Monday, January 23, 2006

Irritants to economic integration in the ASEAN

The ASEAN (Association of Southeast Asian Nations) was set up in 1967. According to their website (, it "has a population of about 500 million, a total area of 4.5 million square kilometers, a combined gross domestic product of US$737 billion, and a total trade of US$ 720 billion." Nothing to sneeze at, for sure. The rationale for economic integration is mainly geographical (just look at the map), as well as historical (we are able to exploit centuries of cultural and economic ties).

There are a few political irritants to economic integration. Consider the absurd Philippine claim over Sabah. I am not familiar with the historical background, and all that, but I do know that possession is nine-tenths of the law, and that is most indisputably in favor of the Malaysians. I am all for laying these legal sheenanigans to rest and profit from existing geopolitical realities. (Read the Malaysian justification for its inclusion of Sabah. Speaking objectively as a Filipino, there ain't no basis for our claim. Zero. Zilch. Some politicians in Mulsim Mindanao are apparently lobbying Manila to keep the claim alive by supporting the claims of the heirs of the Sultan of Sulu. Perhaps getting some generous settlement from Malaysia is a great motivation for this kind of support.)

Domestic laws and policies are also errecting barriers to ASEAN investment. Remember the Manila Hotel fiasco back in 1997? Let me recount: a Malaysian group had given the winning bid for the Manila Hotel. The Filipino runner-up (headed by the owner of Manila Bulletin) lodged a complaint against the deal with the Supreme Court. The Supreme Court relies on the national patrimony provision of the Philippine Constitution to reverse the decision and let the Pinoy investor win. (A clear example why national patrimony provisions may mean by settling for the inferior deal just because the offer is from a Filipino). Apparently this forestalled an outpouring of Malaysian investment in Mindanao - just at the height of the euphoria from the 1996 peace agreeement with the Moro National Liberation Front. Wasted opportunities indeed. Given problems in deregulating foreign investments in general for each ASEAN country, it is time to start examining preferential treatment for ASEAN investors under parity terms.

There is however considerable progress made on other fronts. We'll take that up on my next post.


Anonymous said...

Worse, the owners of the Manila hotel has run it to the ground. It is in terrible shape, a real waste.


Econblogger said...

So much for entrusting the national patrimony to nationals!

cvj said...

agree with you on Sabah, hanging on to the claim is not rational. it's best to devote our energies elsewhere.


The settlement for the issue of Sabah (North-Borneo) was in the hand of "The real heir's of the Sultan of Sulu".

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