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Sunday 22 Jul 2018 | 13:05 | SYDNEY
Sunday 22 Jul 2018 | 13:05 | SYDNEY

ASEAN summit brief: joining the club, infrastructure games, Jakarta’s power team, and business links

Sydney, 1 January 2018 (Photo: D. Morgan/Getty)

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COMMENTS

15 March 2018 14:26

Membership or not

Our experience with Vietnam and the Philippines over the past few years only serves to show why the newly revived idea of Australia joining the Association of South East Asian Nations (ASEAN) is like stepping through Lewis Carroll’s looking glass.

Only a short time ago, the steady, unsensational management of the Aquino Administration made the Philippines an obvious economic and diplomatic partner to nurture. Now President Rodrigo Duterte is spurning this weekend’s summit, and Vietnam’s Prime Minister Nguyen Xuan Phuc is setting the scene with a Strategic Partnership deal on Thursday, and a new 7.4% economic growth rate for Vietnam to boot.

The Philippines is not down and out. Indeed, it’s doing very well economically despite the democratically elected Duterte’s antics. This situation demonstrates the natural volatility of this evolving region.

Australia joining ASEAN is a possiblity being kicked around again, partly based on the idea that South East Asia never really had any fixed historical boundary – so why can’t it be extended south? But one of the most eminent visiting figures at this week’s ASEAN-Australia Dialogue, speaking off the record, says Australia will not be invited to join the group in the foreseeable future, and would invite trouble for itself both internally and externally by pursuing the idea. 

One of Australia’s most experienced regional diplomats agrees, arguing that a successful entry into ASEAN, or even a membership bid, would be very quickly put to an impossible test by a belligerent Australian or South East Asian political player.

Despite the ubiquity of the brand name this weekend, there can be no single ASEAN in such a culturally, economically, and politically diverse region. (See Malcolm Cook here.) This diversity is both a challenge and an opportunity for Australia. The challenge is not to gain full membership of ASEAN, but to first understand the countries involved (and, increasingly these days, their diverse regions) before working up to participating in the many layers of regional integration.

Indeed, the diverse pathways taken into the region by the few Australian companies with a successful regional view – such as BlueScope, Boral, Blackmores, and Cochlear – support going with the flow rather than setting unrealistic unity and integration benchmarks that only disappoint.

At the ASEAN-Australia Dialogue, some of the most chastening views about how this engagement must work came from younger regional academics who often know Australia well as a result their educational experience. However, even these young people still think Australians are patronising about how such a youthful, dynamic part of the world should be run. For example, despite the drift towards more authoritarian top-level politics in much of South East Asia, these young academics argue that the people want governments to deliver quality services, rather than values that score kudos overseas.

Nevertheless, Australia should be well-placed to deal with all this given that Thai journalist and one-time ASEAN staffer Kavi Chongkittavorn says half the people he considers South East Asia experts actually come from Australia.   
    

Word count

ASEAN gatherings need a built-in glossary to translate the verbal baggage accumulated over half a century. But this time there are two clear candidates for new phrase of the moment: “Indo-Pacific” and “Belt and Road”. Australia has embraced the Indo-Pacific idea with a whole new Department of Foreign Affairs and Trade (DFAT) division, but the message from South East Asia is that different interpretations of the idea are still being chewed over.

The Belt and Road Initiative (BRI) has more concrete form, but is still open to imagination. Japanese Prime Minister Shinzo Abe is really onto something by trying to turn the parallel emergence of the Indo-Pacific and the Quadrilateral into, at least partially, an infrastructure-building initiative. South East Asian countries are quite blunt about how they welcome the project finance on offer from China, yet crave better rules about quality and smart regional integration.

If Australia can’t find a way to use its expertise in infrastructure, regional architecture, and ASEAN to help facilitate this, we will be dealing ourselves out of the new Great Game of regional power.  
 

