What is your degree of optimism that there will be free flow of capital and investment (in the Asean region) after 2015?

What is your degree of optimism that there will be free flow of human resources (in the Asean region) after 2015?

And what is your degree of optimism that there will be free flow of goods and services (in the Asean region) after 2015?

These were some of the questions asked to about 250 business leaders and professionals mostly from southeast Asia during the recently held Asean Business Forum (ABF) in Thailand’s capital. They were given four options: highly optimistic, optimistic, cautiously optimistic and pessimistic. And they were asked to choose one of the answers using the electronic voting machines.

Although the votes cast by 250 people could never be a yardstick to measure the sentiment of more than 580 million people living in the region, their preferences gave an opportunity to check where the wind was blowing.

The results showed that a majority of 36 per cent (on average) were ‘cautiously optimistic’, while 35 per cent were ‘optimistic’ about Asean turning into something similar to the European Union—excluding the ‘single currency’ regime— in the next five years. The rest were either ‘highly optimistic’ or ‘pessimistic’.

Turning Asean—a grouping of 10 countries in southeast Asia—into a single economic zone has plenty of benefits.

Once the economic community is formed, somebody from Laos can buy shares of big local companies listed in Singapore or Thailand without having to leave the country. Investors, both large and small, can set up businesses in any one of the member countries with ease. And a skilled worker from say Cambodia can go and work in Singapore or Thailand without facing hassles from immigration officials.

A survey conducted by McKinsey & Company Inc showed that complete liberalisation of policies on movement of capital, investment, human resources, goods and services would increase the region’s GDP by around 10 per cent in 5-10-year period from the date of implementation. These measures would also lower prices of goods and services by around 20 per cent and bring down the cost of doing business by 10-20 per cent.

Yet, as the voting results showed, there are doubts lingering over whether people living in the region can hope for a complete change in Asean’s economic landscape by 2015.

“The governments (of Asean member countries) have shown commitment to meet the target within the deadline.

But it is yet to be seen how the private sector will respond and whether each country will be able to implement the decisions taken,” Low Peck Kem, a senior official of Singapore’s manpower ministry, told AsiaNews on the sidelines of the ABF.

Integrating all 10 economies into one is definitely a tricky issue as it involves more than eliminating import taxes and other tariff and non-tariff barriers.

In many cases it requires coherence in policies of different governments. This means harmonization of legal systems, simplification and streamlining of customs clearance and banking systems, lifting foreign ownership barriers, mutual recognition of academic certificates issued by different educational institutions in the region, and many more.

These complex issues become even more complex when dealing with a largely heterogeneous region like Asean, where sizes of economies, political systems and cultural values are different.

For instance, the region includes countries like Cambodia where an average person earns only about US$750 per year, whereas per capita income of Singapore is $38,000. In terms of political system, there are highly democratic countries like Indonesia and the Philippines, but it also has members like Burma, which is a totalitarian state. The region includes open economies like Singapore but is also home to countries like Indonesia where foreign investors at times have to face stiff resistance from the state agencies, creating uncertainties in the business environment.

On top of these disparities, there are times when misguided nationalistic fervour triggers dispute between two countries, increasing fears of violent confrontation. The recent spat between Malaysia and Indonesia, and Cambodia and Thailand are examples of how minor issues can snowball into an ugly row, spreading feelings of hatred among citizens.

In such cases, can the host countries guarantee those kind of disputes will not affect day-to-day works at companies set up by foreigners and will the host governments do everything to secure the capital and lives of investors that are at risk? These are some of the questions that are being raised by the private sector in the region, especially small- and medium-sized enterprises that have limited resources and have low risk appetite.

Matthew A Squires, CEO of Pacific Healthcare (Philippines) Inc, said that Asean needs to be more clear on its concept of ‘economic community’.

“We know it is going to more than just a free trade area but we’re curious about what other attractions can it include to lure investments and ensure they will remain safe,” he told AsiaNews.

As of now Asean is working on four strategic plans that represent the pillars of the economic community: (i) to convert the region into a single market and production base, (ii) to convert Asean into a highly competitive economic region, (iii) ensure equitable economic development in the region, and (iv) fully integrate the region into the global economy.

To achieve these goals, Asean has formulated a total of 103 action plans, of which 76 have been endorsed by the member countries.

For instance, Asean has already agreed on converting the region into Free Trade Area partially by 2010 and completely by 2015. Under this regime, member countries will eliminate tariffs on 87 per cent of the imports.

To open up movements of skilled labourers, Asean member countries have also signed mutual recognition agreements on six key sectors from engineering and architecture to medicine and nursing. Under these agreements, academic certificates issued in one country will gain equal recognition in any member country. Similarly, to harmonize regulatory works, agreement such as mutual recognition of Good Manufacturing Practice (GMP) has been signed.

This means, GMP certificates issued in one of the Asean member countries will be valid in another country in the region, which will abolish the practice of repetitive testing, ultimately making it easier for manufacturers looking to sell in any of the Asean countries.

But it is yet to be seen whether the member countries will comply with the commitments made as the region is known for its policy of AFTA—an abbreviation for “agree first talk after”, quipped Krirk-krai Jirapaet, chairman of Banpu Public Limited, a Thailand-based coal mining firm.

“The regional members usually say ‘yes’ to everything on the table but when the implementation time nears, they start to fret,” he said.

The latest example is the Philippines’ refusal to lower the import tariff on rice. The Philippines, which imposes a 40-per-cent tariff on rice, is supposed to lower its import duty to 20 per cent effective from Jan 1, 2010. But it is not showing willingness to do so and is adamant at keeping the rate at 35 per cent to protect the interest of its farmers.

Other less developed countries like Viet Nam are also worried that complete liberalisation of many sectors might hurt the incomes of homegrown companies, that are currently receiving government shelters through imposition of various taxes.

“We don’t know whether my country (Viet Nam) will be able to meet the deadline of 2015 given by Asean,” Nguyen Quang Trung, CEO of Viet Nam Alliance Captial, an asset management company, told AsiaNews.

There are other concerns as well.

One of the questions making the rounds lately is: will opening of labour markets for skilled workers trigger brain drain in countries like the Philippines and Indonesia?

The problem here lies in unequal pay scale in the region. For instance, a nurse in the Philippines earns only about $170 a month whereas someone with the same qualification pockets more than $1,500 in Singapore. This financial attraction will definitely propel qualified hands to shift base, leaving the country with unqualified people.

“But if you look at the other side, half of the money earned by migrant workers are usually sent back to their home countries, which will contribute to the economic development there,” said Kem, a senior official of Singapore’s manpower ministry.

“As the economy grows salary scales will also go up.”

Said Krirk-krai: “Looking ahead, we see both challenges and opportunities.

But if we concentrate on the challenges and do nothing, Asean will further lag behind.”

Krirk-krai said it is ‘now or never’ situation facing Asean at this moment.

The region has already fallen behind China and India in terms of attracting foreign investment. If it does not do anything now, it will also lose its edge to emerging Latin American countries. (By Rupak D Sharma in Bangkok/ Asia News Network)