Dr. Mohamed A. Ramady
Publication Date: 
Mon, 2007-05-07 03:00

Toward the middle of January this year, ten Asian nations held their annual summit in the Philippines and agreed to far reaching closer ties, anti-terrorism measures and invigorated moves toward free trade. The leaders of ASEAN — Association of Southeast Asian Nations — agreed to form a closer political union and bring in a free trade zone by 2015. On May 1, 2007, the Gulf Cooperation Council (GCC) celebrated 26 years since its founding charter in 1981. What are the lessons for the GCC from ASEAN’s apparent success? By all indications, the GCC’s union should be that much easier, given the similarities of the GCC member states in their economic infrastructure, social and political composition. The truth of the matter is that ASEAN, with its more diverse economies, social and political structures, seemed to have stolen a march on the GCC. In a world where being a member of a large economic and political club increases countries’ comparative bargaining position, it is important to learn from successful bloc unions. ASEAN has become successful, much to the surprise of many observers who felt that individual country differences would block any meaningful integration.

The January ASEAN summit saw its leaders sign a commitment to create ASEAN’s first ever charter aimed at turning it into a European Union — style entity with binding rules and regulations. The charter, the leaders stated, would be the “glowing achievement of 40 years of ASEAN’s establishment”, and put the block on the way to effectively compete with other world trade and political groupings. While China is not a member of ASEAN, yet the list of ASEAN members shows that there seems to be strength in numbers and diversity, with both “stronger” and weaker”, or “bigger” and “smaller” member states mutually benefiting, otherwise why join? This is illustrated by ASEAN’s membership which includes Brunei, Burma, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand and Vietnam. Not all joined ASEAN in 1967 at the same time — five countries at first, and gradually the others, pulled in by the apparent success of the block.

Looking ahead, the ASEAN countries believe they have now matured into a regional organization, and are expanding its role as an integrated regional economy that will help it become a force in maintaining regional peace and stability. The ASEAN countries want to accelerate economic integration by creating an EU style single market. This will involve scrapping tariffs and liberalizing trade and the movement of labor and capital. The move is, in part, a response from perceived external economic challenges as well as opportunities. The economic growth of China and India — two low-wage mass markets — is seen both as a challenge and a threat, as ASEAN is negotiating free trade agreements with both countries, as well as with Japan. Other blocs better beware — a deal between ASEAN and China would create the world’s biggest free trade zone.

ASEAN however, has its critics. They portray the grouping as being big on words and short on action, driven by the desire for consensus among its members. Its staunch support for the principle of non-interference in other member’s affairs has paradoxically reinforced both regional stability and authoritarian governance. The issue of Burma has been the one of most contention, and ASEAN has resisted calls from the West to take more direct action against the Burmese government. While the criticism might be valid in some respects, yet the same charges can be applied against all major regional groupings today, including NAFTA, the EU and the GCC. The important point to always bear in mind is what are the final goals and objectives of any groupings, and how far do they go in meeting the aspirations of their nationals. In this respect, the opening up of national economies, reduction in tariffs, and facilitating the free movement of labor and capital should be the principal measurement yardstick, as the definition of what constitutes acceptable democracy is very elastic indeed, if one were to add this elusive yardstick to any groupings goals. In the case of the EU and Turkey’s negotiations to join that bloc, it seems that Turkey’s economic performance is not the key measure, but other political yardsticks.

The GCC has come a long way too over these years, with harmonization of tariffs, reduction of customs and coordinated foreign policy matters. The GCC is beginning to find strength from a collective bargaining and negotiating position, as evidenced by the ongoing GCC-EU free trade talks, trying to obtain benefits for all member states of the GCC irrespective of their individual economic or political power. There are still bumps on the road though, such as the issue of the GCC common currency and the apparent lack of free movement of GCC nationals for employment purposes, as opposed to general tourism and recreation. Skilled talent is now available in the GCC countries, with some countries having surplus trained labor which could be used in other skill-deficient GCC countries.

If this happens, then the GCC will also be on its way to having established a full- fledged union that is more meaningful to its citizens.

(Dr. Mohamed A. Ramady is visiting associate professor finance and economics at King Fahd University of Petroleum and Minerals, Dhahran.)

Main category: 
Old Categories: