Today ASEAN operates in a substantially different environment than the one it faced when it was established in 1967. The world has shrunk and its economy has globalized. ASEAN has also evolved. From a focus on regional security, the group's agenda has gradually expanded to cover many new issues, especially economic. The importance of the economic community is expected to continue growing in relative terms compared with the political-security and socio-cultural communities.

ASEAN's institutional set-up has served the region well so far. Its limitations have, however, become evident as it was designed for a group focused on regional security and handling a limited scope of activities. As ASEAN's mandate and operations have largely expanded over the years, its institutional framework and governing mechanisms need efficiency updates. They have become inadequate in keeping pace with internal and external developments.

DECISION-MAKING SYSTEM

Consensus has been ASEAN's basic principle for decision making. Although a multi-track, multi-speed approach was often used in implementing agreements, decisions are typically made only when agreement is unanimously reached by all member countries. The principle of consensus decision-making is enshrined in the ASEAN Charter (Article 20), which also cites the importance of consultations to inform decisions, deferring to the Leaders’ Summit to resolve cases when consensus cannot be reached.

Consensus has worked well to date, especially in dealing with political and security matters. For economic and social issues, however, it often creates unnecessary rigidities. A qualified majority system can in fact be seen as a better substitute to consensus for non-fundamental, operational decisions as it eliminates inefficiencies when resolutions need to be timely made. This is especially true when matters are of a non-fundamental nature. A qualified majority also avoids the possibility of small minorities holding the entire group hostage when dealing with relatively minor issues. As ASEAN activities become more articulated and economic in nature, consensus alone can be too restrictive in malting decisions. Agreeing on day-to-day matters by consensus is cumbersome and a source of avoidable delays.

A system using a qualified majority for day-to-day operational decisions, while maintaining consensus for decisions on fundamental issues, was introduced by the Chiang Mai Initiative Multilateralization (CMIM), with percentage shares of financial contributions used as the basic criterion to decide voting powers for members.

Over the past ten years, Vietnam has faced substantial economic, political and foreign policy challenges. The country's efforts to deal with these challenges have produced mixed results, and how it continues to respond in the coming years will likely determine its long-term economic, political and strategic trajectories.

ECONOMICS: DIFFICULTIES AND RESTRUCTURING EFFORTS

After Vietnam joined the WTO in early 2007 and achieved an annual growth rate of 8.5 per cent the same year, there was high hope that the country would usher in a new phase of robust economic development to reach the goal of becoming an industrialized economy by 2020. However, the 2007–8 global financial crisis and the subsequent economic downturn have dampened this prospect. From 2008 to 2014, Vietnam registered an average annual GDP growth rate of 5.8 per cent, significantly lower than the 7.6 per cent for the 2000–7 period. Adverse global economic conditions together with poor management have also brought many Vietnamese businesses, especially state-owned enterprises (SOEs), to the verge of bankruptcy. Following the collapse of giant state-owned corporations Vinashin and Vinalines and the mounting bad debts within the banking system, the government had to embark upon an economic restructuring programme.

The policy for economic restructuring was officially adopted by the Central Committee of the Communist Party of Vietnam (CPV) in October 2011. The government then developed a blueprint for the restructuring, which was submitted to the National Assembly for review in 2012. The blueprint iden-tified three pillars for restructuring efforts: public (i.e. government-funded) investment, the banking system, and SOEs. By early 2015, all the three pillars of the restructuring programme were still underway, and showing mixed results.

Regarding the first pillar, the share of public investment in the economy's total investment tended to decline because of the private sector's increased involvement as well as the government's constrained budget. A revised law on public investment, with stricter regulations designed to make public investment more efficient, was passed by the National Assembly in June 2014 and took effect on 1 January 2015. Meanwhile, bad debts within the banking system decreased but remained substantial, accounting for 5.4 per cent of the banking system's total gross loans in November 2014 (CafeF 2014).

Established in 1994 with the member-ship of eighteen states, the ASEAN Regional Forum (ARF) is the sole region-wide multilateral security institution in the post-Cold War Asia-Pacific. While it is primarily a dialogue forum without binding decision-making and enforcement mechanisms, it has gradually institutionalized numerous confidence-building measures (CBMs) among the member states. As its name strongly suggests, the members of the Association of Southeast Asian Nations (ASEAN) are in the ‘driver's seat’. Furthermore, the ASEAN states, it is often argued, have successfully transplanted their principles and practices for mutual interaction to the ARF setting. These codes of behavior, often called ‘the ASEAN Way’, are characterized by ‘a high degree of discreetness, informality, pragmatism, expediency, consensus-building, and non-confrontational bargaining style’, in sharp contrast to ‘adversarial posturing and legalistic styles’ found in the West (Acharya 1997: 329).

