Japan and China step up rivalry over ASEAN infrastructure contracts

November 24, 2015

Japan and China step rivalry over ASEAN infrastructure contracts

by Ben Bland in Kuala Lumpur

http://www.ft.com/intl/cms/s/0/f20f9fec-90f4-11e5-bd82-c1fb87bef7af.html 11/23/2015

ASEAN's Time

China and Japan are stepping up their battle for strategic infrastructure projects in Southeast Asia amid rising economic competition and tensions over maritime disputes.

At an annual summit of Asia-Pacific leaders in Kuala Lumpur this weekend, China pledged to add another $10bn to its growing pool of infrastructure lending in Southeast Asia, while Japan vowed to halve the time it takes to approve infrastructure loans and take on more financial risk.

China recently beat Japan to win a $5bn high-speed rail project in Indonesia on the back of no-strings financing that did not require the Indonesian government to act as guarantor.

China and Japan are going head to head to secure other high-speed rail projects, including one linking Kuala Lumpur and Singapore, as well as bidding against each other for ports, power stations and other infrastructure deals across this fast-growing region.

Shinzo Abe, Japan’s Prime Minister, said in a speech that Japan’s official development assistance must keep pace with the speed of change in Asia.

Xi and Abe with Jokowi

“We will drastically reduce the time needed for going through the procedures for ODA loans by as much as one and a half years compared with the current system,” he said, promising a significant reduction from the current average processing time of three years. We will also revise the current practice of requiring without exception recipient governments’ payment guarantees.”

A senior Japanese diplomat said that Tokyo had to become more “expeditious” in executing infrastructure projects in Asia, rather than simply highlighting that it has a better record than China in terms of quality, safety and social and environmental protection.

Beijing also pledged to accelerate and deepen its economic co-operation in Southeast Asia with Premier Li Keqiang promising $10bn of new loans for infrastructure as well as an increase in grants to the region’s less developed nations.

Sale of 1MDB Power Assets to China

China rescues Najib Razak from 1MDB scandal

While China clashes at sea with Japan and some Southeast Asian nations including Malaysia, the Philippines and Vietnam, Beijing and its rivals are competing to build alternative spheres of economic influence.

Malaysia, Vietnam, Japan and the US were among 12 nations that recently signed the Trans-Pacific Partnership, a pact that excludes China and is designed to promote a rules-based trading and investment system in the region.

Beijing has backed a rival trade deal with Southeast Asia, called the Regional Comprehensive Economic Partnership,  that has fewer requirements for economic liberalisation.  But hopes to conclude RCEP by the end of the year received a blow on Sunday when Malaysia, which is chairing the Association of Southeast Asian Nations, said that negotiations would not be concluded until next year because of the “challenges faced”.

Xi Jinping, China’s President, made an implicit criticism of the TPP on Wednesday when he warned at another regional forum in Manila that “with various new regional free trade frameworks cropping up, fragmentation is becoming a concern”. Despite Beijing’s concerns, since the TPP was agreed last month other Southeast Asian nations including Indonesia, the Philippines and Thailand have said they are interested in joining.

“With the TPP now finally coming to fruition, it increasingly seems like it is the best game in town in terms of driving economic development,” said a minister from one of the Southeast Asian nations keen to sign up. “But given the state of our economy and the fact that the existing TPP participants must ratify the deal first, it will take several years before we can join.”

Barack Obama, US President, welcomed the new interest in the TPP from Southeast Asian nations, claiming that the pact would “write the rules for trade in the Asia Pacific for decades to come”, promoting the resolution of economic disputes through dialogue rather than “bullying or coercion”.

ASEAN: Embrace Civil Society and Connect with its Peoples

October 19, 2015

ASEAN: Embrace Civil Society and Connect with its Peoples

by Khoo Ying Hooi

ASEANIn the past, I have written numerous times about the Association of Southeast Asian Nations (ASEAN). ASEAN is a regional organization that is supposed to be close to our hearts, as we are all ASEAN citizens. But most of the time, many are sceptical of its potential.

