「2015年東協整合願景」國際研討會圓滿落幕 · 圓滿落幕編輯部中華經濟研究院台灣東協研究中心於2011 年5 月24 日舉辦「2015 東協整合願景」國際研討會，邀請來自新加坡、

「「22001155 年年東東協協整整合合願願景景」」國國際際研研討討會會圓圓滿滿落落幕幕

編輯部

中華經濟研究院台灣東協研究中心

於 2011 年 5 月 24 日舉辦「2015 東協整合願景」國際研討會，邀請來自新加坡、

泰國、馬來西亞、越南、柬埔寨等研究機

構學者，與國內學者從政治安全、經濟和

社會文化等層面，共同探討東協共同體的

整合之路，以及對加強台灣與東協合作關

係的啟示。

中華經濟研究院梁啟源董事長於致

詞時表示，台灣是東協重要的鄰居和貿易

夥伴，詳細檢視東協共同體的進展，將使

台灣了解整合後面臨的挑戰，以及可扮演

的角色。外交部沈斯淳次長則在貴賓致詞

中指出，馬總統就任後，推動兩岸雙邊正

常交流，也促成了台灣與新加坡進行經濟

夥伴協議談判、與菲律賓研議司法互助，

以及思考投資印尼摩洛泰島開發等多方

面的進展。而台灣在東協國家投資累計達

670 億美元，每年赴東南亞達 100 萬人次，東協國家在台工作的（文續第二頁）

P. 5 ◆The ASEAN Political Security Community: Challenges and Prospect

P.13◆Turning Dream into Reality? Achieving the Goal of Small and Medium Enterprise Development in ASEAN Economic Community

P.27◆The Political Economy of Progress Towards ASEAN Economic Community 2015 and Broader ASEAN Integration

