Asean

There’s an old jazz standard that sums up the view of people who find themselves on the other side of economic progress: The rich get richer, and the poor get—children.

The new struggle of the 21st century, after a full decade of capital expansion, will be to make the world change that tune. And in their own way, the leaders of Asean recognize this struggle with their constant use of the buzz-word “integration”—a word that has been even more in play, if not in more power, since Asean expanded to 10 members.

Yearly per capita incomes in Asean nations, based on the latest numbers from each government

Graphic: Ryun Patterson	Source: World Bank
Statistics for Brunei were not available. The World Bank estimates that Burma is in the "very low" category, which it defines as below $745 per year.

The four newest members of Asean, Cambodia, Laos, Vietnam and Burma, are also the four poorest members. And if “integration” is to have any meaning, some observers say, it must mean bringing those four nations up from the heap of poor countries they now lay among.

It will not be easy; there are yawning gulfs between Asean’s wealthier members and its poorest members. According to World Bank statistics, the average Singaporean makes more than 60 times the average Vietnamese, nearly 80 times more than the average Laotian and nearly 92 times the average Cambodian. Statistics for Burma are not available, but the World Bank estimates its average yearly income to be in the “very low” category.

“I don’t think our country has benefited from Asean,” Cambodian opposition party leader Sam Rainsy said.

There are even huge gaps among the older Asean members. The average yearly income for a Singaporean is $24,740; in Malaysia, the next-highest ranking country, an average worker can expect to take home $3,640 per year. That’s nearly twice the yearly income of the next-highest ranking member, Thailand, whose workers take home $1,970 per year.

This disparity can be felt across the board. Again relying on World Bank figures, the average Cambodian woman can expect to live 55 years and the average man 52 years. Just across the border in Thailand, the average woman can expect to live 71 years and the average man 67 years.

These and other gulfs comes in spite of Asean’s economic recovery. The 1997-1998 financial crisis, which savaged Southeast Asia’s economies, appears in remission.

According to a study published in Singapore’s Straits-Times newspaper, direct foreign investment investment in Asean rose 13 percent last year, totaling more than $13 billion.

The percentage of people living in poverty among Asean nations

Graphic: Ryun Patterson	Source: World Bank
Statistics for Brunei and Burma were not available.

And, some critics argue, little of Asean’s disparity can be blamed on Asean itself. After all, Cambodia, which less than a decade ago was still in the throes of a civil war, has seen its garment sector grow from nothing to a $1.2 billion industry in five years, bringing in 200 companies and employing more than 180,000 people. With its booming tourist industry, Cambodia—along with Vietnam—has one of the fastest-growing gross domestic products in the region.

For the Straits-Times and other Asean boosters, economic statistics like these were signs of new life for the region.

“No doubt, the bulk of this was reinvestment. But the fact that foreign investors chose to plough their earnings back in the region is a huge vote of confidence in Asean. It is also very encouraging that most of the money went to new projects, instead of buying existing businesses,” the newspaper said in a recent editorial.

But that rebound, like much else of Asean’s treasure, has not been equally divided. The government of Singapore announced shortly after the Straits-Times article that the city-state had soaked up nearly 65 percent of foreign investment in the region.

Asean does not have a monopoly on the wealth gap. In the last decade, as communist governments have collapsed, capital has enjoyed more freedom than at any time since the mid-19th century. Liberalism, the philosophy of free markets, has enjoyed a renaissance: Government budgets have shrunk, private investment has risen, and free trade has become to many people synonymous with freedom.

It has produced wealth unheard of before the 1990s—but also an income gap unheard of in earlier times.

According to statistics from the Department of International Affairs at the New School in New York, the richest 20 percent of the world takes home 82.7 percent of world income, the second 20 percent absorbs 11.7 percent of the world’s income and the bottom 60 percent makes 5.6 percent of the world’s income.

Reaction to these gaps has been varied but vocal. In Europe, where liberalism has been the driving force of the European Union, voters have turned increasingly to extremism to rescue themselves from unsettling changes. For the first time since the 1930s, extreme nationalists have become electoral forces in Europe.

And in South America, a model of global liberalism these last 10 years, leftist governments have won or gained in Brazil—the continent’s largest economy—Argentina and Venezuela. Argentina, once the poster child of liberalization, now teeters on the brink of collapse and has been the scene of mass riots.

Even the US, the paradigm of capitalism, has been rocked by corporate scandals. Some experts estimate that the collapse of Enron and WorldCom will cost the US economy between $37 billion and $42 billion in lost consumer confidence.

In addition, there is continued public outrage over the loss of jobs and the collapse of wages that has accompanied liberalization. According to published reports in the US, the average US chief executive officer makes 411 times the salary of his or her average employee; just 20 years ago, CEOs made only 42 times the salary of their employees).