What is the nature of the ARF? In answering this question, specialists have come to loosely form two competing camps: structural realists on the one hand, and the advocates of what Amitav Acharya (1999: 25, n. 15) calls ‘institutionalism with a constructivist orientation’ (constructivists hereafter) on the other. Structural realists regard the ARF essentially as an epiphenomenon and remain highly skeptical about the efficacy of the multilateral institution in Asia-Pacific power politics. Constructivists, on their part, place significant emphasis on a new regional identity being formed, particularly around the ASEAN Way. They argue that old state interests are profoundly transformed to the extent that materialist perspectives like structural realism are becoming increasingly inadequate in the study of the ARF. Power politics in the region, according to constructivists, is changing slowly yet steadily. Each position is epitomized by the two quotations at the beginning of this article.

These two dominant perspectives on the ARF have serious limitations, however, because they fail to adequately capture the utilities that the ARF provides to its member states. The ARF exists because it satisfies some needs felt by its member states. Its rules and practices signify internationally agreed solutions for these needs. The member states would have little motivation to spend their precious resources to sustain ARF activities if the ARF did not supply what they demand. In short, the ARF exists because of its functions; its existence serves the member states’ interests.

RECENT TRENDS IN CAPITAL FLOWS

Southeast Asia was one of the first regions to recover from the recent global economic meltdown. While the region posted an anaemic 1.2 per cent growth in 2009 — its worst performance since the 1997 Asian financial crisis — the outlook for Southeast Asia in 2010 and beyond is buoyant. The five economies that bore the brunt of the crisis — Brunei Darussalam, Cambodia, Malaysia, Singapore and Thailand — have all recovered rapidly.

Southeast Asia's bullish outlook and relatively high interest rates have attracted a massive influx of capital, with the region's emerging markets becoming an attractive destination for footloose liquidity from global funds. These have flown into financial and equity markets in the main, although some have arrived as foreign direct investment (FDI). The two-year peaks of price-to-book values have increased in all major Southeast Asian markets — by a factor of 3.4 for Indonesia's JKSE, 2.1 for the Philippines’ PSI, 1.9 for Malaysia's KLSE, and 1.7 for both Singapore's FTSTI and Thailand's SETI — all well above pre-crisis levels. This rally in the region's stock markets is expected to continue in the near term, as the economies continue to perform above expectations, and as risk-taking investors rotate money to underpriced financial assets.

POST-CRISIS CAPITAL FLOWS: POLICY ISSUES AND CHALLENGES

In theory, capital inflows should offer substantial benefits to Southeast Asian countries in terms of improving resource allocation and filling financing gaps, facilitating cross-border transfers of knowledge and technology, improving risk diversification, and promoting financial market reforms, provided that host countries are equipped with absorptive capacity and sound economic fundamentals. These benefits are usually associated with FDI in productive sectors, but what if the majority of the inflow is short term in nature? In reality, the recent surge in volatile capital has complicated macroeconomic policy management and has the potential of compromising economic stability, putting the region at risk of succumbing to another round of financial distress.

The large volume of volatile capital flows raises a number of policy challenges. First, expectations of currency revaluations and further interest rate increases in order to curb rising inflation will inevitably attract speculative capital flows. This is already evident in some Southeast Asian countries like Indonesia, Malaysia and Thailand, where real exchange rates have kept appreciating despite central banks’ intervention in the foreign exchange markets.

The current conflict between Cambodia and Thailand, both members of the Association of Southeast Asian Nations (ASEAN), provides a test case for ASEAN to act as a key player in resolving disputes among its members. A failure by ASEAN to do so would reduce its credibility and impede the realization of an ASEAN community by 2015. Since its establishment in 1967, ASEAN has made substantial achievements in preventing armed conflict among its members. In the view of many ASEAN supporters, such achievements are attributed to the development of a regional identity among ASEAN members through strict adherence to the “ASEAN Way,” a concept that includes non-interference in member countries’ domestic affairs, the peaceful settlement of disputes, and reliance on the principle of consultation and consensus for decision-making. While the non-interference component of the ASEAN Way may help prevent problems from occurring, it has been less successful at solving conflicts after they erupt. Such a test case now exists in the conflict between Cambodia and Thailand.

Cambodia and Thailand's diplomatic relations deteriorated severely following the Cambodian government's November 2009 appointment of Former Thai Prime Minister (PM) Thaksin Shinawatra as an economic advisor. Thaksin, who was ousted in a 2006 military coup, remains in exile and is wanted by the current Thai government on corruption charges. This situation is not a disconnected event, but part of a chain of events that occurred after the enlistment of the Preah Vihear temple as a World Heritage Site by the Cambodian government in July 2008.

