Wednesday, August 26, 2015

After the 47th Economic Ministers' Meeting: Scoring success in ASEAN

By Dr Deborah Elms

ASEAN officials are wrapping up another long and comprehensive set of meetings in Malaysia.  The more countries become involved in interlocking and overlapping groupings, the more complicated the meeting schedules attached to ASEAN have become.

Dr Elms participating in East Asia Business Council's 1st East Asia Investment Forum, Kuala Lumpur, 24 August 2015

The primary purpose of the ASEAN meetings, of course, is to help guide ASEAN member states. Here in Kuala Lumpur, economic ministers met to discuss progress towards meeting the ASEAN Economic Community (AEC) and other elements of the ASEAN integration agenda.

Officials also met with a variety of counterparts from other countries that are dialogue partners with ASEAN.  Some of the counterparts that are also Trans-Pacific Partnership (TPP) members, including Australia, Canada, Japan, New Zealand, and the United States, held informal bilaterals between themselves and the ASEAN TPP members (Brunei, Malaysia, Singapore and Vietnam) to try to break through remaining issues in the TPP negotiations.

Minsters from the 16 member countries of the Regional Comprehensive Economic Partnership (RCEP) also met to discuss progress after 9 rounds of talks.

Finally, various industry groups and associations, like the EU-ASEAN Business Council and the East Asia Business Council, snagged a few minutes of the time and attention of trade ministers during assorted sideline events.

Many of the ASEAN discussions underway are likely to include at least one comment such as, “ASEAN is on track to achieve that AEC at the end of the year, with 80% (or 90%) of the objectives already finished.”  Or, “As the ASEAN Blueprint (or scorecard) shows, we have already accomplished 80 (or 90) percent of our objectives.”

What makes these statements puzzling is that ASEAN dropped the scorecard some time ago.  The last time ASEAN published the results, the scorecard only covered the period through 2011.  There is really no way to know how close or how far ASEAN might currently be from meeting the targets attached to the AEC.

Yet the idea of a scorecard seems rather firmly anchored.  Where did the original impetus for the scorecard come from?

ASEAN faces at least two distinct challenges in implementing commitments.  First, ASEAN’s methods of negotiation are unusual.  The grouping uses something called the “ASEAN – X” (ASEAN minus X) approach.  Under this approach, somewhere between all 10 members and no members actually implement any given commitment.

This soft, persuasive approach means that members have sufficient flexibility and policy space to move ahead with commitments when they believe the time is right for their specific developmental status and domestic conditions.  The expectation is that all 10 members will eventually arrive at the same set of outcomes, since members that disagreed with the original objective could have rejected the approach or the commitment outright from the beginning.

The ASEAN-X system, however, means that enforcement of commitments may always be a problem. 

Second, the member states do not like confrontation.  The region has been peaceful for all these decades in part, most argue, from the “ASEAN Way” of handling disagreements.  Such an approach requires discretion and careful dialogue over long periods of time to help build up trust and communication.

The lack of confrontation means that the usual path of dispute settlement, taken by states in economic partnerships and free trade agreements, is not an option for ASEAN.  Member states are unlikely to agree to allow one another to actually be taken to arbitration by another member over failure to implement ASEAN commitments.  (Note, however, that ASEAN members have, on rare occasions, moved trade disputes over to the World Trade Organization system if the violation of ASEAN commitments can also be viewed as a WTO violation.)

So, imagine that you are tasked with getting 10 member states to get to the same outcomes if the pathway is flexible and you cannot count on any sort of dispute settlement system to be actually used by members to ensure enforcement of commitments.  What system would you recommend?

One solution is to use some sort of “naming and shaming” approach to call out laggards.  However, if such a system were seen as too harsh and critical, it would never get past the member states.

Hence, ASEAN defaulted to the creation of a blueprint.  The original blueprint was a fixed number of commitments that ASEAN members had agreed to implement on the path to the AEC.  These commitments were broken down into four broad areas.