Two weeks ago, I had the opportunity to present a paper on ASEAN and civil society in a forum on “Promoting and Strengthening ASEAN Regional Integration and ASEAN Community 2015 and Beyond through Multi-Channel Dialogue” at the Institute of Diplomacy and Foreign Relations (IDFR).

The Forum was led by the IDFR’s Foreign Policy Study Group (FPSG), with ASEAN Foundation as joint organizer.

Just last week, it was reported that Laos refuses to host  meeting of civil society organizations (CSOs) in Southeast Asia on the sideline of the ASEAN Summit next year. How can we talk about ASEAN Community when the next ASEAN Summit is not prepared to engage civil society.

That is precisely the key challenge that ASEAnBN faces. Regionalism in Southeast Asia has been traditionally state-centric and leader-driven . It is a general view that ASEAN was born and in many ways remains a club of elites with a top-down approach.

Its origins was mainly due to a shared concern for regime survival among a group of Southeast Asian leaders facing internal challenges to their authority and demands for political openness. That means regional integration takes time and little space is given to civil society actors.

ASEAN celebrated its 48th anniversary this year, but its cooperation founded on the principles such as non-interference and sovereignty stay.. The non-interference principle is being increasingly questioned through its expanded influence, as new challenges arising from globalization processes.

I shared similar sentiment with some scholars who view civil society as “our last best hope.” The CSO has a unique role of expanding and promoting civic space by bringing us, the citizens, into the political sphere and mobilizing a range of popular voices to address the government on issues of interest. This is essential especially it it is in line with the main theme of ASEAN, that is a people-oriented or centered community.

Many might wonder, what can ASEAN do for them, or how could ASEAN be relevant to them, especially in their daily lives.

Hence, the question remains: has regionalism in Southeast Asia made sufficient transition from being a “club of elites” to a “people’s ASEAN”? “Regionalism from below” and participatory regionalism are just the beginning in Southeast Asia.

Yes, we have limited access to key policy-makers of ASEAN. But that does not mean there is nothing that we can do. Let us not forget our role, which is to disseminate information on the ASEAN community to others.


Political Crises will hobble Malaysia’s International Engagement

September 5, 2015

Political Crises will hobble Malaysia’s International Engagement

By Murray Hiebert
Murray Hiebert is Senior Fellow and Deputy Director of the Sumitro Chair for Southeast Asia Studies at the Center for Strategic and International Studies in Washington, D.C. Sumitro Chair for Southeast Asia Studies
In Bersih 4, one of the biggest demonstrations in Malaysia’s history, tens of thousands of protesters took to the streets of Kuala Lumpur on August 29 and 30 calling, among other things, for Prime Minister Najib Razak to resign for his handling of the economy and alleged scandals at a state investment fund. In a surprising development, the demonstrators were bolstered by two appearances by 90-year-old former leader Mahathir Mohamad, who is seeking to oust Najib, his one-time protégé.

Generated by IJG JPEG Library

Much of the protesters’ ire was focused on news, which broke in July, that some $700 million had been deposited in the Prime Minister’s bank accounts shortly before the 2013 elections. Many speculate the money is linked to troubled state investment firm 1 Malaysia Development Berhad (1MDB). Najib is expected to survive the crisis prompted by the allegations—Malaysia’s Anti-Corruption commission has said the money was a donation from an unidentified Middle East benefactor—but it is proving to be a distraction at a time when the country is facing serious economic headwinds and preparing to host the ASEAN leaders’ meeting and East Asia Summit (EAS) in November. President Barack Obama and 16 other senior Asia-Pacific leaders are expected to attend.
FT NajibNajib plagued by scandals and corruption
As plunging commodity prices weaken Malaysia’s economy, Najib faces urgent calls to stem the loss of confidence amid allegations of financial irregularities at 1MDB. Foreign investors have pulled more than $3 billion out of the Malaysian stock market so far this year and the country’s currency has performed worse than any other in Asia.