P.34◆「邁向 2015 年東協經濟整合願景：台越經濟合作」研討會

本本期期目目錄錄

2 東協瞭望 004

勞工有 30 萬人，顯示台灣與東協國家關係緊密，也應建立經常性對話管道，推動

民間互動。他相信如此的良性發展將能帶

來更多的互惠利益。

在東協政治安全共同體方面，新加坡

國立大學東亞研究所黃朝翰（John Wong）教授著眼於分析東協特色的區域合作模

式，他指出東協模式是一種建立在妥協、

共識、包容與相互尊重的態度與互動，因

此在政治場域中能夠經由較為非正式的

協商與取得共識的氣氛下，討論彼此共同

的利益，避免觸及爭議性的議題。不過，

也正因如此，各國承擔的壓力和決心較

小，導致東協在區域整合的進展上相當緩

慢，仍偏向一個鬆散的團體，內部難以取

得實質的凝聚力。

越南外交學院外交政策與戰略研究

所阮雄宋（Nguyen Hung Son）副執行長則分析，東協政治安全共同體是不斷演進

的概念，東協內部已逐漸在人權、海事安

全和爭端調解等方面建立規範，對外也推

動或擴充許多區域會議的規模，然而如何

在國家與區域的利益間取得平衡，以及面

對近年來中國、印度崛起，美國再次積極

涉入亞太事務等情勢，東協須採取一個更

為平衡的途徑，兼顧其對外關係和內部共

同體的形成，以獲得最大利益。

在東協經濟共同體方面，東協與東亞

經濟研究院的狄奧尼索奈傑克（Dionisius Narjoko）研究員特別著眼於中小企業在未來東協經濟共同體的發展。他表示東協

國家逾 90%的公司為中小企業，人數占各國就業人口的 45～92%；然而資金短缺、員工數量與能力的不足，以及法令限制等

因素，對東協的中小企業的成長造成一定

阻礙，他認為東協應積極培植中小企業，

在目前相關的推動措施中強化監督機

制、為東協中小企業量身訂做適當的政策

條款，以及建立相關的評估機制，以促進

各國的中小企業發展。

新加坡國際事務學院謝秀瑜（ Chia Siow Yue）高級研究員則闡述東協經濟共同體的進展和挑戰，他指出東協經濟整合

主要在透過經濟規模增加，拓展其全球的

利益，而對內部的整合關注較小。他認為

目前來看，2015 年完成經濟共同體其實有相當程度的困難，尤其在服務業自由

化、貿易便捷化、資金自由流通以及技術

勞工的移動等方面，不過他認為如能有金

融、人力和技術等資源支持各國政府的政

治意志，經濟共同體即使延後也將能夠完

成。

而柬埔寨發展資源研究院賴瑞史傑

（Larry Strange）執行長則以柬埔寨為實

圖：第一場講者越南阮雄宋執行長（左）、新加坡黃朝翰

教授級研究員（右）、主持人鄭文華董事長（中）

圖：第二場講者柬埔寨賴瑞史傑執行長（左一）、新加坡謝

秀瑜高級研究員（左二）、印尼狄奧尼索奈傑克研究員（右

一）、主持人本院劉碧珍前副院長（右二）。

「2015 年東協整合願景」國際研討會圓滿落幕 3

例，探討其融入東協經濟共同體的歷程。

他指出東協法律文件的翻譯進度落後、對

於東協經濟共同體創造的優勢不夠了

解，以及民間企業組織鬆散等，都使得柬

國對於東協經濟共同體的關注程度不

大，因此他認為東協應提供更多促進民間

認識和參與的機會。此外，在許多東協相

關機制如大湄公河次區域計畫等，賴瑞史

傑執行長也指出，應將區域和次區域的計

畫與有關國家個別的雙邊互動進行整

合，達成比較好的協調，以助相關政府更

有能力推動和執行。

在社會文化共同體方面，泰國發展研

究院經濟發展與收入分配暨政策研究計

畫部門的宋柴（Somchai Jitsuchon）主任指出，東協各國的社會發展和它的經濟發

展一樣，彼此之間有著極大差異。他從一

些經濟指標分析東協的社會現象，例如健

康、教育和貧窮程度，足以反映東協經濟

發展的不同程度；然而，另一些如青年就

業率、女性參政權，甚至是碳排放量和林

地範圍，則不見得反映在經濟發展程度

上。他認為未來東協將進入一個不對稱且

不同步的發展過程，例如更自由的勞動力

流動，可望令技術性勞動力短缺的公司獲

益，卻可能影響半技術性勞動力的外籍勞

工；儘管如此，長遠來看，勞動力自由流

動所帶來的競爭，將增進勞動技能和生產

力，並迫使政府提升教育品質，以更加符

合市場需求。

國立中山大學中山學術研究所顧長

永教授則表示，東協社會與文化共同體有

七大特色，包括促進機會平等、積極培育

人才、落實社會正義、永續發展環境和自

然資源、公民參與政策制定、人民身心發

展健全，並調適在地文化傳統與區域認同

間的互動。以上七大特色有賴東協社會文

化共同體的四大核心要素，即建立一個照

護社會的共同體、管理經濟整合的社會衝

擊、提升環境的永續經營、加強區域的社

會凝聚力等，以獲得最適當的發展。為

此，東協各國持續努力消除區域內的貧

窮，強化社會福利體系，加強傳染病的防

治，推廣科技文化，並建立有效的危機管

理機制。顧教授認為，一旦將東協社會文

化共同體制度化，它將會是從單一到複合

的過程，並擴及至鄰國，使得不論是東協

加一、加三或加六，都會成為區域整合的

最佳典範。

在加強台灣－東協合作關係的啟示

方面，印尼科學研究院政治研究中心安娜

伊莉莎白（Adriana Elisabeth）資深研究員指出，在農業、食品安全與保存、能源

安全、外籍勞工權益、災害防治等產業與

議題上，台灣和印尼有很大的合作空間，

圖：第三場講者泰國宋柴主任（左）、中山大學顧長永教授

（右）、主持人泰國駐台辦事處鍾敬嫺副代表（中）。

圖：第四場講者本中心徐遵慈副研究員（左二）、印尼安娜

伊莉莎白資深研究員（右二）、成功大學宋鎮照教授（右

一）、主持人外交部謝其旺處長回部辦事（左一）。

4 東協瞭望 004

即使在外交政策上印尼仍將依循一個中

國原則，但若從務實的態度著眼，台灣應

被印尼甚至整個東協視為具有潛力的夥

伴。

中華經濟研究院徐遵慈副研究員與

葉長城助研究員則探討台灣面對東亞地

區多軌自由化的政策選擇，包括東協區域

的相關整合、台灣與東協國家的雙邊發

展，或是新進的多邊組織如 TPP（跨太平洋經濟戰略夥伴關係協定）等。他們認為

基於台灣與東南亞國家存有緊密的經濟

關係，東協應該發揮更具創意的思維，在

一中原則之餘為其會員國與台灣創造更

有利的互動環境，如成立共同的企業委員

會或特定部門別夥伴；同時，TPP 是台灣參與亞太經濟整合另一個可能的機會，其

會員國都是台灣重要貿易夥伴，由於 TPP是 APEC 下的架構協議，而台灣已是APEC 一員，推動參與的政治困難度將較小，但台灣必須先調整其產業體質及做好

相關準備，以因應這個高度自由化的協

定。

成功大學政治系宋鎮照教授則提出

在東協共同體整合過程中，台灣所擁有的

機會與因應策略。他表示兩岸簽訂 ECFA

後，台灣的經濟競爭力與外資吸引力增

加，正是參與區域經濟整合的最佳時機，

台灣尤其可在經濟、社會、文化、產業、

科技與教育等面向給予東協共同體實質

的協助。而在策略上，他認為台灣應尋求

在東協區域整合中的利基以維持經濟優

勢，並且因應中國大陸日益升高的勞工成

本，將台商所投資的勞力密集產業轉往東

南亞國家，運用彼此文化多元的優勢與東

協展開文化創意合作，甚至可透過東協既

有的相關發展機制，如大湄公河經濟合作

或人力資源訓練等，尋求參與東協區域整

合的機會。

本次會議到場聽眾近 150 人，不僅吸引政府部會及學界人士到場，更有許多來

自產業界及一般的社會大眾參加，對於東

協各個共同體的發展與願景，表達關注和

興趣。而在台灣與東協的關係方面，與會

者也和各講者就各種可行或具有創意的

合作形式進行熱烈討論，儘管和東協整合

之路一樣，台灣與東協增強雙方關係的途

徑也必須「逐步漸進」，不過各方意見確

實在台灣參與東協區域合作上，激發許多

不同的思考。

5

TThhee AASSEEAANN PPoolliittiiccaall SSeeccuurriittyy CCoommmmuunniittyy:: CChhaalllleennggeess aanndd PPrroossppeecctt

Nguyen Hung Son , Institute for Foreign Policy and Strategic Studies,

Diplomatic Academy of Vietnam

It has almost been a rule, whenever ASEAN Leaders gather in the resort town of Bali, Indonesia, there will be a major development to the regional organisation to watch out for. This year, the 19th ASEAN Summit will be held in Bali again. The clues for the hype this year are well reflected in Indonesia’s Chairmanship theme for ASEAN this year “ASEAN Community in a Global Community of Nations”, which is the advancement of ASEAN community building process one step further towards not only successfully building a community of its own, but also a community with a deserved place and role in the global community of nations. This paper examines the evolution of the ASEAN community and the prospects and challenges involved, in particular with regard to the political security community pillar.

From a community, to a Community, towards a Global Community of Nations

Looking back at the ASEAN community building

process, it could be noted that ASEAN has been progressively developing the idea of the community among its members. Although the Bali Concord II adopted in 2003 is often referred to as the milestone in ASEAN’s community building process, in fact the idea of

a “prosperous and peaceful community of South-East Asian Nations” was embodied in the Bangkok Declaration (1967) as an ASEAN’s goal right from its inception 1. Given the deep division and suspicions that characterised relationship in South East Asia at the time, the founding nations of ASEAN had to overcome very major challenges, most notably the lack of confidence among one another in order to agree on a the common interests of working together towards a peaceful and prosperous region.

Nine years after the Bangkok Declaration, after the unification of Vietnam, the withdrawal of the US from the region, hence the transformation of the regional geo-political environment, ASEAN strengthened its resolve to create a community. However, ASEAN recognised the need to develop shared values and an identity among its members to serve as a firmer foundation for the community, rather then basing the community on just common interests. The Bali Concord I (1976) resolved that “Member states shall vigorously develop an awareness of regional identity and exert all efforts to create a strong ASEAN community” 2.

After ASEAN underwent a major transformation due to enlargement from 6 to 9

1 “Bangkok Declaration”, 1967, accessed at http://www.aseansec.org/1212.htm 2 “Declaration of ASEAN Concord”, 1976, accessed at http://www.aseansec.org/5049.htm

6 東協瞭望 004

members with the admission of Vietnam in 1995, Laos and Myanmar in 1997, and Cambodia agreed to be admitted as the 10th member, a major new challenge arose for ASEAN: to integrate the newer members. ASEAN first needed to make sure that the common interests and values that ASEAN aspire for would be shared among all members, and to create a common vision for the whole new Association. Therefore, ASEAN further defined the community in the ASEAN Vision 2020 (1997) “as a concert of Southeast Asian nations, outward looking, living in peace, stability and prosperity, bonded together in partnership in dynamic development and in a community of caring societies” 3.

The Bali Concord II (2003) was ASEAN’s next big step in formalising and institutionalising the ASEAN’s community vision into a concretely targeted Community by 2020, thanks to ASEAN’s recognition of the need for greater and faster regional integration in order to remained competitive and relevant in the fast changing regional landscape. The 3-pillar Community goal, which was subsequently accelerated to 2015 at the 12th ASEAN Summit in 2007, was a major advancement of the ASEAN community vision because it made community building the most important objective of ASEAN. With now less then 4 years left to the targeted goal, it was recently argued, rationally, that ASEAN needed to think about the Community’s further development beyond 2015. Indonesia’s vision of an ASEAN Community in a Global Community of Nations may be the next step in ASEAN Community development.

3 “ASEAN Vision 2020”, 1997, accessed at http://www.aseansec.org/1814.htm

Community is, therefore, a very dynamic, evolving and constructive concept in ASEAN. As ASEAN members move along the Community building process, new vision will emerge, new goals will be added, new targets are set, new opportunities and challenges will arise. It is therefore necessary to analyse the challenges ASEAN now face, and likely to face in the future, in the path to build its Community.

Implementing the ASEAN Charter

The signing of the Charter is arguably the most important development so far in the Community building process, and its successful implementation is of critical importance to the success of the whole process. The Charter re-organises ASEAN in 3 major ways (i) it re-organises the ASEAN’s institutions to better fit its Community building objectives; (ii) it re-organises how ASEAN works internally (or the ASEAN’s way); (iii) and it re-organises how ASEAN works with the rest of the world (by creating an ASEAN’s legal entity).

- With regard to ASEAN’s institutions, the Charter re-structured the whole ASEAN machinery in accordance with the Community building objective; it increased the number of ASEAN summit to at least two meetings per year, one focusing on ASEAN’s own internal affairs, the other one on external relations; the Ministerial bodies were organised into three Community Councils corresponding to the three Community pillars; the ASEAN Secretariat was also re-structured into three pillars; a Committee of Permanent Representative to ASEAN in Jakarta was created to allow Member States to coordinate

The ASEAN Political Security Community: Challenges and Prospect 7

positions on a regular basis without having to conduct costly and time consuming meetings; an ASEAN Inter-Governmental Human Rights Commission was created to promote cooperation on human rights, and the ASEAN Foundation became the bridge between ASEAN and the grass roots in the process of community building. More new institutions are being planned, including formal linkages with the ASEAN Inter-parliament Assembly (AIPA), an Institute for Peace and Reconciliation etc.

A big challenge for ASEAN is to make all the above changes work the way they are designed for, meaning that all mechanisms will be effectively functioning in a well coordinated manner, capable of delivering concrete outcome without stressing member countries further with additional meetings each year. As it is, the Charter also placed too much responsibility on the shoulder of the leaders, having the final say in any thing that ASEAN Member States could not agree on, or in any disputes which cannot be resolved by the disputes settlement mechanism. With this design, there is a risk that the leaders meeting will be distracted from strategic discussions and from important agendas, and instead get overwhelmed by disagreements and housekeeping issues. To avoid this scenario, each Community Council will have to resolve their own Community issues effectively without elevating un-resolved problems to the upper level.

- With regards to improving the “ASEAN way”, the most important challenge is to further cultivate the culture of compliance, and to efficiently implement the newly established, Charter level dispute settlement mechanism. Since there are several disputes settlement

mechanisms in place – mechanism prescribed in some existing ASEAN agreements (e.g. the Treaty of Amity and Cooperation); mechanisms already setup such as the Protocol on Enhanced Disputes Settlement Mechanism on Economic agreements; and the new mechanisms setup in accordance with the Charter – there need to be clear guidelines as to which disputes is to be resolved by which mechanism, and through which procedures. The cross cutting nature of many of ASEAN issues will further complicate this problem. For example, an issue involving migrant workers can be political if seen on human rights ground, economic if looked upon in terms of creating a single market with free movement of labour, especially skilled labour, and social – cultural if it involves welfare issues.

