ASEAN: An Asian Model for Regional Cooperation               ASEAN was founded on August 8, 1967 with the signing of the Bangkok Declaration by the five founding states including Indonesia, Malaysia, the Philippines, Singapore and Thailand. Brunei became the sixth ASEAN member in 1984, followed by Vietnam in 1995, Laos and Myanmar in 1997 and Cambodia in 1999.            During the Cold War, Indochina countries like Vietnam, Cambodia and Laos could not join ASEAN due to complex geo-political realities including civil war and internal conflicts. ASEAN that had successfully settled a few regional problems had given confidence to Indochina countries to join ASEAN. After the end of Cold War in 1991, ASEAN's membership increased through the participation of above-mentioned communist countries of Indochina.             ASEAN is a regional organization which encourages a more effective cooperation in matters pertaining economy, social, culture, agriculture, trade, transportation, technical, educational, professional, training and research, science and administration. ASEAN endeavours to protect mutual interest and create a regional solidarity while also promoting regional peace and political stability. When building regional ties, ASEAN members comply with the rules and regulations as enshrined in the UN charter.           The Association of Southeast Asian Nations (ASEAN) is now a multi-faceted regional organization which has grown in both membership and importance in the Southeast Asia region and internationally. ASEAN has always believed, like many other international organizations, that functional structural integration would facilitate enhanced regional economic prosperity and security cooperation.           After the Cold War ended, ASEAN became the springboard for other formal and informal regional groupings such as the much-needed security community in the Asia-Pacific region namely the ASEAN Regional Forum (ARF). The ARF provides a forum for member state’s foreign ministers, including from some of the world’s biggest rivals like India and Pakistan, Japan and China and the US and China, for discussions on regional security challenges.           There is ample debate about the success of ASEAN as a regional organization. Based on the limited mandate outlined in its 1967 charter, ASEAN has fulfilled an important role. ASEAN has reduced security competition among its members and contributed to a more stable order in Southeast Asia. The growth of membership in the 1990s was meant to enhance ASEAN’s voice in international affairs by making the region economically more attractive and politically more cohesive. Expansion, however, also brought forth complex challenges.           The 10-member ASEAN has successfully promoted cooperation and dialogue in the region since its creation in 1967, ensuring durable peace and security allowing its members to focus their energy, time and resources on their economic development. As a region, ASEAN has dramatically outpaced rest of the world in economic growth and development. Income growth has remained strong since 2000, with average annual real gains of more than 5 percent.             According to a study by McKinsey, 14 percent of the region’s population was living below the international poverty line of $1.25 a day in 2000, but that share had fallen to just 3 percent by 2013. Already, several million households in ASEAN countries have substantial purchasing power and the number could reach 125 million households by 2025, making ASEAN an important consumer market. However, there were certain inherent structural weaknesses in the organisation and among its members.           It took a crisis to transform ASEAN from a rather loose association into a well-knit community. The East Asian monetary crisis that began in South Korea in 1997 quickly spread to Southeast Asia. It immediately affected Thailand, Malaysia, the Philippines, and Indonesia—key ASEAN members, together representing the largest proportion of region’s economies. The 1997 Asian financial crisis generated substantial macroeconomic fundamental effects, including a collapse of Asian stock markets, devaluations of domestic currencies, and a reduction in asset prices throughout Asian countries. Many businesses collapsed which in turn contracted per capita income for millions of people in the region.           Some experts argue that the Asian financial crisis exposed many issues such as banks’ structural inefficiencies, weak financial infrastructures, lack of transparency, weak governance and regulation involving the banking sector. Others argue that moral hazard, asymmetric information, short-sighted government policies, weak institutions and ineffective regulation also made the region vulnerable to the crisis. It was against this background that the ASEAN Economic Community emerged as an apparatus for meeting these needs.           It was Singapore which proposed the establishment of an ASEAN Economic Community (AEC) in 2000. A balanced concept of community-building based on three pillars—namely the ASEAN Political and Security Community (APSC), the ASEAN Economic Community (AEC), and the ASEAN Socio-Cultural Community (ASCC)—was later endorsed by ASEAN leaders at the 2003 Bali Summit. A healthy habit of dialogue that had developed since 1967 allowed ASEAN to agree on something which had the potential to be transformative. Thus, its adoption truly represented a new stage in ASEAN’s development. A new ASEAN Charter was accordingly prepared in 2007 and came into force in December 2008.            The legal and institutional framework of ASEAN was established through this document after 41 years of existence. This reflects the celebrated ‘ASEAN Way’, which is a step-by-step, gradual and bottom-up process. The ASEAN Charter reflects the commitment of ASEAN members to intensify community-building through enhanced cooperation and integration, specifically by establishing a formal ASEAN Community comprising the ASEAN Political-Security Community, the ASEAN Economic Community, and the ASEAN Socio-Cultural Community.         The ASEAN leaders adopted the ASEAN Vision 2020 hoping to strengthen the foundation for a prosperous and peaceful community of Southeast Asian nations while creating a community that lived in shared stability and prosperity. The purpose of establishing an integrated economic community is to accelerate economic growth, enhance trade in the region, and allow freer movement of goods, services, skilled labour, and capital.              