The ongoing political crisis will make it more difficult for Malaysia to complete negotiations with its 11 partners in the Trans-Pacific Partnership (TPP) trade agreement, which includes the United States and Japan. Najib, who had joined the TPP in the hopes that it would help him press economic reform to boost longer-term growth, now appears to lack the political juice to push through compromises at home on such politically sensitive issues as government procurement and state-owned enterprises.

U.S. President Barack Obama and Malaysia's Prime Minister Najib Razak walk off 18th hole while playing a round of golf at the Clipper Golf course on Marine Corps Base Hawaii during Obama's Christmas holiday vacation in Kaneohe, Hawaii, December 24, 2014. REUTERS/Hugh Gentry (UNITED STATES - Tags: POLITICS SOCIETY)

U.S. President Barack Obama and Malaysia’s Prime Minister Najib Razak walk off 18th hole while playing a round of golf at the Clipper Golf course on Marine Corps Base Hawaii during Obama’s Christmas holiday vacation in Kaneohe, Hawaii, December 24, 2014. REUTERS/Hugh Gentry

The ongoing scandal also appears to have distracted Kuala Lumpur and Washington from pressing ahead on the U.S.-Malaysia comprehensive partnership announced during Obama’s visit in April 2014. Najib and Obama played golf in Hawaii in January, but plans for Najib to visit the White House this spring were jettisoned after the Malaysian government threw opposition leader Anwar Ibrahim in prison on sodomy charges.

For the U.S. administration, the challenge in the run-up to Obama’s November trip is to find effective strategies to work with Malaysia on security initiatives such as the maritime tensions in the South China Sea and regional economic schemes such as the TPP and ASEAN economic integration. At the same time, Washington finds itself in a difficult spot, wanting to give Malaysia space for its domestic politics to play out but also compelled to express concern about the government’s increasingly reactive muzzling of critical voices in the press, civil society, and political opposition, including most prominently Anwar. On this last point, Malaysian authorities’ measured response to the weekend’s protests—a stark contrast with security forces’ use of tear gas and water cannons to disperse previous Bersih rallies—helped avoid international criticism that would have further strained the ability of the United States and Malaysia to engage productively on areas of cooperation.
PMCABINETFormer Partners

Despite the anger over 1MDB, the size of the protests, and Mahathir’s involvement, Najib is expected to retain control of the government. He does not face the threat of a no-confidence vote in Parliament because his ruling coalition holds a significant majority. He also appears to retain outsize support among the leaders of his United Malays National Organization (UMNO) party, which has ruled Malaysia since independence in 1957, despite sniping from Mahathir and his supporters. As a warning to party dissidents, Najib fired his Deputy Prime Minister and the Attorney General in July and promoted four members of a parliamentary committee investigating 1MDB, thus making them ineligible to continue the investigation.

The opposition coalition lacks the heft to exploit the anger over 1MDB to challenge Najib even though it won 52 percent of the popular vote in the 2013 elections. The coalition has splintered along ethnic lines since the imprisonment of Anwar, the grouping’s charismatic leader. The mostly ethnic Chinese-based Democratic Action Party, along with Anwar’s People’s Justice Party, has split with the Pan-Malaysian Islamic Party (PAS) over the latter’s insistence on introducing Islamic law in areas it governs.

PAS decided not to participate in the protests, which resulted in virtually no rural Malay participation, although a small breakaway faction of PAS did support the rally. Roughly a quarter of the protesters were young ethnic Malays, but the majority were middle-class, urban ethnic Chinese, allowing UMNO leaders to conclude that most Malays were less upset about the continuing scandal surrounding 1MDB. A poll released by Merdeka Center found that 70 percent of Malays surveyed were opposed to the protest.

