Talk given by H. E. Rodolfo C. Severino, Secretary-General
of the Association of Southeast Asian Nations,
at a luncheon sponsored by the Asia Society Hong Kong Center

Hong Kong, 5 April 2000

I wish to thank the Asia Society Hong Kong Center for giving me this chance to be with you today. Only last month, I took part in the Williamsburg Conference in Singapore, an annual event that Asia Society sponsors. There, a small of group of us went over the situation in East Asia and the role of the United States in it. It was a most stimulating and occasionally provocative two days.

Today, in another Asia Society event, I have this opportunity to exchange views with you on what is happening in Southeast Asia, in ASEAN, from the distinct vantage point of Hong Kong. As a Special Administrative Region of China, managing its own economy, administering itself, and maintaining its own social arrangements and lifestyle, Hong Kong has its own perspective on the state of the region of which it is a part.

The fact that we -- you in Hong Kong and I from Southeast Asia -- are here to discuss developments in ASEAN in the broader regional context reflects the recognition by both Hong Kong and ASEAN of Hong Kong's close interest in what is happening in its neighborhood to the south. Hong Kong, after all, is less than two hours from Hanoi or Manila, and only two and a half hours from Bangkok.

Beyond this geographic proximity, which is important in itself, the destinies of Hong Kong and Southeast Asia are closely intertwined. As an open and free economy, an open and pluralistic society based on the rule of law, and a well-run administrative and economic entity, Hong Kong has valuable lessons to impart to Southeast Asia. As a place that is steadily building a knowledge society and a technological economy, Hong Kong can show the way for Southeast Asia. At the same time, Southeast Asia offers a growing and integrated market for Hong Kong goods, Hong Kong services and Hong Kong investments.

Hong Kong and Southeast Asia have a common interest in the stability of the East Asian region. They have a common stake in the ability of Hong Kong, ASEAN and the other countries of this area to deal effectively with a globalizing world economy and with the international financial system. Hong Kong and Southeast Asia will both benefit from rising living standards for all the people of this region.

ASEAN has definite contributions to make to the advancement of these common interests. In my view, ASEAN can best make its contributions in the following ways:

1. Fostering a stable regional security environment;

2. Advancing regional economic integration;

3. Promoting economic openness to the world; and

4. Dealing regionally with transnational problems.

How is ASEAN doing in these critical tasks?

In promoting regional security, ASEAN, mainly through the ASEAN Regional Forum, has engaged the regional states and other major powers in addressing together the security concerns of our part of the world. They are doing this by holding regular consultations and by building mutual confidence through dialogue and practical cooperative measures. This does not sound dramatic or exciting until you think of the alternative. ASEAN looks forward to developing ARF as an effective instrument for preventing conflict and, eventually, the settlement of disputes.

One outstanding issue in Southeast Asia is the conflicting territorial and jurisdictional claims in the South China Sea. Territorial disputes are often intractable, and those in the South China Sea seem to be more so than most, involving, as they do, maritime jurisdictions, varying interpretations of history, disparities in power, and differences in perceived strategic interests.

ASEAN has finally succeeded in engaging China in discussions on a regional code of conduct for the South China Sea. ASEAN hopes that under such an agreed code of behavior China and the Southeast Asian countries will commit themselves to specific measures to avoid conflict, reduce tensions, promote cooperation, protect the marine environment, and prevent crime in the South China Sea. Three weeks ago, ASEAN and Chinese officials undertook consultations on the proposed code. They identified the elements on which they agree and pinpointed those issues on which they continue to differ. They agreed to meet again to see whether they can narrow their differences. Pending the resolution of the fundamental issues, a regional code of conduct, if respected and observed by all, would serve the interests of all, the interest of regional stability above all.

