Author: Shankaran Nambiar, MIER

China has come to occupy a prominent position on Malaysia’s trade agenda over the past few years and is now Malaysia’s fourth largest trading partner. China currently accounts for about 11 per cent of Malaysia’s global trade, lagging behind the likes of the US, Japan and Singapore.

This was not always the case. Between 1995 and 1999, only about three per cent of Malaysia’s exports moved towards China. Today, about ten per cent of Malaysia’s exports are destined for China. Only about two per cent of imports came from China in 1995, but more recently they have shot up to close to 13 per cent. Read the rest of this entry »

Guest Author: Maria Monica Wihardja, CSIS, Jakarta

This post looks at the interaction between economic and political institutions.

A theoretical study of a simple strategic complementary game with private and public information among partially informed agents such as central banks shows that initial fundamentals might give rise to different levels of transparency. Read the rest of this entry »

Guest Author: Vani Archana, ICRIER

India has recently signed a free trade area (FTA) agreement with the ASEAN nations (Brunei, Singapore, Cambodia, Indonesia, Malaysia, Laos, Myanmar, the Philippines, Vietnam and Thailand). The agreement allows for the reduction of tariffs on so-called highly sensitive items, and special products including palm oil, pepper, coffee and black tea by 2019. Tariff rates on sensitive items with the five ASEAN member states most important to India’s trade system will be reduced gradually until 2016. Tariff rates on Normal Track 1 items will be reduced, and finally eliminated, by 2013, and by 2016 for Normal Track 2 items. Other countries in ASEAN like Cambodia and Myanmar receive three to five years longer to achieve the same tariff goals. There is also an exclusion list, which will be reviewed every year.

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Author: Joel Rathus

Examining the reports and minutes from the ASEAN Regional Forum’s Inter-Sessional Group on Confidence Building and Preventative Diplomacy (ISG-CBMs) doesn’t exactly instil much confidence in the ASEAN Regional Forum (ARF). This group is the litmus test of mutual trust in East Asia. More than that, it is a window into the thinking of the member states on the prospect of regional inter-state violence, up to and including, war.

While East Asia’s recent moves towards more and deeper regionalism, driven in part by uneasiness inspired by the Bush administration’s unilateralism and inattention to the region, would suggest a greater level of trust between the regional countries, the results of the ISG-CBMs are less than inspiring. Indeed, on reading what was being claimed as a CBM, one could be forgiven for losing some confidence that Asia could learn from Europe and find its way to a true peace predicated on trust rather than a cold peace based on the US hegemonic stabilizer and functional elite relations overlying popular fear and mistrust.

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Author: Jia Qingguo, Peking University

Since the end of the Cold War, many have considered what should be done institutionally to secure peace and prosperity in Asia. Some argue that the existing bilateral military alliances offer the best chance for sustaining peace and prosperity in the region. Others argue that multilateral cooperation mechanisms are a better alternative. Many believe the existing matrix of various bilateral and multilateral arrangements presents the best we can hope for in the region. But some argue that none of these is good enough. Instead, they propose the idea of an alliance of democracies, meaning the US, Japan, India and Australia—an alliance which Japanese Prime Minister Taro Aso described euphorically as an ‘Arc of Freedom and Prosperity‘. So far, the third argument appears to have prevailed.

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Guest Author:  Barry Eichengreen

There has never been a question about the ultimate purpose of the Chiang Mai Initiative (CMI), the system of Asian financial supports created in 2000 in that Thai city. That purpose, of course, is to create an Asian Monetary Fund, i.e., a regional alternative to the International Monetary Fund (IMF), whose tender ministrations during the 1997-98 financial crisis have not been forgotten or forgiven.

So far, however, the CMI has been all horse and no saddle. Its credits and swaps have never been activated. The distress following the failure of Lehman Brothers would have been an obvious occasion. Yet, revealingly, the Bank of Korea, the central bank hit hardest, negotiated a $30bn foreign-currency swap with the US Federal Reserve, not with its ASEAN+3 partners.

