Keynote address by H. E. Rodolfo C. Severino, Secretary-General
of the Association of Southeast Asian Nations
at the First ASEAN-Russia Business Forum

I am extremely pleased to take part in this First ASEAN-Russia Business Forum. I consider it as another milestone in ASEAN-Russia relations. The first such milestone was set in this very city of Kuala Lumpur, in 1991, when Russia attended the opening of the ASEAN Ministerial Meeting as guest of the host, Malaysia. The next year, the Philippines invited Russia to participate in a similar occasion as guest of ASEAN. Thus, Russia became a consultative partner of ASEAN. This paved the way for Russia to take part in the first ASEAN Regional Forum in 1994.

Another important milestone was reached in 1996, when ASEAN admitted Russia as a full dialogue partner. ASEAN did so in recognition of Russia’s strategic importance to this part of the world. A vast portion of Russian territory lies in Asia, with its eastern shore meeting the western edge of the Pacific. Russia is the second leading nuclear power and is a permanent member of the United Nations Security Council. At the same time, Russia has regarded ASEAN’s role as critical to the affairs of the Asia-Pacific. Regional security was a key agenda item in the two annual senior officials consultations held so far, in 1998 and 1999.

The dialogue relationship was forged with the realization by each side of the economic potential of the other. Russia has incredibly vast and rich mineral, timber and other natural resources. It has a very high level of science and technology. It has an immense industrial base. At the time of its admission as an ASEAN dialogue partner, Russia had started to allow its economy to be governed by market forces and had opened it to the global economy. Its industries had begun to be privatized, its economy to be deregulated. At the same time, Southeast Asia’s economies were surging. ASEAN as an association was showing the way in how to push regional economic integration as a tool for dynamic growth.

Sure enough, in 1996, the year that Russia became an ASEAN dialogue partner, ASEAN exports to Russia leaped to almost US$3.2 billion. ASEAN imports from Russia hit more than US$2 billion. However, in 1997, ASEAN exports to Russia plunged to US$876 million, to a little over US$500 million in 1998, and to a piddling US$117 million in the first half of 1999. ASEAN imports from Russia dropped to US$1.1 billion in 1997, to US$567 million in 1998, and to US$377 million in the first half of 1999. It would be safe to attribute this to the economic troubles on both sides - the drop in consumer demand, the financial strains, the decline in industrial production, the dwindling of investments.

Now, things are turning around, on both sides. Two weeks ago, the ASEAN Finance Ministers estimated that ASEAN would grow by 4.7 to 5.5 percent this year. This would be a marked improvement over the 4.6 percent contraction in 1998 and the positive growth of 4.4 percent last year. Exchange rates have stabilized, with the ringgit, the baht, the peso and the rupiah, currencies hardest hit by the crisis, experiencing minimal fluctuations from the first half of 1999 to February this year. Inflation is at single digits throughout the region, allowing interest rates to go down substantially. Consumer and industrial demand is rising steadily. For example, industrial electrical consumption and automobile sales have increased considerably. On the part of Russia, the recent elections and the smooth transfer of power have given the country new, vigorous leadership under President Putin, leadership that seems able to put in place the right setting for dynamic growth.

ASEAN as an association has expressed keen interest in Russia’s renowned advances in science and technology, particularly in the almost fifty areas that ASEAN has identified, ranging from waste water treatment to food safety and quality, from solar energy to coal technology, from haze monitoring and modeling to disaster management. However, cooperation has stalled because of lack of financial resources. The economic recovery on both sides should warrant another look at these very useful - even vital - areas for mutually beneficial cooperation.

Meanwhile, prospects for the renewed expansion of trade are rising again. This time, Russia should be looking at ASEAN as one integrated market, as the ASEAN Free Trade Area nears completion and the ASEAN Investment Area takes hold. It is a market with fully half the population of China and the same level of GDP as China’s. At the same time, Russia should be considering ASEAN’s great diversity, its rich variety of natural and human resources, and its different levels of development. This diversity gives Russian traders and Russian investors a large number of choices in an integrating regional economy that is again on the path of sustained growth.

For ASEAN, Russia has always been a vast market whose full potential has yet to be explored, exploited and fulfilled. Deputy Prime Minister Klebakov has outlined Russia’s strengths and potentials and the areas in which Russia is interested in cooperating with ASEAN, where it thinks the prospects for such cooperation are greatest, and from which both sides can draw most benefit.

Now is the time to step up the contacts between the two sides. The ASEAN and Russian governments have provided the policy setting. They have given official encouragement. Actual business transactions and interactions have to be carried out by the private sectors - firm to firm and person to person.

This is why this First ASEAN-Russia Business Forum is most timely indeed.