2014 Inaugural Seminar on ASEAN Economic Community by 2015: Challenges and Opportunities for Timor-Leste Membership

9 January 2014, Dili, Timor-Leste

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Your Excellency, Mr. Roberto Soares, Secretary of State for ASEAN Affairs

Honorable Secretaries of State,

Ambassador João Freitas de Câmara, Director-General for External Affairs

Excellencies,

Ladies and Gentlemen,

Introduction

“We stand…on the threshold of a new period in history […] Asia…has suddenly become important again in world affairs […]. [She] is again finding herself. We live in a tremendous age of transition and already the next stage takes shape when Asia takes her rightful place…there [is] a widespread urge and an awareness that the time [has] come for us, people of Asia, to meet together, to hold together, and to advance together.”

These could easily be the words of any modern Asia-Pacific leader speaking today, but they were in fact those of Indian Prime Minister, Jawaharlal Nehru at the 1st Asian Relations Conference in 1947.

Prime Minister Nehru’s words ring as true today as in 1947, because the world around us has changed again. Ours is a time once more of great uncertainty amid global turbulence. Asia has grown, our economies have flourished, and economic power has shifted to our region – but at a cost to our people and to our planet, with rising inequalities and ecosystems stretched beyond their carrying limits.

I am very pleased therefore, to have this opportunity to share with you some thoughts today about the enormous challenges and opportunities of regional economic integration – including for countries like Timor-Leste, within the context of sub-regional groupings and organizations.

Excellencies, Ladies and Gentlemen,

Regional Integration as New Engine of Growth and Prosperity

The global financial crisis which started in 2008 has changed many assumptions about the way the global economy functions. It is clear that the advanced economies of the world will find it difficult to play the role of growth poles for the developing countries of Asia and the Pacific, as they did in the past, given their priority of unwinding high levels of debt.

This is why ESCAP has provided focused advice to our member States about the importance of rebalancing patterns of economic growth in favour of domestic and regional sources to sustain their dynamism. Member States have been encouraged to focus on generating new aggregate demand by increasing the purchasing power of the “bottom billion”, through greater focus on social protection, employment guarantee programmes, and other poverty reduction initiatives.

The policies to lift the “bottom billion” out of poverty, and to allow them to join the mainstream of the region’s consumers, can contribute to sustaining the region’s economic dynamism for decades to come. Another critical message for sustaining the dynamism of the region in the aftermath of the global financial crisis, has been to tap the potential of regional economic integration.

Since the 1990s, regional economic integration has become a dominant trend in the world economy, with the rise of regional and subregional groupings such as the European Union and the North American Free Trade Agreement. In South-East Asia, as we know, ASEAN has led its 10 member countries in the process of economic integration towards the ASEAN Economic Community (AEC) by 2015.

It has become very clear that capabilities and resources vary across countries, giving rise to complementarities and opportunities for mutually beneficial exchanges which can be unlocked by enhancing regional economic integration. One lesson that comes out of the experiences of different regions with regionalism, including ASEAN, is the potential for fostering balanced and equitable development, with less-developed economies converging with more-developed ones.

This was expressed in the 2012 ESCAP theme study “Growing Together: Economic Integration for an Inclusive and Sustainable Asia-Pacific Century”, which looked at the potential for cooperation and integration in Asia and the Pacific. The study proposed a four-pronged policy agenda, as part of a long-term strategy to build the economic community of Asia and the Pacific, to exploit the potential of regional economic integration, and to achieve a more resilient and sustainable region founded on shared prosperity and social equity.

Excellencies, Ladies and Gentlemen,

Four-Pillared Approach to Regional Economic Cooperation & Integration

The first element of this agenda is creating a broader, more integrated market in Asia and the Pacific by coalescing and building upon existing subregional groupings like ASEAN, SAARC, PIF, and bilateral FTAs, in order to connect high- and low-growth countries in economic “corridors of prosperity” to spread the benefits of regional growth to all. One important initiative in the direction of creating a larger integrated market is the Regional Comprehensive Economic Partnership (RCEP) covering the ASEAN+6 countries, launched in Phnom Penh in November 2012. Bringing together some of largest and most dynamic economies of the world in a single grouping would provide the nucleus of an integrated regional market to which other countries can the accede.

The second component is ensuring seamless regional connectivity. Asia-Pacific countries are still better connected with the advanced countries of the West than they are with most of their own regional neighbours. ESCAP has, over many years, facilitated connectivity through international agreements on the Asian Highway, the Trans-Asian Railway, and most recently on Dry Ports – part of a vision of an international, integrated, intermodal transport and logistics system, which includes sea and air connectivity. However, we need the software of connectivity as much as the hardware. This includes regulatory frameworks, institutions, and common norms and standards.

The third element is further developing the regional financial architecture to better deploy the region’s savings – including excess foreign exchange reserves and private savings – for productive purposes, and to close the gaps in the region’s infrastructure. In this context there are some important examples such as the Chiang Mai Initiative, which covers the ASEAN+3 countries with a US$ 240 billion pool, to provide member countries with short-term liquidity support. This needs to be expanded to the rest of the region to effectively serve as a regional lender of last resort. In the area of infrastructure financing, while subregional funds and bond funds have been set up, there needs to be a large-scale regional lending facility to catalyse investments in infrastructure across the region.

The fourth element is to provide a coordinated regional response to shared vulnerabilities. Beyond the most obvious of these, such as food and energy security, transnational crimes, natural disasters, pressures on natural resources, and a shrinking carbon space, Asia will need to invest in joint research to develop new development pathways that are low on carbon but high on prosperity, high on poverty reduction, and high on human security. This could be fostered through new regional centres of excellence set up to discover fresh solutions to persistent problems through research, innovation and technological development and unleash the creativity and entrepreneurship of people, including for SMEs.

I was extremely pleased that the Ministerial Conference on Regional Economic Cooperation and Integration, in which Prime Minister Xanana Gusmão participated at ESCAP in December last year, adopted the Bangkok Declaration, which in turn endorsed this four-pillared approach to regional economic cooperation and integration – laying the foundations of an economic community of Asia and the Pacific. It was the culmination of the process started in 2010, responding to the challenge posed by the global financial crisis for the countries of Asia and the Pacific.

Excellencies, Ladies and Gentlemen,

ASEAN and New Vision for Regional Integration

Let us turn now to ASEAN. Established in 1967, during the heights of the Cold War, for mainly political and security reasons – peace and stability were its original aims. For more than four decades ASEAN has helped to move our region from conflict and competition to closer cooperation.

As early as 1976, however, at the time of the first ASEAN Summit, issues of economic concern were becoming a priority for the countries of the subregion. ASEAN became a mechanism for regional economic integration – and its work on agricultural productivity, food security, regulatory reform, and trade, marked the start of the so-called “East-Asian miracle’. The three pillars of ASEAN became economic integration, political and security cooperation, and socio-cultural cohesion.

The pursuit of these aims also led the original five ASEAN countries to pursue enlargement of the ASEAN bloc – with Brunei joining in 1984, followed by Vietnam, Laos, Myanmar, and Cambodia (the CLMV countries) over the next 15 years. ASEAN identified, as one of its greatest challenges for the new millennium, the integration of market diversity and the transitional economies of its CLMV member countries.

One of the most important lessons of the ASEAN experience is that true regional integration will require all ASEAN countries to achieve minimum standards of economic and social development.

Without the closing of these gaps, ASEAN integration will lead not to shared prosperity, but rather to winners and losers, with poverty and inequality increasing between members as well as within member countries. This is naturally also of great significance to other least-developed countries, such as Timor-Leste, who aspire to join ASEAN, and whose own economic and social capabilities and resources will need to move to convergence with those of existing ASEAN members to ensure the greatest mutual benefits of such membership.

In 2000, ASEAN Leaders also launched the new ‘Initiative for ASEAN Integration’ (IAI), to direct and sharpen collective efforts to narrow the development gaps between ASEAN’s older and newer members. There is a greater sense of urgency and commitment among ASEAN countries to ensure that the newer members are not left behind.

An example of these challenges is the severe income gap between ASEAN countries. Even excluding Singapore and Brunei, the next richest country in 2010, Malaysia, had a per-capita GDP nearly 12 times that of Myanmar’s, and more than four times higher than the regional average. Myanmar’s per-capita GDP was less than one fourth of the ASEAN average.

Over the past two decades, however, the CLMV countries have made steady progress in closing the gaps. As ADB’s ASEAN 2030 Report has shown, the ratio of average per-capita GDP of the ASEAN 6 to the CLMV countries declined from over 11 times in 1990 to about 4 times in 2010. If the 2030 per-capita GDP growth aspirations are met, the ratio will fall even further, to about 3 times.

The ASEAN of today has taken these foundations and built a new collective vision for 2030 – to become Resilient, Inclusive, Competitive, and Harmonious — a “RICH ” ASEAN for a more integrated and prosperous region. The first major landmark on this journey will be the establishment, by 2015, of the AEC.

Excellencies, Ladies and Gentlemen,

ASEAN Economic Community

The plan to create the AEC is one of the most ambitious and comprehensive integration projects ever undertaken. It entails the total removal of all trade barriers in goods, services, and investment – and the creation of a single market and production base, which is fully integrated with the rest of the global economy, and which aims to drive equitable growth and development for the region.

As we move ever-closer to 2015, the AEC still faces a daunting range of challenges: technically, economically, politically, socially, and culturally. Eliminating non-tariff barriers, upgrading the productive capacity of the CLMV countries, and establishment of an efficient trade facilitation system, for example, are particularly complex issues on which it is difficult to forge consensus. These are, however, some of the critical issues that need to be resolved if a truly borderless economic community is to be created under the AEC.

Other priorities which have been identified for ASEAN policymakers include (i) managing macroeconomic and financial stability for resilience; (ii) promoting economic convergence and equitable growth for ensuring inclusiveness; (iii) using and developing comparative advantage and innovation for competitiveness; as well as (iv) nurturing natural resources and sustaining the environment for harmonious growth.

2015 is also the deadline for achieving the Millennium Development Goals (MDGs), and the world is already moving into the next phase of global development. Sustainability – for people and planet is already at the heart of these negotiations, and ASEAN will need to ensure that the economic growth needed to drive the AEC also enhances the management of natural resources and factors environmental priorities into national and regional planning.

Excellencies, Ladies and Gentlemen,

Timor-Leste and ASEAN

One of the specific terms of reference for my appointment as Special Adviser of the United Nations Secretary-General to Timor-Leste is to advise the Government on “organising its internal preparations for integrating into regional forums”, and on “promoting Timor-Leste on the regional and global scenes to help ensure that [it] will continue to be an active player in the regional and international discussions on development and capacity building, and to benefit from regional and international support […]”.

Despite being one of the youngest nations, Timor-Leste has already made substantial contributions to regional and global development. As the Chair of the g7+, you have championed peace-building and state-building not only in your own country but in fragile states around the world. As observers in the Pacific Islands Forum, and organizers of the Pacific Consultation on post-2015 development, in Dili last year (as part of the Development for All Conference, which I was pleased to support), you have deepened your relationship with the Pacific island nations, supporting ocean economies, and their call for more people- and climate-centered development, becoming a bridge between Asia and the Pacific.

With Minster Pires as a member of the United Nations Secretary-General’s High Level Panel on the Post-2015 Development Agenda, you have made sure that the voices of fragile states are heard through the Dili Consensus and that nobody will be left behind. This is a concrete outcome of the Development for All Conference. With the Prime Minster as the Chair of the 69th session of Economic and Social Commission for Asia and the Pacific, you have worked with 53 Asia-Pacific member States and the United Nations to shape a resilient Asia-Pacific that is more inclusive and sustainable, and spearhead the campaign on Zero Hunger regionally. Earlier today, in Parliament, Timor-Leste became the first Asia-Pacific country to launch the United Nations Zero Hunger Challenge at the national level.

Your leadership is well recognized at all levels of the United Nations family. In fact I received a message yesterday afternoon from the Special Representative of the Secretary-General on Food Security and Nutrition, Mr. David Nabarro, congratulating H.E. the Prime Minister, the Government of Timor-Leste, and the National Parliament, for this important initiative and for their strong commitment to reducing hunger and improving food security.

Simply put, Timor-Leste is already a valuable part of the fabric of South-East Asia and the region as a whole. In the next phase of its development journey, it will be even more important for Timor-Leste to get as much sustained support as possible, from our region and beyond, to help ensure its continued contributions to regional and global development. Timor-Leste’s acceptance into ASEAN is therefore the next logical and important step for regional integration. Already Timor-Leste is participating in several ASEAN events including the ASEAN Regional Forum (ARF) on issues of security.

We know that there are concerns about the capacity of Timor-Leste to fully participate in the complete range of ASEAN meetings and activities – and about its ability to meet the obligations of membership at this time. Some believe that Timor-Leste is not yet ready. I would like to view this from another perspective and suggest that it is time also for ASEAN to reexamine if it really needs a thousand meetings a year, and if it is possible to form clusters of countries on certain issues so that a member, on a rotational basis, can represent the whole cluster for some meetings to reduce the travel burden on LDCs. In other words ASEAN itself has to design its procedures and business model to accommodate its LDCs, and perhaps to use IT to gain efficiency in the conduct of some of its meetings.

Even without these changes, ASEAN has had long experience of including members who were not yet fully ready at the start of their membership, but ASEAN contributed to their capacity building. At the same time, the CLMV countries have become a source of great strength for ASEAN – but even today they are still not fully converged with the original ASEAN 6 and there are capacity gaps. The important point for Timor-Leste’s membership in ASEAN is the recognition that Timor-Leste is an integral part of the region. It will make valuable contributions to the strength of the organisation – especially in the areas of peace and state-building, human rights and human security, democratic governance, and by providing a real voice for some of the most marginalized communities in Asia and the Pacific. Timor-Leste in turn will benefit from the security and prosperity of the neighborhood. But is has to build up its productive capacity and be in charge of how it integrates: the pacing and sequencing of the integration process. Hence I believe it is just a matter of time before Timor-Leste will be a fully fledged member of ASEAN. Meanwhile it is important to have the continued support of different ASEAN members and for Timor-Leste to continue participating in ASEAN meetings where it already has a seat at the table. It is equally important to understand and prepare institutions for engaging with the AEC in 2015 in ways that are beneficial to the people and economy of Timor-Leste.

Excellencies, Ladies and Gentlemen,

Conclusion

In conclusion, Asia and the Pacific today has the historic opportunity to rebalance its economic structure in favour of itself, to sustain its dynamism with strengthened connectivity and balanced regional development.

In this journey, the United Nations system stands ready to assist all Member States, especially our developing countries such as Timor-Leste, in advancing the agenda of deeper regional economic cooperation and integration, as a key tool towards reducing poverty, sustaining growth, and making human security, as well as inclusive and sustainable development, a reality for all. It is time to take this next step – together.

As the Special Adviser of the United Nations Secretary-General to Timor-Leste, I stand with you in support of your application for membership in ASEAN, and will continue to be your advocate in this endeavour. This region will grow better if it is growing together, inclusively, for peace and security, for sustainable development, and for shared prosperity.

I thank you.