The AEC is seen as the realization of the end-goal of regional economic integration by ASEAN’s 10 member economies, encompassing more than 620 million people. The AEC aims to transform ASEAN into a region with “free movement of goods, services, investment, skilled labour and freer flow of capital,” based on four pillars of a single market and production base, a highly competitive economic region, equitable economic development and full integration into the global economy.            It is estimated that ASEAN’s collective gross domestic product (GDP) would grow to more than 6.2 trillion US dollars by 2023, expanding at an exponential growth rate of more than 10 per cent. ASEAN’s share of global GDP is expected to increase from 3.2 per cent to 4.7 per cent by 2023, with its share of world trade rising from 5 to 6 per cent. According to the Asian Development Bank, ASEAN has made the greatest progress in tariff reduction, with more than 70 percent of intra-ASEAN trade now incurring zero tariffs under the ASEAN Free Trade Area (AFTA). According to ASEAN, average tariff rates on intra-ASEAN imports have declined from nearly 3 percent in 2003 to 0.5 percent in 2014.            However, gaps remain between the region’s larger and smaller economies in areas such as trade facilitation and investment liberalization, while services trade has proved harder to liberalize. Problems have been experienced in protecting intellectual property rights as well as reducing development disparities between the region’s rich and poor. Highlighting the region’s economic divide, both Brunei and Singapore had GDP per capita exceeding $35,000 in 2013, while Indonesia, Malaysia, the Philippines and Thailand ranged from $2,700 to $10,400. Opportunities           There is a substantial list of opportunities associated with AEC integration. For instance, economic integration provides opportunities to boost economic stability in the region. Another benefit is that integration would turn ASEAN into a more competitive region within the world economy. A stronger regional economy will help to improve the living standards of the ASEAN population by reducing poverty through economic development.           ASEAN member countries expect to achieve greater economic cooperation in the areas of financial policies, trade and human resource development. AEC integration will serve to promote goods and services, investment, labour and capital mobilization. The ASEAN region could potentially become a highly competitive economic union operating as a single market. ASEAN also intends to improve regional agricultural and industrial cooperation, expand trade, and improve transportation and infrastructure.           Labour-force expansion and productivity improvements have driven GDP growth in the ASEAN region. ASEAN has the third-largest labour force in the globe, behind China and India. The ASEAN region is projected to rank as the fourth-largest economy in the world by the year 2050. Economic growth and expansion in trade have yielded tangible benefits to Southeast Asia. In 2012, ASEAN’s GDP per capita reached $3,748, more than double the 2000 figure of $1,172. Over the last many years, poverty levels across the region have decreased. As per a study, the proportion of the population living on less than $1.25 a day in Cambodia, Laos, Myanmar and Vietnam fell to 16 percent in 2010, from 45 percent in 2000.           However, it is important to highlight that there are structural and institutional differences across the 10 member ASEAN countries, and consequently, these countries can be expected to have different levels of economic growth and subsequent economic development. While ASEAN has nominated 11 “priority integration sectors” comprising agribusiness, air travel, automotive, e-ASEAN, electronics, fisheries, healthcare, rubber, textiles, tourism and wood, there are expected to be some winners and losers in the process.            In the auto sector, Thailand, Indonesia and Malaysia would further strengthen their position as manufacturing hubs, resulting in others such as the Philippines missing out on jobs and investment. Indonesia and the Philippines are expected to drive vehicle demand growth, given their large populations and low car ownership. However, while smaller economies such as Cambodia and Laos are expected to attract investment due to their lower wages, the non-tariff barriers such as excise duties could prevent the predicted industry growth from being fully realized. The pharmaceutical and healthcare industry is seen as another winner from the AEC, with ASEAN pharmaceutical sales likely to more than double by 2023, rising from $21 billion in 2013 to $50 billion, despite disparities in intellectual property rights and resources preventing full integration.           It is believed that the increased government investment in healthcare and aging populations would spur demand, along with rising incomes. Private healthcare providers are expected to expand their regional footprint, while medical tourism should benefit Singapore, Malaysia and Thailand. However, there is the danger of a potential “brain drain” of medical professionals from the less developed economies to their richer rivals, compounding a shortfall of medical staff and infrastructure in countries such as the Philippines and Indonesia.           In agribusiness, Thailand, Malaysia and Vietnam are expected to benefit the most, although given the sector’s political sensitivities, protectionist countries such as Indonesia may see limited gains. While Thailand could gain market share in sugar exports from the Philippines and Vietnam, Vietnam should emerge as a winner in rice exports at the expense of Thailand. Vietnam, Malaysia and Thailand should also benefit the most from growing demand for dairy products.           Another key winner from the AEC should be the region’s consumer electronics, IT and telecommunications sector. This is despite slow progress on removing barriers to foreign investment, particularly in telecoms, where countries such as the Philippines, Vietnam and Indonesia have high levels of state involvement. Vietnam, Cambodia and Laos should attract increased investment in consumer electronics due to their lower wages, with both Indonesia and Vietnam becoming sizeable growth markets.           As a whole, the ASEAN region will benefit tremendously from the growth opportunity, the increased specialization, the reduction in prices for consumer goods as well as the increased integration of these economies. However, despite the AEC’s potential, bottlenecks include protectionist pressures limiting reforms, along with a potential slowdown in major trading partners, given that intra-ASEAN trade accounts for only a quarter of the total.                  