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Association of Southeast Asian Nations (ASEAN)

Few regions of the world offer U.S. companies as much opportunity as Southeast Asia. As the 10-nation Association of Southeast Asian Nations (ASEAN) has developed in recent decades, the region has emerged as a prime target in the trade and investment strategies of many U.S. companies. In 2005, the region ranked as the United States' fourth-largest global trading partner. The United States is second only to Japan in direct investment in ASEAN.

The region boasts an array of natural resources, including oil and gas, timber, gold, rubber, and arable land for agriculture. It is culturally, ethnically, and religiously diverse and is home to the world's largest Muslim population in Indonesia, Malaysia, and Brunei. Its economies run the gamut from highly developed Singapore and the middle-income markets of Malaysia and Thailand to rapidly growing Vietnam and the least developed countries of Cambodia and Laos.

Southeast Asia in the coming decade offers the United States vast potential to enhance economic growth, increase competitiveness, create new jobs, and bolster its security. American products are popular with the region's large, youthful consumer base. Trade with Southeast Asia already supports and estimated 800,000 U.S. jobs.

The United States has deep geopolitical security interests in the region. Straddling the Straits of Malacca and the South China Sea, Southeast Asia occupies key strategic real estate along some of the world's busiest shipping lanes linking China, Japan, and Korea to the Middle East and Europe. Singapore, Thailand, and the Philippines have long been strategic allies of the United States. In recent years, Washington has strengthened its relations with Indonesia and Malaysia - moderate, democratic Islamic countries that serve as key partners in the battle against terrorism.

The rise of China, India, and other emerging economies is causing shifts in Southeast Asia's former regional economic, political, and security arrangements and creating new regional alignments. These dynamics have created new challenges and opportunities for the United States and call for Washington to re-examine its relations in the region. Political and economic stability cannot be taken for granted. The United States needs to seek ways to remain actively engaged in the region and help create an environment that will ensure that political stability and economic growth continue.

The ASEAN Regional Forum (ARF), the preeminent forum for dialogue on political and security matters between ASEAN and its external partners, is a critical venue for U.S. engagement in the region. The continued participation by the U.S. Secretary of State in the annual ARF ministerial meeting sends an important signal that regional security and stability in Southeast Asia are key priorities of American foreign policy.

Beyond strategic reasons for U.S. engagement with Southeast Asia, American business sees untapped economic opportunities in the region in which it would like to participate. To help ensure continued U.S. access to open markets, it is crucial that Washington help shape the emerging commercial architecture and continue to push for a level playing field for foreign companies.

U.S. efforts to negotiate regional and bilateral trade agreements in Southeast Asia are an important priority of American business. In addition, U.S. leadership in the Asia-Pacific Economic Cooperation (APEC) forum, in which the United States and key Southeast Asian countries are major players, is critical to addressing such regional goals as strengthened intellectual property (IP) protection, customs integration, and the harmonization of industrial standards.

This is an important time in the U.S. relations with Southeast Asia. The U.S. government, with strong support from the U.S. Chamber, the American Chambers of Commerce (AmChams) in the region and our member companies, has a tremendous opportunity to shape commercial trends and expand the American business presence in the region. With bold economic leadership, Southeast Asian governments can realize their dual objectives of ensuring political stability and economic prosperity for their people.

ASIAN REGIONAL INTEGRATION
ASEAN was formed in 1967, when the foreign ministers of Indonesia, Malaysia, the Philippines, Singapore, and Thailand met and agreed to cooperate to accelerate economic growth, boost social and cultural development, and ensure peace and stability in the region. Four decades later, the expanded 10-member grouping - now including Brunei, Burma, Cambodia, Laos and Vietnam - represents a dynamic and growing consumer market of nearly 600 million people with an average per capita income of more than $4,000.

During the 1990s, the "tiger" economies of Southeast Asia benefited from high levels of foreign investment and growth. Economic integration was not a top priority for the grouping. In 1997, the region's dynamic growth came to an abrupt halt when the Asian financial crisis hit. Some countries saw their currencies depreciate by as much as 80%, making repayment of foreign-denominated debt impossible. Seemingly overnight, banks closed, building cranes ceased operations, and millions became unemployed as formerly booming economies turned to global financial institutions for massive bailouts.

While Southeast Asia has largely recovered from the crisis, the region has not yet witnessed a sustained return of high levels of foreign investment. Increased competition for investment from other emerging markets, particularly China and India, underscores the urgency for a more competitive Southeast Asia. At the 2004 ASEAN summit in Laos, the region's leaders launched a program calling for the comprehensive integration of the regional grouping by 2020. Its aim is to reduce all barriers to the free flow of goods and services, liberalize the flow of capital, and provide national treatment for foreign investors in an ASEAN Free Trade Area (AFTA).

Click here  to view the Chamber's 2010 ASEAN Economic Integration Scorecard.  The scorecard  rates how U.S. companies perceive ASEAN is doing in meeting their delclared goals for regional economic intergration.

ASEAN'S ROLE IN APEC
To improve economic growth and enhance political stability, it is vital that Southeast Asia embrace regional initiatives and institutions that foster regional integration, transparency, and openness. One forum that plays this role is APEC.

The five original members of ASEAN were founding members of APEC, a loose 21-member grouping that includes key countries in Asia as well as the United States, Mexico, Canada, and Chile. APEC was formed in 1989, and its members today account for 60% of the world's GDP. The grouping focuses on promoting regional trade and investment liberalization, business facilitation, and economic and technical cooperation with the goal of achieving free trade and investment among its members by 2010 for developed economies and 2020 for developing countries.

Southeast Asia's goal of establishing an integrated free trade area by 2020 tracks closely with APEC's goals. APEC offers a vehicle for Southeast Asian countries to expand trade and investment liberalization with their major trading partners. Progress on liberalization within ASEAN can serve as a catalyst to advance trade benefits to other APEC economies.

U.S.-SOUTHEAST ASIA RELATIONS
Although the U.S. government is active in the region through APEC and ARF, there is a perception by some in Southeast Asia that the United States is inattentive to the region - except on issues of terrorism and security cooperation. The U.S. decision to appoint an ambassador to ASEAN as a grouping and to assign a Treasury Department representative to the region should help change this perception. At the APEC summit in 2005, U.S. President George W. Bush announced the Enhanced ASEAN Partnership, which included the goal of negotiating a region wide Trade and Investment Framework Arrangement with ASEAN.

The United States has already begun efforts to build a network of bilateral trade agreements in Southeast Asia. The United States is in the process of negotiating a free trade agreement (FTA) with Malaysia and has launched Trade and Investment Framework Agreement (TIFA) discussions with Cambodia, Indonesia, the Philippines, and Vietnam. The United States already has an FTA with Singapore which, in its first year, increased trade between the two countries by more than 10%.

The U.S. business community supports efforts to negotiate bilateral FTAs with Southeast Asian partners. U.S. FTAs are considered the "gold standard" of trade agreements, because they are comprehensive and call on partners to open markets and reduce trade barriers beyond the requirements of the World Trade Organization (WTO).

In addition to new opportunities for American business, these bilateral negotiations can help spark a healthy atmosphere of competitive liberalization among countries. The U.S. business community encourages U.S. leadership to promote regional and bilateral efforts in ASEAN that would prompt a "race to the top," to advance development of economic standards and create world-class competition.

MUTUAL OPPORTUNITIES FOR THE U.S AND ASEAN
Regional integration in Southeast Asia is becoming a growing priority for American companies. An integrated ASEAN, under the AFTA framework, would enhance the region's competitiveness beyond the benefits that are gained through bilateral trade agreements. A Southeast Asia with a freer flow of goods, services, and capital would attract U.S. investors, while local consumers and companies would have access to a wider range of competitive services, products, and financing.

The U.S. business community recommends that ASEAN governments take tangible actions to enhance their competitiveness, including:

• Establish predictable investment regimes. To encourage investors to pursue bases of operation in Southeast Asia, regional governments should clarify regulations, reduce political risk, and spell out transparent procedures for resolving disputes.

• Promote liberalized financial services and good corporate governance. This will strengthen capital markets, stimulate innovation, and provide consumers with the broadest range of products and services at the lowest cost.

• Increase protection of intellectual property. IP theft hampers investment and innovation, threatens public health and safety, and reduces government revenue. Governments should launch regular raids on IP violators, impose maximum penalties for pirates, and initiate training for law enforcement and customs officials.

• Harmonize standards. This will boost ASEAN's efforts to become a regional production hub. Unifying regulations would enhance competitiveness. For example, a single ASEAN standard for labels that allows production lines to use the same packaging throughout the region would reduce production costs and provide timelier introduction of new products to consumers.

• Integrate customs procedures. The introduction of a single customs window, which allows for single-channel clearance of goods for all ASEAN member countries, is expected to be in place by 2008 for the grouping's six most developed countries. The U.S. business community urges ASEAN leaders to ensure that this goal is realized.

• Establish a more open and transparent agriculture market. High tariffs and sanitary and phytosanitary standards (SPS) can act as impediments to trade. Lowering tariffs and adopting a common SPS regime would enhance trade within ASEAN and trade between Southeast Asia and other partners.

• Encourage exploration of new energy resources. A regional, liberalized approach to petroleum exploration would enhance the potential for investment and improve global energy security. The region could gain from cooperation in developing new and renewable energy sources by developing a coordinated strategy to produce ethanol and biodiesel fuels.

BUSINESS RECOMMENDATIONS FOR THE U.S. GOVERNMENT
It is important for the U.S. government to bolster policy initiatives and programs that would help American companies compete and prosper in this vital overseas market. FTAs are beneficial to economic growth, but protectionist sentiment in Congress and eroding support for export assistance programs mean that many companies, particularly small and medium-sized ones, are not able to benefit.

Here are some of the American business community's recommendations for the U.S. government:

  • Promote regular visits to the region by Cabinet officials and lawmakers.
  • Invest in capacity-building initiatives that support regional economic reform and integration.
  • Provide increased resources to bolster programs in Southeast Asia by the Export-Import Bank., the Overseas Private Investment Corporation, and the Trade Development Agency.
  • Support and participate in grassroots programs around the United States to raise awareness of economic opportunities in Southeast Asia.
  • Ensure that U.S. tax policy does not impede companies from sending Americans overseas to expand business opportunities.
  • Streamline U.S. visa procedures to ensure a balance between maintaining security and promoting American business competitiveness.
  • Hold annual congressional hearings to monitor the impact of U.S. policy on commercial relations with ASEAN.
  • Continue U.S. presidential participation at the APEC Leaders' Meeting and the APEC CEO Summit.

This is a delicate and critical time for the United States in Southeast Asia. It is important for Washington to recalibrate its role and strategy in Southeast Asia to ensure a strengthened competitive position for U.S. companies in this critical market.

The U.S. business community wants to ensure that the U.S. and ASEAN governments are working together to promote growth and prosperity in the region. We look forward to working with governments and the private sector in Southeast Asia on the challenges and opportunities before us.