Another measure to improve compliance was to charge the Secretary General of ASEAN with monitoring the implementation of the decisions made in ASEAN. The Secretary-General will then make regular report on non-compliance to the ASEAN leaders. The challenge is what to do with the reports at the leaders level. Critics doubt the leaders would be able to enforce compliance given that decisions are still made by consensus. And although the Charter does open the opportunity for the leaders to make decision on a particular issue other then by consensus, it is not clear how the leaders would be able to do so since a consensus among them is still required to deviate from the standard making method of consensus. Critics call this “double consensus”.

- With regards to external relations, the Charter conferred “legal personality” to ASEAN, meaning ASEAN would and should be recognised as one legal entity, which is

8 東協瞭望 004

entitled to act on its own in international affairs. As a result, ASEAN has for the first time been recognised by United Nations as the “legal” body at the regional level to help maintain regional peace and stability in accordance with Article VIII of the UN Charter. Therefore, on 15 February 2011 the United Nations Security Council left the issue of Thailand – Cambodia border clashes to be resolved by ASEAN. A critical challenge for ASEAN to become one legal entity is to at least speak with one voice, or to have common positions in its relations with the world outside. This has been a chronic problem for ASEAN and it is not clear how ASEAN would be able to over come in the near future, given that ASEAN members still have vastly different interests and opinions when it comes to external relations. Article 41 of the ASEAN Charter, however, does require ASEAN to “coordinate and endeavour to develop common positions and pursue joint actions”, on the basis of unity and solidarity 4. Another difficulty lie with member states on how much power to delegate to the “legal person” of ASEAN to act on behalf of the member states, who is eligible to exercise the power and through which procedures. The most vivid representation of ASEAN is the Secretary-General of ASEAN, therefore, it is logically assumed that the Secretary-General would be empowered to pro-actively speak and act on behalf of ASEAN. ASEAN member states, however, feared an overly – powerful Secretary-General of ASEAN might threaten their absolute sovereignty, a still very sensitive issue in ASEAN affairs.

4 Paragraph 4, Article 41, ASEAN Charter, accessed at www.aseansec.org/21069.pdf

The ASEAN Political Security Community Building Process

The ASEAN Political Security Community Blue Print adopted by the 14th ASEAN Summit in 2009 specified 3 key areas where the APSC is to be built on: (i) a rules based community with shared values and norms; (ii) a cohesive, peaceful and resilient region with shared responsibility for comprehensive security; (iii) a dynamic and outward looking region.

One often cited problem in monitoring ASEAN Community building progress is the lack of quantifiable targets, particularly in the Political Security pillar. To “Promote understanding and appreciation of political systems, culture and history of ASEAN Member States” as called for in article A1.1 of the Blue Print, the actions requirements are “Encourage the holding of at least two track-two events per year.” and “Intensify exchange of experience and training courses...” 5, all with no clear quantified targets.

On the other hand, a very notable qualitative progress was achieved with ASEAN breaking the boundary of its cooperation by developing cooperative activities, new norms and slowly new rules in difficult areas, some even considered untouchable before. The ASEAN inter-governmental commission on human rights is one of such achievement, considering that human rights issues were once seen as too sensitive to appear in any ASEAN’s formal discussions. ASEAN managed to advance its cooperation on maritime security,

5 “ASEAN Political Security Community Blue Print”, p. 3, accessed at www.aseansec.org/22337.pdf


despite maritime boundaries disputes among its members. An ASEAN Maritime Forum was inaugurated in 2010 after years of consideration; an enhanced discussions on the South China Sea in ASEAN’s high level meeting; and an ASEAN Declaration on Search and Rescue of People and Vessels in distress at sea, reflecting rising confidence among member states to touch upon issues considered too sensitive before, a positive sign that some community sense is under formation.

In tackling the regional comprehensive security, ASEAN relies on internal as well as external cooperation. Internally, ASEAN is becoming more pro-active and more direct in addressing internal security problems. The creation of the ASEAN Defense Ministers Meeting mechanism is an effort to build confidence among the most important security sector which has long been considered sensitive even for dialogue, let alone cooperation. ASEAN has opened up dialogue among its security chief as well, with their first meeting held in Hanoi in 2010. The ASEAN Secretariat plays increasingly active roles in mobilising support and coordinate efforts to tackle non-traditional security issues like disaster relief, communicable diseases, etc. The ASEAN Secretariat, for example, played a central role in ASEAN response following the Nagis typhoon in Myanmar; as well as several other natural disasters in the region. ASEAN in 2011 was seen to play an active role as well in mediating conflict among its members, in particular the ongoing Thailand – Cambodia conflict, thanks to Indonesia, the current ASEAN’s chairman. Externally, ASEAN has been using the ASEAN Regional Forum as the leading mechanism to build confidence and

improve the regional security environment. The ARF has adopted a Vision Statement in 2009 and in 2010 built a concrete Action Plan to realise the Vision; has agreed to explore some preventive diplomacy measures along with measures to build confidence in the region.

The critical challenge for ASEAN’s security has always been building regional confidence, among ASEAN’s own members and between ASEAN’s members and the regional and global partners they frequently engage with. Given the rapidly changing geo-political and strategic environment in the region, enhancing confidence should be central to the Community building process. It is no secret that while confidence among ASEAN members has been greatly improved, ASEAN members still seriously lack confidence on certain issues, most notably territorial disputes. Thailand – Cambodia ongoing conflict is a case in point. ASEAN members must maintain frank and open dialogues on any issues that affect their changing security environment or interests, their threat perceptions and national strategies to deal with those threats. While this is easier said then done, encouraging results were observed in 2010 when ASEAN broke silence and discussed the South China Sea issue in an open and constructive manner.

ASEAN members will also need to overcome rising nationalism to think beyond national boundaries and balance out regional versus national interests. A “we feeling” must be developed both from the grass-root level up and from top down. Better cooperation and coordination between and within each Community pillars’ activities is needed to ensure higher operational efficiency, but for this to happen member states need to

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successfully address cross-sectoral issues both at national and regional level.

Managing ASEAN external relations

The ASEAN Political Security Community Blue Print foresee a dynamic and outward looking ASEAN, which means the ASEAN Community would not be realised without the outside world recognising its relevance and lending support to it. Indeed, from its inception, external relations has always been an important pillar to ASEAN’s cooperation, and strategically ASEAN has always maneuvered at times of geo-political change and come up with solutions in order to stay relevant. ASEAN’s initiatives such as the Zone of Peace, Freedom and Neutrality was ASEAN’s reaction to the changing Sino-US relationship and its implications to the region; the ASEAN Regional Forum was ASEAN reaction to the US diverting its attention from the region amid the end of the cold war; the ASEAN+3 process was inaugurated on the wake of the regional financial crisis etc.

Amid the current wave of changing regional environment due to the rise of China and India, the return and re-engagement of the US with the region, ASEAN has been actively trying to stay relevant and remain a driving force in the regional architecture through series of initiatives, most notably the creation of the ASEAN Defense Ministers Meeting Plus and the expansion of the East Asia Summit to include key military and economic powers, including Russia and the United States. The challenge is not only for ASEAN to be able to “drive” much larger and powerful “passengers”,

but more importantly to drive the processes in the way that ensure ASEAN’s vital interests, i.e. to preserve ASEAN’s priorities and agendas, which at the moment is to successfully build the ASEAN Community by 2015. With the US and Russia admitted to the East Asia Summit, ASEAN will have a tougher job of spearheading the 5 year old process to preserve the agreed 5 priority areas for cooperation, while accommodating to some extend its new and important members’ interests of making the EAS a strategic security forum. ASEAN will need to find a logistic and substantive formula for the EAS to make the process attractive enough to maintain the US and Russia continued interests, but at the same time not being too dependent on them to keep the process going.

