Asean is not yet ready for integration, Mahathir says
September 18, 2013 00:00
By Supalak Ganjanakhundee
M'sian ex-premier says EU's woes show dangers of rushing plan; poor nations protections "should stay in place"
Singapore is the only Asean member that will be completely ready for economic integration under the Asean Economic Community (AEC) by 2015, and some of the group’s poorer members should be allowed to retain their economic protections, former Malaysian prime minister Mahathir Mohamad said yesterday.
“The poorer members of Asean are not yet ready for the AEC. Even the richer members are not really ready for the AEC. This is because their domestic policies are not similar,” Mahathir told a conference on “Assessing Asean’s Readiness by Country” held by Krungthep Turakij newspaper at a Bangkok hotel.
Singapore is best prepared for the AEC because the city-state is a free port that has never relied for long periods on tariffs, he said. Other economies depend heavily on tariff duties, Mahathir said, noting that even his own country is second to Singapore in terms of readiness.
Asean members have the ambition to liberate and integrate their economies by promoting free movement of goods, investment, services and manpower by the end of 2015. Tariffs and non-tariff barriers are being pushed down and will be eliminated eventually.
If Asean sticks to its original schedule for economic integration, some countries might face difficulties, Mahathir said. “We should come together, but we should allow countries like Cambodia, Laos and Myanmar to protect their economies.”
Different strategies can achieve different results from trade liberalisation, such as with automobiles in Malaysia and Thailand, he said. He noted that Malaysia had invested a lot to develop its own automobile manufacturer – Proton Holdings – but had derived less benefit from the effort than Thailand had from its strategy of assembling foreign automobiles.
Mahathir suggested Asean look to the crisis in the European Union as a lesson for Asean integration.
“We cannot reject unity outright. On the other hand, we cannot just unite simply because the Europeans united. We need to know first why the EU has seemingly failed,” he said.
Europe is today an unequal community, he said. Countries in Eastern Europe as well as Spain, Portugal and Greece were relatively less developed and had low-cost economies, which formerly attracted tourism and investment from richer nations. Things changed when poorer European nations adopted the single euro currency. The rate of conversion was not properly worked out and the cost of living climbed. Some countries that are now in crisis made the mistake of borrowing money to meet their shortfalls and to sustain their high-cost living standards, he said.
The former Malaysian premier suggested Asean not make Europe’s mistake of adopting a single currency. Currency in this region could be traded but all individual members should retain their national currencies, he said. The trading of currency should be based on gold to make it more stable, he said. “We do not have a gold-based currency trade now and this may hamper the implementation of the AEC in 2015,” Mahathir said.
Former Asean chief Surin Pitsuwan said the association should boost trade within the group in order to realise its integration. Trade among the 10 nations accounted for only 25 per cent of their combined US$2.7 trillion (Bt85.7 trillion) in international trade, he said.
Most Asean members – the exceptions are Singapore and Brunei – are middle or low-income countries, Mahathir said. Malaysia is moving to high-income status quickly, but the rest should put more effort into investing more in research, technology and innovation, he said.
While eliminating tariff duties, Asean members should not put more non-tariff barriers into their trade regimes, he said.
Asean members have ratified 75 per cent of agreements to form the community, but that is not enough. It needed to do more to push forward integration. The group should allow free movement of professional workers to cross borders, otherwise integration would not happen, he said.