Economic Cooperation in ASEAN Flashcards
A judgement on the effects of economic cooperation within ASEAN?
Success at promoting regional economic cooperation was elusive in the earlier years of the organisation from 60s-80s, but ASEAN has managed to overcome challenges in cohesion to deliver tangible progress by the 90s
More advanced economies of Singapore and Malaysia benefited more than the newer ASEAN members from intra-ASEAN trade
What happened in 1977?
Preferential Trading Agreement (PTA)
Rationale: Increase intra-ASEAN trade by generating a list of goods in the region for which members were willing to grant lower tariffs → to increase trade
Evaluation of the 1977 Preferential Trading Agreement
Most ASEAN economies were mainly primary producers → economies were competitive rather than complementary
Import Substitution Industrialisation (ISI) → members focused on import substitution → required higher tariffs to protect infant import-replacing industries
Hence, it is clear that ASEAN members favoured national over regional interests.
States placed major exports on exclusion list; and granted lower tariffs on irrelevant goods like nuclear reactors
What happened in 1980?
ASEAN Industrial Projects (AIP)
Rationale: Develop large-scale projects within a single ASEAN nation, with the goods produced to be freely traded to other members → made use of each country’s comparative advantage to produce with greater efficiency → ED and regional cooperation
Evaluation of the 1980 ASEAN Industrial Projects
Unsuccessful:
Vacillation over projects → 5 projects approved, 2 completed
SG withdrew from the scheme as Indonesia refused to stop producing diesel engines which had been allocated to SG
What happened in 1981 and 1983?
1981 ASEAN Industrial Complementation Scheme (AIC)
Different ASEAN countries would specialise in different stages of the production process → subsequently manufactured to be sold as finished products for extra-regional and ASEAN markets
1983 ASEAN Industrial Joint Ventures (AIJV)
Private companies from different ASEAN states to form joint industrial ventures → products subsequently sold in the ASEAN market, capitalising on economies of scale and specialisation
Evaluation of ASEAN Industrial Cooperation
ASEAN members’ prioritisation of national interests over regional interests doomed plans to failure
Lack of consensus on location of projects; resisted limits placed on their own production of products intended for others to produce
AIJV failed as countries unwilling to grant preferential tariffs → removing appeal of incentive to private firms
What happened in 1992?
ASEAN Free Trade Area (AFTA)
To achieve objective of ‘moving towards a higher plane’ of economic cooperation - Singapore Declaration of 1992;
Common Effective Preferential Tariff based on inclusion; rather than exclusion
Evaluation of ASEAN Free Trade Area (AFTA)
To show effectiveness: ASEAN trade rose 11.6% annually from 1993-2000
To show ineffectiveness: Average tariff rates in the CEPT fell: 12.8% in 1993 to 3.2% in 2002
BUT intra-ASEAN trade only grew 3% in 2001 → ASEAN members continued to exclude heavily traded products (eg. agriculture) from the CEPT
What happened in 1999?
ASEAN plus three
Institutionalised to promote greater cooperation among ASEAN states, China, Japan and South Korea
Paved the way for subsequent initiatives like Chiang Mai Initiative → established bilateral currency swap agreements → provide ST currency support for countries facing liquidity problems → forex risk reduced due to ready pool of forex currency to as a defence
ASEAN Surveillance Process → supervised exchange of information on financial developments to provide early warnings for potential financial crises