Preah Vihear, a 900-year-old Hindu temple dedicated to Shiva, is situated near the Cambodian-Thai border. Despite the International Court of Justice (ICJ)'s 1962 ruling that the Preah Vihear temple is located within Cambodian territory, some Thai nationalists have never accepted that the temple belongs to Cambodia. Others suggest that the ICJ's ruling only covers the temple and not the surrounding 4.6 square kilometers of land. This situation made Preah Vihear a point of contention between Cambodia and Thailand.

Cambodia's enlistment of the temple as a World Heritage Site actually covered only the temple, not the surrounding land, and was supported by the government of former Thai PM Samak Sundaravej. A joint communique demonstrating Thailand's support was signed between former Thai foreign minister, Noppadon Pattama, and Cambodia.

The popular referendum held on the future of East Timor in August 1999 presented a novel challenge for ASEAN and its members. During the twenty-four-year Indonesian occupation of the territory ASEAN had studiously upheld its policy of non-interference in the internal affairs of member states, despite the fact that the 1975 invasion was a violation of international law and despite the ongoing abuses of human rights. For this reason, ASEAN was ill-prepared to play a constructive role at the time of the referendum and East Timorese leaders had little reason to view ASEAN with much sympathy. Nevertheless, when the UN called for regional participation in the peacekeeping force tasked with maintaining security in the territory until the restoration of independence in May 2002, Thailand, the Philippines, Malaysia, and Singapore all agreed to contribute military personnel.

With the achievement of independence, East Timorese elites began to discuss foreign policy issues, including application for membership in regional associations. These early discussions were coloured by concern about negotiating the maritime boundary with Australia and production-sharing agreements from offshore oil and gas fields, but also included consideration of cultural affinities with states in the Pacific Islands Forum and the potential economic and security benefits of orientation toward ASEAN. Further afield, the Community of Portuguese-speaking Countries offered historic and linguistic succor, while China loomed as a potential benefactor.

Timor-Leste thus enjoyed a range of options in the international arena, but it faced pressing issues on the domestic front. Physical infrastructure had been devastated by the Indonesian military and its militias in 1999, tens of thousands of people remained displaced from their homes (some still in Indonesian West Timor), agricultural output was well below domestic needs, basic health care was limited, and the education system needed to be rebuilt from scratch. The United Nations and a host of international agencies provided technical assistance and aid, but much of the focus was on building new state institutions, not the provision of services or job creation. With meager annual state budgets, the Fretilin government led by Prime Minister Mari Alkatiri prioritized the repair of basic infrastructure, health care (with Cuba providing doctors to serve in rural clinics and medical training for East Timorese students), and primary education (with Portugal providing several hundred volunteer language teachers).

INDONESIA IN ASEAN: PAST

After Indonesia's independence in 1945, Sukarno, the country's first President, faced the challenge of building a nation that had been occupied for 350 years by the Dutch and for 3.5 years by the Japanese. From the early to mid-1960s, Indonesia had experienced great domestic and foreign political dynamics. Sukarno secured his domestic authority with the support of the military, the communist party and the parliament, to which he had appointed half the members. At that time, he did not want to be associated with the West since he saw many of them as former colonials. His basic obsession was to build the world anew, in which the West needed to be balanced by new emerging nations.

However, with the downfall of Sukarno due to the alleged coup d’état by the Communist Party in Indonesia, things changed dramatically under Suharto who succeeded as president in 1967. Suharto had to face not only domestic political and economic turmoil inherited from the previous government, but also growing concerns about communist influence in the Southeast Asian region. Domestically, Indonesia inherited a massive foreign debt from the last government and needed money to pay it off. In handling the domestic economic burden, Suharto followed a more pragmatic approach and was willing to accept help from countries in the West to settle Indonesia's debt. Externally, Indonesia faced the growing threat of communism after Vietnam won the war against the United States. Communism had become a common threat to the countries in Southeast Asia.

As with Sukarno in his earlier years, along with the spirit of the Constitution of Indonesia, Suharto developed a “non-alignment” or “free and active” foreign policy which emphasized neutrality (“free”) and the need to proactively engage in a continuous effort to keep peace in the region (“active”). Based on the need to establish a zone of peace and cooperation, Indonesia signed the ASEAN declaration with Malaysia, the Philippines, Singapore and Thailand in 1967, showing the group's commitment to regional cooperation against a common enemy: the communists.