Malu Malu UMNOShame on Najib and Accomplishes

At least for now, the majority of the ruling party’s leaders appear to be siding with Najib. The only scenario in which they would move against the prime minister would be if they determined he would be a liability in the next elections, due before 2018, much like they decided to oust Najib’s predecessor, Abdullah Badawi, in 2008. To this end, Najib remains far more concerned with the slowing economy. If the economic situation continues to deteriorate, it could undermine UMNO’s popularity even with its ethnic Malay base.

It is unlikely that Najib’s political crisis will dissipate before Kuala Lumpur hosts the summits in November. Najib and his foreign ministry demonstrated in early August that they could host an effective ASEAN Regional Forum that seriously addressed challenges in the South China Sea, despite the country’s political distractions. President Obama and Malaysia’s neighbors should assume that Najib will be able host a credible ASEAN Summit and East Asia Summit in November, with serious regional economic and security discussions, despite the Prime Minister’s preoccupation with his political survival.

Time to welcome Timor Leste into ASEAN

July 31, 2015

Foreign Affairs


COMMENT: Friends of Timor Leste welcome this initiative by the Jokowi administration to push for the country’s admission into ASEAN. There are no grounds to postpone this decision and one hopes that come November 2015 ASEAN summit in Kuala Lumpur ASEAN leaders will welcome Timor Leste as a full and equal partner.

It is commendable that Indonesia, a former occupier of this little island nation, should take the initiative to raise the matter at the forthcoming August 2015 ASEAN Foreign Ministers meeting in Kuala Lumpur. This will be seen as a final reconciliation move and as formal endorsement of Timor Leste as a sovereign and independent nation state by Indonesia.

I remember  being in Dili several years ago when the question of Timor Leste’s admission into the ASEAN community was the sole agenda for the forum organised by the Malaysian Institute of Economic Research Institute. At the time, Timor Leste was protected by a UN Peacekeeping Force which included a contingent from our Royal Malaysian Police.

There was consensus among forum delegates that Timor Leste’s membership in ASEAN should be a non-issue. We, however, agreed at the time that their officials should use the interim period to learn more about ASEAN processes and work on a campaign to convince their own citizens that ASEAN would be good for their country. I was impressed with these officials for their commitment to and understanding of ASEAN.

I am now glad that the opportunity has come to admit Timor Leste. I am sure that we can look forward to welcoming the people of this beautiful island nation into our community in Kuala Lumpur at the  November 2015 ASEAN Summit. I thank President Jokowi Widodo, Foreign Minister Retno Lestari Priansari Marsudi and officials of the Indonesian Foreign Ministry for this important initiative. Timor Leste deserves our support and encouragement. –Din Merican

ASEAN: Time Leste as 11th Member –A Welcome and Timely Move

ASEAN Community 2015

The Indonesian delegates would raise the issue of membership of Timor Leste in ASEAN during the 48th ASEAN Foreign Ministers’ Meeting in Kuala Lumpur early next month, an Indonesian official said in Jakarta today.

The Indonesian government would persistently attempt to include the new nation into the ASEAN membership, China’s Xinhua news agency reported MI Derry Aman, Director at the Indonesian foreign ministry, as saying.

“Indonesia will raise the issue of Timor Leste membership in ASEAN (at the meeting). It is time for the ASEAN member countries to consider the membership of Timor Leste,” he said at his office.

Indonesia is the first country giving support to the membership as the new nation is located in the Southeast Asia region, according to Aman.

“Indonesia’s commitment is clear that Timor Leste will be an ASEAN member country in the future,” he revealed.

A study on the readiness of Timor Leste on the membership has been carrying out which will determine whether the new nation will be accepted into the Asean membership, according to him.

– Bernama

ASEAN Economic Community?

July 30, 2015

Foreign Affairs:  ASEAN Economic Community? 

