Can An Asian "Eurozone" Succeed Where Europe's Failed?
In October, President Barack Obama will attend the Association of Southeast Asian Nations’ (ASEAN) summit in Bandar Seri Begawan, Brunei, a small country that's tucked into the northern part of Malaysia. While the setting may be small, the summit's goals are monumental. The countries of ASEAN hope to create an economic bloc equivalent to the European Union (EU). If ASEAN is successful, cooperation will replace competition, boarders will become more permeable, workers will be given more job opportunities, and a major economic player will emerge on the world stage. However, as we've seen with the EU, that success is far from guaranteed.
ASEAN is hoping to establish the ASEAN Economic Community (AEC) in 2015, instilling near-complete regional economic integration. The emergence of the AEC will mark a huge change for the region, and for ASEAN itself. When it was originally founded in 1967, ASEAN consisted of just five nations: Malaysia, Indonesia, Thailand, the Philippines, and Singapore. ASEAN's initial aims were simple, and made it little more than a club of good ol' boys. It sought to promote peace, generate a market for economic cooperation, aid in the proliferation of information, and maintain Southeast Asian cultures and traditions. Since ASEAN's creation, Southeast Asia has seen phenomenal economic growth that has vastly increased ASEAN's international influence. ASEAN has added another five countries to its ranks — Brunei, Vietnam, Laos, Myanmar, and Cambodia — and countries like East Timor and Papua New Guinea are vying for entry.
While the AEC could increase Southeast Asia's economic and political prominence, putting it in a class with Europe, the AEC will also be susceptible to the problems that have confronted the EU over the past few years. In Europe, economic inequality between countries has lead to instability. The weak economies of Greece, Ireland, and Portugal (and, to a lesser degree, Spain and Italy) have threatened to push the EU to the brink of economic collapse. While ASEAN has deferred the implementation of a unified currency until sometime after 2015, the vast economic disparity between its countries seems to recommend against such a move entirely. Countries like Thailand, Brunei, and Singapore have robust economies that are poised for long term growth, but Laos and Cambodia lag behind in terms of economic development and infrastructure, and Myanmar is just now opening its boarders to foreigners.
Much as Germany is stuck bolstering the EU, the AEC will burden ASEAN's prosperous nations with supporting their economically inferior counterparts. It's not clear that ASEAN's richer countries will be able to absorb such costs. Worse, there's no guarantee that ASEAN's stronger economies will be able to maintain their niche markets once a currency zone is implemented. Take Thailand, which has attracted several automotive companies to build factories around Bangkok, a deal made possible by heavy tax incentives. The implementation of the AEC may cause those auto companies to move their businesses to ASEAN's frontier markets. As such, ASEAN's wealthier countries have a lot to lose from such a regional partnership.
If ASEAN can somehow manage to keep foreign investors interested and attract further international business, rather than cannibalizing the current market, then Southeast Asia could become a serious international contender. But in light of the above concerns, it's hard to believe that the AEC will be anything other than an economic blunder that serves as a grave reminder that the international market is an unforgiving landscape. Come 2015, Southeast Asia will experience a significant economic change — for better or for worse.