In 1967, ASEAN was merely a “declaration”, which was non-binding. ASEAN's objectives were to accelerate economic growth, social progress and cultural development…

INTRODUCTION

Now into its 47th year, the Association of Southeast Asian Nations, ASEAN, is the most durable and effective regional economic and political grouping in the developing world. This raises the question, does it make sense to contemplate the existence of a ‘Southeast Asian development model’?

The approach adopted in this paper is two-fold. The first is to enquire whether the Southeast Asian economies are in some sense converging with respect to development policies, strategies and outcomes. Second, to the extent that there is such convergence, is there any causality at work that is derived from common geographic location.

The paper focuses primarily on eight of the countries, excluding Brunei because it is so small and atypical, and Myanmar because of the poor quality of its statistics.

GROWTH

The growth record is first examined to get a sense of whether there is any sort of synchronised growth pattern discernible.

First, the three Indo-China latecomers, led by Vietnam, have actually grown the fastest. This is not surprising, as they commenced growth at extremely low levels of per capita income, and were less affected by the Asian financial crisis (AFC). Second, the Philippines remains an outlier (along with Myanmar if reliable national accounts statistics were available), both before and after 1990. Third, apart from the Philippines, the growth dynamics of the original ASEAN Five have been broadly similar over this period.

These diverging growth rates are unsurprising. First, the experience with major departures from trend growth rates, principally economic crises, have varied enormously, reflecting both the differing responses to common exogenous shocks, and the presence of home-grown crises. Second, commodity price fluctuations have different effects within the region. Third, a range of other country-specific factors is at work. Localised political disturbances are also a factor, such as in Cambodia and Indonesia in 1998 and the Philippines in 1986.

More importantly for the purposes of this paper, are the region's growth cycles synchronised? Putting aside the outliers, Brunei and Myanmar, the coefficients are quite high, especially in the case of pairs of countries where intuition suggests similar growth drivers. In fact, for the ASEAN Five, with the partial exception of the Philippines, practically all the bilateral coefficients are high, suggesting deepening integration.

A. INTRODUCTION

1. 1. The ASEAN Socio-Cultural Community (ASCC) Blueprint's primary goal is “to contribute to realising a people-centred and socially responsible ASEAN Community by forging a common identity and building a caring and sharing society.” The ASCC Blueprint is structured into 6 characteristics. The Blueprint contains an implementation schedule and a coordination mechanism delegating roles to the ASCC Council, Sectoral Ministerial Bodies, Senior Officials Meetings and other ASEAN-affiliated bodies and associated entities. ASCC is required to identify and address resource requirements, and to enumerate a communications plan to enhance awareness and raise funds.

2. 2. The ASCC Council oversees the implementation of the ASCC Blueprint and ensures coordination of efforts, including across the other Communities. The ASEAN Secretariat (ASEC) is tasked to monitor and review the implementation of the ASCC Blueprint. The ASCC Blueprint calls for a mid-term review whenever necessary. The Mid-Term Review (MTR) of the Implementation of the ASCC Blueprint officially commenced in June 2013. The regional-level assessment to collect data from primary documents, data sources and interviews ran from 27 June until 31 August 2013.

3. 3. The purpose of the MTR is to assess (i) whether the measures and actions in the ASCC Blueprint have been effectively implemented at the national and regional levels; (ii) whether implementation of the ASCC Blueprint has contributed to achieving the goals of the ASCC; (iii) the means of implementation; (iv) institutional mechanisms in ASEAN Member States (AMS) and the ASEC; (v) the availability and efficacy of financial resources and potential financing gaps; and (vi) to provide recommendations to enhance timely and effective implementation of the ASCC Blueprint by end-2015.

B. METHODOLOGY

1. 4. The MTR is implemented by a Regional MTR Working Group composed of regional and national MTR focal points and representatives of the ASEC, with technical advisory services provided by national consultants appointed by AMS where necessary, and by appointed regional consultants, Asia Partnership for the Development of Human Resources in Rural Areas (Asia DHRRA). The main documents reviewed were the latest ASCC Scorecard received on 28 June 2013 and the latest implementation-focused monitoring system report dated 20 June 2013. The MTR was enriched by reports from the national assessment process of the MTR, conducted simultaneously with the regional process.

INTRODUCTION

Myanmar is a multi-cultural, multi-racial and multi-religious society. There are eight main ethnic groups, with the Bamar (formerly known as Burman) being the largest, comprising over 60 per cent of the total population. There are four officially designated faiths (Buddhism, Christianity, Hinduism and Islam), and although Myanmar is a secular state, Buddhism, with 90 per cent following, enjoys support from the ruling elite.

