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Time for ASEAN, and its Partners, to Get Regulatory

August 9, 2017

By Veronica L Taylor

The Association of Southeast Asian Nations (ASEAN) turned 50 yesterday, August 8, which should be cause for celebration. But is 50 an energized mid-life birthday, or is it an ominous marker of faltering health for ASEAN?

As in all things multilateral, where you sit determines where you stand. For some observers, such as Singaporean academic Kishore Mahbubani, for example, ASEAN’s chief accomplishments have been maintaining a post-WWII peace across its 10 member states and developing the diplomatic capacity to influence “hot” issues (such as when ASEAN’s joint statement criticizing Myanmar for its use of deadly violence against protesters in 2007 signaled regional disapproval, to which Myanmar acquiesced).

Other observers, however, see ASEAN as a mismatched grouping of lower-middle, upper-middle, and high-income economies. None are willing to take policy decisions collectively, despite the 2008 ASEAN Charter giving it legal status under international law. Instead, some argue that ASEAN’s genius for creating committees and an overblown work program is a recipe for thwarting meaningful progress on most issues of common concern.

Imelda Deinla, a research fellow at Australian National University, takes a different view in her new book, The Development of the Rule of Law in ASEAN: the State and Regional Integration, arguing that ASEAN is indeed more than a “talking shop.” She points to clear signs of rule of law norms emerging within ASEAN. But the member states are not always driving these developments—norm creation and economic harmonization are being fostered by networks of non-state actors, including business.

That is an important insight at a time when ASEAN’s declared priority is regional economic integration, with the launch of an ASEAN Economic Community (AEC) in December 2015. Since 2012, ASEAN has been negotiating a Regional Comprehensive Economic Partnership (RCEP) with its member states and its Free Trade Agreement (FTA) partners. RCEP is the world’s last big multilateral trade deal still standing, unless or until the larger multilateral Trans-Pacific Partnership (TPP) trade agreement is revived.

But these global ambitions are a difficult sell for domestic politicians within ASEAN. Former Indonesian Finance Minister Chatib Basrie commented recently that politicians need to work a lot harder to establish the economic benefits of a single market ASEAN.

Part of that argument has to be, as Somkiat Tangkitvanich, president of the Thailand Development Research Institute (TDRI), and Saowaruj Rattanakhamfu, senior research fellow at TDRI, point out, that if ASEAN simply remains a “hub” of bilateral FTAs, the main winners are multinationals, not local business.

That ambition is complicated by the role of China, both as a trade and investment partner advancing its Belt and Road Initiative (BRI) southwards, and in its challenge to Southeast Asian maritime boundaries and security.

So, what does ASEAN need to do to get beyond its current level of economic cooperation?

One answer is to regulate: an RCEP or an FTA or the TPP is only as strong—and as beneficial—as its regulatory implementation at national level, backed by regional or multilateral capacity for enforcement.

ASEAN lacks this regulatory architecture at present. Of course, most ASEAN countries have some form of legislation in regulatory areas that matter for sustainable and equitable development, such as: tax administration, banking regulation, competition, anti-corruption, immigration and customs, corporate governance, environment, consumer protection, labor, work health and safety, and cybercrime and security. But in many ASEAN member states, the agency responsible for these areas is either under-resourced, administratively siloed, or has a limited mandate.

One pathway to tackle this issue is to revise and harmonize all the relevant legislation into a pan-ASEAN lawmaking structure. We know from experience in forums such as the Organisation for Economic Cooperation and Development (OECD) that this process is slow, and needs a legislative “engine-room” and a sense of urgency.

An alternative pathway is discussion, trust-building, and knowledge-sharing among national regulators, while building the capacity of national agencies. This approach opens up the possibility of ASEAN’s allies and friends (its “plus-plus” partners such as Japan, the United States, Australia, and New Zealand) cooperating to help such efforts.

This does not presume that ASEAN should adopt western templates of liberal democracy, or mimic the political design of the European Union or the African Union. But it acknowledges that the price of economic integration—and its benefits—is a pragmatic ceding of some sovereignty.

ASEAN politicians need to show their constituents that a caring and cohesive ASEAN is possible. Regulatory approaches that can correct power imbalances (through competition policy and consumer protection) and deliver better outcomes for workers and for micro-, small- and medium-sized enterprises could do a great deal to deliver that reassurance.

If ASEAN fails to establish shared standards and a networked regulatory capacity, other actors will fill the rule-making space. From the private sector, for example, we have Microsoft proposing to write cybercrime laws for the region; through the Asian Infrastructure Investment Bank (AIIB), China will in effect shape investment rules for the region; and the United States is unlikely to step away from its global regulatory role in areas such as anti-money laundering.

So how can ASEAN’s partners contribute to a regulatory ASEAN?

ASEAN could harness the resources of its partners better. Australia and New Zealand are good friends to have—they are world leaders in building simplified, very cost-effective, legitimate systems of regulation. Japan is a loyal ASEAN supporter and has backed that interest with long-duration legal technical assistance to improve civil and commercial law quality within a number of ASEAN countries.

The United States has signaled its commitment to ASEAN. The challenge will be to compel a suitable level of investment from President Trump and his administration as they are famously transactional and see the world as a series of “deals.” ASEAN has something very valuable to offer in return for U.S. development assistance and investment: access to a largely peaceful region and potentially a profitable single market that will both sustain the U.S. economy and balance its relationship with China.

China, of course, will continue to be the most significant investor in ASEAN, but tends to back away from international obligations when they become inconvenient. The value of having China within RSEP as a trade platform is to engage them in a rules-based environment where the rules are shaped collectively.

Neither ASEAN nor its bilateral or multilateral aid partners are focused on a comprehensive regulatory agenda at present—but for an economic community to genuinely emerge, we all need to be.

This is part of special series from the May 2017 “U.S.-ASEAN Conference on Legal Issues of Regional Importance” in Singapore, convened by The Asia Foundation in partnership with the U.S. Department of State and the S. Rajaratnam School of International Studies (RSIS).

Veronica L Taylor is professor of Law and Regulation at the School of Regulation and Global Governance, Australian National University, and a panelist at the “U.S.-ASEAN Conference on Legal Issues of Regional Importance.” The views and opinions expressed here are those of the author and not those of The Asia Foundation or its funders.

1 Comment

  1. Interesting article – complex subject and good for ASEAN to look outward for examples/assistance although notable EU is not mentioned (expect there are some lessons both good and that continue to challenge). Add to this though the political and security challenges in the region and it’s a challenging field.

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