Thoroughfares versus wrestling mats

Hat’s off to two academics who might actually manage to get the ins and outs of ASEAN into a TV news graphic. Australian National University’s Evelyn Goh says the Indo-Pacific construct has simply returned South East Asia to its traditional role as a maritime thoroughfare between the Pacific and Indian Oceans, or between India and China. A thoroughfare mentality means the countries are open to multiple influences and partners which, when it comes to great powers, means managing rather than preferring them.

While this is different to the way some Australians (and most Americans) see the Indo-Pacific in alliance terms, it also means the ASEANs should be naturally receptive to Australia using them as a conduit to broader Asia. But La Trobe University’s Nick Bisley warns that the growing contestability over a range of institutions in the region means South East Asia faces the risk of becoming a permanent wrestling mat for these contests.

You can see the graphic now: on the first screen Donald Trump and Xi Jinping are happily golfing their way through a trail of resorts; on the next they are stripped down for a new Thrilla in Manila – which, unnervingly, Rodrigo Duterte probably doesn’t need reminding was one of Philippines dictator Ferdinand Marcos’s better ideas. 
 

Centrality finds a home

It’s hard to get through a discussion about South East Asia without someone getting tied up in verbal contortions over what ASEAN “centrality” actually means. But in the slow-moving and low-key ASEAN way, the resident ambassadors to the ASEAN Secretariat in Jakarta are now actually living this piece of diplomatic jargon.

This Sunday’s summit communique was negotiated by a subgroup of the dedicated ambassadors who have become an addition to the Jakarta diplomatic scene in the past few years. Other statements, such as the East Asia Summit (EAS) communique, have been issued by this group in an apparently more efficient way than the old-fashioned bilateral tick-tacking via multiple embassies.

ASEAN members and all ten dialogue partners have designated envoys along with some other nations – most recently Norway. One reason the EAS has subsumed the older ASEAN Regional Forum is that it is a smaller and more efficient operation, which perhaps explains why more countries want to join in.

At the ASEAN-Australia Dialogue, Jane Duke, Australia’s ambassador to ASEAN, made an oblique reference to how all of this works, noting how ASEAN countries like to negotiate as a bloc with the other eight EAS members, while Australia likes to take a more fluid approach.
 

Steel yourself

Given that national interest in ASEAN is greater than regional interest in the group, Indonesian economist and former trade minister Mari Pangestu must have known she was knocking on a locked door when suggesting Australia should join a regional World Trade Organisation appeal against the US steel tariffs rather than taking exemptions. Nevertheless, contrary to former Prime Minister John Howard’s mantra, we do have to make choices on these issues, and they can come back to haunt us.

It is worth noting that Australia’s annual two-way trade with the ASEAN group was 51% higher than two-way trade with the US last year, although the US five-year growth trend is higher. And with Thailand, the Philippines, and Indonesia all expressing an interest in joining the new Trans-Pacific Partnership, freer trade seems to have more momentum in Asia than in the US.

On the issue of trade, this new ANZ research has an interesting way of looking at the bilateral trade relationships, suggesting that two-way trade with Singapore, Thailand, Malaysia, and Vietnam is doing well, while trade with Indonesia and the Philippines is lagging.

 

* Two-way trade and foreign direct investment annual flow (five year average) # Inward foreign direct investment stock (2016) ^ Two-way FDI stock (2016) Germany outbound not disclosed

 

Chartbuster

“Underdone” will be an overused word in Australia’s business engagement with South East Asia as half a dozen Summit-related business events get under way. But it is worth reprising this chart (above) we published last year (amid the US versus China relative importance debate), which attempts to put the vexed issue of investment and trade stocks and flows into a more orderly, comparative perspective. There is no single right way to do this. But the black bar is a combination of two-way foreign direct investment flows and trade flows averaged over five years to smooth-out volatility. 

ASEAN comes second only to China as an economic partner by this measure, which is not too bad.

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