Now, we are told, ASEAN+3 has achieved another great breakthrough, the so-called Chiang Mai Initiative Multilateralisation (CMIM), aimed at turning its bilateral swaps and credits into a regional reserve pool. The goal was set in 2005, and last month ASEAN+3 finance ministers negotiated the details.
They specified contributions to their $120bn pool, set down borrowing entitlements, and allocated voting shares.
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Author: Ron Huisken

Twenty years ago, Japan and Australia spearheaded a drive to create a forum for the states of the Asia Pacific to collectively consider how to advance their shared interests in a more liberal trading regime. This became Asia Pacific Economic Cooperation or APEC, the first official (or Track One) multilateral acronym in the region (other than the sub-regional Association of Southeast Asian States – ASEAN – which dates from 1967). Establishing APEC was a major, and difficult, accomplishment. The Asia Pacific was (and, of course, still is) a vast and diverse region. Moreover, it had little pedigree in, and weak instincts to, surrender of any sovereign rights to multilateral processes. The difficulties are manifest in the title of the forum – four adjectives in search of a noun, as one wit observed – and in the fact that it was a gathering of member economies, not of states, in order to finesse Taiwan’s participation. But APEC has endured. Since 1993, at the initiative of the US, it has involved Heads of Government. Even though its formal mandate has remained confined to trade liberalisation, HOGs have found the opportunity for low-key bilateral negotiations to be sufficiently attractive to continue to turn up.

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Guest Author: Joel Rathus, Adelaide University

On the 3rd of May, the ASEAN + 3 Finance Minister’s Meeting (APT-FMM) met in Bali. Expectations were high that, at last, an agreement might be reached on the multilateralization of the Chiang Mai Initiatives, or CMIM. An agreement, were it reached, would allow the members of the CMI to tap a regional pool of Foreign Exchange Reserves to better fend off a financial crisis.

Yet, ever since the agreement to proceed with multilateralization was reached at the 2005 Hyderabad Conference, the CMIM has faced difficulty in reaching a decision about contribution levels. This problem was political; boiling down a simple question of whether China would succeed in persuading Japan to accept an ‘equal firsts’ solution, or whether Japan would succeed in making its case that it should to be the largest single contributor.

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Authors: Hal Hill and Greg Lopez

Chaos in Thailand, a controversial new PM in Malaysia, uncertainty in the Philippines, ASEAN as an institution searching for a role in the crisis. Hal Hill and Gregore Lopez ask: how serious is the crisis in Southeast Asia?

Even though the recent East Asian Summit was aborted in dramatic circumstances, this initiative underlines the diplomatic clout of the 10-member Association of Southeast Asian Nations, ASEAN. Put bluntly, Australia would not have a seat at this table if ASEAN had not acquiesced. ASEAN will also be critical to the success of Prime Minister Rudd’s proposed Asia Pacific Community.

These countries are also hugely significant economically and socially to Australia. For example, they are a larger share of our trade, our immigrants, our international student community, our overseas travel destinations and our aid program than is the case for any other OECD member.

Se we have a vital stake in their progress and, in particular, how well they are currently managing during the global financial crisis.

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Author: Donald K. Emmerson, Southeast Asia Forum, Stanford University

The turmoil in Thailand is about domestic questions: who shall rule the kingdom, and what is the future of democracy there? But the crisis also raises questions for the larger region: who will lead the Association of Southeast Asian Nations (ASEAN), and what is the future of democracy in Southeast Asia?

In mid-2008, Thailand began its tenure as ASEAN’s chair. The chair is expected, at a minimum, to host successfully the association’s main events, most notably the ASEAN Summit and multiple other summits between Southeast Asia’s leaders and those of other countries.