Of most interest to the business community were promises made in the first pillar, “Single Market and Production Base.”  This included commitments towards free flows of goods, services, investment, skilled labor and freer movement of capital.  The blueprint for achieving these objectives was broken down into phases, starting in 2007-2009 and concluding in 2015 with the launch of the AEC.

The commitments would be tracked by the use of an ASEAN Scorecard that could measure progress towards achieving each of the items in the blueprint.  Critically, to get approval of the members, the report card had several interesting features.  The report is an aggregated account of progress—no single member is ever praised or punished specifically for implementing or failing to implement any given commitment.

The scorecard is a binary system.  Members are given “credit” for progress made towards the objective or are not.  There is no attempt to measure actual implementation.  The member states themselves must provide the information to the Secretariat for tabulation.

At the Secretariat, officials add up (behind the scenes) the check marks for progress and report out either “fully implemented” or “not fully implemented.”  As an example, the first scorecard for free flow of goods showed 9 items fully implemented and 0 items not implemented between 2007-2009.  The record reported in Phase 2, 2010-2011, was more mixed with 23 items implemented and 24 items not fully implemented.  It is not clear what items are even being measured.

This highlights more challenges with the blueprint/scorecard system.  Over time, members added additional items.  This made the scorecard more of a moving target.  A member state might have thought it would receive credit for 80% of commitments in phase 2, only to discover that with new, unmet commitments added to the scorecard, it (and ASEAN) might receive a score closer to 70% or worse.

The easiest commitments are always likely to go first.  The tougher parts of integration dealing with the more sensitive items are most likely to appear in the blueprint at the end of the process.  Hence, under whatever system members might have devised to address implementation challenges for the AEC, progress towards the end was likely to slow down.

In the years since the last publication of scorecard results, officials and other stakeholders have had discussions about revising the system.  But given the extreme unwillingness of participants to have anything that might appear to be bad news or backsliding on commitments, members appear to have decided to abandon the entire scorecard exercise.

The lack of an actual scorecard now makes repeated references in 2015 to the scorecard and blueprints so strange to hear this week in Malaysia.

Dr Deborah Elms is Executive Director of the Asian Trade Centre, Singapore. She is also a senior fellow in the Singapore Ministry of Trade and Industry’s Trade Academy. Previously, she was head of the Temasek Foundation Centre for Trade & Negotiations and senior fellow of international political economy at the S. Rajaratnam School of International Studies at Nanyang Technological University, Singapore. She publishes the Talking Trade Blog.

Tuesday, August 25, 2015

Highlights of the ASEAN Economic Ministers' Meeting & related meetings

By Edmund Sim

The 47th Meeting of the ASEAN Economic Ministers was held on 22 August 2015 in Kuala Lumpur, Malaysia. The ministers also held joint meetings with the 29th ASEAN Free Trade Area (AFTA) Council and the 18th ASEAN Investment Area (AIA) Council. Highlights of these and related meetings include:

Regional Comprehensive Economic Partnership (RCEP)

Malaysia's Minister of international trade and industry, Mustapa Mohamed, said that the RCEP parties had agreed to a tariff reduction modality for the agreement.  According to Dato Sri Mustapa, 65% of tariff lines would be zero-rated immediately upon the RCEP agreement taking effect, with 80% of tariff lines at zero rates within 10 years. Although ASEAN and its FTA partners already had tariff reduction commitments, this was not the case for all RCEP partners, such as China, Japan and India.  Dato Sri Mustapa said that details would be worked out at the next negotiating session in Korea in October, but that technical issues could lead to RCEP’s conclusion only in 2016.

ASEAN + Free Trade Agreements (FTA)

Dato Sri Mustapa also said that ASEAN’s FTAs with South Korea and Japan would be expanded to include services and investments, and the FTA with China would be upgraded.   This represents improved coverage for those FTAs, especially when compared with the ASEAN FTA with India, which does not cover investment (the ASEAN-FTA with Australia-New Zealand covers goods, services and investment). It also represents progress in RCEP, as that blanket agreement also includes services and investment.

ASEAN Trade in Goods Agreement (ATIGA)

Indonesia said that it had the continued support of  the other ASEAN members to exclude alcoholic beverages from the 0% duty rate under the ATIGA.  Indonesia said that the exclusion was consistent with  Article 8 of ATIGA provides a general exception from trade liberalization commitments for measures “necessary to protect public morals.”

ASEAN Economic Community (AEC)

The AEM noted that 91.5% of "prioritized" AEC goals had been met.  This refers to the items which should be completed by end of 2015, not the total AEC Blueprint items (of which the completion rate has not been updated). A new AEC Scorecard report should be released at the November ASEAN summit, along with the ASEAN Trade Repository.  A new AEC Blueprint 2025 will be issued at the November summit as well.

Edmund Sim is an American international trade lawyer and partner in the trade boutique firm Appleton Luff. He also teaches the first course on the law and policy of the ASEAN Economic Community at National University of Singapore law school and has served as an adviser to the ASEAN Secretariat and various ASEAN government ministries. He publishes the ASEAN Economic Community Blog.

Friday, August 21, 2015

ASEAN Economic Ministers’ Meeting to add "finishing touches" to the formal launch of AEC single market

Economic Ministers of the 10 ASEAN  member states meet in Kuala Lumpur, Malaysia from 22 to 25 August to put the finishing touches to the formal establishment of the ASEAN Economic Community (AEC) by the end of this year.

Dato’ Sri Mustapa Mohamed, Minister of International Trade and Industry Malaysia will chair the 47th ASEAN Economic Ministers’ (AEM) Meeting that is expected to deliberate on, among others: the implementation of the AEC measures, especially the completion of commitments agreed to under the AEC 2015 Blueprint; the work on developing the ASEAN Post-2015 Economic Vision 2025 and strategic action plans for the next 10 years; and development of the ASEAN SME Master Plan 2016-2025.

The AEC seeks to formally establish a single market and production base among the 10 Member States of ASEAN.

"The eventual integration of national economies into a single regional bloc is expected to facilitate the creation of a seamless trade and investment regime in ASEAN. It will also propel ASEAN's economy, whose GDP currently is estimated at $2.7 trillion, into a global powerhouse, with GDP expected to rise to a combined $4.7 trillion by 2020," Dato' Sri Mustapa said.

He will also chair the ASEAN Economic Ministers Consultations with ASEAN’s Dialogue Partners.

Economic ministers from Australia, Canada, China, India, Japan, South Korea, New Zealand, Russia and the United States of America will be participating in the meetings with the ASEAN Economic Ministers.

The ASEAN Economic Ministers will also be meeting with representatives from the ASEAN Business Advisory Council (ASEAN BAC), the East Asia Business Council (EABC), the Federation of Japanese Chambers of Commerce and Industry in ASEAN (FJCCIA), the US-ASEAN Business Council (USABC), the Canada-ASEAN Business Council (CABC) and the ASEAN-India Business Council.

In addition, the EU-ASEAN Business Summit and the East Asia Investment Forum will be held on 23 and 24 August 2015, respectively.

The meetings will include discussions on enhancing economic linkages with ASEAN Dialogue and Sectoral Partners which include progress in the enhancement and upgrade of ASEAN-China Free Trade Agreement; the conclusion of the trade in services and investment chapters of the ASEAN-Japan Comprehensive Economic Partnership Agreement; further improvements to the ASEAN-Korea Free Trade Agreement; ASEAN-Australia-New Zealand Free Trade Agreement Economic Cooperation Support Programme; ratification and entry into force of the ASEAN-India Trade in Services and Investment Agreements; progress of the implementation of the ASEAN-Russia Trade and Investment Cooperation Roadmap; ASEAN-US Trade and Investment Agreement and Expanded Economic Engagement Initiatives; and the ASEAN-Canada Joint Declaration on Trade and Investment Work Plan 2014-2015.