On a longer run, to stay relevant in the regional architecture, ASEAN will need to deliver not just a neutral ground for the major powers to interact, but also effective instruments and sometimes innovative ideas to address very specific problems facing the region. ASEAN’s instruments such as the Treaty of Amity and cooperation (TAC), the South East Asia Nuclear Free Zone (SEANFWZ), and the Declaration of Conduct of the parties in the South China Sea (DOC) etc. must be made to work. The TAC has been increasingly accepted by non-regional countries as ASEAN’s ground rules they must obey to interact with the region. However, ASEAN itself has yet to make the rules work within the ASEAN’s compound, making the TAC still aspirational and symbolic rather then having actual effect in regulating relationship between countries in the region. The SEANFWZ’s prospect of engaging the Nuclear Weapon


States also looks dim for the time being, since ASEAN continue to insist that all the 5 NWS must be admitted to the treaty at once, while ASEAN still have unresolved differences with these states on several articles of the treaty. The DOC is another critical instrument to keep peace and stability in the region, and the instrument was referred to regularly by ASEAN and China while dealing with the situations in the South China Sea. However, the DOC’s implementation suffer from different interpretation of its some what vague provisions, for example what “exercise maximum self restrain” means in very specific scenarios, while a set of guidelines to implement the DOC has yet to be finalised.

Reaching out to the Community of Nations

Indonesia aspiration to take ASEAN Community building to the next level beyond 2015 has its logic. In fact, ASEAN has made its voice heard and contributed to the international and global community in many different ways. ASEAN has often been cited as an example of successful cooperation among developing countries. ASEAN has made remarkable gains in meeting the UN’s millennium goals. ASEAN has much to share with the global community on issues like poverty reduction, or managing the social-economies through financial crisis. Most recently, ASEAN has strengthened its partnership with the United Nations, was invited to participated at the G20 Summits, spoken its common positions on global issues such as climate change etc. ASEAN maintains regular cooperative contact with various other regional organisations, such

as the European Union (EU); Gulf Cooperation Council (GCC); South Asia Association for Regional Cooperation (SAARC); the Economic Cooperation Organisation (ECO); the Organisation of America States (OAS); the MERCOSUR etc. By reaching out, ASEAN has strengthened its position as a viable regional player in the international community while at the same time consolidated its own community. The main challenge for ASEAN in this endeavour is to speak with one voice on ranges of issues which touch upon very different interests among its members; and how to reach out enough to prove its relevance and protect its interests while not losing sights of its own Community building priorities and not divert too much of its limited resources to less critical and immediate objectives.

Conclusion

ASEAN Community building, including its Political and Security pillar, is a continuously learning process for ASEAN. ASEAN depth and scope of integration within the organisation as well as with the international community has gradually evolved and will continue to evolve, much depending on ASEAN’s own effort but also depend on the regional environment that ASEAN is bound to. The current changing regional environment presents a major opportunity for ASEAN to enhance its relevance and role in the regional architecture, thus mobilising support for its Community building effort. However, the new environment also poses many critical challenges to the organisation. ASEAN must therefore find a balanced approach to its external relations and internal community

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building process that best serve its interests. That is why when the ASEAN Leaders meet again in Bali this year, Indonesia should set the goal of strengthening and accelerating the ASEAN’s Community building process at least as important as setting a new mile stone for ASEAN future development.

Dr. Nguyen Hung Son, Deputy Director-General, Institute for Foreign Policy and Strategic Studies, Diplomatic Academy of Vietnam, Vietnam Paper presented at the International Conference on ASEAN Vision 2015: Moving Towards One Community, Taipei, 24-25 May 2011

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Dionisius Narjoko, Economic Research Institute for ASEAN and East Asia

1. Introduction

Small and medium enterprises (SMEs) play an important role in promoting regional economic integration. SMEs generate employment that incorporates a social protection function. The SME’s characteristic of being able to be so flexible often helps government during the times of economic downturns or crisis. In fact, not even in a recession or crisis situation, the extent of employment created by SMEs has clearly demonstrated how important they are for a country economic development. SMEs and informal enterprises account for over 60% of GDP and over 70% of total employment in low-income countries, while they contribute over 95% of total employment and about 70% of GDP in middle-income countries, Ayyagari et al. (2003).

SMEs play a vital role in the ASEAN economies, following this general and global pattern (see Table 1). The statistics show that more than 90% of firms in ASEAN Member States are SMEs. These SMEs also significantly contribute to countries’ employment, with the SMEs’ workforce

accounting for a substantial share of each country’s total employment, ranging from 45 to 92 %.

Table 1. SMEs in ASEAN countries: Relative Size and Employment in 2000 (estimates)

Year 2000 SMEs as % of all firms

SME workforce as % of total employment

Brunei 98 92

Indonesia 98 88

Malaysia 84 39/m

Philippines 99 66

Singapore 91 52

Thailand 96 76/m

Cambodia 99 45

Myanmar 96 78

Vietnam 96 85 Source:Asasen,etal.(2003)Note: Percentages refer to shares in national totals./m: manufacturing only.

In ASEAN, SME development is an important part of the ASEAN Economic Community building. SME development forms a crucial part of the third pillar of the ASEAN Economic Community on achieving “Equitable Economic Development.” The inspiration is that by 2015, ASEAN SMEs would comprise

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of world-class enterprises capable of taking major roles in the regional and global supply chains, able to take advantage of the benefits of ASEAN Economic Community, and operating in a policy environment that is conducive to further SME development, competitiveness and innovation.

In this context, ASEAN adopted the ASEAN Policy Blueprint for SME Development (APBSD) 2004-2014 that outlines the framework for SME development as a key measure for equitable economic development in the ASEAN region. Specifically, its objectives are to: (i) accelerate the pace of SME development, optimizing on the diversities of ASEAN Member countries; (ii) enhance the competitiveness and dynamism of ASEAN SMEs by facilitating their access to information, markets, human resource development and skills training, finance, and technology; (iii) strengthen the resilience of ASEAN SMEs to better withstand adverse macroeconomic and financial difficulties, as well as the challenges of a more liberalized trading environment; and (iv) increase the contribution of SMEs to the overall economic growth and development of ASEAN as a region. In addition to APBSD, ASEAN recently adopted the Strategic Plan of Action for ASEAN SME Development 2010-2015. The Strategic Plan is meant to chart future directions of regional cooperation in enhancing SME’s competitiveness and resilience. It focuses on (i) access to financing, (ii) facilitation, (iii) technology development, (iv) promotion, (v) and human resource development.

This paper addresses the subject of SME development in ASEAN. It focuses the issue of

integration of SMEs in international production networks and SME access to finance. The ASEAN SME Blueprint/APBSD and the ASEAN SME Strategic Plan indicate these issues as few the key factors to achieve the objective of SME development in the context of ASEAN Economic Community. This paper draws from the results of the SME research project of ERIA in the past two years in analyzing the issues. Discussion on policy implications and the way forward is presented to follow the analysis.

2. SME Participation in International Production Networks (IPNs)

2.1 Firm Characteristic Determinants of SME Particiption in IPNs

The AEC is designed to bolster IPNs by creating an integrated single market and production base. To be part of the network, industries have to be competitive regionally in a way that they can add value to the regional production chain. Combining this with the significance of SMEs should therefore create new opportunities for SMEs in the regional market.

Economies have become more interdependent due to the intensification of competition and reductions in transportation costs. More intense competition leads companies to shift part of their activities to the most cost-effective location. Reductions in transportation costs are due to advances in information technology and infrastructure development. Therefore, in order to have globally competitive production, firms build networks across countries, allocating value-

Turning Dream into Reality? Achieving the Goal of Small and Medium Enterprise Development in ASEAN Economic Community 15

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added in various locations according to competitive advantage.

A high proportion of intra-regional trade in parts and components reveals an active presence of IPNs in ASEAN countries. Moreover, priority sectors in the AEC include electronics and automotives, which often heavily involve production value chains, as well as air travel and logistics that support the networks. Hence ASEAN Member States would increase their engagement in global and regional IPNs.

That SMEs are located in the lower-tier of IPNs naturally creates a threat to survival. This is simply because firms in the lower-tier form the weakest link in a production network; they typically are used as price breakers and capacity buffers, and therefore, can be dropped at short notice (Ernst 2004, p.96). Yusuf (2004, p. 40) provides the example of Compaq, which adopted a new strategy to produce and sell personal computers for under US$1,000, and many small companies that manufactured personal computers in Taiwan were forced to shut down their operations.

This threat needs to be addressed, and this can be done by upgrading the role and ability of SMEs in the IPN. Here, the concept of upgrading can be defined broadly as improvements in specialization, productivity, and linkages (Hirschman 1958), all of which need skilled human resources and a strong base for knowledge dissemination, and to facilitate all these, strong international linkages (Ernst 2004).

Based on a survey of sample of about 900 SMEs in ASEAN, ERIA research project on SME in 2009-10 gauged the firm

characteristics determinants of SME participation in international production networks. The ASEAN countries covered in this survey are Thailand, Indonesia, Malaysia, Philippines, Vietnam, Cambodia, and Laos PDR.