Administratively, the Republic of the Union of Myanmar is divided into seven states (named after the major non-Bamar ethnic group that resides in the area) and seven regions (areas with the Bamar ethnic group comprising the majority). There are also six self-administered zones comprising several townships where a substantial population of a non-Bamar ethnic group (which does not belong to the majority non-Bamar ethnic group if it is an ethnic state) resides. The new national capital called Nay Pyi Taw (meaning “Abode of Kings”) was established in November 2005, to replace Yangon (Rangoon). The English name “Burma” was dropped in favour of “Myanmar” on 18 June 1989.

POLITICAL SYSTEM

On independence, the country was a parliamentary democracy. After the coup on 2 March 1962, direct military rule was practised by the junta, known as the Revolutionary Council (RC). From January 1974, a one-party (Burma Socialist Programme Party or BSPP) socialist system was in place until 18 September 1988 when it reverted to military rule under the State Law and Order Restoration Council (SLORC) in the midst of a popular uprising that had paralyzed the government for many weeks. The SLORC held a multi-party general election (for a unicameral legislature) in May 1990 but refused to hand over power to the National League for Democracy (NLD; the main opposition party led by Aung San Suu Kyi, who is the daughter of Myanmar's national hero General Aung San) which won some 80 per cent of the seats. The junta that reconstituted itself in 1997 as the State Peace and Development Council (SPDC) oversaw the drafting of a new constitution by way of a fourteen-year long process in which a handpicked National Convention was tasked to formulate its detailed principles.

Historically an ad hoc, uneven, and for the most part uncoordinated process, Southeast Asian defense cooperation has evolved incrementally from bilateral efforts to the incorporation of multilateral initiatives including ministerial-level meetings. With unresolved territorial disputes and residual mistrust continuing to color intramural relations despite more than four decades of regionalism, the aims of Southeast Asian defense collaboration have understandably remained limited, focused as they have been on informal confidence building, trust creation, mutual reassurance, and where conditions have permitted, embryonic preventive diplomacy. In riposte to a host of nonconventional (or nontraditional) challenges that partly define the contemporary security milieu in Southeast Asia, defense cooperation has expanded beyond dialogical activity to include practical and actionable responses to natural and humanitarian disasters, challenges in the maritime domain, international terrorism, pandemic outbreaks, and the like. The ASEAN Defense Ministers Meeting (ADMM) framework, for example, is designed to facilitate the upgrading of national and regional capacities for managing specific nonconventional security problems, many of which are transnational in character. However, the inclusion of this “operational” element by no means indicates that ASEAN is ready to formally embrace preventive diplomacy, even less conflict resolution, in any systematic or substantive way. If anything, contrary to past ASEAN practice, the deliberate avoidance of grandiloquent gestures in the ADMM's narrowly defined remit arguably reflects the desire among ASEAN's defense practitioners to “talk their walk” — exercise a visionary restraint that is more or less commensurate to actual practice — rather than attempting, and likely failing, to walk their talk.

DEFENSE REGIONALISM IN SOUTHEAST ASIA

In May 2006 in Kuala Lumpur, Malaysia, ASEAN leaders inaugurated the ADMM. The development marked a departure of sorts from the way Southeast Asian states had until then engaged in regional defense cooperation. Four years later in Hanoi, Vietnam, ASEAN leaders launched the ADMM+ grouping composed of defense ministers from the ASEAN countries and eight of the regional organization's dialogue partner nations. For many, the establishment of these forums is no less remarkable especially for a region for which the categorical rejection of collective defense, whether with or without the great powers, has long been a sine qua non of regional organization. The existence of the ADMM and its extraregional appendage reveal a contemporary Southeast Asia not loath to institutionalized multilateral defense dialogue and cooperation at the highest levels with major military powers.

INTRODUCTION

In November 2012, the leaders of the ASEAN+6 countries agreed to launch a new free trade agreement (FTA) negotiation called the “Regional Comprehensive Economic Partnership” (RCEP). This paper aims at providing rationales for pursuing an East Asian-wide FTA and making policy proposals for the key elements to be negotiated under the RCEP.

ASEAN has been playing a substantial role in developing FTAs in East Asia. The Common Effective Preferential Tariff (CEPT) entered into force in 1993 and was replaced by the ASEAN Trade In Goods Agreement (ATIGA) in 2010. The development of FTA networks with ASEAN's Dialogue Partners has been an integral part in the ASEAN Economic Community (AEC) design. As a result, five ASEAN+1 FTAs have come into force, namely the ASEAN-Australia-New Zealand FTA (AANZFTA), the ASEAN-China FTA (ACFTA), the ASEAN-India FTA (AIFTA), the ASEAN-Japan Comprehensive Economic Partnership (AJCEP) and the ASEAN-Republic of Korea FTA (AKFTA). Moreover, ASEAN is taking further steps to establish the RCEP, which was formerly called “ASEAN++ FTA” and will bring larger advantages for ASEAN countries.