Partly in response to the recent financial crisis, ASEAN has of late been accelerating the process of regional economic integration. It is quickening the pace of the ASEAN Free Trade Area, or AFTA. By the beginning of 2002, or in less than twenty-one months, about 90 percent of intra-ASEAN trade will have tariffs of no more than five percent or none at all. Even now, trade within ASEAN is close to this AFTA target. Even now, products of companies with related operations in two or more ASEAN countries receive the full AFTA treatment under the ASEAN Industrial Cooperation scheme, AICO. Some of the region's biggest companies, most of them Japanese and none from Hong Kong, have benefited from this arrangement. We would like to see more companies take advantage of it, including smaller ones and including those from Hong Kong.

ASEAN has started the process of negotiating the liberalization of trade in services, including financial services. Trade within ASEAN is being made easier through the increasing harmonization of product standards and of customs rules and procedures. ASEAN is seeking to turn the region into one investment area, the ASEAN Investment Area. As part of this effort, ASEAN countries have agreed to open up their economies to ASEAN investors, and others in joint venture with ASEAN investors, and to extend national treatment to them.

The region is intent on binding itself more strongly with road networks and transport arrangements, with regional electric power grids and gas pipeline networks, and with telecommunications interconnections. Much of this work is focused on the Mekong Basin, both as a natural geographic unit for development and as a vehicle for pulling up ASEAN’s newer members, all of which are in the Mekong Basin, to the economic level of the older ones.

All of this -- an integrated market, open investment regimes, infrastructure development, and so on -- should make ASEAN's economies considerably more efficient and productive and attractive to investment. The Hong Kong business community ought to look into the many opportunities that an integrating ASEAN offers.

While integrating its own economy, ASEAN remains open to the rest of the world. It is now exploring with Australia and New Zealand the possibility of a free trade area between them and AFTA. Cooperation between ASEAN and China, Japan and the Republic of Korea has been gaining momentum within the so-called ASEAN Plus Three framework. Forums have rapidly multiplied among these thirteen countries of East Asia to work out measures to advance substantial cooperation among them. These include annual summits and regular meetings of foreign ministers, trade and industry ministers, finance ministers, deputy finance ministers and deputy central bank governors, and senior officials in various sectors.

Relations between ASEAN and China are expanding steadily. The South China Sea is just about the only issue between them. China is one of the countries with which ASEAN as a region has the most active relationship. Trade between ASEAN and China is growing fast, hitting more than US$27 billion in 1999, from less than US$9 billion in 1993. In this light, ASEAN has from the beginning supported China's entry into the World Trade Organization. As a special region of China with superior facilities and long experience in trading, shipping and finance, Hong Kong can play an even greater role today as a bridge between ASEAN and China than it has already done.

ASEAN remains at the core of APEC, a force for keeping APEC faithful to its original purposes -- not only the liberalization of trade and investment, but, just as importantly, the facilitation of trade and investment and economic and technical cooperation. Seven ASEAN members are active in pursuing the goals of WTO in a balanced and fair way. We hope that Hong Kong will continue vigorously to support the entry of Cambodia, Laos and Viet Nam into WTO.

In one sense, ASEAN has been integrating its economy as a matter of deliberate policy. In another sense, the forces of globalization and the power of modern technology are impelling that integration. The contagion effect of the recent financial crisis has shown how investors and fund managers have come to regard Southeast Asia as, to a substantial degree, an integrated economy. The financial turbulence was thus a regional problem requiring regional measures to prevent its recurrence -- at one level within ASEAN, at another level among East Asian countries.

One of ASEAN's first regional reactions to the crisis was to accelerate economic integration, through AFTA, the ASEAN Investment Area, and other schemes, in order to stimulate trade and attract investments. ASEAN launched the process of liberalizing and facilitating trade and investment in financial services on a regional basis.

ASEAN set up a surveillance mechanism, run out of the ASEAN Secretariat and supported principally by the Asian Development Bank. Through this mechanism, ASEAN finance ministers, in a process of peer review, exchange views on the regional economic situation, brief one another on their national economic conditions and on the policy measures they are undertaking, and encourage one another in their efforts at reform. Such a review was conducted eleven days ago in Bandar Seri Begawan.