The analysis, both descriptive and econometric, suggest that productivity, foreign ownership, financial characteristics, innovation efforts, and managerial/ entrepreneurial attitude are the important firm characteristics that determine SME participation in production networks.

The descriptive analysis finds that SMEs participated participating in production networks are importantly different than from those are that do not participated (Table 2). They are larger, younger, and involve more foreign ownership than the non-participating SMEs. Regarding foreign ownership, SMEs may not receive a strong flow of information spillovers from their foreign partners. This is because the average foreign ownership share is less than 51%. Nonetheless, the higher foreign ownership share in the participating group indicates that, somehow, SMEs still benefits from their foreign partners with respect to their participation in production networks.

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Table 2. Average Value of SME Characteristics, between SMEs Participating and Not-Participated Participating in Production Networks

In Production Not in

Production�StatisticallyCharacteristic Networks Networks Different

Size (employees) 666.2 552.1 Yes+ Age (years) 110.6 113.8 Yes**

Share of foreign ownership (%)

118.2 77.2 Yes**

Labor productivity (sales/employee, thousand USD)

226.8 223.0 No2

Loan interest rate (%) 66.1 88.9 Yes** Interest Coverage Ratio, ICR4

2250.0 777.5 Yes*

Credit interest rate (%)

66.2 88.9 Yes**

Distance to industrial parks or EPZs (hours)

11.0 00.9 No3

Distance to port (hours)

11.3 11.2 No3

Skill intensity5 00.4 00.3 Yes** Notes: 1. + Significant at 10%; * significant at 5%; **

significant at 1%. 2. Significant at 65% confidence level. 3. Significant at 60% confidence level. 4. ICR is defined as the ratio of sales to payment for

interest. 5. Skill intensity is defined as the proportion of

skilled labor (i.e., employees with tertiary and vocational education level) in a firm total employment.

Source: ERIA survey on SME participation in production networks.

The econometric analysis using the results of the survey shows that firm productivity determines the participation of SMEs in production networks (see Table 3 for the complete results of the econometric analysis). The estimated coefficients of labor productivity are positive and statistically very significant. This finding is robust. It supports our hypothesis of a positive relationship between productivity and SME participation in production networks. Moreover, it accords with our argument that SMEs who plan to participate in production networks need to

prepare themselves by mimicking the characteristics of exporting firms, one of which is a high level of productivity. The superiority in productivity is needed given the strict requirements of related to goods produced by and used by other firms in participated participating in production networks.

SMEs that actively conduct innovation activities seem to have a higher chance to probability of participate participating in production networks. This is shown by Table 4 for the descriptive result and Table 3 for the econometric result). The innovation efforts here covered those related to the activities made referred to making improvements in terms of business strategies and in technological capability. This finding is consistent with the idea that firms need to be more productive if they wish to engage in production network activities.


Table 4. Innovation Effort Characteristics, Frequency (in %) of SMEs Participating and Not Participating in Production Networks

In Production Not in

Production Statistically

Characteristic Networks Networks different

Met international standards (e.g. ISO, etc.)

44,4 36,5 Yes*

Introduced information and communication technology

35,5 36,0 No2

Established new divisions or plants

27,0 18,8 Yes*

Involved in business network activities

52,6 47,1 No3

Bought new machinery with new functionality

58,4 47,9 Yes**

Improving the existing machinery

72,5 59,1 Yes**

Introduced new know-how in production method

49,6 40,7 Yes*

Recently introduced new products

63,4 55,1 Yes*

Notes: 1. + significant at 10%; * significant at 5%; **

significant at 1% 2. Significant at 10% confidence level. 3. Significant at 84% confidence level. Source: ERIA Survey on SME Participation in production networks.

SMEs in production networks are less financially constrained and have better access to the financial sector. The latter is indicated in the descriptive analysis by the lower loan interest rate reported by these SMEs, compared to with those not participated participating in the networks. These findings, particularly the former, suggest that SMEs in production networks have better cash-flow cash flow, due thanks to their large, stable, and more certain buying purchase orders from other firms in the networks. The findings also support the idea that SMEs in production networks are able to convey more information to their banks, which reduces the extent of asymmetric information.

The characteristic of firm attitude toward risk, or the adoption of a new business idea is another important determinant. The estimated coefficients of the two dummy variables in Table 3 that represent this, i.e., “consideration of risk in business operations” and “willingness to adopt new business strategy” are all positive and statistically significant. The coefficient further suggests that the impact of this characteristic is large. This finding is consistent with the view that SMEs in production networks operate in a tough business environment and faces a constant survival threat, because SMEs will not have a favorable chance of survival chance if they are reluctant to accept new ideas and are not w unwilling to face the risks of business in the networks.

2.2 SME Particiption in IPNs: Policy Implications

Developing SMEs and Promoting SMEs to Engage in Production Networks

The most serious barrier that impedes SMEs from developing and exploring their business opportunities is a capital shortage. There are several factors hindering SMEs’ access to formal finance. First, SMEs often do not have assets that can be given to creditors as collateral. Second, many SMEs basically cannot meet commercial bank standards, though they are willing to take loans. Third, the survey also finds that retained earnings and personal savings are the two main financial sources for SMEs in general, and for SMEs that do not participate in production networks, in particular. This implies that a large number of SMEs may not be well exposed to variety

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financial sources. In addition, they tend to be risk-averse in making the decision to expand business through using third parties’ funds.

To address these problems, a multi-pronged approach is needed. In order to help credit institutions to properly assess the risk associated with SME loans, credit-reporting agencies should be established, either privately or publicly. Various credit guarantee schemes can be developed for helping SMEs to improve their access to finance. To minimize the moral hazard problem, it is preferable for the private sector and business associations to be important players in these schemes. Direct financing for SMEs through the stock market should also be made possible. SMEs can also benefit from leasing activities in financing their medium and long-term investment, for example acquiring machinery and durable assets for their business. It is also important to develop and strengthen the various microfinance institutions that provide loans to SMEs.

Insufficient quantity of and/or untrained personnel is one of the big constraints for SMEs in ASEAN countries, especially in CLV countries, on effective competition. Capacity building is an essential measure to strengthen SMEs’ managerial skills and capability. In particular, it would help SMES to meet the usual requirements (e.g. on project proposals, financial statements, accounting reports) for getting access to formal finance. Together with the long term improvement/reform of professional education and training systems, several types of capacity building programs, such as counseling and advice, business coaching, and short-run on-the-job training, could be organized for SMEs. Training in modern management systems, or on (simple)

information and communication technology would help SMEs in terms of accessing wider and more thorough market information.

Last but not least, sharing the lessons learnt by SMEs, especially by those participating in production networks, would raise SMEs’ awareness of the balance between the costs and benefits of being engaged in production networks and hence, encourage their willingness to be a link in the production network value chain.

Promoting SMEs to Participate More Effectively in Production Networks

Participation in production networks means that SMEs, especially those in the lower-tier of production networks, will have more opportunity for upgrading by making improvements in specialization, productivity, and linkages (Hirschman, 1958). The appropriate policies can act as catalysts for this process.

The connection between flagship firms and SMEs can be very effective, as their activities concentrate in clusters. Successful development of clusters is a complex issue, but at least requires three interrelated conditions, namely the presence of flagship firms, attractive infrastructure and low service-link costs, and reasonable cooperation between local authorities, firms, and training and R&D centers.

Foreign ownership can play an important role in promoting SMEs towards higher-quality participation in production networks. Not only large foreign-invested enterprises as flagship firms, but also foreign SMEs (especially those from advanced economies) can make a


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significant contribution towards widening the value of regional production networks. Attracting foreign direct investment, therefore, should not focus solely on large companies, to the exclusion of small and medium firms. The host country, while reducing tariffs on parts and final products, should strengthen protection for IPRs, ensure security and safety, and speed up procedures for trade and investment. Other necessary measures for countries wishing to increase FDI include the development of human capital and physical infrastructure, transparency in legal systems and their implementation, particularly of tax-related regulations, and improvement of industrial relations.

Firm technological and innovation capability is another determinant of the probability of SMEs in production networks upgrading the quality of their roles. This requires a good infrastructure for technological transfer, namely modern telecommunications networks, wide Internet coverage, highly qualified educational institutions, and IPRs protection. These infrastructures provide a platform on which SMEs can upgrade their technology and products to meet international standards, and in the end, sharpen their competitiveness in the market.

