ASEAN's FTA-led economic integration

Abstract

ASEAN economic cooperation in the pre-AFTA period, 1977–91 Prior to the late 1980s, consideration of deep regional economic integration remained taboo and the focus was on economic cooperation. This period was characterised by preoccupation with commodity trade problems, the ASEAN Preferential Trading Arrangement (PTA) and industrial cooperation schemes. Akrasanee (2000 : 36–7) notes: [T]o counter the growing influence of communist/socialist states the member countries decided to strengthen ASEAN as the defining regional community. Economic cooperation was adopted as a means to serve the purpose … The PTA was intended for ASEAN markets to become more accessible to the member countries and more integrated. For large-scale capital intensive projects, joint investments with proper division of responsibilities would benefit from economies of scale. Initial obstacles and subsequent rationale ASEAN's preference for regional economic cooperation rather than deep integration in the 1970 s and 1980 s reflects the reluctance of some ASEAN countries to undertake trade and investment liberalisation owing to the pursuit of industrial policies of import substitution and picking winners. However, as the limitations of import substitution became increasingly apparent, more countries favoured an export oriented development strategy with greater acceptance of trade and investment liberalisation unilaterally and under ASEAN. Another obstacle to deep economic integration in ASEAN at the time was the diversity in size, resource endowment, level of economic development, technological capability and openness of trade and investment regimes among ASEAN countries that led to differing perceptions of benefits and costs of economic integration. It was perceived that the more competitive ASEAN economies would gain more. There is also the political economy dimension of trade and investment liberalisation within each country. The winners include consumers (the silent majority) who enjoy lower prices and wider range of goods and services; farmers, businesses and workers in expanding export sectors; and foreign investors able to have right of establishment and a level playing field.