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Friday, November 16, 2007

ASEAN single market faces obstacles: analysts

SINGAPORE (AFP) — Southeast Asia's plans for a unified market by 2015 hinge on painful reforms that could be derailed by red tape, vested interests and foot-dragging, observers say.

Association of Southeast Asian Nations (ASEAN) leaders holding their annual summit in Singapore from Sunday are expected to approve a blueprint for an ASEAN economic community embracing more than half a billion people.

"Political will is the key. If countries don't have the political will to push through with these reforms, this will remain just a dream," said a Southeast Asian trade official, talking on condition of anonymity.

"Can governments, for example, resist pressure from domestic interests against allowing foreign airlines to fly domestic routes?"

Analysts have lauded ASEAN for moving forward by five years its timetable for economic integration, from 2020 to 2015.

But they said the 40-year-old organisation faces a formidable task in establishing a unified market and production base that would help it compete against Asian giants China and India.

Some of the reforms could come up against entrenched domestic business interests and face resistance from officials in departments such as customs, a major source of corruption in some countries, they said.

Complicating the situation are disparities between the group's more developed members Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand, and lower-income states Cambodia, Laos, Myanmar and Vietnam.

As a first step to integration, ASEAN has marked 12 priority sectors for the elimination of tariffs and non-tariff barriers by 2010.

These are agricultural, rubber and wood-based products along with air travel, Internet linkages, automotives, electronics, fisheries, healthcare, logistics, textiles and apparel, and tourism.

ASEAN also plans to liberalise the services sector, open formerly-closed sectors to foreign investors, harmonise and streamline customs procedures, and ease the movement of professionals.

ASEAN transport ministers agreed in November that national airlines can fly between capital cities by the end of 2008 under an open-skies pact that could be expanded later to include secondary cities.

Mike Barclay, regional vice president of the industry trade body, the International Air Transport Association (IATA), said however that ASEAN still had a "long way to go" in freeing up aviation.

"We don't see any relaxation of foreign ownership controls... we don't see the opportunity for airlines to operate domestic sectors in another ASEAN country," Barclay told an aviation conference in Singapore last month.

Philippine Trade Secretary Peter Favila said in August there could be "unintended pockets of bureaucratic red tape" that could slow the blueprint's implementation, but voiced confidence this could be overcome.

The Asian Development Bank (ADB) Institute identified in a recent report the huge scale of some of the reforms ASEAN states must undertake.

"A shift to knowledge-based economy is crucial for Malaysia and Thailand and institutional and governance reforms and restoration of good investment climate should be priorities for Indonesia and the Philippines," it said.

Cambodia, Laos, Myanmar and Vietnam need to build infrastructure like transportation and telecommunication facilities. They also need legal, judicial and governance systems and a skilled work force, the ADB's research arm said.

"These countries are still not ready for the ASEAN economic community," said analyst Hiro Katsumata of the S. Rajaratnam School of International Studies in Singapore.

ASEAN's six wealthier states could form the core of an economic community by 2015, with the poorer members joining later, Katsumata suggested.

The ADB Institute paper highlighted the wide disparity within ASEAN in terms of market openness and urged financial and technical help for ASEAN's poorer members.

For example, ASEAN's average tariff import rate is 9.53 percent, ranging from zero tariffs in Singapore to 17.92 percent in Vietnam.

It takes an average 32 days to import an item in ASEAN, varying from three days in Singapore to 45 days in Cambodia and 78 days in Laos.

An average 64 days are required to start a business in ASEAN, ranging from six days in Singapore to 163 days in Laos and 97 days in Indonesia.

"The greatest challenge is to narrow the development gaps within ASEAN," the paper said.


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