While 10-member bloc of south-east Asian nations anticipate investment riches, observers say communities may be sacrificed for big business
Kate Hodal | Tuesday 3 February 2015 07.00 GMT
It has been billed as the world’s greatest emerging economy: a $2.4tn (£1.5tn) south-east Asian marketplace home to 620 million people poised to follow the European Union’s lead and declare itself a single market this year.
But as some in the 10-nation Association of Southeast Asian Nations (Asean) anticipate lucrative benefits from deeper trade and economic integration, there are mounting warnings that some communities and even whole countries may lose out because of the risk of human rights being sacrificed to the imperatives of big business.
The EU-styled economic market aims to ease tariffs, increase investment flows and open borders by December across 10 countries: Burma, Brunei, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam – a move that has already attracted significant investment to the region.
The world’s seventh largest market, home to 10% of the world’s population, Asean is expected to grow 5% each year by 2018, surpassing the US, EU and Japan. But the scope of each individual country in the bloc varies wildly, prompting scepticism that a single market can be successfully created by the end of the year. In the poorest member state, Burma, three-quarters of the population still lack electricity after half a century of dictatorship; in the richest, Singapore, citizens are among the wealthiest in the world.
“The business community wants Asean to be integrated as one entity,” says Mustapa Mohamed, Malaysia’s trade minister. “The fact is that there are border issues, customs, immigration and different regulations.”
Malaysia – a global exporter of electronics and electric appliances – is chairing the rotating presidency of the bloc, and has warned that free movement of goods and services should not be expected before 2020. Until then, the group will merely be “laying the stage for bigger things to come”.
While the vast differences in language, culture, political and economic models among Asean member states may make some investors wary, Asean is not likely to suffer the same debt concerns as the EU , primarily because the bloc has never planned to adopt a single currency or parliament.
The variance among its economies, however, means certain countries already benefit more from the united marketplace than others, a report has found. Singapore remains the preferred regional base for 80% of multinational companies thanks to its international finance hub and open markets, according to recent findings from global law firm Baker & McKenzie. Up-and-coming economies with strong manufacturing pulls such as Indonesia and Burma are expected to profit as well, with companies naming them as their preferred factory locations over the next five years.
Once a highly competitive business hub, Thailand has lost out to the region’s more politically stable emerging markets where low-cost labour and favourable business regulations reign, says IHS’s Asia-Pacific chief economist, Rajiv Biswas.
“Recent political turmoil has increased country risk and made some multinationals more reluctant to put new investments into Thailand,” Biswas says. “In contrast, foreign investment into Vietnam is showing a strong recovery, helped by the improving macroeconomic environment and the very competitive wage levels in Vietnam compared to coastal China.”
A budding middle class across the region also means healthy domestic markets, and as the cost of labour in China rises, the potential for Asean – and its pool of both skilled and unskilled workers – increases as well.
But Asean’s focus on trade could ultimately prove problematic for the region’s 620 million citizens, say activists, who underline the tenuousness of the sociopolitical landscape in south-east Asia, and how little the organisation seeks to address regional challenges such as religious extremism and human trafficking.
In a recent statement the Asean People’s Forum (APF) – Asean’s largest civil society group – listed a number of problems in the region, among them grave human rights violations; corruption and poor governance; state-sanctioned land grabs; authoritarian and military regimes; police brutality, torture and enforced disappearances; modern-day slavery and lack of corporate responsibility and accountability.