Strengthening the Regional Institutional Arrangements for Supporting SMEs

Various free trade areas (FTAs) in East Asia, actual or under negotiation have been helping the region to move from market-driven to a more institutionalized economic integration. They can have significant impacts on the involvement of SMEs in the regional

production networks. The FTAs’ impacts could be very positive, depending on several factors revealed in a number of studies. First, the FTAs should deepen the multilateral trade arrangements of East Asian economies and be harmonized in setting rules of origin (ROO), which usually make distortions in, and higher costs for, trade flows, especially those with SMEs’ involvement. As establishment of the ASEAN Economic Community (AEC) is to have a single market and production base, harmonization of ROO within the ASEAN Free Trade Area (AFTA) framework with the other FTAs of ASEAN+ will be very demanding.

Second, the regional economic arrangements should go beyond the traditional FTAs. In that sense, ASEAN is moving in the right direction in having comprehensive economic partnerships (ECPs) with the key partners, in and outside East Asia. The ECPs include trade and investment facilitation as well as various forms of cooperation. This is very much related to the development of “hard” and “soft” regional infrastructure and capacity building programs. The successful establishment of the ASEAN “Single Window” can be a good example of how customs procedures could be harmonized and simplified. Huge capital is required for infrastructure (such as regional highways) development. Funds set up or supported by more advanced countries in East Asia (China, Japan, Korea) and international financial institutions, together with appropriate public-private partnership (PPP) schemes for project implementation, and master planning of development of industrial zones/towns along the economic corridor, can be used for efficient infrastructure development.

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Moreover, all types of regional cooperation should have components for capacity building and for SME development. The case of the Initiative for ASEAN Integration (IAI) is an exception to this principle. Though SMEs share many similarities in terms of the challenges and issues facing them, they are heterogeneous. At the regional level it is reasonable to have both general as well as selective and more focused programs in support of SMEs. Once again, the exchange of professionals, scholars, and entrepreneurs across the regions should be encouraged. This not only promotes information flows, but more importantly also enhances the knowledge stock of all countries, including those relevant for SMEs.

Third, as product standards may act as non-tariff barriers (NTBs), the regional Mutual Recognition Arrangements (MRAs) could facilitate SME access to markets, and lower transaction costs, by eliminating duplicative testing. Thus, the MRAs could also deepen SME participation in regional production networks. There has been progress in reaching some MRAs among ASEAN countries, but there is still a long way to go. MRAs are needed for various goods produced in East Asia and as noted in Narjoko et al. (2010), the MRAs must be carefully devised to ensure that the lowest quality does not become the standard.

3. SME Access to Finance

Access to funding is the lifeblood of any enterprise facilitating it to grow, generate more output and employment, Beck et al. (2005, 2006, and 2008). There is considerable

evidence to support the contention the SMEs face a number of obstacles in accessing finance mainly related to their limited resources and perceived risk by lenders. The focus of this paper is only upon formal sources of finance (e.g. commercial banks and other financial institutions), and it is clear that, in this context, market failure exists. SME access to finance and the cost of this finance does not compare favourably with that of large enterprises. From the literature market failure in lending to SMEs can arise for a number of reasons primarily relating to their relatively small size, lack of resources, and opaqueness, Petersen and Rajan (1994), Berger and Udell (1998), and Hyytinen and Pajarinen (2008).

In the seminal contribution by Stiglitz and Weiss (1981), they show that due to the problems of dealing with uncertainties such as agency problems, asymmetric information, adverse credit selection and monitoring problem, lending institutions find it difficult to distinguish between good and bad risk which can result in adverse selection and moral hazard problems. In this context lending institutions such as banks find it less risky and less costly to lend to large enterprises, and, therefore, rational to apply credit rationing to SMEs which are subject to greater opaqueness and risk. SMEs face higher transactions (compliance) costs in obtaining loans.

In many transition economies, SMEs are facing more severe challenges and the private sector is still in an embryonic form where many remain in the informal sector and operating in an environment of underdeveloped financial markets. Their domestic financial markets may have a limited range of financial products and services that can stem from a variety of reasons,


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such as regulatory rigidities or incomplete legal framework.

Access to finance is critical to the performance of SMEs in a number of areas. Access to finance appears from the literature to be the biggest problem for SMEs and not the cost of finance. SME performance and development will be severely hindered from a number of perspectives (e.g. growth, employment, profitability, exports, efficiency, productivity and returns on assets) without adequate access to formal sources of finance, as informal sources are very limited. In turn, an inhibited or poor performance by SMEs in these areas will constrain access to funds and the cost of these funds in the future.

Another round of ERIA research project on SME development addresses access to finance. Using the same approach of questionnaire survey of SMEs in ASEAN countries, this research reveals several interesting facts about access to finance of SMEs in ASEAN countries. First, the research suggests that although a significant number of SMEs still rely on their internal resources both for start-up and business expansion. However, external finance becomes very important for those domestically owned, smaller size, making lower profits, and business aspiration but with insufficient fund SMEs in less developed economies. Moreover, size of SMEs and stage of country development that reflect the financial market conditions also affect how diversify SMEs can access in terms of choices of financial institution and financial products.

Second, there is some evidence of credit rationings or risk premiums exercised by the financial institutions on SMEs. The key

findings from our analysis suggests that size and stage of country development (financial market development) do affect the conditions of external finances offered to SMEs, i.e., bigger size SMEs in more developed economies tend to get bigger amount of loans, with longer terms, and lower interest rate than otherwise. We also find that owner’s networth, collateral, business plan, financial statement, and cash flow are critical for financial institutions to devise their financial conditions extended to SMEs. In other words, financial intuitions seem to put higher risk premiums on opaque SMEs by offering less favorable financial conditions to less well-established and transparent SMEs.

Third, financial access has significant impact on SMEs’ innovation capability and participation in export market, the study suggests that bigger SMEs with access to larger amount of loans, longer term, and lower interest rate are conducive to their innovation capability and exporting activity, since these external finances with favorable conditions would provide SMEs enough time and resources to engage the innovation capability and entering foreign markets.

Given these findings, the following policy measures could be taken into considerations. First, regional service liberalization, especially finance, is critical to bring down overall cost of finance to all firms, especially SMEs in less developing economies. Macroeconomic policy settings and performance and appropriate microeconomic policies can establish a sound footing for development of the overall private sector and for the establishment, nurturing and growth of SMEs.

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Second, establish and deepen financial markets with the requisite regulatory and institutional environment to promote competitive, innovative, and diversification of financial products.

Third, develop an institutional environment where contracts are enforced and property rights established and clear; land/bankruptcy legislation that ensures access to land for SMEs and clear land use rights (that can be used as main collaterals). Cheap and simple procedures are necessary to encourage informal SMEs to be formalized with proper book keeping and accounting standard.

Fourth, encourage the establishment of industry organizations for SMEs that will represent the interests of members and provide market information and capacity buildings.

Finally, introduce credit guarantee schemes subject to rigorous and viable business plans, credit rating and information system. Establish specialised and better development financial institutions such as the establishment of an SME bank, and the provision of business development services that can assist SMEs with embedded business training (e.g. management, business plan, book keeping and accounting, financial literacy) and network promotion. However, the research also finds that loan quotas imposed on commercial banks to private sector SMEs, interest rate subsidies to SMEs, tax concessions proved to be ineffective due to an absence of sound legal and institutional capacities (weak governance).

4. Achieving the Goal of SME Development in ASEAN Economic

Community: Turning a Dream into Reality?

The description and discussion in the previous section show that there are promoting SME development is indeed a difficult task, even at country level. There is complexity in terms of constraints for SMEs to grow, which depend not only on policy or external situation but also on either firm characteristics or how the firms/SMEs perform and behave. The ASEAN’s agenda of to accelerate SME development therefore could be a daunting task, as indicated by the title of this paper.

Having said this, there is no reason to be pessimistic on the agenda. Indeed, there is plenty of room that ASEAN as regional grouping can contribute to strengthen SME growth in the ASEAN member countries. To be sure, there is indeed a correct approach and agreement by the ASEAN member countries to act as a facilitator for SME growth in each of the countries. In addition, ASEAN has the SME Blueprint and the SME Strategic Plan that provide a guideline on how the ASEAN as a group can support the SME development. Moreover, as indicated by the strategic plan, ASEAN has committed to continuously refine the SME Blueprint which indicates an effort by ASEAN to always improve the general guideline for the SME development.

Further room for improvement that ASEAN may be considered is to improve the monitoring mechanism for the implementation of the SME Blueprint. To date, there does not seem a robust and credible monitoring system in placed, and the absence of the system likely lead to missing the targets set by the SME Blueprint.


