Remarks by Rodolfo C. Severino, Secretary-General
of the Association of Southeast Asian Nations,
at the ASEAN Forum sponsored by the ASEAN Consulates

Guangzhou, 9 June 2001

        It is good to be back in Guangzhou.  It was in Guangzhou that I first set foot on Chinese soil – early in 1975, as part of a small party that was to prepare the way for the historic visit of President Marcos to China and the establishment of diplomatic relations between the Philippines and the People’s Republic.

        In those days, Guangzhou was China’s only official window to the world of international trade – in the form of the twice-yearly Canton international trade exhibition.  Today, practically all of China is open to, linked with, the world economy – and increasingly so – a process to be given impetus by China’s imminent entry into the World Trade Organization.  Still, Guangzhou remains a dynamo of China’s engagement with the world.

        I first landed on Chinese soil by flying in a small, borrowed corporate jet from the Philippines to Hong Kong, and thence to Guangzhou.  In those days, that was an unusual way of entering China from the South.  One would normally take the train from Kowloon to Lowu, walk on a small bridge across the border into Shenzhen, at that time a small, sleepy rural backwater, and then take another train to Guangzhou, where one could take a plane or a train to Beijing or Shanghai or one of the few other places where foreigners were permitted to go.

        Today, one can fly from all corners of the globe into an enormous number of Chinese cities – either on one of the numerous foreign airlines flying in and out of China or on one of the many Chinese airlines that have sprung up to serve the spectacular increase of travelers to and from China.  Indeed, this current visit of mine started in Hainan, from where I flew here.  I had flown from Hong Kong to Haikou.  Tomorrow, I go directly to Singapore on Singapore Airlines.  Certainly, a far cry from walking across that bridge between Lowu and Shenzhen.

        The way Hainan province is intensely engaged in international economic interaction today, receiving many visitors for business or pleasure or both – sometimes even unwelcome flights – it is hard to imagine the day when Hainan used to be one of the many places in China that were closed to foreigners at the time I was living in Beijing in the latter half of the 1970s.

        As I said earlier, I just came from Hainan, in Boao specifically.  I took part in the annual political consultations between senior foreign ministry officials of China and the ten member-countries of ASEAN.  This forum, which I am proud to have helped start, has gone a long way from the initial tense and tentative meeting in Hangzhou in 1995 to the richly textured and constructive dialogue in Boao a couple of days ago.

        These political consultations are only one of the rapidly increasing contacts and relationships between ASEAN and China today.  These expanding and deepening relations reflect the fact that ASEAN figures large in China’s engagement with the world.  In the light of the current regional configuration of power, the strategic imperative of close ASEAN-China linkages and interaction is evident.  Geography mandates them.  Geography, too, and historical and cultural ties have impelled the growing commercial exchanges between ASEAN and China, once economic and political barriers have begun to come down.

        As one indicator, trade between ASEAN’s six older members and China has been expanding steadily – from less than US$8.9 billion in 1993 to US$32.6 billion in 1999 – or a leap of three and a half times in six years.  The figures would be even more impressive if one were to include the trade with China of ASEAN’s four newer members.

        As trade and other economic linkages between ASEAN and China grow, they have also become active competitors – for markets and, above all, for investments.  Many people have raised the warning, in dire tones, that China will become an even more formidable competitor, especially for ASEAN, once China enters WTO.

        That is true.  But there is nothing wrong with competition.  Competition is what globalization is all about.  It is what commerce is all about.  It is what economics should be all about.  Competition – free competition – is not bad or necessarily frightening, provided it is fair.  Let us look at the positive side of competition.

        The opening-up of the Chinese economy not only makes more formidable the challenge of China as a competitor of ASEAN for investments and export markets.  It also presents a tremendous opportunity, offering a large – in many cases, new – market for ASEAN exports, for products of companies operating in ASEAN.

        Another reality is that countries and regions, no less than people, strive to improve and strengthen themselves, are pressured to become competitive, if there is competition.  In ASEAN, the prospect of heightened competition from China and elsewhere will impel ASEAN member-countries to shore up their strengths and fix up their weaknesses.  Not least, growing competition from China and others will push ASEAN into hastening the integration of the regional market.  Large, integrated markets – not small, fragmented ones – are what attract investors.  This is the major impulse for ASEAN’s determination to achieve the ASEAN Free Trade Area earlier than originally scheduled.