Saturday, July 4, 2015

The post-2015 ASEAN Economic Community brings huge challenges for trees, farmers and food supply

By Rob Finlayson, World Agroforestry Centre

The ten members of the Association of Southeast Asian Nations will form a single economic bloc at the end of 2015. Agroforestry, forestry and agricultural policies, implementation and law enforcement are lagging behind. The gap threatens millions of livelihoods, environmental safety and national abilities to adapt to climate change, despite some inspiring progress:

"For ASEAN economic integration to work for the millions of citizens and national budgets reliant on agroforestry, forestry and agriculture," said Dr Delia Catacutan, "we need a change of mindset and behaviours as well as new, integrated policies, real implementation and enforcement. The risks of failing to provide for our people are real. And the consequences will be severe."

Dr Delia Catacutan preparing to speak at the 6th ASEAN Social Forestry Network Conference, Inle Lake, Myanmar, 1-3 June 2015. Photo: World Agroforestry Centre/Robert Finlayson

Dr Catacutan was speaking on the sidelines of the 6th ASEAN Social Forestry Network Conference at Inle Lake, Shan State, Myanmar, 1–5 June 2015. As the country coordinator of the World Agroforestry Centre Vietnam, with a wealth of experience throughout Southeast Asia and Africa, she is well placed to be sounding a warning.

At the end of 2015, the ten countries that make up the Association of Southeast Asian Nations (ASEAN) will form the ASEAN Economic Community (AEC), opening trade, investment and labour markets, supported by a new, integrated transport network through previously remote, forested areas that are home to millions of indigenous, poor, smallholding farmers.

While economic growth will likely follow, what’s not yet known is the impact on the 3.4 million square kilometres of treed and agricultural landscapes that represent the major sources of livelihoods for the majority of the region’s citizens and are the primary drivers of national economies.

Experience from other parts of the globe suggest what’s likely to happen is more deforestation, large-scale commercial monoculture crops, extraction of natural resources, environmental degradation, income disparities, environmental degradation and a lack of resilience to climate change that will create a ‘perfect storm’ that threatens not only the region but the planet. Unless the nations work together, quickly, to address some glaring gaps.

But is this likely to happen by the end of 2015? According to Ramon Razal from the University of the Philippines Los BaƱos and the Non-Timber Forest Products Exchange Programme, who conducted a study on the forest sector’s readiness for integration, awareness and preparations vary across sectors and countries.

"With the exception of Vietnam, knowledge about the AEC is low, even among government forestry officials, with claims that what little they know about the AEC is what they have learned from the media," he said. "Furthermore, the AEC is weak in terms of resolving trans-border issues, such as haze from forest fires and illegal trade in forest products. There is a need to strengthen law enforcement and install a regional grievance mechanism to resolve conflicts," he added.

While monocultural rubber plantations dominate huge swathes of ASEAN,  farmers in Thailand have better incomes from mixed rubber gardens. Photo: World Agroforestry Centre/Robert Finlayson

ASEAN covers 4.4 million square kilometres and has a population of 617 million growing at 1.3% a year. Agricultural land covers 1.26 million square kilometres or 29.4% and forests another 2.14 million or around 50%. Not surprisingly with statistics such as these, the main sources of livelihoods for the majority of the region’s citizens are agriculture and natural resources. Perhaps more surprisingly, average gross domestic product of the ten nations combined is 5.7 % per year, suggesting rapid exploitation of the resource base to fuel such growth.

