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The EU: an example for the ASEAN?

19 March 2013

Since 1967, the ASEAN (Association of Southeast Asian Nations) has established a supranational organization on the same basis as the European Union (created in 1957).  Five countries were at the origins: Singapore, Indonesia, Malaysia, Thailand and Philippines. Later Brunei, Viet Nam, Laos, Myanmar and Cambodia joined the community composing nowadays of 10 countries. But at a time when the European Union is experiencing a political and economic identity crisis after the implementation of a common currency and increased political integration, the ASEAN is patiently building an economical giant, which will be a direct competitor to China or India in the coming years. Indeed, by 2015 ASEAN aims to achieve a full economic integration, creating a single market that will allow the free flow of goods, services and capital (economic and human). This is quite similar to the Schengen agreement of the EU in 1992. With 10 countries compared to 27, ASEAN is trying to build the same model of regionalisation with fewer countries and therefore has a higher chance to succeed on the long-term.

Moreover, ASEAN and EU have been built for the same purpose. Thereby, ASEAN and EU are at least comparable. We will find the same hope for peace and security, the safeguarding of national independence against interference from external actors, the research for economic prosperity and competitiveness in a globalizing world. Motivated by the same desire to influence international debates in front of the major powers. We can extend the comparison to the currency. On March 1979, the EU implemented the European Currency Unit, a basket of European currency, which attempted to limit the fluctuations of currencies. This ECU has been replaced in 1999 by the Euro.

In 2005, on the impulsion of Japan, an Asia Currency Unit was created. It is the weighted average of ASEAN +3 (Japan, China and Korea) +3 (Australia, New-Zealand and India). This has lead to a stabilization of each country’s currency, which is showed by Eiji Ogawa and Junko Shimizu in their research for the Asian Bank Development Institute.

But even with so many similarities, EU and ASEA are very different. It is just pretence to try to look for other common points, their respective compositions are opposite. While democracy is a prerequisite to enter the EU (for example the entry of Spain, Portugal or Greece after dictatorship), the ASEAN members have politically a lot less in common. Myanmar and Singapore share little political similarity.

In terms of wealth this area is also a paradox, Singapore is one of the richest countries in terms of GDP per persona ($60,900 for 2012 ranked as 6th) while Cambodia and Laos (respectively: $900 ranked 159th and$1,320 ranked 147th) and are among the poorest countries in the world. Globally their economic structure is totally different: ASEAN is mainly dependent on exportation to grow, while gross in EU is lead by household consumption. With this context it would be quite impossible for ASEAN to transpose the European rules and policies. That is why ASEAN takes its time, observes what happens in Europe and contextualize borrowed concepts such as the Asian Currency Unit, which have proven their potential viability, even with several countries.

Attempting to forecast is always risky. Nevertheless, by observing carefully recent events in EU and ASEAN, a line is drawn, and it is not so obvious that the ASEAN will tend to become an Asian EU. In fact it is nearly impossible to run an integrated area of too many languages, cultures and religious diversity. The future of ASEAN will mainly cover agreements on economic cooperation, because these do not exert politics and religion, but help countries to remain close. An example in Asia is the tension between Thailand and Malaysia. However, these two countries are still doing business together. On the other hand, to be credible as an entity on the international scene, they will have to act together and concert before taking a decision, something that Europe failed to do (e.g: War of Iraq in 2003). However, even with its failures, EU will remain a model to follow. How is it possible twelve years after the most deadly war of history that enemy countries decide to unite to build one of the most peaceful and wealthy regions in the world?

Thereby, both EU and ASEAN understand that joining forces will help to set up a different balance of power. This is a response to the supremacy of US or the coming supremacy of China. These organizations have a role to play among the nations

In ASEAN, some countries have a particular role, for example Singapore, the gateway to Asia for western countries, or petroleum producing Brunei, a country that assures a constant supply of oil. But one has a more implicit role: the kingdom of Thailand. Indeed, Thailand is the heart of the ASEAN and the link between the member countries. Being the founding member of the ASEAN, Thailand has a proactive role in the implementation of the unique market in 2015. With its central location in Southeast Asia, we can expect Thailand to become a hub in this area of the world. By 2015, companies based in Thailand will have an advantage of being located in one of the biggest markets in the world.

The Broadgate Financial Group has understood this unique situation as an opportunity to invest in. Firstly, by providing expert advice in plantation and renewable energy development in Southeast Asia. Also by diversifying its consultancy activities, resulting in being the most diverse corporate consultancy firm in South East Asia.

“A new growth force is coming in Asia,”
Changyong Rhee Chief Economist of the Asian Development Bank (ADB) when talking about ASEAN.

 Pierre-Louis Vouteau
Portfolio Support Officer
pierre@broadgatefinancial.com

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official position of The Broadgate Financial Group.