We believe that ASEAN should take the leadership role in designing a new regional architecture, using the ASEAN+1 FTAs, the AEC efforts including connectivity and trade facilitation, and various cooperation schemes as building blocks. The three reasons for this belief follow in this section.

Most importantly, the current ASEAN+1 FTAs have not yet achieved a fully liberalized region: there is much room for the RCEP to strengthen ASEAN and East Asia as a production base. The level of tariff liberalization is not sufficiently high. Also, rules of origin (ROOs) are not liberal enough in some ASEAN+1 FTAs: while most ASEAN+1 FTAs allow co-equal rules, i.e., more business-friendly rules, some do not. Similarly, services liberalization have only small “WTO Plus” (or “GATS Plus”) components in the current ASEAN+1 FTAs. Trade facilitation chapters remain general in most ASEAN+1 FTAs. In fact, the RCEP negotiation framework can give ASEAN a source of additional bargaining power toward a higher target which is not valid under bilateral negotiations. All the FTA Partners have strong economic and political incentives not to be excluded from the new regional FTA.

Secondly, the existence of several ASEAN+1 FTAs itself creates a “noodle-bowl” (also known as “spaghetti-bowl”) situation which potentially hampers the firms’ usages of preferential systems and impairs the potential values of such FTAs.

This article explores perceptions and reactions across Southeast Asia towards the Obama administration's “pivot” or “rebalance” to Asia. The US approach has been dismissed as more rhetorical than substantive grand strategy, its credibility under renewed scrutiny following President Obama's cancelled visit to Southeast Asia in October 2013. Nonetheless, the rebalance has expanded from its origins in 2010–11, acquiring diplomatic and economic “prongs” with a particular focus on Southeast Asia, broadening the bandwidth of US engagement beyond military diplomacy and force realignment. However, the US “pivot” has had to contend with entrenched narratives of the US role in the region oscillating between extremes of neglect or over-militarization. The US-China strategic dynamic weighing over the region, itself central to Washington's strategic calculus across Asia, has also coloured the lens through which Southeast Asians have viewed the re-balance. Varied reactions to the US rebalance at the national level in Southeast Asia are further suggestive of a sub-regional divide between “continental” and “maritime” states that to some extent predisposes their perspectives and orientation towards the Great Powers.

The rebalance to Asia — launched two years into Barack Obama's first term — initially re-awakened the over-militarization critique of US policy, given its up-front focus on US force realignment and rising tensions in the South China Sea. Within the US military global commands structure, the Western Pacific and eastern Indian Ocean fall within the Pacific Command (PACOM) and Pacific Fleet's area of responsibility. This automatically subsumes Southeast Asia in a wider strategic context. Secretary of State Hillary Clinton's intervention at the July 2010 ARF in Hanoi, and her subsequent November 2011 Foreign Policy article — still the closest document to an official doctrine for the pivot — clearly signalled an intensification of US interest in the South China Sea. Attention in Southeast Asia was further garnered by Washington's apparent interest in a more “redistributive” footprint for the US military forward-deployed presence in the Western Pacific, given its top-heavy dispositions in Japan, South Korea and Guam. Since 2012 there has been a conscious re-calibration to the pivot/rebalance, widening the base of US engagement efforts to include diplomatic and economic legs to match the already extended defence component.

ASEAN leaders proclaimed to create an ASEAN Economic Community (AEC) by 2015. While the fundamentals for creating a single market and production base are a work in progress, it is also crucial for ASEAN to facilitate the realization of the ASEAN community through “connectivity”. This is because community building through physical, institutional and personal connectivity is not only expected to reduce business transaction cost, time and travel cost, but also to connect the “core” and the “periphery” in ASEAN, thus distributing the benefits of multifaceted growth wider in the region and reducing the development divide in ASEAN. Moreover, better connectivity within ASEAN is essential for further connectivity with other regions, such as East and South Asia, which will help ASEAN to maintain its centrality in the evolving regional architecture.

In 2010, during the 17th ASEAN Summit in Vietnam, the Leaders adopted the Master Plan on ASEAN Connectivity (MPAC). The plan strives to integrate a region of over 600 million people with a combined GDP of about US$1.5 trillion.

