Presentation by H. E. Rodolfo C. Severino, Secretary-General
of the Association of Southeast Asian Nations,
at the ASEAN Business Summit

Kuala Lumpur, 11 April 2000

I have been asked to speak on the relevance of ASEAN to the world economy. At first, I thought of asking that the topic be changed to the relevance of ASEAN to its people. That is really the kind of relevance that interests me, the subject that I care about with respect to ASEAN. However, I realized that these two concepts - ASEAN’s relevance to the global economy and ASEAN’s relevance to its people -- are really two sides of the same coin. One is not valid without the other. I suggest that where they intersect is on the issue of ASEAN’s competitiveness.

In Southeast Asia, the central question of our time is: How can the people of this region compete, and thus raise their living standards, in a global economy that is being integrated and transformed by policy and technology interacting with each other? How can ASEAN as an association help them to do so? ASEAN’s relevance both to the world and to its own people depends on how effectively it can help the region to be competitive in the global marketplace. Of course, because ASEAN is made up of sovereign states, competitiveness depends even more on what ASEAN’s states, societies and peoples do for themselves in this regard.

When we look at the issue of competitiveness, we ask: Competitiveness for what? The basic answer is: For markets, investments and people. We can now ask: At the regional level, what has ASEAN done with respect to each of these objects of competition?

First, markets. The primary strategy that ASEAN has adopted is to integrate and thus expand the regional market. As we all know, the ASEAN Free Trade Area is being accelerated, creating a market of 500 million people, half of China’s population, with a gross domestic product equal to China’s. For all practical purposes, AFTA is now with us, less than twenty-one months from its official target date for ASEAN’s six leading trading nations. Products of companies with related operations in two or more ASEAN countries have been enjoying full AFTA treatment under the ASEAN Industrial Cooperation scheme (AICO).

ASEAN is easing the flow of trade within the region. It is harmonizing customs procedures and product standards. It is drawing up implementing protocols for the framework agreement on goods in transit. It is working out agreements on multi-modal transport and inter-state transport. Talks are going on or about to start on freeing up trade in services in several sectors. ASEAN is developing e-ASEAN, which is intended to harness, cooperatively, information and communications technology to make trade more efficient and less expensive within countries, within the region and with the world outside.

Beyond Southeast Asia, ASEAN is now exploring with Australia and New Zealand a possible free trade agreement between them and AFTA. The institutionalization of the ASEAN Plus Three forums should lead to more intensive economic and other contacts between ASEAN and its Northeast Asian neighbors, China, Japan and Korea.

To protect and expand their markets in the large economies of North America and Western Europe, the ASEAN countries have taken common positions on issues before the World Trade Organization. These include the need for the industrialized countries to reduce tariffs on manufactured goods and to fulfill the spirit, as well as the letter, of their commitments to remove quotas on garments and textiles. They also cover the abolition of agricultural export subsidies and the use of labor and environmental issues and anti-dumping measures for protectionist purposes. ASEAN insists that the developed countries cooperate in building the capacity of developing countries to negotiate and compete in an open world market.

Competitiveness, of course, requires investments, investments of the productive kind, the long-term kind, quality investments to finance production, to lower costs and to harness and acquire technology, as well as to generate jobs. Investment is itself an object of competition; competition with China and its huge domestic market and massive, fast-developing and still-inexpensive manpower; competition with India and its dynamic pockets of high technology; competition with Latin America and its opening economies and proximity to the huge North American market; competition with Eastern Europe and its broad industrial base and highly educated people.

What has ASEAN done as a region to compete for much-sought-after investments?

First, the integration of ASEAN into one big market is one attraction for investment. Investments in ASEAN would have an even larger market should ASEAN form free trade areas with Australia and New Zealand and with other countries and regions. The work on liberalizing intra-ASEAN trade in services is part of this market-enlarging endeavor. At the same time, making services more efficient and less expensive would in itself be a major consideration in investment decisions.

ASEAN is being bound closer together by regional infrastructure linkages - road networks, railways, power grids, gas pipeline networks, and telecommunications interconnections. Not only would these facilities support the establishment and operation of investment projects; they present opportunities for investment.

ASEAN has been taking direct measures to draw investments into the region. It has agreed to set up an ASEAN Investment Area, in which each ASEAN country opens most sectors of its economy to investors from other ASEAN countries and extends national treatment to them. Other investors in joint venture with ASEAN nationals or companies are entitled to this liberal treatment. Six weeks ago, ASEAN sent out a ministerial-level joint investment promotion mission to Japan. This will be followed next month by similar missions to New York, Minneapolis, San Jose, London, Paris and Munich.