By Pattharapong Rattanasevee



…without a strong central authority and mandate, ASEAN integration will remain in a mess and the AEC remain an illusion. A single market across ASEAN nations requires a strong central authority that can harmonize and standardize regional regulations, and it must be recognized by all member countries.– Rattanasevee

With just six months left before the end of 2015 and the scheduled implementation of the ASEAN Economic Community, it is clear that the member nations of ASEAN are far behind in planning what is supposed to be the integration of the region into a close-knit community featuring free movement of goods, services, skilled labor and freer flow of capital.

It is a significant step forward and could be a crucial turning point for ASEAN. But without a strong central authority and mandate, ASEAN integration will remain in a mess and the AEC remain an illusion. A single market across ASEAN nations requires a strong central authority that can harmonize and standardize regional regulations, and it must be recognized by all member countries.

ASEAN will need a guardian of competition. It will need to significantly improve the current trade competition policy and arbitration. The scheme itself requires a consensual agreement among members that should be implemented as a bundle. That is, governments should not be allowed to pick and choose among components or sectors.

ASEAN is dealing with a colossal and ambitious task but with limited resources and capacity.But how limited are these resources? ASEAN has no intention to become a supranational organization like the European Union, where members coordinate within the context of inter-governmentalism. The internal dynamics of ASEAN institutions have been designed to uphold the roles of national governments and the norms of the association — known as the ASEAN Way.

The ASEAN Secretariat — the current central authority and only real institutional organ — remains at the margins of ASEAN policy making. It does not possess the mandate or power to command individual member states, or the power to devise common policies on its own. It is a glorified secretary, responsible for only administrative support, sorting out the daily paper work and arranging meetings for the organization.

There is no guarantee that the central authority will implement policy effectively and ASEAN will be unlikely to enforce compliance from obstinate members. Interestingly, Barry Desker pointed out that during the preceding 40 years of ASEAN, only 30 percent of agreements were actually implemented.

ASEAN will need to increase funding if it is to strengthen the Secretariat. The current operational budget relies on equal contributions by the member states, reflecting the norms of equality and stemming from the belief that different contributions might lead to a hierarchy of powers. The payment has never been increased substantially and has been kept low enough to ensure the poorest members can pay. ASEAN also receives substantial funding from dialogue partners and external donors — mostly through specific projects or operations — but this is not sustainable in the long run if ASEAN wishes to present itself to the world as a non-aligned power.

The Secretariat lacks professional staff, making it difficult for it to become a powerful central administration and the backbone of the association. It employs roughly 300 staff: 65 managers and experts, 180 local staff and 55 people from donor organizations. These figures are miniscule compared to other organizations with similar size and missions. They do not fairly represent a community of 625 million people and a nominal GDP over US$2.5 trillion.

The secretariat has also been facing difficulties attracting talented and capable people. Working for ASEAN is not seen as prestigious or well-paid, unlike other regional organisations that could offer up to US$74,000 for bright talent.

These problems raise the question about how prepared ASEAN is to implement the single market scheme, and how feasible that scheme will be. The region contains countries that are prone to financial shortfalls, domestic weakness, poor governance, corruption and coordination problems.

he member states lack an ‘ASEAN mindset’ to facilitate cross-national and cross-sectoral interactions. The AEC will not thrive unless there is a significant improvement to how ASEAN policy is implemented. ASEAN does not need to — and will not — depart from the ASEAN way to become a supranational or fully-consultative organization like the EU.

But its central administration is a basis of continuity. It needs to be given mandate and resources in order to acquire the capacity to encourage compliance and support its administrative functions. This could narrow the gap between ASEAN’s rhetoric of cooperation and its actual commitments. It could improve the poor implementation record.

Additionally, the contribution system should be substantially revised. It is not realistic nor applicable to the growing activities of the association and the excessive tasks of the ASEAN Secretariat. It should consider a GDP-based contribution system or seek other sources of revenue such as a share of taxes, import duties and licensing.

Finally, ASEAN awareness must be promoted among private sectors and ordinary citizens. The AEC could bring tremendous benefits to their daily lives. Improved ASEAN awareness would encourage public scrutiny and would put massive pressure on governments to focus on accomplishing the AEC in time.

