommendations from the East Asia FTA study that was concluded last year, the Statement is expected to further define the vision of the East Asia Community with clearer direction and goals, including for greater economic integration in East Asia.
In addition to the ASEAN Plus Three (China, Japan, ROK) process, there is the East Asian Summit (EAS), which is now in its third year and still evolving. The EAS cooperation framework expanded on the ASEAN Plus Three by adding India, Australia and New Zealand.
From the first EAS where a declaration on Avian Influenza Prevention was adopted to the second EAS where four priority areas have been added, including energy, education, finance, and natural disaster mitigation, and where a substantive declaration on East Asian Energy Security was adopted, the EAS process is gaining momentum.
Realizing that the EAS is still in its infancy stage, the EAS Leaders also agreed at their second summit to conduct a track-two study on Comprehensive Economic Partnership in East Asia or CEPEA to explore how the East Asia 16 could deepen its economic integration given the existing ASEAN and ASEAN Plus Three frameworks and building on an earlier study on East Asia FTA.
Given the size of the East Asian region and its complementarities, it is obvious that closer integration will bring benefits to the region. The EAFTA study explored these benefits and quantified them as an increase in the economic welfare by USD 104.6 billion and an increase in overall GDP of the ASEAN+3 countries by 1.2 percent with ASEAN countries enjoying 3.6 percent rise in combined GDP.
I believe you would agree with me that the prospects are bright for ASEAN and East Asia and ones that see the region becoming a closely integrated community in the years ahead.
The key challenges are how to realize the ASEAN Leaders’ vision of an ASEAN Community in 2015 in a timely and effective manner while at the same time synchronizing it with the ASEAN Plus Three and the EAS cooperation in such a way that brings out the greatest benefits that are shared among all its members, not only of ASEAN but also of the wider East Asian community.
Impact
The ASEAN Community building will bring about a stronger ASEAN and we can see three possible outcomes on the energy sector. They are: