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Asean integration vs domestic preoccupations

EVERY so often there is concern about the level of commitment to Asean among its members states.

Even with Malaysia, which is taking some very active steps as the chair to ensure a credible community – particularly the AEC (Asean Economic Community) – is announced at the end of 2105, some are wondering whether the challenges confronting its domestic economy, will be a distraction.

Of course the likelihood of oil prices remaining low throughout 2015 will have serious implication on the country’s fiscal position. Experts are talking about the average price being US$47 per barrel whereas the budget assumed well above US$100 for the contributor to revenue of more than one-third.

The ringgit is weak. We are already looking at RM3.70 to the dollar, not too far from the RM3.80 that was fixed in 1998 during the Asian financial crisis. Foreigners are selling their holdings of Malaysian bonds and equity, and there are concerns over liquidity and bank exposures. There is the threat of higher inflation with the weaker ringgit (despite lower oil prices), what with the GST also coming in during the year.

The worst thing to do however is to panic. I have every confidence the Malaysian Government and leadership will be able to handle the challenging circumstances with, hopefully, the engagement of the private sector as well. An A-Team Malaysia will be able to ride out this challenging year by forming a strategy quickly, to strengthen other revenue sources and to have a tight lid on spending, to contain inflation, to ensure domestic banks remain strong, to address political issues that could conspire with the challenges to attack confidence in the country – and, most of all, to avoid a potential twin deficit by using the weak ringgit to boost exports quickly: tourism (which contributes about 13% to our GDP) is one sector not so structurally inflexible which can offer some quick wins.

Government leadership is not a fairweather enterprise. Neither is it unidimensional or unidirectional. The country has every ability to weather the storm we have to negotiate and, at the same time, to carry through the plans, as the chair of Asean, to ensure a successful conclusion of 2015 – without neglecting any single domestic challenge.

It is with its largest member Indonesia that the level of commitment to Asean arouses the greatest concern.

During the long legislative and presidential campaigns last year, strong nationalistic statements were made particularly by Gerindra and its presidential candidate Prabowo Subianto which raised fears of a negative Indonesian attitude towards Asean.

Now with President Joko Widodo in power statements have been made, although not as nationalistic and strident, which are quite clear that Indonesia will look after its own interest first of all. While this is not surprising – as it is the leitmotif of every state – there is concern of what they might imply for Indonesian commitment to Asean and to the community building process so critical in 2015.

I have never had any doubt about Indonesia’s commitment to Asean, something confirmed by conversations I recently had in Jakarta. But what Indonesia wants to know more intimately – particularly with regard to the AEC – is about actual benefits.

Indeed, in Indonesia’s wider foreign policy under Jokowi, the country is not going to be involved in visibility international relations, but in benefit-based involvements. Whether this means abandonment of Indonesia’s long-standing foreign policy credo best described by its first vice-president Hatta as mendayung antara dua karang, remains to be seen.

But what is clear for now is that the Jokowi administration is focused on benefit, particularly economic benefit, for the Indonesian people and economy.

The AEC brings that benefit. However this is not adequately appreciated in Indonesia because its leaders have not been sufficiently engaged to spell out the real economic benefits of the AEC.

There are two primary reasons for this. First, in the Indonesian government structure, from before Jokowi’s time, there is no senior coordinating minister who can take up Asean matters with the President. This is different from not being committed to Asean, but does result in no concentrated effort to address Asean issues for clear decision.

A former minister in the SBY (Susilo Bambang Yudhoyono) administration described to me recently how Asean decisions by Mari Pangestu, a former Industry Minister, led to her being sacrificed because she had no traction with the President and was insufficiently senior in the Cabinet hierarchy.

While the minister of trade is nominally in charge of AEC matters, it must be recognised they cut across other portfolios and have wide socio-economic impact. If Indonesia had a senior coordinating minister it would be of enormous help in bringing to Indonesian decision-making consciousness the benefits of the AEC as well as its costs in clear specific terms. At the moment, many Asean matters fall between the cracks in the administration and only generalised reactions are coming out from Indonesia.

Secondly, as I have always advocated, Indonesia needs to be engaged by other Asean member states on the AEC more aggressively and more consistently. While it would certainly help if Indonesia had also that senior coordinating minister, advocacy at head of government level is necessary.

For example, when President Joko Widodo visits Malaysia at the beginning of next month, and other Asean countries as well, apart from bilateral matters, Asean matters and the AEC must rank high in discussions.

A one-off engagement however would be insufficient. It has to be consistent. At the same time, the private sector must be given the opportunity to engage the President, brief him and make the very beneficial case.

Private sector engagement with Indonesia is critical, particularly this year. This is something which organisations like Asean Business Advisory Council and the Asean Business Club must put high on their to-do list.

Every Asean country has domestic preoccupations. Thailand’s domestic political problems are not resolved despite – some would say because of – last May’s coup; the economy remains anaemic. The Philippines is doing well, but elections and a new president are coming up in May 2016, including in the Autonomous Region of Muslim Mindanao.

Myanmar has elections coming up too by early November this year and there is the question of whether Aung San Suu Kyi will be allowed to stand for president but, perhaps more importantly, there is the question of the succession in the military-backed ruling Union Solidarity and Development Party: Thein Sein will likely step down and Shwe Mann, the former number 3 in the military junta, will most probably succeed him – there will be implications.

Every Asean country – including Singapore where general elections will probably be held ahead of the January 2017 deadline – has many domestic preoccupations. You can list them out. But Asean is part of the agenda. In the typical Asean way, some will have Asean up and some down in the priority list.

It is the test for the Asean chair this year to bring it up the list for every member state for end 2015 objective and beyond. With respect to the AEC, the particular test is to give argument and substance that proves its success and benefits will go a long way towards addressing, yes, domestic preoccupations.

Tan Sri Munir Majid, chairman of Bank Muamalat and visiting senior fellow at LSE Ideas (Centre for International Affairs, Diplomacy and Strategy), is also chairman of CIMB Asean Research Institute.