Accordingly, Thailand had planned to welcome the heads of ASEAN’s other nine member government plus their counterparts from Australia, China, India, Japan, New Zealand, and South Korea in a series of meetings in the Thai resort town of Pattaya on April 10-12. (The other nine are Singapore, Malaysia, the Philippines, Vietnam, Myanmar, Laos, Brunei, Cambodia and Indonesia.)

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Author: Razeen Sally

The Association of Southeast Asian Nations (ASEAN) recently held its annual summit in Thailand. ASEAN leaders signed an FTA with Australia and New Zealand; promised to achieve an ASEAN Economic Community (AEC) by 2015; and pledged to keep borders open to trade, services and investment. In light of the global economic crisis, they agreed to refrain from erecting new trade barriers and to take “assertive action” against protectionism. ASEAN is also armed with a new “charter”. The ASEAN Charter gives the group a common legal personality; it contains (minor) institutional innovations; and it houses an ASEAN Political-Security Community, an ASEAN Socio-Cultural Community and the afore-mentioned AEC.

What are we to make of the new-look ASEAN? Outsiders have long belittled ASEAN for its internal divisions and lack of integration. ASEAN rhetoricians counter that with its brand-new Charter, its AEC blueprint and new FTAs, ASEAN has reached a watershed. In future it will spur intra-regional integration, be a viable collective force in wider Asian and international relations, and collectively counter common challenges – not least the present global economic crisis.

I remain very sceptical. Read the rest of this entry »

Author: Josef Yap, President of the Philippine Institute for Development Studies (PIDS), Manila

Regional financial cooperation in East Asia flourished in the aftermath of the 1997 crisis. Driven by common experiences, objectives, and concerns—particularly the realization that fundamental reform of the international financial architecture (IFA) was not forthcoming—the ASEAN+3 countries laid out a broad framework for financial cooperation and integration. Enthusiasm for regional financial cooperation also reflected frustration among some of the countries about the emphasis on reforms of domestic financial systems. Such emphasis carried the implicit message that the root cause of the 1997 financial crisis was the lack of transparency and poor governance in their financial sectors.

The current global financial turmoil has shifted attention back to the supply side of the problem. The crisis has revived calls for fundamental reform of the IFA, revolving around proposals for new international institutions designed to regulate and stabilize international capital flows. The proposals have ranged from the modest—collective action clauses in loan contracts and greater policy coordination among G7 countries—to the ambitious, e.g. a global currency and an international clearing system using individual country currencies.

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Author: Rizal Sukma, CSIS Indonesia

Despite clear and loud evidence to the contrary, officials from ASEAN continue to engage in the habit of deceiving themselves by believing that the ASEAN Charter — now fully ratified by all 10 member states — will automatically create a new ASEAN.

A long-serving assistant to ASEAN Secretary-General Termsak Chalermpalanupap maintained that once the charter goes into force next month, ASEAN will soon turn into a new organization. He believes the charter will turn ASEAN into a rules-based and people-oriented organization. He is also convinced that with the charter, ASEAN is ‘now changing into a new mode, into community building’.

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Author: Jusuf Wanandi, vice chair of the board of trustees, CSIS Foundation, Jakarta.

After six months of heated debate in the House of Representatives’ Committee I for foreign relations, defense and information, the Indonesian Parliament has ratified the ASEAN Charter.

Its endorsement was accompanied by a formal interpretation of several elements of the charter contained in the addendum to the ratification law. It stipulated that the charter has to reflect the ‘ideals of ASEAN’, specifically with regard to: the improvement and protection of human rights through an effective ASEAN human rights body; the institution of sanctions, including freezing of membership in cases of serious non-compliance and obstruction of the charter by members; and greater public involvement in ASEAN’s activities.

These points also have been strongly advocated by civil society groups (especially human rights bodies and scholars), who want them to be proposed as amendments to the charter as soon as possible. And that is also the parliament’s wish with the addendum to the ratification law. Read the rest of this entry »