What are ASEAN’s top economic priorities at the moment? How is the block performing?
PITSUWAN: Our top priority is integrating all ten economies into one. There are four main objectives of the ASEAN economic community. As I said, the first is to create one market. The second objective is to be competitive; the third, to be equitable and inclusive among us, and the fourth is to be able to integrate into the global market seamlessly. We are concentrating on the first objective by looking at ways to bring down barriers in order to open up all areas to the free flow of goods and skilled labor across borders. Further, we are striving to open up areas of services and investment among us. We have found that countries that have developed to a certain degree will have some resistance. Countries that have not had much to protect in the past are more willing to open up because they want more and they have less to protect. We are moving ahead with full force on market integration and in order to have one truly integrated market, you need financial integration. It is necessary to have financial services that can help to move and propel economic integration and economic activities going forward. Without financial integration and without opening up banking, finance services and stock markets to each other, it would be very difficult to envision one, effective, integrated market with 650m people. In fact, our population is one of our great attractions; we can promise to potential investors that if they come to invest in one market, there are 9 other markets at their disposal totaling 600m people, many of whom are part of a growing middle class with growing purchasing power. Our goal is to be fully integrated in less than three years. I can say we are on course to achieve this goal; we will certainly have to make adjustments along the way but have no doubt that our direction is very clear.
What new foreign policy initiatives are you undertaking?
PITSUWAN: As far as foreign policy initiatives are concerned, I would point to our relationship with the EU. The EU is our largest market for export. It's not our largest trading partner, but certainly our largest export market. The EU is the largest source of FDI into ASEAN. Approximately 20 percent of all FDI into ASEAN has come from, and continues to come from, the EU in spite of everything that the EU is going through. We would certainly like to continue to be the target of investment from the EU without being at the receiving end of all the problems that the EU is experiencing. We have, however, been assured by no less than the President of the European Commission, Mr. Barroso, that the markets are responding well and that they are back in business. He has also said that ASEAN can help to contain some of the fires that could spill over into the larger region of Europe. We hope that the EU will get over its problems soon because whatever we produce here, any parts that we would send to factories in China which would then go into finished products, eventually will make it to the European and American markets. We would therefore like to see Europe and America come out of their problems as soon as possible. The combined GDP here is close to $2 trillion and the trade figure is also about the same. Our trade is a combination of importing as well as exporting both our own products and other’s products which results in our GDP and trade figures being the same, or quite similar. We also trade about 25% of that $2 trillion trade volume among ourselves. This poses a challenge for ASEAN as we seek further financial integration. Part of that effort is to promote and propel further trade integration, which we need to increase to a level that would justify our title as an economic community. Within NAFTA for example, the trade volume between and among Mexico, Canada and the US is about 50%. In the EU, with 27 countries, it is about 70%. ASEAN is only one fourth of all our trade with the world. We need to work on that. We are consequently concentrating on the SMEs, crossing borders, and investing in each other. Our attempt is to start with financial integration so that it could serve as the foundation for further growth among us and between us. Our middle class is also expanding and one of our challenges is to figure out how to get them to spend more. The savings here are very high at over 40%. This is different from Europe and America where it's minus 50% spending into the red. We have a great deal of savings and we want to mobilize that savings, either into spending or into investment. We know what we need to do and I think that the ministers and the leaders also understand the challenge. We are moving very steadily in the direction where we have more trading partners from the EU, the US, and the rest of the world.
Where do you see opportunities for mutual economic cooperation and collaboration between ASEAN nations?
PITSUWAN: I think members of ASEAN are lucky in the sense that we are at different stages of economic development. Some of us are very good as production bases, some as manufacturing bases, and some as exporters to the world. Many of us are still exporting commodities. I think investment in transforming those raw materials and commodities into a value added class of items or products would be a very good prospect in the future. Whether its rubber or minerals, there are opportunities all across the region, in Indonesia, Malaysia, and definitely Myanmar is opening up. Rather than just extracting and prospecting on those minerals and natural resources, I think some of these countries can foray into manufacturing, processing, and making finished products out of those commodities that we have. I think that presents great potential for the future and for foreign direct investment coming in. The service industry in the region is very competitive. Certainly in tourism, we have almost 70m people coming into the ten countries of ASEAN every year, and that number can be increased. In the hospitality industry, in hotels, in various areas of services for travel, for tourism, for health, there is a great deal of potential for even more growth. In the area of education, we see the middle class expanding, as I said with rising purchasing power, and looking for better education for their children; and they are willing to invest. There are some universities that are putting up campuses here and doing very well. Others are just ‘coupling’ and instituting sister organizations. There are many universities from the UK as well as some from the US and Australia. Health tourism in ASEAN is very attractive. Many people from the Gulf region are coming here because the standard is as good as anywhere in the world. The price is lower and at the same time they can have a family vacation while visiting. In the health sector there are many Western companies becoming more involved. Western groups are advising, consulting, and operating these hospitals with first rate, state of the art medical technology. Further, when discussing economic community, you can't get away from the sector of logistics, which includes transport and infrastructure. Logistics, transport, and infrastructure are important because you want to produce goods and services that people will have easy access to. The transport of goods and products must be done effectively from the factories, to the market, to the consumers. We have discovered in our quest to create this economic community that we are not very well connected in terms of infrastructure. Further, we lack in terms of institutional norms and standards with regards to quality of products and services. We must improve on those things and we also need to encourage people to move across borders. The want for logistics portends enormous promise for anybody who would want to come in and invest.
What is the latest update on the ASEAN Economic Community (AEC) Blueprint? What are the main tenants of the AEC Blueprint?
PITSUWAN: Going from ratification to implementation is a challenge, much like in Europe. Of all the agreements, protocols, and treaties that we have made on the economic front, we have been able to ratify about 70%. We have told the leaders, the ministers and officials, that they’d better get going on ratifying all of them. Without ratification, you can't implement. On top of that, those that have been ratified need to be put into practice. You must implement them because you need to always amend legislation down the road, and this cannot be done until ratification and implementation are completed. Further, it is sometimes necessary to reform laws and regulations at all levels of government, including at the ministerial level, the departmental level, and even at the provincial level. This is necessary because it is important to open up the space for each other to conduct business freely. Again, 70% ratification is not bad and the leaders are aware of the importance of ratification. The private sector is also doing its part and putting pressure on all of us to not only ratify the legislation, but also implement it. They wish to make it easier for them to move, to buy, to trade, and to invest in each other’s markets. Without these changes, it won't be one market nor can we expect to attract external parties to come and invest if we can't deliver one integrated market by 2015. We are very much committed to that goal.
Within NAFTA for example, the trade volume between and among Mexico, Canada and the US is about 50%. In the EU, with 27 countries, it is about 70%. ASEAN is only one fourth of all our trade with the world. We need to work on that. We are consequently concentrating on the SMEs, crossing borders, and investing in each other. Our attempt is to start with financial integration so that it could serve as the foundation for further growth among us and between us.