THREE LINKAGES AND STRATEGIES

The MPAC has three components:

1. a) physical connectivity;

2. b) institutional connectivity and;

3. c) people-to-people connectivity

a) Physical Connectivity

Currently, in ASEAN, the physical infrastructure, particularly in the less developed members, is characterized by structural weaknesses — low responsiveness to users, organizational inefficiencies, insufficient funding, heavy dependence on official development assistance, low foreign direct investments (FDI), and lack of environmental awareness. Most ASEAN countries are also short of the “soft” infrastructure (ICT), which are important prerequisites for the next stage of development. This calls for the upgrading of existing infrastructure, the construction of new infrastructure and the harmonization of regulatory framework.

The key strategies for enhanced physical connectivity include the completion of the ASEAN Highway Network (AHN); fully implementing the Singapore-Kunming Rail Link (SKRL); establishing an efficient and integrated inland waterways network; forming an integrated, efficient, and competitive maritime transport system; building integrated and seamless multimodal transport systems; accelerating ICT infra-structure and services development in member states; and prioritizing the processes to resolve institutional issues in energy infrastructure projects.

b) Institutional Connectivity

While ASEAN has been successful in eliminating tariffs, it is still struggling with the issue of non-tariff barriers (NTBs) to trade and investment. While some such barriers are necessary — for example, to protect the environment or the health of humans, animals and plants — others unnecessarily distort trade flows and restrict competition.

INTRODUCTION

Both ASEAN and the South Asian Association for Regional Cooperation (SAARC) have a diverse array of economies at different levels of development and contain a wide range of cultural, religious, and ethnic and linguistic communities. Territorial disputes whether on land or at sea are also a facet of both regions. War has erupted between India and Pakistan on three occasions and there have been almost continuous skirmishes along the Line of Control (LOC), which dissects Kashmir into Pakistani and Indian-held territories. ASEAN too has its share of insurgency and separatist conflicts along some of its common borders. The main difference with regards to security problems between the regions is that India and Pakistan are declared nuclear weapons states, which magnify the political tensions in South Asia manifold compared to those in ASEAN. Both regions also display different characteristics as economic groups. The founding of ASEAN was with the participation and blessings of the biggest and most influential member of the group, Indonesia. In contrast, the founding of SAARC in 1985 was largely the initiative of smaller economies such as Bangladesh and Nepal. The late President of Bangladesh Ziaur Rahman was the main instigator for SAARC's formation. Together with the support of smaller countries such as the Maldives, he sought consensus from the leaders of India and Pakistan. Other impediments to greater intra-SAARC trade are structural because there is also a lack of transportation (land, sea and air) and information dissemination to promote intra-regional trade. SAARC members have to focus on mobilizing their resources to build up their infrastructure to enable greater economic activities. However, the lack of political will and prevailing political differences are the biggest obstacle to creating trade complementarities within the SAARC region.

Unlike SAARC, ASEAN has largely managed to keep problematic bilateral issues between its members from derailing regional initiatives. SAARC's regional initiatives have been sidelined when bilateral disputes flared up in the region. This paper argues that SAARC could move ahead by using economic benefits to marginalize the “ghosts of the past”. Kashmir has become the symbol that has divided India and Pakistan for over 50 years, much like the Berlin Wall divided East and West Germany.

CONTROVERSY OVER MYANMAR AND CAMBODIA's MEMBERSHIP

ASEAN was mired in controversy over the admission of new members. Just as ASEAN was preparing for the ASEAN Ministerial Summit in July 1997 and its thirtieth anniversary celebrations, Cambodia was caught in a power struggle. Cambodia's second prime minister, Hun Sen, staged a coup to oust Prince Ranariddh as first prime minister. As a consequence, ASEAN decided to delay Cambodia's admission into ASEAN. ASEAN's decision was to drive home the point that no leadership or form of government by violent means was ever to be encouraged.

The deferment of Cambodia's membership juxtaposed against the admission of Myanmar earned ASEAN a lot of flak for its inconsistency and double standard. ASEAN's position was that while Myanmar's political conditions were regarded as internal matters of the state, Cambodia's case was viewed differently. The latter was regarded as one that had serious implications for ASEAN since Cambodia broke the regional norm of the non-use of force. As a consequence, ASEAN insisted that Cambodia met certain conditions before its admission, which included among others, the holding of free and fair elections and the establishment of the Cambodian Senate. ASEAN also formed the ASEAN Troika to deal with efforts at restoring political stability in Cambodia. However, ASEAN's drawing of a distinction between the cases of Myanmar and Cambodia based on the norms of non-interference and non-use of force was not lost on its critics.