“The greatest challenge that the world faces,” former US president and this year’s Nobel Peace Prize winner Jimmy Carter said recently, “is the growing chasm between rich people and poor people.”

All of these events have put liberals on a more defensive footing than they were just a decade ago.

At last year’s G-8 summit in Canada, for instance, wealthy nations chose a mountaintop resort to hide out from protesters. At the Earth Summit in South Africa this year, the government swept off squatters and potential activists, confining protesters to narrow parade routes—if they had a permit.

So far, Asean has not seen the kind of organized resistance to the liberal agenda that other parts of the world have. To be sure, countries have been wracked by uprisings, especially in the wake of the 1997-1998 financial crisis, but those have been masked to a certain extent by the specific politics of those countries.

Activists from the region have banded together to form the Asean People’s Assembly, whose goal is to shadow Asean leaders and speak for the voiceless, but thus far they have not made much of an impact on Asean business.

One Cambodian involved in the assembly has referred to the group as “a 2-year-old baby running behind a 30-year-old.”

For Cambodia’s opposition leader, Sam Rainsy, part of the problem is that even wealthier Asean nations are still autocratic ones. Singapore has no laws for freedom of expression and even regulates the sale sale and use of chewing gum. Malaysia has an internal security act that allows people to be jailed without trial. Indonesia only recently shook off a corrupt dictatorship and has not completely liberalized.

Not all of this can be blamed on Asean itself. As some critics have pointed out, the four poorest members of Asean are both rife with corruption and have not shaken off their authoritarian past.

Internal Exports

Graphic: Ryun Patterson	Source: Societe France Generale.
Intra-Asean exports as a percentage of total exports for each country.

“My feeling is, leaders of countries like Burma, Vietnam, Laos and Cambodia are not willing to listen to the problems their own people are having,” Kek Galabru, founder of the Cambodian human rights group Licadho, said in September after returning from an assembly meeting in Indonesia.

Then there is also the politics of foreign aid. Cambodia’s international donors meeting has been chaired by the World Bank. That means the World Bank has had de facto control over the aid to which Cambodia’s people cling, Sam Rainsy said.

“Most of the Cambodian people live day-to-day; they live on assistance—and this assistance comes from the World Bank, etcetera. So how can you protest against them?” Sam Rainsy asked.

This was also on the mind of King Norodom Sihanouk recently, when he referred to his country as “a beggar nation.”

Nonetheless, while acknowledging that the wealth gap in Asean is a problem, Asean’s defenders say the grouping is still moving in the right direction to fight it.

“Yes, we are miles apart. But the belief is these sort of differences need not be permanent and the sooner you can narrow the differences, the better,” one Asean diplomat said.

After all, some observers say, Asean has given its four newest members grace periods for folding their tariffs. If they manage their economies well, they should have little trouble using import taxes as a way to protect emerging industries enough to develop them to compete.

Average life expectancy at birth for people living in Asean nations

Source: World Bank	Graphic: Ryun Patterson
Statistics for Brunei were not available.

Critics ought to recognize just how hard it is for a regional bloc, still in the midst of recovery from a series of its own calamities, to absorb four backward economies like Burma, Cambodia, Laos and Vietnam.

“Every year, there is a view or belief Asean is on its way out,” the Asean diplomat said. “We’re in a consolidating phase.”

The demonstrations and shake-ups that came in the wake of the financial crisis have made the region stronger and better, the Asean diplomat said.

“There were some valid criticisms made about how Asean needs to change. Well, those changes have been made,” the diplomat said.

And, for the first time in decades—perhaps ever—poor Cambodians, Laotians, Vietnamese and even Burmese face the prospect of a better future, some observers say. For others, there are more intangible benefits to Asean membership for its four poorest nations—namely, having real recognition by a world that had treated them as lepers.

“Over the past decades, when you talked about Cambodia, you talk about something that is negative: War, killing, the Khmer Rouge. But with their association with Asean, their image improves. And that’s good for Cambodia,” government adviser and Cambodian Institute for Cooperation and Peace Executive Director Kao Kim Hourn said.

The same can be said of Laos, Vietnam and Burma.

But it is especially true for Cambodia, emerging from three decades of civil war and genocide to embrace liberalism and the world, some observers say. The country’s payoff will come in their hosting of the Asean summit.

“For the next few months, Cambodia will be the center of the world,” Malaysian Minister of Culture, Arts and Tourism Abdul Kadir bin Sheikh Fadzir said during a September tour of Cambodia designed to foster intra-Asean tourism.
Even if these four nations weren’t recovering from their own 20th century meltdowns—as Asean’s poorest members are in their own ways—the fact is they would still need Asean, Kao Kim Hourn said.

“We’re too small and too poor to have a say in world and regional politics. Asean is already well-engaged in world politics, so why not use it?” he asked.
But that gift won’t keep on giving, Kao Kim Hourn acknowledged.