The accelerating pace of ASEAN cooperation in matters of finance is meant to enhance ASEAN’s attractiveness to investment as well as to strengthen its economic fundamentals. The liberalization of intra-ASEAN trade and investment in financial services is being worked on. ASEAN is seeking jointly to develop regional capital markets, including bond markets. The finance ministers, in their meeting two and a half weeks ago, decided to adopt international standards and practices in accounting, auditing and disclosure. A working group has been set up to carry out this decision.

An economic surveillance mechanism is now in place. Run out of the ASEAN Secretariat with support from the Asian Development Bank, the mechanism gathers and analyzes economic data from the member-states and periodically issues surveillance reports on the economic state of ASEAN from various points of view. In a process of peer review, the finance ministers examine and debate these reports, reporting to one another on the progress of reform in their respective countries and encouraging one another to persevere in their reforms.

Financial cooperation occupies an important place also in the fast-developing forum between ASEAN and China, Japan and Korea. In less than a month, the finance ministers of the thirteen countries of Southeast and Northeast Asia will meet in Chiangmai to explore, among other things, possible measures for monitoring short-term capital flows within the region and a self-help and support mechanism to make available resources for use in financial emergencies.

ASEAN has been enhancing the investment climate by fostering a sense of stability and security in the region, cultivating such ventures as the ASEAN Regional Forum, the Treaty of Amity and Cooperation in Southeast Asia, the Southeast Asia Nuclear Weapons-Free Zone, and the ASEAN-proposed regional code of conduct for the South China Sea.

An increasing number of binding economic agreements strengthens ASEAN’s rules-based regime, a factor of importance to investors

Finally, there is competitiveness in terms of people. At its most basic, this means training ASEAN’s people, giving them a sound education, and keeping them healthy. Human resources and their productivity have always been a factor for economic competitiveness. They are much more so now, when knowledge-based and technologically dynamic industries assume ever-greater importance in the world’s economies. More than this, people are also consumers and constitute a market. Purchasing power that is well-distributed provides a more potent stimulus to and more stable foundations for economic growth than purchasing power that is concentrated in a few. This is why ASEAN has, of late, been focusing its attention on human resource development, rural development, the fight against poverty, and social safety nets - within itself and in cooperation with its dialogue partners and international institutions.

Cutting through all this - trade, investments and human resources - is the development and use of information and communications technology. ASEAN is determined to join the information age on a cooperative basis, building the infrastructure, providing the legal and policy environment, training people, stimulating investments in information and communications technology companies, freeing trade in ICT products, using ICT for trade, harnessing ICT for education and health, utilizing ICT for the improvement of society and the enrichment of people’s lives. An e-ASEAN task force, consisting of public and private sector representatives, is now at work on practical measures to start bringing e-ASEAN to reality, to help ASEAN to be competitive in the information age.

Much of the work to make each ASEAN country competitive has to be done at the national level. It is the national will that must be exerted. Opening the economy to competition, leveling the business playing field, solidifying the rule of law, enforcing law and order, strengthening political stability, removing red tape, fostering a business-friendly business environment -- these are all matters for national societies and their governments to decide. Ensuring a more equitable national distribution of income, and thus raising the purchasing power of the people, is the concern of national policy. Education and training adequate for global and regional competition require a substantial re-allocation of resources that only individual countries can decide for themselves. Countryside development, poverty-eradication, and social safety nets are basically national responsibilities, as they have everything to do with the re-distribution of national resources.

But it is ASEAN that is making possible the regional economic integration that reinforces Southeast Asia's economies, enhances their competitiveness and helps make the region attractive to investors. It is ASEAN that gives impetus to the regional infrastructure linkages that support and attract investments. It is ASEAN that can provide the increasingly useful regional supplement to the global and national efforts to deal with volatile capital flows and currency movements. It is in ASEAN where the countries of the region can learn from one another, undertake joint training, exchange best practices and establish regional models for rural development, the alleviation of poverty, education for today's economy, and social safety nets. It is ASEAN that fosters regional stability in Southeast Asia. It is through ASEAN that the countries of Southeast Asia can deal with other countries and regions from a position of greater strength.

It is this work of ASEAN in reinforcing the competitiveness of the region as a whole - in terms of markets, investments and people - that makes ASEAN relevant to the world and, above all, to its people.