At that meeting, the finance ministers also decided to build a regional framework for the development of the ASEAN bond market in order to deepen the region's capital markets. They agreed to adopt internationally accepted standards and practices in accounting, auditing and disclosure. At a meeting with their counterparts from China, Japan and the Republic of Korea in Chiangmai next month, the finance ministers will be discussing a mechanism to monitor international capital flows within the region and a possible regional financing arrangement for use in times of crisis. Depending on the shape that it takes, Hong Kong can have a place in this endeavor. After all, as a leading financial center, Hong Kong was part of the Manila Framework of 1997.

Even earlier than the financial turbulence, ASEAN has recognized that the threat to the environment transcends national boundaries and must be dealt with collectively. But this fact was brought home to ASEAN with full force when, in 1997, the haze rising from forest and peat fires in large parts of Indonesia threatened the health, economies and living conditions of neighboring ASEAN countries. ASEAN responded by polishing off the regional haze action plan crafted in 1995 and worked out detailed implementation arrangements involving monitoring, prevention and firefighting. The fires that blazed again earlier this year put ASEAN's response to the test. The operation of the plans and pre-arranged reactions seems to have worked well, with the full participation of the Indonesian Government.

The onset of the information age is raising challenges to ASEAN's future competitiveness, challenges that will, again, test ASEAN's ability to act together to face common difficulties and seize new opportunities. ASEAN’s leaders have recognized that the best way to position the countries of Southeast Asia in cyberspace is to work together as ASEAN in order to achieve economies of scale, integrate and enlarge the market, develop region-wide infrastructure, and learn from one another. For this purpose, an e-ASEAN task force of government and private-sector representatives has been established to carry out the leaders’ mandate. It will be developing a work program for all sectors involved. It will draft an e-ASEAN agreement on the policy environment for the knowledge industries to flourish, including free trade in goods, services and investments in those industries. It is identifying pilot projects to get e-ASEAN off the ground. I suggest that technologically competent Hong Kong can have a significant role to play in this enterprise.

As ASEAN enters the information age, it has become increasingly clear that the development of human resources - education, training and health -- holds the key to the region’s competitiveness as well as to the wellbeing of its people. ASEAN has been focusing cooperation with its dialogue partners on this crucial area. Hong Kong, too, has much to contribute to this partnership, which would, at the same time, strengthen the ties between the people of ASEAN and the people of Hong Kong.

ASEAN is also strengthening its cooperation in combating trans-national crime, including drugs, money laundering, and trafficking in human beings. Here, too, there is much room for cooperation between ASEAN and Hong Kong.

I have summed up what ASEAN has been doing to advance our common interest - Hong Kong’s and ASEAN’s - in the stability and prosperity of our region in this new era of economic globalization and technological revolution.

ASEAN countries have kept the peace among themselves. This is no mean achievement. ASEAN as an association has also provided venues for addressing the major regional-security issues of our time. But powers mightier than the Southeast Asian states have a heavy responsibility also for regional peace and stability.

ASEAN has speeded up regional economic integration to stimulate trade and investment and link up the region together for greater efficiency and productivity. This, in ASEAN’s view, is the only way to compete in a globalized economy. At the same time, ASEAN has remained open to the world, with growing ties especially to its neighbors to the North and the South.

ASEAN has shown the way in acting together to deal with common challenges - in matters of finance, the environment, trans-national crime, information and communications technology, and the development of human resources.

In all this, ASEAN and Hong Kong can forge productive partnerships. Hong Kong could look closely into the investment opportunities in ASEAN’s integrating market and in the growing regional infrastructure, particularly in the Mekong Basin. Hong Kong and the ASEAN countries could coordinate their moves more closely in forums in which they belong, like APEC and WTO. There is ample room for cooperation in matters of finance. Potential synergies exist in e-commerce and other areas of information and communications technology. Hong Kong and ASEAN could help each other in the vital endeavor of human resource development. Combating trans-national crime is a natural area for cooperation.

I suggest that ASEAN and Hong Kong explore mechanisms and muster the will to work more closely together for the goals that we share and cherish.