If they are going to justify their membership in Asean, Cambodia’s leaders are going to have demonstrate real success for Cambodia’s people.

“The issue for the people is, they don’t care whether Cambodia joins Asean or not—but they do care how that affects their standard of living,” he said.

For some observers, part of the problem is not in what things Asean does, but how it does them.

“We are seeing de facto regional integration in Asia, as shown by the increasing integration in regional trade flows,” the Societe France Generale wrote in a recent report. “However, there is no institutional leadership driving this integration, as there is in Europe. The only regional association in Asia is Asean, which is unable to provide such leadership.”

For the French society, “Asean has become too politically heterogeneous after the admission of Vietnam in 1995, Laos and [Burma] in 1997 and Cambodia in 1999,” as well as its insistence on protecting each country’s “sovereignty.”

“In addition, Asean works exclusively on a consensus basis, and does not interfere in the domestic affairs of member states. This seriously limits its ability to take the initiative and its responsiveness, particularly during times of crisis such as 1997,” the Societe report states.

For Kao Kim Hourn, part of the answer lies in strengthening Asean as a central body—setting regional standards and giving the bloc the power to enforce them.
The bottom line is that more needs to be done by the bloc’s wealthier nations to bring along their poorer partners, he said.

Asean leaders have at least given lip-service to developing their poorer neighbors, if only for the interests of the wealthier nations.

“The result [of inaction] is that one or two or three member states may keep the others from moving ahead,” Asean Secretary- General Rodolfo Severino was quoted as saying recently.

Already, Asean leaders have put together an integration package that has left Cambodia’s leaders at least grateful for acknowledgment, if not thrilled.
“We should be happy with it,” Foreign Minister Hor Namhong said of the package.

Advancing the economies of the poorest nations is a major challenge. Most Asean countries are still pulling themselves out of the last crisis.

Indonesia, Asean’s most populous nation—with nearly half of the region’s 500 million people—has an external debt that takes up 87.4 percent of its gross domestic product, according to the World Bank. The Philippines’ debt is nearly 70 percent of its GDP and Malaysia’s debt is 51 percent of its GDP.

There are also internal problems with the organization itself that may interfere with cooperative development.

All of Asean’s poorer countries may be cooperating for the same markets, but they are also competing for them.

The Societe France General points out that Asean’s best asset is its cheap labor, and most of its exports go to the US and Europe, not each other.

And things are likely to get more competitive as China, the World Trade Organization’s newest member, soaks up most of the region’s investment with its huge—and cheap—labor force.

“I think that at present, Asean nations have interests that sometimes converge and sometimes conflict,” Sam Rainsy said. “I think Cambodia’s economy often conflicts with our neighbors.”

This puts the squeeze on Asean’s four poorest countries, observers say.
“We all know we need to export more, but what can we export?” Kao Kim Hourn asked.

And then there are the political crises. The Philippines has been at war with Muslim reactionaries for decades and just brought back its former colonizer, the US, to help. Indonesia, wracked by divisions between secular democrats and Islamic nationalists, has been thrust into the world’s war on terrorism by the October attack outside a Bali nightclub that killed almost 200 people.

The lesson of all this is one of liberalism, some advocates, say: Individuals need to take the initiative.

“The feeling is that those who want to move ahead, move ahead,” Kao Kim Hourn said.

Some of that may require countries operating a kind of economic triage, focusing on those industries in which they have comparative advantages, instead of working to compete in an area where other countries already have the advantage.

That was the theme of Singaporean Prime Minister Goh Chok Tong’s visit to Cambodia last year, when he urged the government to focus on tourism, telling the Cambodians, “There is only one Angkor Wat.”

Tourism, especially, is an area where all of Asean can agree, some observers have said.

“A lot of tourists, when they come to our part of the world, like to take in two- and three- and four-country tours. In Asean, we don’t compete, we complement one another,” Abdul Kadir said.

The Asean tourist pact, which delegates are expected to sign at the conference here in Phnom Penh is going to pay major dividends for Cambodia, Abdul Kadir said.

“I’m sure Cambodia is going to be one of the biggest beneficiaries of this great agreement,” he said.

For Abdul Kadir, developing the poor countries is “just a matter of time.” As China’s economy expands, it continues to put pressure on the region to build up its infrastructure.

As the region’s infrastructure gets built up, more markets—especially for tourists—will expand, the minister said.

“It is a matter of time, where tourism will boom, I mean boom, in Cambodia,” Abdul Kadir said.

Besides, Abdul Kadir and others have added, even the fact that the argument in Cambodia is about wealth distribution and not war is a huge step forward.
“Without peace, we can do nothing to help the people,” Abdul Kadir said.

(Additional reporting by Pin Sisovann)