Financial Implications of ASEAN - Essay Example

Introduction The second half of twentieth century saw wide scale developments in international political and economic scenarios. In the wake of fast integrating world, the nation states began to understand the need of international organizations to provide a common platform for nations to sit together and think in terms of common goals of economic prosperity. The idea of geographical vicinity and sharing of common features as to resources and output further translated into common market, common currency and ultimately political integration. The emergence of European Union (EU) and creation of bodies such as South Asian Association for Regional Cooperation (SCCRC), North Atlantic Treaty Organizations (NATO) and Southeast Asia Treaty Organization (SEATO) are all examples of such regionalization. Association of Southeast Asian Nations (ASEAN) is also one of these organizations which have been developed to promote the interests of the whole Southeast Asia. Being a fast growing economic bloc, observers pay a special attention towards its financial worth now and in future. Here we would focus on financial implications of ASEAN being our research question, vis-à-vis other blocs and in global economy as a whole. Our research method would be primarily comparative and analytical and will be based on available historical data, both in print and electronic media, as primary research does not suit the purpose. We will also deliberate upon the individual contribution of member states wherever seems necessary. Evolution of ASEAN ASEAN was founded on August 8, 1967. Initially, it had five member countries namely Indonesia, Thailand, Malaysia, Philippines and Singapore. Since then, five more countries have joined ASEAN namely Brunei Darussalam, Cambodia, Vietnam, Burma and Laos making it a vibrant regional organization with ten members. Together these nations look to strengthen their political, economic, social and cultural development. With the passage of time ASEAN has provided even bigger platforms for nations of the region to sit together. One of them is ASEAN plus three where three economic giants of East Asia i.e. China, South Korea and Japan also attend the meetings to further the cause of regional development. Similarly, the creation of East Asian Summit is another step towards such regional dialogue. East Asian Summit includes New Zealand, Australia and India in addition to the ASEAN plus three states making it a meeting point for 16 nation states. Objectives of ASEAN ASEAN countries have set out an objectives plan for their organizations. These objectives are provided in the ASEAN declaration. The major points of these objectives are following: 1. To speed up the economic, social and cultural development of the whole region; 2. To work for the peace and stability of the region under the umbrella of United Nations. 3. To help member states in their respective economic, social, cultural, scientific and administrative development. 4. To promote educational and professional standards of member states through help in the fields of training and development. 5. To mutually work for the development of agricultural, industrial and trade related issues. Special emphasis is given for the development of telecommunication and transportation facilities in this regard. 6. To develop better relationship with other regional and international bodies. It is interesting to note that the major focus of all these points is economic development. (aseansec.org, 2009) Even political and social development agendas are designed to suit the economic side of development. This depicts the vision of member states in understanding that economic development is the key for the success of whole region. Under ASEAN vision 2020, three key areas including economic community creation have been identified for future progress and an ASEAN community is created for the development of those areas. (Hew, Chin and Lee, 2005, P-36) Financial data as to ASEAN This bloc has tremendous potential as to resources and oppertunities. Its total area is around 4.46 million km2 with a population 600 million approximatly. This economic bloc is growing at a rate of 5.6% per annum with a global market share of $ 1.5 trillion. The above points provide for an integrated regional economy model and various steps have been taken by AEC to execute these visions. These steps are designed to ensure financial strength of the region and include the following: ASEAN Free Trade Area One of the biggest financial steps taken by ASEAN is the creation of free trade area for inter-member trades. The ASEAN Free Trade Area (AFTA) agreement was signed in 1992 in Singapore by six members of the organization. Other members have since joined and the process is still in the process of development. AFTA, when fully operational, will provide for tariff free import and export within the ASEAN member states enabling local business to explore regional market at a comparative advantage as compared to non-member states. The initiative has met many challenges in the past decade mainly because of already existent trade commitments of many member states but the process is moving forward towards a positive direction. ASEAN Comprehensive Investment Area Just like AFTA provides for free trade with member countries, The ASEAN Comprehensive Investment Area (ACIA) provides for advantageous investment opportunities for investors from member countries. The advantages offered to member states will include opening up of borders for investment purposes with lesser legal requirements, granting of national status to member states’ investors and developing such rules and regulations for investment which are acceptable by all member states. It is expected that most member countries will open their borders for investment for fellow members by the end of 2011. Certain countries e.g. Cambodia and Vietnam have been given additional time frame of 5 years though. ASEAN has also highlighted certain investment areas as areas of extreme importance. These include manufacturing sector, agricultural sector, mining sector, forestry sector and fishing sector. Governments of member states are expected to provide state of the art facilities for these upcoming regional investment sectors with a vision to add more in the coming future. ASEAN Single Aviation Market The growth of aviation industry has opened up new horizons for many businesses such as tourism. Traditional businesses have also benefited much because of speedy transportation thus increasing the scope of trade and investment. ASEAN has realized this importance and decided to work towards making ASEAN an open sky for the member states. In 2008, the member states started relaxing ruled for airplanes of member states to enter their territories. It is expected that by 2015 all member states will have an open air agreement to facilitate business and tourism. This will not only work for the economic betterment but also for cultural augmentation. ASEAN vision 2020. Under this vision three key areas have been identified for future progress and an ASEAN community is created for the development of those areas. (Hew, Chin and Lee, 2005, P-36) International Free Trade Agreements As discussed earlier that the East Asian Summit includes 16 states. ASEAN members have taken advantage of the organization to strengthen their mutual ties with concerned states. There have been many free trade agreements with countries like Australia, Japan and China. In addition to that ASEAN is also working to develop trade ties with other regional organizations such as European Union (EU) which will give ASEAN countries access to not only regional but also international markets. Development of Service Sector ASEAN leaders have also visualized the importance of human resources in the twenty first century. This has led to the idea of service sector reforms within ASEAN. Under this program the member states will provide for service sector development and human resource exchange with other members. It is expected that many concrete agreements will be executed in the coming years to handle this issue. ASEAN and Other Regional Blocs Having discussed about the background of ASEAN, it would be appropriate to look at the counterpart blocs. SAARC is also a similar socio-economic bloc having a great potential so far as resources and market potential. However, this region is marked by political and regional conflicts which eclipse its potential. Market is numerous but market share is very small as compared to the size. Total market share is less than 5% as compared to one sixth of population in ASEAN countries. Here we find comparative efficiency of ASEAN over SAARC. Similarly ECO/RCD has yet not achieved a status of an economic bloc. EU has however proved to be the role modal for economic blocs in the world. Its output has a fairly large share of global market as compared to its size. (Strange, Slater & Moltine, 2000) Relying upon the facts narrated above, it is clear that ASEAN has all the potential to become a driving force in the region and upon inclusion of major partners like China in the fold, the overall weight of the bloc will be able to counter any other regional bloc of the world. This fast growing economic cohesion is yet to produce a well balanced economic hub for the global economy. Conclusion In the four decades of existence ASEAN has grown from a small group of largely insignificant states to a vibrant regional organization with clear goals and objectives. It has provided a good platform for political and cultural arenas but its most important contribution is with the economic development of these states. The financial decisions made under the umbrella of ASEAN have proved to be of much help for the member states. Its success reflects the change in fortune of its member states. Countries like Malaysia and Indonesia have developed much during the course of these decades because of successful planning on economic fronts. In coming days its market is expected to takeover some other regional blocs. ASEAN’s performance in recessionary period of 1990’s is an ample evidence of its flexibility. These financial steps have put the region’s economic progress on the right track and its impact will be visible for many a decades to come. Work Cited Retrieved on December 09, 2009 from the official website of ASEAN Secretariat i.e. http://www.aseansec.org/64.htm Hew, Chin and Lee, Towards Realizing an ASEAN Community: A Brief Report on the ASEAN Community, (2004), Page 36 Wei-Yen and Hew, Brick by Brick: the Building of an ASEAN Economic Community, (2007), Page 14 Strange, Slater and Moltine, (2000) The European Union and ASEAN: Trade and Investment Issues, Read More