Malaysia and the ASEAN: Engagement and Contribution

Economy By Dr Shankaran Nambiar

As ASEAN grows and attracts trade and investment from the rest of the world, there will also be enhanced intra-ASEAN flows in trade and investment, with Malaysia being the focal point for these transactions.

Malaysia has long been an active partner in Association of Southeast Asian Nations (ASEAN). During recent times, ASEAN has articulated the concept of the ASEAN Economic Community (AEC); and Malaysia has been an enthusiastic supporter of this concept.

There are several reasons why Malaysia has carried the torch in forwarding the notion of an ASEAN community. First, Malaysia recognises the value of ASEAN being a counterweight to other regional groupings, both for political and economic reasons.

Second, Malaysia readily acknowledges the value of being situated in a regional space that is vibrant, stable and deeply interconnected. Malaysia, as an open economy, that is dependent on trade and Foreign Direct Investment (FDI) can certainly benefit from being among friendly nations, which share a greater measure of economic integration.

Third - and this arises as a matter of self-interest - Malaysia is highly cognisant of the fact that it is among the best-prepared nations in ASEAN to take advantage of trade and FDI. Given its attributes, Malaysia is reasonable in its self-assessment of being able to take advantage of any spillovers from progress in the development of AEC.

Malaysia aspires to be the hub of trade and investment in ASEAN, and that, indeed, is a position that will be valuable for ASEAN, while serving to push Malaysian growth and development ahead. If Malaysia is to establish itself as a regional hub, it has to have a position of mutually assured advantage. The underlying rationale behind this line of thinking is that as ASEAN grows and attracts trade and investment from the rest of the world, there will also be enhanced intra-ASEAN flows in trade and investment, with Malaysia being the focal point for these transactions.

The notion of ASEAN centrality is key to the understanding of AEC. Although ASEAN centrality can take different definitions, one influential meaning is that of being a critical grouping in the world, one that can compete with other regional groupings. A slightly different sense in which ASEAN ‘centrality’ has been used is that of ASEAN member states cohering to the ASEAN spirit and the goals and vision of ASEAN.

Although some commentators have argued that Malaysia’s participation in the Trans Pacific Partnership Agreement (TPPA) sacrifices the objective of achieving ASEAN centrality, which is not the case. ASEAN member states have different levels of development; they have different developmental goals, as well as different conceptualisations of their national trade policies; and some member states have no intention of entering into a trade agreement with the high standards that characterise the TPPA.

Having said that, it should be added that 4 ASEAN member states (Singapore, Brunei, Vietnam and Malaysia) are part of the TPPA, and Indonesia and the Philippines have expressed interest in joining the grouping. Thailand has maintained a wait-and-watch approach with the distinct possibility of eventually becoming a member. This discussion will take a different turn depending on how the United States domestically views the TPPA because the agreement has yet to receive Senate approval. It would be precocious to delve into the impact of Malaysia’s involvement in the TPPA and its effects on ASEAN.

An important pillar of the AEC is the bid to arrive at an agreement based on the Regional Comprehensive Economic Partnership (RCEP) programme. Malaysia has been an active proponent of RCEP and has tried to promote and expedite the negotiation process. In fact, Malaysia was keen on seeing that the agreement be signed before the end of its tenure as chair of ASEAN.

In any case, RCEP is a significant free trade agreement that will liberalise trade and investment within ASEAN. RCEP also links ASEAN with its trading partners (China, India, Australia, New Zealand and Japan). This FTA, when concluded, will encourage trade and investment between ASEAN and its other partners. In keeping with Malaysia’s intention of being a regional hub, the signing of RCEP and its implementation will be favourable to Malaysia. Further, there are many companies in Malaysia in the manufacturing and services sectors that have reached a state of maturity. These companies are well on their way to being ASEAN-wide companies and further liberalisation will encourage the growth of these companies. It will also encourage companies in other member states to tap ASEAN as a market.

One sore point that stands out in this landscape is the prickly issue of the South China Sea (SCS). Malaysia is among the claimants to the SCS. Malaysia has on various occasions tried to bring some understanding to the dispute and to moderate on China’s demands. As chairman, Malaysia remained neutral and supported the majority view rather than those of some member states. More recently, after The Hague ruling, Malaysia called for the disputes to be resolved by diplomatic and legal processes.

ASEAN, by its very nature, is an association of member states. ASEAN is not binding in the fashion that the Union is, neither does it plan to be. Further, all decision making is through consensus. This allows for flexibility, but it does not help create a cohesive grouping. As a consequence, this encourages nations to pursue their own agendas, much the same as Singapore has done although it is a member of ASEAN. Malaysia remains a firm supporter of the AEC, and it is committed to pursuing the notion of a community or a loose grouping of members, as any community would be.

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Diplomatist Magazine was launched in October of 1996 as the signature magazine of L.B. Associates (Pvt) Ltd, a contract publishing house based in Noida, a satellite town of New Delhi, India, the National Capital.

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