For ASEAN and Myanmar, an opportunity not to be missed

Author: Giovanni Capannelli, ADB

The 25th ASEAN Leaders’ Summit will be held in Naypyidaw this week back-to-back with related meetings of the East Asia Summit and other groups, bringing world leaders to Myanmar. For some of them it will be the first time in the country and for Myanmar a unique occasion to show its commitment to complete the country’s transition to democracy and ‘normalisation’ with the international community, after decades of difficult political and economic relations.

Attracting foreign capital that is in line with Myanmar’s growth and development strategy is an important task for President Thein Sein and his country’s management team. To be effective, they must convince world leaders of their determination to introduce structural reforms that improve income distribution and provide equal opportunities to everyone, not only elites. Enhancing the country’s human rights record, which continues to be negatively affected by ethnic, religious and communal violence issues, is another priority.

The theme chosen by Myanmar to mark its first ASEAN chairmanship is ‘Moving Forward in Unity to a Peaceful and Prosperous Community’. The aim is to promote regional solidarity and progress towards a more closely integrated community based on maintaining peace and security among its members — and with the rest of the world. With the ambitious commitment to establish the ASEAN Community by the end of 2015, this summit is expected to adopt resolutions that accelerate the implementation of the blueprints for the Community’s three pillars: political security, economic and socio-cultural.

On some fronts, notably on security issues, Myanmar has been able to strike a fairly good balance against contrasting interests. This is evident, for example, on the South China Sea issue, where Myanmar has managed to maintain internal cohesion among ASEAN members, while continuing to constructively engage with both China and the United States.

Significant progress was also made in the socio-cultural sphere. Regional cooperation initiatives have seen progress in human development, social welfare, and environmental sustainability. An ASEAN Institute for Green Economy is expected to be established in Yangon soon. ASEAN leaders will also be adopting a Joint Statement on Climate Change at the upcoming summit.

On the economic front, progress is encouraging but insufficient, especially with regard to completing the ASEAN Economic Community (AEC). While member countries have already adopted more than 80 per cent of all measures that were to be introduced before the end of 2015, what remains is the hardest part. It will take several more years to have the AEC fully in place. Major delays in policy implementation are due to difficulties with the ratification of signed agreements and their alignment with national laws. A significant lack of coordination among national and regional agencies is another major problem. And given the pronounced intraregional development gap, a few countries also lack the technical, regulatory and financial capacity to fully implement some of the measures needed to complete the AEC.

While the elimination of non-tariff barriers — including anti-dumping provisions and sanitary regulations — is the crux of the problem, countries must also reinforce food security and cooperation in agriculture and forestry; adopt bold trade facilitation measures to further reduce costs; strengthen investment policies; improve the business climate; and encourage capital mobility with other ASEAN members while watching against possible sudden reversals in short term flows.

Progress in promoting the free flow of skilled labour is also slow. Labour market regulations are yet to be fully harmonised across countries. There needs to be easier access to visas and employment passes for workers engaged in cross-border trade and investment. Introducing a region-wide definition of core competencies for job and occupational skills is also important, especially for services. Even though mutual recognition agreements have been signed in eight occupational categories, actual progress has only been observed for engineers, with almost 1,700 registrations to date in the ASEAN Association of Engineers Organisation — although those registered still need to pass a local exam to become certified engineers in the countries they intend to provide their services.

While the ASEAN Summit may be unable to significantly speed up the AEC implementation, leaders are expected to contribute to shaping ASEAN’s post-2015 vision, to be endorsed next year. There are two areas of utmost importance. First, is a renewed focus on connectivity through significant infrastructure investment and the complete elimination of non-tariff barriers in goods, services and investment. Second, is an agreement on bold institutional reform to enhance the efficiency of ASEAN governing principles, including on decision-making systems and financial contributions, reflecting the group’s expanded economic agenda. Moreover, as current AEC provisions for skilled labour mobility only cover a tiny share of the region’s total migrant workers, ASEAN leaders should start discussing ways to manage unskilled labour mobility at least in key sectors such as construction, garments, fishing, plantations, and tourism.

While the presence of many world leaders in Naypyidaw and global media attention will add to Myanmar’s existing logistical challenges, the summit will mark a success for the country’s first ASEAN chairmanship. President Thein Sein’s ability to introduce significant progress toward enhanced internal cohesion and renewed group centrality in Asia’s architecture for cooperation has been remarkable. The next chair, Malaysia, should thank Myanmar for the good work it has done this year.

Giovanni Capannelli is Principal Economist in the Central and West Asia Department of the Asian Development Bank.

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