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In this respect, ASEAN may consider adopting a similar action taken by Balkans countries through their SME Policy Index. The Balkans/OECD Policy Index essentially is an implementation monitoring mechanism that ensures the Balkan countries to meet the objective, or to move towards the objective, of the European Charter for Small Enterprises in their policy to support SMEs. The OECD SME Policy Index essentially assesses the quality and level of implementation of policy for SMEs, by quantifying and comparing some qualitative policy features (OECD 2009).

The ASEAN’s version of SME Policy Index may be tailored to meet specific needs for SME development in ASEAN. Similar to the OECD version, the ASEAN version of SME Policy Index may cover a number of areas of interest to SMEs, including faster and cheaper start-up, entrepreneurship education and training, access to finance, improving technological capability, getting more out of the ASEAN market, and developing stronger representation of SMEs in national policy arena. What is important is that, the ASEAN version should be tailored to meet specific needs for SME development in ASEAN, as well as to take into consideration the widely varied a number of economic factors, such as level of economic and financial sector development.

As indicated in the report of OECD SME Policy Index in terms of its usefulness, having a SME policy-index monitoring system is expected to be able to facilitate and harmonize policies, strengthen coordination of policies and programs for SME development in the region, and serve as an instrument for capacity building for regulators and SMEs. All these may occur because the Index mechanism offers an evaluation mechanism that encourages countries to have credibility in conducing policy reforms for SME development. Therefore, having the Index for ASEAN may in fact really turn what one may consider as an impossible task – or a dream – into a reality: having a competitive and world class ASEAN SMEs. This may not be achieved in short-run but this may not be so crucial, since it is well accepted that some hard policy reform indeed needs time to gain political supports.

Mr. Dionisius Narjoko, Researcher, Economic Research Institute for ASEAN and East Asia (ERIA), Indonesia

Paper presented at the International Conference on ASEAN Vision 2015: Moving Towards One Community, Taipei, 24-25 May 2011

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Larry Strange, Cambodia Development Resource Institute (CDRI) 1.ASEAN and its Aspirations – An ASEAN Economic Community by 2015

The leaders of the 10 ASEAN member countries have made a commitment to establish an ASEAN Economic Community (AEC) by 2015. The ASEAN Charter and associated ASEAN Blueprint, endorsed in 2007, envision an economic community based on a single market and production base, a competitive economic region with equitable development, and a region that is still actively engaged with the global economy. These objectives have been affirmed at subsequent ASEAN summits, with a further emphasis on ensuring financial stability, especially in the light of the Global Financial Crisis and associated economic downturn of 2008-9, promoting regional infrastructure and ‘connectivity’, and narrowing the development gap which is still significant between the developed, developing and least developed countries that comprise ASEAN. This paper focuses on the interests and needs of the ASEAN least developed countries (LDCs) – Cambodia, Lao PDR and Myanmar – in achieving AEC 2015 and GMS, ASEAN and broader East Asian economic integration, and highlights some of the challenges they face.

2.Progress to AEC 2015 and The AEC ‘Scorecard’ – The Example of Cambodia: Strengths and Weaknesses

In practical terms, achievement of the ASEAN Economic Community by 2015 involves progress in implementation of reform measures in relation to specific ‘key deliverables’ by ASEAN member state economies. These cover measures in relation to free flow of goods, free flow of services, free flow of investment, freer flow of capital, and ‘hard and soft’ transport and infrastructure development. An AEC ‘Scorecard’ is utilized by the ASEAN members to assess their progress and identify issues for remedial attention.

Let me use Cambodia as an example of how this works. The latest status report on implementation of key measures to be fully implemented by all ASEAN members states for the period January 2008 to December 2009, published in July 2010, assesses Cambodia as having achieved ‘70% compliance’ with key deliverables of AEC, and being currently ‘ranked 3rd in ASEAN’ in its implementation record, after Singapore and Malaysia. This excludes some special provisions under the free

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flow of goods measures for the CLMVs (Cambodia, Laos, Myanmar and Vietnam) such as the timetable for operationalising a National Single Window (NSW) as a building block for the ASEAN Single Window.

Cambodia’s slowness in translating ASEAN legal documents into Khmer language for ratification by its National Assembly has prevented Cambodia from achieving more on score card, along with some unresolved issues in the aviation industry, and, apart for the garment industry, still unresolved issues on the free flow of goods and people, both ‘formally’ and ‘informally’ across borders.

Cambodian officials, while very positive about Cambodia’s performance assessment against the AEC scorecard, acknowledge that this strong performance is more the result of the general ‘openness’ of the Cambodian economy, especially as compared with some other ASEAN economies, and Cambodia’s 2004 accession to the World Trade Organisation (WTO), and its very demanding compliance programme, rather than specific responses to the AEC compliance measures.

Despite effective national government-private sector consultation and engagement mechanisms in Cambodia, private sector awareness and engagement in ASEAN and AEC processes, and the involvement of other relevant parts of government, are at best very uneven, but generally very weak. There is low or uneven knowledge on the implications of AEC and its potential benefits, no reliable detailed analysis of Cambodian competitiveness by sector compared to other ASEAN economies, and where the most promising AEC benefits and opportunities

might be found. This is a particularly critical factor for Cambodia and the other ASEAN LDCs, and their private sectors given the imperatives of economic and industrial diversification and enhanced competitiveness discussed above.

Interviews with business leaders in Cambodia reveal that the private sector, except for the garment and tourism sectors, is not well networked, not well informed about ASEAN-AEC matters, and not effectively engaged in either ASEAN or GMS processes. The few big conglomerate businesses are led by tycoons who are either playing a duel business and legislative role, or are politically connected. Knowledge of ASEAN matters is very uneven among them. However, there is a strong desire to learn more of ASEAN issues and to receive more accessible useful information from relevant ASEAN bodies and their Cambodian government focal points. The Cambodian garment and tourism sectors, key sectors for economic growth and development, present important exceptions, with effective national leadership and coordination, and engagement with ASEAN sectoral processes. They can be seen as models for national and regional private sector collaboration and economic ‘community building’, to be adopted by other key sectors, with resources and support from ASEAN and its development partners.

Interviews with senior officials and business leaders also reveal a ‘two way frustration’ with current arrangements in ASEAN and GMS private sector mechanisms and issues. On the one hand, some business leaders who attend ABAC and other ASEAN and GMS meetings, question their value and capacity for influencing good policy outcomes

The Political Economy of Progress Towards ASEAN Economic Community 2015 and Broader ASEAN Integration 29

responsive to the day to day concerns of business, short notice of meetings, inaccessible and often too complex materials in English only rather than national languages, and a lack of timely preparatory background briefings. On the other hand, senior officials complain that many business leaders have little interest or attention span on ASEAN and GMS issues, and a record of poor attendance and participation in both regional meetings and national and provincial workshops organised by government to raise awareness of ASEAN and the GMS and their implications for business.

3.Matching leadership and commitment, political will and national-regional institutional capacity

ASEAN leaders continue to strongly affirm the value of ASEAN membership and its agenda for a future community – economic, political-security, and socio-cultural. In a recent speech to a national and ASEAN audience, for example, the Cambodian Prime Minister presented an overview of his government’s policy commitment to the strategic value of Cambodia’s membership of ASEAN, and associated regional institutional arrangements and priorities, while at the same time keeping future options for emerging East Asian regional architecture open. He emphasised:

. The medium term challenge for ASEAN is to promote domestic sources of growth and diversify regional cooperation to maintain sustained high growth rates in the post-crisis environment, requiring a stronger push and more effective completion of regional

economic integration utilising the ASEAN-China/Japan/South Korea FTAs, as well as the longer term potential for an East Asian Free Trade Area (EAFTA or ASEAN +3) and/or the Comprehensive Economic partnership in East Asia (CEPEA or ASEAN +6), while avoiding overlapping efforts and resources for EAFTA and CEPEA.;

－Narrowing the development gap in the region is essential to realising regional competitiveness and resilience through reinvigorating domestic demand and boosting intra-regional trade;

－ The importance of effective implementation and complementarity of the Greater Mekong Sub-region Programme and the Initiatives for ASEAN Integration (IAI) and their strong support by development partners and the regional community, so that GMS countries can enter a ‘second generation of reform’ through increasing investment on ‘soft’ aspects of development such as financing human resource development, improving institutional competency and training, and cross border market management

Senior officials in Cambodia and other ASEAN members countries identify various priorities for the strengthening, reforming and better resourcing of ASEAN for the next stage of regional integration beyond 2015, emphasising the centrality of more effective regional cooperation on human resource development, particularly between the developed and least developed countries of ASEAN and in broader cooperation with the ‘+3’ of China, Japan and South Korea to ‘bridge the development gap’ in ASEAN and East Asia.