ASEAN is not quite ready for the AEC. But with some significant improvements to how the ASEAN Secretariat is run, it may just be possible.

Dr Pattharapong Rattanasevee is a lecturer at Burapha University, Chonburi, Thailand. This was adopted from an article that appeared on the website of the East Asia Forum, This was written for the East Asia Forum, a platform for analysis and research on politics, economics, business, law, security, international relations and society centered on the Asia-Pacific region. It is based out of the Crawford School of Public Policy at the Australian National University 

ASEAN and the Lessons of Greece

July 25, 2015

ASEAN and the Lessons of Greece

by Dr. Munir Majid


“Thank God we don’t have a Common Currency and never should have.”

There are therefore nascent possibilities and challenges which should concentrate ASEAN minds as they consider the Greek drama in the EU’s eurozone beyond “Thank God, we do not have a single currency, and never should have.” We cannot be immunised from the unintended and unanticipated consequences of community-building. We have to have the institutions and imagination to manage them.–Dr. Munir Majid

Dr Munir MajidEUROPE has been glued to the Grexit television screen for the longest time. Going on and on for at least five years, each episode of whether Greece will remain in the eurozone or not has run longer than the longest Tamil movie of yore (although we have our own MIC version, with 1MDB trying to play catch-up).

What are the lessons for ASEAN of the EU’s Greek tragedy? No doubt the first thing that will trip out is: Thank God we do not have a common currency. However, this is only the tip of the iceberg. Beneath the surface there are deep issues involved, so many currents, cross-currents and counter-currents in the management of regional integration.

I will highlight three of the more profound: fiscal discipline; national sovereignty; and community negotiation process.

Fiscal Discipline

Fiscal discipline is actually easy to define, but so difficult to uphold when the freewheeling genie has been out of the bottle for so long with no inclination of coming back in. Under the EU’s Stability Growth Pact government deficit has to be not more than 3% of GDP and debt 60%, something characterised more in the violation than the adherence. Nothing has been done about this for years.

In the case of Greece over the last five years they were supposed to be brought down, but the numbers for the fiscal deficit went up again and the country is up to its ears in debt, coming to 200% of GDP after averaging an already unsustainable 177%.

The other side of the austerity equation is unemployment which has hit 25.6%. (Unemployment in Indonesia as a result of the 1997-98 Asian Financial Crisis was 30%; lowest European unemployment is in Germany at 4.7%).

Youth unemployment in Greece stands at 60%. The Greek economy has shrunk by 25% since the first IMF aid package in 2010. The government and people are saying they cannot take any more, but the creditors – on whom the Greeks are dependent for more bailout and interest servicing packages like an opiate – are saying not enough has been done in a sustained fashion to bring debt and the deficit down.

The Greeks have been used to many things which the creditors now insist on taking away from them. You cannot live beyond your means forever. The chicken is coming home to roost.

From the seven main points of the agreement reached on the night of July 13 for a new bailout package of 86 billion euros, it is clear Greece is now being pushed right against the wall – including what many in the country declare to be violation of its sovereignty.

Cutting pensions

While certain requirements such as cutting pension spending and increasing revenue, through seamless imposition of the top VAT rate of 23% for instance, might be considered par for the course in these bailout situations, the insistence on the transfer of up to 50 billion euros of “valuable Greek assets” to a new independently managed fund, as a form of collateral, was felt by Greeks to be rubbing their noses in the dirt.

National Sovereignty

Alexis and Angela

Sovereignty, what sovereignty? If Greece wants to remain in the euro and needs all the bailout money, including money to service existing bailout funds, has the country got any alternative?

The Greek Prime Minister may quote Paul Krugman on the pain and damage all the austerity requirements are causing the economy, or even appeal to a European sense of history by comparing them to the punitive terms of the Peace of Versailles in 1919 (which historians assert were the root cause of the Second World War as Germany struck back to wipe off the shame), but has he got any other option?