Controversy notwithstanding, the Cam-bodian episode eventually led to the formal establishment of the ASEAN Troika in 1999. As defined by its experience in Cambodia, the ASEAN Troika was to be an ad hoc body comprising the ASEAN Foreign Ministers of the present, past, and future chairs of the ASEAN Standing Committee (ASC). The positions would rotate in accordance with the ASC's chairmanship. The purpose of the Troika was to enable ASEAN to address urgent and important political and security issues in a timely manner. However, the mandate of the Troika as stipulated in the Troika paper had to be compatible with the principles enshrined in the TAC, particularly the core principles of consensus and non-interference in domestic affairs of states.

THE REGIONAL HAZE PROBLEM

The regional challenges brought on by the financial crisis were exacerbated by the onset of the haze problem that enveloped most of Southeast Asia between 1997 and 1998.

Capitalist development and its attendant crises have posed differing challenges for political and economic elites in Southeast Asia. Indeed, Singapore powerfully illustrates how a wholehearted embrace of global capitalism does not inexorably translate into a convergence around either liberal or democratic governance institutions. It is a case of outstanding elite cohesion even in the face of periodic global economic crises. However, such cohesion and the durability of authoritarian rule in Singapore is a function of a particular form of state capitalism.

PAP leaders realized, though, that they also needed to develop the party's own power base and towards this end a merger of state and party reshaping the political economy of Singapore was affected. This entailed not just a powerful new class of politico-bureaucrats, but also a form of state capitalism that rendered many Singaporeans directly or indirectly dependent on the state for economic and social resources, including housing, employment, business contracts, and access to personal savings. This structural relationship fostered vulnerability to political co-option and intimidation and further limited the possibility of alternative social and economic bases from which challenges to the PAP could be effectively mounted.

Importantly, the emergence of this state capitalist class not only cultivated a strong nexus of material and ideological interests between state bureaucrats and political leaders. It also contained and circumscribed the domestic bourgeoisie's development as a matter of political strategy, given suspected links in the early 1960s between elements of this class and oppositionists (Rodan 1989: 98). As a result, the domestic bourgeoisie's economic opportunities have been heavily conditioned by, and dependent on, state capitalism-most recently through offshore investment strategies by GLCs (Rodan 2006).

The political inclinations and capacities of the middle class have been no less influenced by the structural relationships embodied in Singapore's state capitalism. Much of that class is either employed within the state in one or another of the government departments, statutory bodies, or GLCs, or indirectly derives its livelihood from servicing state capitalism through the provision of professional, legal, commercial, or other services.

Therefore, the PAP state capitalist model has thus far succeeded in generating the social foundations for the consolidation of the existing elite's own reproduction.

The economic world in 2030 will be unrecognizable from what it is today as emerging countries, including the Association of Southeast Asian Nations (ASEAN) region as a whole, grow faster than advanced economies as a result of the global financial crisis.

After recovering from the Asian financial crisis of 1997–1998, ASEAN started to feel the need to move beyond the scope of AFTA to attract more capital inflows, especially from East Asia. From that point onwards, the ASEAN Economic Community blueprint was proposed and finally signed, with the aim of creating a single market and production base by promoting the free flow of goods, services, capital, and skilled labor.

To promote a free flow of goods in order to position itself as a production base for both ASEAN and ASEAN dialogue partners and investors, ASEAN switched from a collection of agreements related to trade in goods to a comprehensive agreement — the ASEAN Trade in Goods Agreement (ATIGA).

With ATIGA, ASEAN set the time frame to eliminate both tariff barriers (especially for products on the sensitive and highly sensitive list) and NTBs by 2015.

For the movement of capital, ASEAN adopted the elimination of investment restrictions and impediments under the ASEAN Comprehensive Investment Agreement (ACIA).

The AEC also agreed to ease the free flow of professional employees, but only seven mutual recognition agreements (MRAs) were finally signed (for engineering services, architectural services, nursing services, medical practitioners, dental practitioners, surveying qualifications, and accountancy services).

The ability of ASEAN to position itself as a core of all ASEAN+ economic integration depends mainly on the success of members in narrowing their differences, both on economic and noneconomic issues.

One proposal starts with an East Asian FTA (known as EAFTA) among ASEAN+38 countries and then extending it gradually to ASEAN+6 countries and others; another idea proposes including all ASEAN+6 countries in a region-wide FTA or comprehensive economic partnership in East Asia (known as CEPEA) from the start.

Overall, the two processes (EAFTA and CEPEA) have created real questions in East Asia, if not great confusion, about the way people look at the region, and have complicated the regional institutional landscape.