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While generally committed to the achievement of an ASEAN Economic Community by 2015 there is general skepticism that this will be fully achieved, and with significant challenges remaining on financial services, investment and capital market liberalization and associated enforcement, monitoring and conflict resolution mechanisms, again stressing the broader engagement and integration of ASEAN with the ‘+3’ on these issues. There is also a need for a more future-looking dialogue on whether ASEAN should move towards a more ‘rules based’ institutional model with a significant strengthening and increased resourcing of the ASEAN secretariat, its role and powers, if AEC 2015 and deeper regional integration are to be achieved.

4.The Greater Mekong Sub-region (GMS) Factor

The ASEAN LDC's engagement with and preparedness for the AEC is both assisted and ‘complicated’ by their membership of the GMS, comprising Cambodia, Lao PDR, Myanmar, Thailand, Vietnam, and Yunnan and Guanxi provinces of China, and as a participant in and beneficiary of the associated ADB GMS development programme. The programme, established in 1992, is designed to promote ‘connectivity’, achieve socio-economic development, reduce poverty, and bridge the development gap in GMS and ASEAN - infrastructure and energy, transport, logistics and trade facilitation, environmental and natural resource management and human resource capacity development, useful tools for GMS ASEAN members in also achieving the AEC. The GMS, like ASEAN, has its own

complex set of multilateral government and private sector consultation and cooperation mechanisms, including a GMS Business Forum and sector-specific consultation processes.

A 2008-9 research study, The Political Economy of Regional Integration in the GMS: A Stakeholder Analysis, hosted by UNESCAP-ARTNeT, involving research institutes in Cambodia, Laos, Thailand, Vietnam and Yunnan province of China, explored the effectiveness of these processes through a specific case study on the GMS Cross Border Transport Agreement (CBTA) and its transport and trade facilitation (TTF) aspects. It found that the complexity of ASEAN-GMS institutional arrangements, and regional economic integration strategies, priorities and initiatives, had fundamental implications for the pace and effectiveness of regional integration, and for the ‘absorptive’ and institutional capacity of GMS national and provincial governments, and their private sectors, constituting ‘another noodle bowl’ effect, mirroring the proliferation of Free Trade Agreements in ASEAN and broader East Asia.

The experience of Cambodia and the other ASEAN LDCs suggests some practical measures that could be taken to raise private sector awareness of and participation in the achievement of an ASEAN Economic Community by 2015, and associated sub-regional GMS integration and ‘connectivity’. They include the better coordination and integration of ASEAN-AEC and GMS economic community, private sector development, infrastructure and ‘connectivity’ strategies, programmes and initiatives – particularly the GMS programme and ASEAN’s Initiatives for ASEAN Integration


(IAI) - to ensure coherency and complementarity, and ease the ‘absorptive burden’ on national governments and the private sector. AEC sectoral coordination and support offices should also be established in the ASEAN Secretariat, building on the garment and tourism sector models and experience, along with investment of ASEAN resources to build capacity of LDC national peak private sector bodies and sectoral associations to participate in ASEAN-AEC processes, linked to the GMS programme.

5. ASEAN and GMS ‘Connectivity’: AEC 2015 Infrastructure – Hard and Soft

As already indicated above, ASEAN LDCs are involved in a complex but very beneficial set of initiatives and processes to promote ‘connectivity’, achieve socio-economic development, reduce poverty, and bridge development gap in the GMS and ASEAN, but ‘soft’ infrastructure, the legal and regulatory framework and associated institutional capacity to support cross-border movement of goods and people and promote regional economic integration, is lagging well behind the ‘hard’ infrastructure. A major issue – the complexity of ASEAN-GMS institutional arrangements - has implications for pace and effectiveness of regional integration and on ‘absorptive capacity’ in CLMV GMS countries where institutional capacity is still building.

An imperative for the LDCs is the strategic coordination ASEAN-GMS integration initiatives, more realistic time

frames for implementation of complex reforms and associated investment in long term institutional capacity building eg GMS Cross Border Transport Agreement and synchronicity of the Master Plan on ASEAN Connectivity with GMS connectivity initiatives and processes, and a greater awareness of and engagement in ASEAN Economic Community mechanisms and opportunities.

6.ASEAN, the LDCs and Regional + + Scenarios: Unfinished Business

The complexity of ASEAN-GMS institutional arrangements has serious implications for the pace and effectiveness of regional integration and on the ‘absorptive capacity’ in CLMV GMS countries where institutional capacity is still building. The strategic coordination of ASEAN-GMS integration initiatives is important for these GMS countries, with more realistic time frames for implementation of complex reforms and associated investment in long term institutional capacity building eg GMS Cross Border Transport Agreement, synchronicity of the Master Plan on ASEAN Connectivity with GMS connectivity initiatives and processes, and a greater awareness of and engagement in ASEAN Economic Community mechanisms and opportunities.

The already strong and deepening engagement of China in the GMS LDC’s is an increasingly important factor in the current and future character of regional integration and cooperation. China is now, for example, Cambodia’s major source of both development assistance and foreign direct investment, with

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similarly deepening engagement and influence with Lao PDR and Myanmar, both bilaterally, and through its significantly increased financial contribution to the ADB’s GMS programme. This will have fundamental implications for economic, political and security issues in ASEAN, and the role of the Greater Mekong Sub-region as the bridge between Southeast and Northeast Asia.

If ASEAN’s regional integration aspirations, according to the ASEAN Charter, are to be realised, ASEAN LDCs need GMS, ASEAN & ASEAN + 3 partnerships to deliver on the ASEAN charter commitment “to alleviate poverty and narrow the development gap within ASEAN through mutual assistance and cooperation”; to better exploit the real and potential benefits of ASEAN + China/Korea/Japan FTAs especially provisions like the Early Harvest Programme in the ASEAN-China FTA, as agricultural producers and potential food processors; and to promote awareness and engagement of the private sector in ASEAN Economic Community, GMS and broader East Asian ‘connectivity’ and economic integration opportunities and processes.

7.Conclusion: A Scenario and Some Questions

Ultimately, it would be in the ASEAN LDCs’ interests, while achieving their commitment to be part of an ASEAN Economic Community by 2015 or soon after, to be part of an East Asian wide free trade and economic cooperation area or community linked to or including specific strategies for East Asian development cooperation and

integration strategies to “narrow or bridge the development gap” in East Asia. Related to this will be the importance of ensuring the coordination and synchronisation of GMS-ASEAN-East Asian development cooperation and regional integration processes to include a focus on sustained growth and ‘bridging the development gap’, with associated regional investment in long-term institutional capacity development in the LDCs – Cambodia, Lao PDR and Myanmar. This could be ‘transformational’ for these economically and strategically important small GMS members of ASEAN.

While this is a positive and feasible scenario, many questions require further exploration, including:

－If, as seems likely, there is only partial achievement of an ASEAN Economic Community by 2015, what will this mean for the strength and credibility of ASEAN, the commitment of its members, and prospects for the political-security and socio-cultural aspects of a future ASEAN Community?

－ Is the concept of ‘ASEAN centrality’ to emerging Asian regional architecture a myth or a reality, and what emerging factors will determine this, including any prospect of eventual northeast Asian (China, Japan and South Korea) regional integration leading to ‘+3 centrality’? Or ‘+4 centrality’ if the ASEAN + 6 configuration, with India, Australia and New Zealand evolves?

－ How will the already strong but deepening engagement and influence of China in the GMS LDC members of ASEAN, impact on the influence of other ASEAN members and


the prospects for ASEAN economic integration, community and identity?

－ Does the current ASEAN leadership, political and bureaucratic, have the will, commitment, capacity and resources available to achieve the significant institutional strengthening that will be required to achieve its ambitious ASEAN Community agenda and mobilise the ASEAN private sector as the main driver of ASEAN growth, and investment in the LDCs to narrow the development gap?

－To achieve its ambitious agenda, does ASEAN need to move to a more ‘rules based’ institutional model including new mechanisms,

and significantly increased resource contributions, for conflict prevention and resolution between ASEAN members states on economic, political and security issues, or will sovereignty concerns continue to prevent this? Are there prospects for a new ‘ASEAN Way’?

Dr. Larry Strange, Executive Director, Cambodia Development Resource Institute (CDRI), Cambodia

Paper presented at the International Conference on ASEAN Vision 2015: Moving Towards One Community, Taipei, 24-25 May 2011

Documents

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