Factory Workers in Cambodia. Photo by ILO in Asia and the Pacific, CC BY-NC-ND 2.0, https://creativecommons.org/licenses/by-nc-nd/2.0/

Built Upon Non-Interference: Can ASEAN Economic Integration Succeed?

In April 2018, the Association of Southeast Asian Nations (ASEAN) will host its 32nd summit. The path to economic integration laid down by the foundation of the ASEAN Economic Community (AEC) in 2015 holds the promise of increasing living standards and growth – but it also presents challenges to the group’s policy of non-interference in member states’ affairs.

ASEAN’s themes for 2018, under Singapore’s chairmanship, are “resilience and innovation.” Both will be needed if the group’s members are to bridge their differences and meet their challenges. Economically, for example, the Bertelsmann Transformation Index shows that the ten ASEAN countries have experienced widely different degrees of economic transformation. Singapore ranks 5th out of 129 countries, but its closest ranked member in the group is Malaysia, which places 21st. Meanwhile, Myanmar is 122nd, and Cambodia 96th. The strength and implementation of institutions and regulations vary across nations; moreover, the AEC itself, an ambitious project to create a regional single market, so far at least has few of the formal structures and mechanisms, rooted in a commitment to shared sovereignty, that have allowed the European Union to thrive.

Inequality within countries is also a big problem for many ASEAN members. The BTI Index notes that in Laos, Cambodia, Vietnam, the Philippines and Indonesia poverty and inequality are still “pronounced and partly structurally ingrained.” Some countries have made progress in reducing poverty, but in the worst performing member state, Myanmar, socioeconomic indicators have continued to decline. Inequality breeds instability, and instability could threaten economic integration as well as public support for the leaders who pursue it.

Another threat in ASEAN’s future is the rise of automation. The region is a major commodity exporter. Cambodia, for instance, relies heavily on its garment industry, which accounts for 85 percent of its exports. Automation could take the jobs of low-skilled assembly line workers, as well as jobs in other regionally important industries such as business processing outsourcing.

Further economic integration through digitalization

The bloc hopes that innovation can help its members to meet some of these challenges, and so it plans to promote digital technologies and the new skills needed to take advantage of them. Although free trade in goods and some services has been in place for some time, restrictions still exist. Cross-border payments and investments remain slow and cumbersome. In the World Bank’s Doing Business 2018 report, Cambodia, for example, was ranked 124th for ease of trading across borders, with Singapore only 42nd. Digital technologies could help speed things up, and ASEAN has plans to set up an integrated e-payment scheme, as well as a single digital market.

Southeast Asia is the world’s fastest growing internet region – by 2020, the region is projected to have an internet user base of 480 million. But at the moment, these users spend only $30 billion online. The potential for growth is enormous – and ASEAN hopes to leverage digital technologies to enable micro, small, and medium enterprises to get online and become part of global value chains.

Rohingya humanitarian crisis disunites group members

Working together to create common digital infrastructure assumes a baseline of unity and commitment to progress, and the grouping’s theme of resilience focuses on promoting regional order and stability, as well as cooperating on common threats such as terrorism and cyber security. But in the coming year, it may prove very tricky for member states and Singapore as chair to walk the line between, on the one side, promoting unity and cooperation, and, on the other, speaking out or taking action on member states’ affairs. Potential flashpoints for volatility, which could affect the stability of the grouping as a whole, are looming in several of the bloc’s members.

In Myanmar, the Rohingya humanitarian crisis has already caused tensions between ASEAN members. Relations between Myanmar and its Muslim-majority neighbors, Malaysia and Indonesia, are strained, and with no long-term resolution in sight, ASEAN can only step up aid through the ASEAN Coordinating Centre for Humanitarian Assistance and repeat its calls for a durable solution. But the crisis is affecting domestic politics – in Indonesia, Islamist groups are exploiting public sentiment in favor of the Rohingya to build their own support – which could act to undermine unity within the group as a whole.

Upcoming elections stir up internal conflicts and ethnic nationalism

Elections will be held in Malaysia and Cambodia in 2018, and possibly in Thailand in 2019. Each holds the potential to generate upheaval within countries, which could contribute to destabilization across the region.

As in Indonesia, ethnic tensions are flaring in Malaysia, where elections to be held before August are set to be the closest in years. Both the ruling coalition and the main opposition parties are appealing to anti-Chinese sentiment to galvanize support from the majority Muslim population.

In Cambodia, ranked 98th of 129 in the BTI’s political transformation rankings, the government dissolved the main opposition party in November 2017, creating a one-party state ahead of July’s elections. In the Economist Intelligence Unit’s Democracy Index for 2017, the country was downgraded from a “hybrid regime” to an “authoritarian regime.”

Thailand has not held elections since the military coup of 2014, and although the junta has promised polls will be held by February 2019, such promises have been made and broken before. However, political parties were allowed to register in March 2018, ahead of the promised elections, and 42 parties did so – some of which have been accused of being fronts for the military. Even if the polls go ahead, the junta has made changes to the law to limit the power of elected officials and maintain its own authority. Protests in February 2018 against further postponement of the elections may be a sign that tensions could increase as the military continues to suppress democracy.

Internal conflicts and ethnic nationalism could cause countries to focus inwards, undermining their commitment to regional integration and posing a challenge to ASEAN’s plans. Full economic integration and the policy of non-interference are uneasy partners – and it seems likely that in the long run, ASEAN will have to decide which one it views as most important.


Justine Doody is an editor and analyst specializing in foreign policy and development. She writes for the Bertelsmann Stiftung’s SGI News and BTI Blog.

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