        Rising competition, especially from China, and the lessons learned from the 1997-1998 financial crisis have pushed ASEAN members into doing precisely those things that build up their competitiveness – undertaking financial and corporate reforms, strengthening the rule of law, improving transparency, embracing information technology, and, not least, integrating the ASEAN market at a faster pace.  They are reviewing their competitive strategies.  Prime Minister Thaksin Shinawatra of Thailand, for example, in a recent speech in Hong Kong, called on ASEAN corporations to collaborate among themselves in jointly exploiting overseas markets.

        Most ASEAN countries still have some way to go to complete the reform process – as does China.  But we are getting there.

        All this is behind ASEAN’s unwavering support for China’s entry into WTO from the very beginning.  This is in addition to ASEAN’s desire, a desire shared by much of the world, for China to grow and compete within the rules of the international trading order.

        Now, there are certain things about ASEAN that people tend to overlook.  ASEAN, which now comprises all of Southeast Asia, has half a billion people, almost half the population of China.  It has a combined gross domestic product about the size of China’s.  The regional market is integrating to a level approaching the actual integration of the Chinese market.

        The ASEAN Free Trade Area is, substantially, now a reality.  In less than seven months, it will have achieved its target of zero-to-five-percent tariffs for the trade among the six original signatories to the AFTA treaty, which are the region’s principal trading nations.  Even today, more than 90 percent of ASEAN’s trade is in the zero-to-five-percent tariff range.  Product standards are being harmonized, and other measures to make trade easier are being undertaken.  ASEAN has ambitious programs for railway and highway systems, an electric power grid, and a gas pipeline network to further integrate the region’s economy.

        At the same time, ASEAN is determined to forge closer economic links with China.  Economic ministers of ASEAN and China have formed an experts group to further deepen the economic relations between ASEAN and China, relations that are already increasingly close.  A possible ASEAN-China free trade area is part of the scope of the experts group’s work.  With sufficiently close links between the ASEAN and Chinese economies, investors in China or ASEAN could, in effect, have the economies of ASEAN and China as a potential market, a market of 1.7 billion people.

        There is a larger dimension to this.  It is what is known as the ASEAN-Plus-Three process.  It is the process that aims at deepening the relations among ASEAN, China, Japan and the Republic of Korea.  It is being driven by the ASEAN-Plus-Three Summit, which has been meeting every year since 1997.

        The process has advanced most rapidly in financial cooperation.  The ASEAN-Plus-Three finance ministers and central banks have agreed to set up a network of bilateral currency swap and repurchase agreements.  This system is intended to avert a crisis arising from short-term liquidity problems by making financial resources available to countries that may find themselves in sudden trouble; for example a critical balance-of-payments problem.  Substantial agreements have already been reached on bilateral swap arrangements between Japan and Malaysia, between Japan and Thailand, and between Japan and Korea.  Others are being worked on.  The ASEAN-Plus-Three finance ministers are also forging cooperation in research, in training, and in the monitoring of the regional economic situation.

        The ASEAN-Plus-Three foreign ministers have been meeting at least once every year to review and consult on live political and security issues in East Asia.

        Meanwhile, an East Asia Vision Group of eminent personalities is completing its work and will submit to the ASEAN-Plus-Three Summit in Bandar Seri Begawan in November this year its recommendations on the future direction of East Asian cooperation.  One of those recommendations could be for an East Asian free trade area.  An East Asia Study Group of senior officials has been formed to work on these recommendations and to examine ways of deepening the relations among the countries of East Asia within the ASEAN-Plus-Three process.

        Apart from the benefits of cooperation in financial and economic matters, the expansion and deepening of the relations among the countries of East Asia have served as a way of managing the strategic dynamics in the region and thus as a force for peace and stability in this part of the world.

        It is partly in the context of East Asia and partly in the context of globalization, as well as in the bilateral context, that ASEAN-China relations must be seen.  As the economies of ASEAN and China get increasingly interlinked, businesses have an increasingly wide choice of where to set up operations for the ASEAN, the Chinese, the East Asian or the global marketplace.   Each of ASEAN’s members and China have their own strengths as production platforms.  If present trends continue, businesses operating in them will have the entire region for their market, provided the East Asian economies continue to open up and the opportunities they offer are wisely used.

        When viewed and carried out in this light, the strengthening of the linkages, as well as of the competition, between ASEAN and China bears enormous promise for the peoples of ASEAN and China and for the enterprises operating in them. The dynamics between ASEAN and China as competitors and partners will then prove of tremendous benefit to all.