China’s position as the region’s largest trading partner has left ASEAN exposed to a slowing Chinese economy, while top foreign investor, the European Union is struggling to emerge from recession. Concerns have also been raised about the ability of the ASEAN Secretariat to drive change given its limited resources compared to bodies such as the European Union. Nevertheless, ASEAN’s growth potential should keep the region in the spotlight for some time to come, regardless of its expected stumbles toward full integration.            Accommodating AEC accords will not be easy when they require changes to domestic laws or even the national constitution. The flexibility that characterizes ASEAN cooperation, the celebrated ‘ASEAN way’, may provide member states a convenient pretext for non-compliance. Sometimes, there are shocks associated with rapid liberalization of a particular economy, including the forced restructuring of uncompetitive industries which are subject to foreign competition, but also sometimes you have uncontrolled capital inflows which can be the result of rapid economic liberalization. A piecemeal approach should help reduce the risk of such unintended consequences. Challenges           Economic integration could potentially combine to produce opportunities to ASEAN countries; however, it could also generate challenges, namely higher costs related to implementing economic integration across such economically and culturally diverse countries. ASEAN is an economic region which has diverse patterns of economic development. The majority of ASEAN countries are categorized as low middle income countries, whereas a few are positioned better economically. The existing income inequality gap among some of the ASEAN countries could become even wider post AEC integration.           Some ASEAN countries have high inflation rates. This could result in dissimilar price levels and unequal purchasing power across ASEAN countries, giving some countries the ability to purchase more goods of another member country. Also, different levels of inflation could result in different levels of investment. This could inadvertently lead to some sectors and industries incurring economic losses and to some workers in the less economically stable countries to consider migrating to more economically prosperous member countries. Many of the ASEAN economies are currently in vastly different stages of development, with large differences between high-saving economies, such as Brunei, Malaysia, and Singapore, and low-saving economies, such as Cambodia, Laos, and the Philippines.           There is the possibility of witnessing highly disparate levels of economic development, interest rates, and exchange rates across member countries. As a result, governments could face some challenges in stabilizing macroeconomic and financial conditions under an integrated economic system. There is also a high degree of political and socio-cultural diversity among ASEAN countries which makes economic integration challenging.           ASEAN member countries have disparate levels of capital market development and financial regulations. Some of the ASEAN member countries do not have the appropriate financial sector regulation and infrastructure necessary for a seamless integration process. We can expect that there will be challenges associated with capital market development, financial services liberalization, capital account liberalization, and an eventual ASEAN currency cooperation.           AEC will also incur costs related to institutional strengthening, costs related to monitoring and evaluating the regional systems within the economic framework, and costs related to developing and managing the regional systems necessary for an effective economic integration. One could also expect other costs to rise, such as those related to urbanization as millions of citizens migrate from rural areas to cities in search of economic opportunities. As most of the ASEAN member countries grow and expand their economic activities, there will be additional costs related to climate resilience and environmental sustainability.           The ASEAN region sits at the intersection of global trade flows. Intra-regional trade in goods is likely to increase with the implementation of AEC as is overall economic growth. To realize the full potential of the AEC, better management of structural and institutional change is needed, in addition to ensuring that economic gains lead to shared prosperity among the members. The success of ASEAN economic integration will depend on how it influences the labour market – and consequently on how it improves the quality of life for people in the region.           In order to take full advantage of economic growth, the region must develop its human capital and workforce skills, while addressing income inequality and gender inequality. In order for ASEAN to become globally more competitive in a wide range of sectors and industries, it must invest in institutions, infrastructure, education, on the-job-training, and in allowing women to participate more in the regional economy. It is important to emphasize that unless managed properly, the AEC may not be able to capitalize on all of the foreseeable economic opportunities.           The fact remains that intra-ASEAN trade was just 25 per cent of the entire regional trade compared     with 67.3 per cent of intra-trading among European Union members in 2015. The intense competition among ASEAN countries was fierce and thus undermined the goal of regional integration. The three countries namely Singapore, Malaysia and Thailand dominate intra-ASEAN trade, accounting for about 70 per cent. The extra-regional free-trade agreements of some ASEAN members outside the regional bloc (e.g. those of Thailand’s pact with New Zealand, Australia and China) also compromise the efficacy of trade agreements within the grouping.           The ASEAN Secretariat is said to be too weak and understaffed for facing up to the newer challenges of integration and newer global economic and political realities. It was this structural weakness and lack of internal cohesion that was noticeable in ASEAN leaders’ failure to make any significant joint efforts to tackle the 1997 financial crisis. Even though the Organisation vows to abide by the UN Charter, the regional human-rights standards are lower than those stipulated in the United Nations Charter. The grouping needs to be seized with these realities to tackle the same in right earnest to be better equipped to face the global challenges unitedly and with confidence.