The disconnect can be seen more clearly when the Food and Agriculture Organization of the United Nations informs us, in 2014, that 10% of the total population, or 60 million people, have insecure food supplies, that around 1 million hectares of forest were lost annually from 2000–2010 and that many of the countries are amongst the most vulnerable in the world to the impact of climate change in the form of extended and untimely droughts, extreme and unpredictable storms and floods, landslides and rising altitudes for plant growth, which is a major issue for a largely mountainous region.

Can ASEAN meet these challenges?

"It will be difficult," Dr Catacutan told delegates in the session she led on ‘Agroforestry in multifunctional landscapes: its contribution to social forestry and climate-change mitigation and adaptation in the context of ASEAN economic integration’. She pointed out that in a study of government effectiveness in the 25 countries responsible for 95% of global forest-based emissions during 1990–2005, of the ASEAN member states only Malaysia and the Philippines appeared in the top six most effective; Indonesia was at ninth position but also had the second-highest forest-based emissions of the 25; Cambodia was nineteenth; and Myanmar second last.

"With the planned infrastructure developments funded by the new Asian Infrastructure Development Bank and other international development funders, we will see major expansion of road and rail networks, which can help improve agriculture and forest production and incomes by reducing the costs of transporting inputs and outputs and reducing post-harvest losses’ she noted. "But building new roads and railways and improving existing ones can have significant negative ecological impacts directly through habitat loss and fragmentation and, indirectly, by encouraging settlement and land conversion for agriculture."

According to Dr Razal, it’s already happening in one of the poorest and most vulnerable parts of ASEAN: "Because Lao PDR is landlocked, it has strong dependence on its neighbors for trade. But Lao is crisscrossed by old and new highways—with more planned—that connect Thailand in the west to China and Vietnam in the north and east and Cambodia in the south. Not only have these roads opened up remote forests to illegal activities but they have resulted in social problems in communities along them," he said.

A key objective of the AEC is to enhance intra- and extra-ASEAN trade and long-term 

Dr Grace Wong from the Center for International Forestry Research, speaking on ‘Community-based livelihoods and conservation in forested landscapes,’added that, "Benefits to communities who are granted management of forests, particularly those linked to the global agreement known as ‘reducing emissions from deforestation and forest degradation plus conservation’ (REDD+), are tied strongly to the rights to land. This becomes really challenging because throughout ASEAN the legal regimes and implementation on the ground vary from place to place. In nearly all cases, procedural equity is very important and provides legitimacy for communities.

"Our research shows that in some REDD+ pilot projects, allocation of rights is more desired than monetary incentives. Rights are a contentious topic that is centuries old but are mostly more important than tenure, or ownership, in the areas I’ve worked. On that note, the AEC could bring more risk in places where there is greater uncertainty and conflict. On the other hand, the AEC could potentially bring greater transparency in decision-making and participation in those decisions, and this is critical."

All agreed that the solution was in greater—and swifter—communication between governments, communities and the private sector accompanied by clear, integrated policies at national and ASEAN levels that are backed up by accelerated implementation of community forestry, agroforestry and agricultural agreements with the millions of smallholders who face an uncertain future under current arrangements.

"Despite all these challenges," concluded Dr Catacutan, ‘I am confident that the people of ASEAN and their respective governments will be able to affect the needed shift of mindset and behaviour. In research-for-development projects dotted throughout the region supported by fellow travellers in securing a stable future for our planet, such as the Swiss International Development Agency, Australian Centre for International Agricultural Research, European Union, Federal Republic of Germany, CGIAR Research Program on Forests, Trees and Agroforestry and our many friends in national and international non-governmental organizations, we see model examples of how poor, smallholding communities enthusiastically embrace new ways of working that increase their wellbeing and incomes while protecting the environment.

"If we embrace the ASEAN tradition of humility and respect for our traditions, we can preserve what is most valuable to us and simultaneously take the place on the world stage that is waiting for us."

Robert Finlayson is Regional Communications Specialist, Southeast Asia at World Agroforestry Centre. This article was previously published as "ASEAN economic integration means huge challenges for trees, farmers and food supply"