If you need the money, what can you do? South-East Asians may remember that picture in 1998 of the then IMF Managing Director Michel Camdessus standing over the cowed former Indonesian President Suharto, as he signed away Indonesian macroeconomic sovereignty. From profligacy, it might be said, to loss of an important part of national sovereignty.

In the negotiation of the new Greek bailout deal this month – which still may undergo many twists and turns – a feature has been the predominance of Germany in the EU and in the eurozone (comprising 19 of the 28 members of the EU). It is after all the largest creditor nation and economy. If pretence was set aside, it is also the most powerful country in Europe (which arrangements at the end of the Second World War were intended to avoid – but that is a different story).

Every member country has a veto of course, but in negotiating the outline and details of the rescue package for Greece, Germany has led the way all this while and its commitment is indispensable, however much the French try to give the impression of having an eminent role as well.


So, how do we look at it all from an ASEAN perspective? The first instinct – thank God we do not have a single currency – is of course to be expected. But the thinking on what has been happening in Europe and on how relevant it is to AASEAN should not end there.

We do have big states and small states. We may say our negotiating and decision-making processes are different – and national sovereignty is untouchable. But this is too pat and shallow. The process of community-building is moving ahead. The voice of bigger countries does carry greater weight. However if it is in the service of what is good for the larger whole, there is not much to be afraid of.

The changeable predispositions of member states, however, have to be managed. Indeed, what a significant member state DOES NOT DO also affects ASEAN – as is the case now with the growing uncomfortable feeling that Indonesia under President Jokowi is not so enamoured of the regional grouping.

Indonesia therefore is critical to ASEAN. What and how it thinks, what happens in that country, have Asean impact. Thus engagement, with Indonesia particularly but also among all member countries, is most important. ASEAN needs, at this stage of its development, to have a Minister for ASEAN Affairs in each member country. The prospects and challenges need to be a focus in every national administration.

Economic management

With respect to economic management, while there is no single currency, there are threats to ALL ASEAN economies of mismanagement in ONE, especially a significant economy. Contagion is always a risk. With increased intra-regional trade (although now only a quarter of the total trade), there will be knock-on effects across the region.

Importantly – let us not forget – we are talking of ASEAN as a region, one single economy, with the prospect of the most promising growth in consumer demand and economic size (coming up to 4th in the world by 2050). ASEAN is an asset class. With the herd instincts of markets, reverse flows caused by fear of contagion can quickly develop into a regional crisis.

While global arrangements such as with the IMF remain, let us also not forget we have an untested multilateral currency swap system that includes three East Asian partner countries to address potential and actual balance of payments and short-term liquidity difficulties – the Chiang Mai Initiative Multilateralisation (CMIM). The US$240bil fund is 20% Asean and 80% China, Japan and South Korea. The commitments from each country are really promissory notes, and a country in difficulty can draw up to 2.5 times its committed amount.

Will the support always be forthcoming? Will political differences not get in the way? Not to mention an assessment of whether the country facing difficulty has exercised fiscal discipline in the management of its economy. The CMIM has an institution, AMRO (ASEAN+3 Macroeconomic Research Office), to monitor and analyse regional economies in support of its decision-making process.

The central bank governors deciding on requests for support will also rely on AMRO reports and input, and there could be conditions attached to such support, whether the 6-month Breaking Line or the One-year Stability Facility. There could be expectation, frustration, anger and discord.

There are therefore nascent possibilities and challenges which should concentrate ASEAN minds as they consider the Greek drama in the EU’s eurozone beyond “Thank God, we do not have a single currency, and never should have.” We cannot be immunised from the unintended and unanticipated consequences of community-building. We have to have the institutions and imagination to manage them.

Tan Sri Dr. Munir Majid, Chairman of Bank Muamalat and Visiting Senior Fellow at LSE Ideas (Centre for International Affairs, Diplomacy and Strategy), is also chairman of CIMB ASEAN Research Institute.


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